Q1 2026 WESCO International Inc Earnings Call

April 30, 2026

Operator: 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 would now hand the call over to Scott Gaffner, Senior Vice President, Investor Relations, to begin.

Speaker #1: And only mode throughout the presentation. If you would like to ask a question, please press star followed by 1 on your telephone keypad. Please note that this event is being recorded.

Operator: 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 would now hand the call over to Scott Gaffner, Senior Vice President, Investor Relations, to begin.

Speaker #1: I would now hand the call over to Scott Gaffner, Senior Vice President, Investor Relations, to begin.

Speaker #2: 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.

Scott Gaffner: Thank you, 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 uncertainties. Actual results may differ materially. Please see our webcast slides and the company's SEC filings for additional risk factors and disclosures. Any forward-looking information speaks only as of this date, and the company undertakes no obligation to update the information to reflect changed circumstances. Additionally, today, we'll use certain non-GAAP financial measures. Required information about these 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, WESCO's Chairman, President, and CEO, and Indraneel Dev, Executive Vice President and Chief Financial Officer. Now I'll turn the call over to John.

Speaker #2: Forward-looking statements are not guarantees of performance and by their nature are subject to uncertainties. Actual results may differ materially. Please see our webcast slides and the company's SEC filings for additional risk factors and disclosures.

Speaker #2: Any forward-looking information speaks only as of this date, and the company undertakes no obligation to update the information to reflect changed circumstances. Additionally, today we'll use certain non-GAAP financial measures.

Speaker #2: Required information about these measures is available on our webcast slides and in our press release, both of which are posted on our website at WESCO dot com.

Speaker #2: On the call this morning, we have John Engel, WESCO's Chairman, President and CEO, and Neil Dev, Executive Vice President and Chief Financial Officer. Now I'll turn the call over to John.

Speaker #3: Thank you, Scott. Good morning, everyone. Thank you for joining our call today. We delivered an exceptional start to 2026, building on last year's market-out performance and accelerating business momentum.

John Engel: Thank you, Scott. Good morning, everyone. Thank you for joining our call today. We delivered an exceptional start to 2026, building on last year's market outperformance and accelerating business momentum. In Q1, sales, backlog, operating margin, adjusted earnings per share, and free cash flow all increased versus the prior year and exceeded our expectations. Record Q1 sales of $6.1 billion were up 14%, marking our Q3 in a row of double-digit sales growth. Booming data center demand remains a significant growth driver of our business. Data center sales of $1.4 billion were up approximately 70% versus prior year and represented 24% of total company sales in the quarter.

Speaker #3: In the first quarter, sales, backlog, operating margin, adjusted earnings per share, and free cash flow all increased versus the prior year and exceeded our expectations.

Speaker #3: Record first-quarter sales of $6.1 billion were up 14%, marking our third quarter in a row of double-digit sales growth. Booming data center demand remains a significant growth driver of our business.

Speaker #3: Data center sales of $1.4 billion were up approximately 70% versus prior year, and represented 24% of total company sales in the quarter. Overall, our business momentum continued to accelerate in the quarter, with organic sales up sequentially, outpacing normal seasonality and reinforcing the strength and durability of demand across our end markets.

John Engel: Overall, our business momentum continued to accelerate in the quarter, with organic sales up sequentially, outpacing normal seasonality and reinforcing the strength and durability of demand across our end markets. This performance reflects broad-based strength across our entire portfolio, led by continued strong momentum in CSS and EES, along with improving trends in UBS. We again ended this quarter with a record backlog, up 22% versus prior year, reflecting the continued effectiveness of our cross-selling program and providing clear visibility of the secular growth trends on our business. Profit growth, margin improvement, and free cash flow generation were also excellent in Q1. Adjusted EBITDA grew 25%, and adjusted EBITDA margin expanded 60 basis points, driven by gross margin expansion and strong operating cost leverage on our double-digit sales growth. Adjusted diluted earnings per share was up 52% versus the prior year.

Speaker #3: This performance reflects broad-based strength across our entire portfolio, led by continued strong momentum in CSS and EES, along with improving trends in UBS. We again ended this quarter with a record backlog, up 22% versus prior year, reflecting the continued effectiveness of our cross-selling program and providing clear visibility of the secular growth trends on our business.

Speaker #3: Profit growth, margin improvement, and free cash flow generation were also excellent in the first quarter. Adjusted EBITDA grew 25%, and adjusted EBITDA margin expanded 60 basis points, driven by gross margin expansion and strong operating cost leverage on our double-digit sales growth.

Speaker #3: Adjusted diluted earnings per share was up 52% versus the prior year. Free cash flow generation at $128% of adjusted net income was also very strong, underscoring our disciplined execution and continued focus on working capital management.

John Engel: Free cash flow generation at 128% of adjusted net income was also very strong, underscoring our disciplined execution and continued focus on working capital management. We're very pleased with our Q1 results. While we remain mindful of the volatility of the broader macroeconomic environment, we see positive momentum continuing across our business. As a result, we are raising our full-year outlook for 2026. As the market leader and with positive momentum building, I'm confident that WESCO will continue to outperform our markets through disciplined execution, our differentiated value proposition, and the strength of our global platform. Our WESCO team remains focused on driving strong growth and margin expansion and delivering superior value to our customers and shareholders. One final comment. As we announced earlier this year, David Schulz is retiring from WESCO, and Indraneel Dev has joined our team as CFO.

Speaker #3: We're very pleased with our first-quarter results. While we remain mindful of the volatility of the broader macroeconomic environment, we see positive momentum continuing across our business.

Speaker #3: As a result, we are raising our full-year outlook for 2026. As the market leader and with positive momentum building on confident that WESCO will continue to outperform our markets through disciplined execution, our differentiated value proposition, and the strength of our global platform.

Speaker #3: Our WESCO team remains focused on driving strong growth and margin expansion and delivering superior value to our customers and shareholders. One final comment. As we announced earlier this year, Dave Schultz is retiring from WESCO, and Neil Dev has joined our team as CFO.

Speaker #3: I would like to thank Dave for his outstanding leadership, his dedicated service, and his tremendous contributions to WESCO and our overall success over the past 10 years.

John Engel: I would like to thank Dave for his outstanding leadership, his dedicated service, and his tremendous contributions to WESCO and our overall success over the past 10 years. We wish Dave and his family our very best. Neil's off to a great start as WESCO's new CFO, and I will now turn it over to him to take you through our excellent Q1 results and raised full-year outlook in more detail. Neil.

Speaker #3: We wish Dave and his family our very best. Neil's off to a great start as WESCO's new CFO. And I will now turn it over to him to take you through our excellent first-quarter results and raised full-year outlook in more detail.

Speaker #3: Neil.

Speaker #2: Thank you, John. And good morning, everyone. I'd like to thank John and the board for the opportunity and I want to recognize Dave for his leadership and thank him for his partnership during this transition.

Indraneel Dev: Thank you, John, and good morning, everyone. I'd like to thank John and the board for the opportunity, and I wanna recognize Dave for his leadership and thank him for his partnership during this transition. Before turning to our results, I'll take a minute to touch on my near-term priorities. I intend to focus on partnering with the leadership team to scale our business in attractive end markets, drive profitable growth, continued market outperformance, and deliver strong cash flow with disciplined capital allocation. That mindset has been shaped by working across both public and private companies, often in complex global, highly competitive technology and capital-intensive businesses. John and I are aligned on the initial focus areas where we have the potential for taking our existing great capabilities to the next level.

Speaker #2: Before turning to our results, I'll take a minute to touch on my near-term priorities. I intend to focus on partnering with the leadership team to scale our business in attractive and markets.

Speaker #2: Drive profitable growth. Continued market outperformance in deliver strong cash flow with disciplined capital allocation. That mindset has been shaped by working across both public and private companies, often in complex global, highly competitive technology and capital-intensive businesses.

Speaker #1: The opportunity and I want to recognize Dave for his leadership and thank him for his partnership during this transition. Before turning to our results, I'll take a minute to touch on my near-term priorities.

Speaker #1: Additionally, EPS growth benefited from a lower tax rate and from the absence of the preferred stock dividend following last year's redemption. Turning to slide 6, CSS delivered another excellent quarter.

Speaker #1: I intend to focus on partnering with the leadership team to scale our business markets. Drive profitable growth, continued market outperformance in deliver strong cash flow, with disciplined capital allocation.

Speaker #2: John and I are aligned on the initial focus areas where we have the potential for taking our existing great capabilities to the next level.

Speaker #1: However, including data center-related sales, enterprise network infrastructure grew high teens year over year. Overall, organic growth was driven primarily by volume, up about 21%, with price contributing approximately 1%.

Speaker #2: First, driving operating leverage and margin expansion as we scale. Particularly in data centers and other high-growth end markets. This will be accomplished by a combination of partnering with our business leaders to ensure that our commercial and go-to-market strategy reflects our enhanced value proposition and partnering with our functional leaders on continuing to improve our cost structure.

Indraneel Dev: First, driving operating leverage and margin expansion as we scale, particularly in data centers and other high-growth end markets. This will be accomplished by a combination of partnering with our business leaders to ensure that our commercial and go-to-market strategy reflects our enhanced value proposition, partnering with our functional leaders on continuing to improve our cost structure. It is all about profitable growth. Second, improving working capital efficiency and cash conversion through tighter processes, analytics, and execution discipline. This is not just about back office. It is about optimizing our end-to-end capabilities from sales funnel to cash collection. Transitioning to our results, let me start with the highlights for the quarter. We delivered strong organic sales growth year over year, with sequential performance better than typical seasonality. Profitability improved with meaningful EBITDA margin expansion.

Speaker #1: With organic sales up 22%. We're set. Within the rest of the portfolio, security delivered high single-digit growth while enterprise network infrastructure declined mid-single digits due to weakness in the service provider market.

Speaker #1: That mindset has been shaped by working across both public and private companies, often in complex global, highly competitive technology and capital-intensive businesses. John and I are aligned on the initial focus areas where we have the potential for taking our existing great capabilities to the next level.

Speaker #1: Backlog ended the quarter at a record level, and was up approximately 40% versus the prior year. Reflecting continued strong data center project activity and order rates.

Speaker #1: First, driving operating leverage in margin. Year over year improvement was driven primarily by stronger operating performance in the quarter, reflecting higher sales and improved profitability.

Speaker #2: It's all about profitable growth. Second, improving working capital efficiency and cash conversion through tighter processes analytics and execution discipline. This is not just about back office.

Speaker #2: It's about optimizing our end-to-end capabilities from sales funnel to cash collection. Transitioning to our results. Let me start with the highlights for the quarter.

Speaker #2: We delivered strong organic sales growth year over year. With sequential performance, better than typical seasonality. Profitability improved with meaningful EBITDA margin expansion. EPS was up more than 50%.

Indraneel Dev: EPS was up more than 50%, and free cash flow generation was strong at 128% of net income. With that, let me turn to our Q1 results starting on slide 4. We delivered an excellent Q1, with reported sales of $6.1 billion, up 14% year over year, including 12% organic growth. We delivered volume growth across all three SBUs and realized an estimated price benefit of approximately 3 points. Gross margin was 21.2%, up approximately 20 basis points year over year, and SG&A operating leverage improved by 40 basis points. As a result, adjusted EBITDA increased 25% to $389 million, and adjusted EBITDA margin expanded 60 basis points to 6.4% of sales.

Speaker #2: And free cash flow generation was strong at $128% of net income. With that, let me turn to our first-quarter results starting on slide four.

Speaker #2: We delivered an excellent first quarter with reported sales of $6.1 billion, up 14% year over year, including 12% organic growth. We delivered volume growth across all three SBUs and realized an estimated price benefit of approximately three points.

Speaker #2: Gross margin was 21.2%, up approximately 20 basis points year over year. And SG&A operating leverage improved by 40 basis points. As a result, adjusted EBITDA increased 25% to $389 million.

Speaker #2: And adjusted EBITDA margin expanded 60 basis points to $6.4% of sales. Turning to slide five. Adjusted EPS increased 52% year over year, to $3.37.

Indraneel Dev: Turning to slide 5, adjusted EPS increased 52% year over year to $3.37. The year over year improvement was driven primarily by stronger operating performance in the quarter, reflecting higher sales and improved profitability. Additionally, EPS growth benefited from a lower tax rate and from the absence of the preferred stock dividend following last year's redemption. Turning to slide 6, CSS delivered another excellent quarter, with organic sales up 22% year over year and reported sales up 24%. This growth was driven by continued strength in Wesco Data Center Solutions, which delivered a record quarter with sales up over 60%. Within the rest of the portfolio, security delivered high single-digit growth, while enterprise network infrastructure declined mid-single digits due to weakness in the service provider market. However, including data center-related sales, enterprise network infrastructure grew high teens year over year.

Speaker #2: The year-over-year improvement was driven primarily by stronger operating performance in the quarter, reflecting higher sales and improved profitability. Additionally, EPS growth benefited from a lower tax rate and from the absence of the preferred stock dividend following last year's redemption.

Speaker #2: Turning to slide six. CSS delivered another excellent quarter. With organic sales up 22% year over year, and reported sales up 24%. This growth was driven by continued strength in WESCO data center solutions.

Speaker #1: You unpack the data center strengths, giving you a clearly outperforming the peers here, you know, where are you gaining share of wallet? You know, how's the growth rate different across the great space, white space, and services?

Speaker #2: Which delivered a record quarter with sales up over 60%. Within the rest of the portfolio, security delivered high single-digit growth, while enterprise network infrastructure declined mid-single digits due to weakness in the service provider market.

Speaker #2: However, including data center-related sales enterprise network infrastructure grew high teens year over year. Overall, organic growth was driven primarily by volume, up about 21%, with price contributing approximately 1%.

Indraneel Dev: Overall, organic growth was driven primarily by volume, up about 21%, with price contributing approximately 1%. Backlog ended the quarter at a record level and was up approximately 40% versus the prior year, reflecting continued strong data center project activity and order rates. Profitability also improved meaningfully, and our focus remains on margin expansion as we scale the business, particularly in our data center markets. Adjusted EBITDA increased 41% to $223 million, and adjusted EBITDA margin expanded 110 basis points to 9%. Importantly, despite some modest pressure on gross margin from large data center projects, we generally see healthy and accretive EBITDA margins for Wesco Data Center Solutions. Moving to slide 7. EES delivered solid growth in the quarter, with organic sales up 7% and reported sales up 9% year over year.

Speaker #2: Backlog ended the quarter at a record level, and was up approximately 40% versus the prior year. Reflecting continued strong data center project activity and order rates.

Speaker #1: Profitability also improved meaningfully in our focus remains on margin expansion as we scale the business. Particularly in our data center markets. Adjusted EBITDA increased 41% to $223 million, and adjusted EBITDA margin expanded 110 basis points to 9%.

Speaker #2: Profitability also improved meaningfully in our focus remains on margin expansion as we scale the business. Particularly in our data center markets. Adjusted EBITDA increased 41% to $223 million.

Speaker #1: Importantly, despite some modest pressure on gross margin, from large data center projects, we generally see healthy and accretive EBITDA margins for WESCO Data Center Solutions.

Speaker #2: And adjusted EBITDA margin expanded 110 basis points to 9%. Importantly, despite some modest pressure on gross margin from large data center projects, we generally see healthy and accretive EBITDA margins for WESCO data center solutions.

Speaker #1: Moving to slide 7, ESS delivered solid growth in the quarter with organic sales up 7% and reported sales up 9% year over year. Growth was driven by strong execution in OEM and construction.

Speaker #2: Moving to slide seven. ESS delivered solid growth in the quarter with organic sales up 7% and reported sales up 9% year over year. Growth was driven by strong execution in OEM and construction.

Speaker #1: OEM was up mid-teens, driven by strength in the semiconductor and data center markets. Construction was up low double digits, supported by robust wire and cable demand and continued infrastructure project activity.

Indraneel Dev: Growth was driven by strong execution in OEM and construction. OEM was up mid-teens, driven by strength in the semiconductor and data center markets. Construction was up low double digits, supported by robust wire and cable demand and continued infrastructure project activity. Industrial was down low single digits, primarily reflecting project timing impacts. However, our industrial stock and flow business grew mid-single digits in Q1, and backlog was up double digits, supporting an improving trend. Data center sales in EES were up over 100% year-over-year and represented about 10% of EES sales, highlighting the continued scaling of our exposure to this secular growth trend. Overall, organic growth was driven by solid underlying demand, with volume contributing approximately 3% and pricing contributing about 4%.

Speaker #2: OEM was up mid-teens, driven by strength in the semiconductor and data center markets. Construction was up below double digits. Supported by robust wire and cable demand and continued infrastructure project activity.

Speaker #1: Industrial was down low single digits, primarily reflecting project timing impacts. However, our industrial stock and flow business grew mid-single digits, in the first quarter, and backlog was up double digits, supporting and improving trend.

Speaker #2: Industrial was down low single digits, primarily reflecting project timing impacts. However, our industrial stock and flow business grew mid-single digits, in the first quarter, and backlog was up double digits, supporting and improving trend.

Speaker #1: Data center sales in EES were up over 100% year over year, and represented about 10% of EES sales. Highlighting the continued scaling of our exposure to this secular growth trend.

Speaker #2: Data center sales in EES were up over 100% year over year, and represented about 10% of EES sales. Highlighting the continued scaling of our exposure to this secular growth trend.

Speaker #1: Overall, organic growth was driven by solid underlying demand, with volume contributing approximately 3% and pricing contributing about 4%. Importantly, backlog ended the quarter at a record level, up 14% versus the prior year, supported by strong order activity and pipeline conversion.

Speaker #2: Overall, organic growth was driven by solid underlying demand, with volume contributing approximately 3% and pricing contributing about 4%. Importantly, backlog ended the quarter at a record level, up 14% versus the prior year, supported by strong order activity and pipeline conversion.

Speaker #1: Profitability improved meaningfully in the quarter, adjusted EBITDA increased 30% to $185 million. And adjusted EBITDA margin expanded 130 basis points to $8.2%, driven by higher gross margins and strong operating leverage.

Indraneel Dev: Importantly, backlog ended the quarter at a record level, up 14% versus the prior year, supported by strong order activity and pipeline conversion. Profitability improved meaningfully in the quarter. Adjusted EBITDA increased 30% to $185 million. Adjusted EBITDA margin expanded 130 basis points to 8.2%, driven by higher gross margins and strong operating leverage. Turning to slide 8. UBS delivered 6% organic sales growth in Q1, supported by improving demand and an increasing backlog. Utility delivered high single-digit growth, driven by strong double-digit growth in investor-owned utilities and continued positive momentum in grid services. Public power was flat year-over-year, which is encouraging. However, the market remains highly competitive, and gross margins are expected to remain under pressure given weak sales in transformers and wire and cable, consistent with our prior commentary.

Speaker #2: Profitability improved meaningfully in the quarter. Adjusted EBITDA increased 30% to $185 million. And adjusted EBITDA margin expanded 130 basis points to $8.2%, driven by higher gross margins and strong operating leverage.

Speaker #1: Turning to slide 8, UBS delivered 6% organic sales growth in the first quarter, supported by improving demand and an increasing backlog. Utility delivered high single-digit growth, driven by strong double-digit growth in investor-owned utilities and continued positive momentum in grid services.

Speaker #2: Turning to slide eight. UBS delivered 6% organic sales growth in the first quarter, supported by improving demand and an increasing backlog. Utility delivered high single-digit growth, driven by strong double-digit growth in investor-owned utilities and continued positive momentum in grid services.

Speaker #1: Public Power was flat year over year, which is encouraging. However, the market remains highly competitive and gross margins are expected to remain under pressure, given weak sales in transformers and wire and cable, consistent with our prior commentary.

Speaker #2: Public Power was flat year over year, which is encouraging. However, the market remains highly competitive and gross margins are expected to remain under pressure, given weak sales in transformers and wire and cable, consistent with our prior commentary.

Speaker #1: Broadband delivered mid-single-digit growth year over year, supported by strength in the US. Overall, organic sales growth reflected approximately 3% volume growth and about 3% pricing.

Speaker #1: Backlog increased 16% year over year. We are seeing increasing interest in our grid services-enabled power capabilities, from hyperscalers and other data center customers. We have a growing funnel of sales opportunities and we are bullish that we will benefit from AI-driven data environments and other major power-related infrastructure projects over the long term.

Speaker #2: Broadband delivered mid-single-digit growth year over year, supported by strength in the US. Overall, organic sales growth reflected approximately 3% volume growth and about 3% pricing.

Indraneel Dev: Broadband delivered mid-single digit growth year-over-year, supported by strength in the US. Overall, organic sales growth reflected approximately 3% volume growth and about 3% pricing. Backlog increased 16% year-over-year. We are seeing increasing interest in our grid services-enabled power capabilities from hyperscalers and other data center customers. We have a growing funnel of sales opportunities, and we are bullish that we will benefit from AI-driven data center investments and other major power-related infrastructure projects over the long term. Adjusted EBITDA was $131 million, down 5% versus the prior year, and adjusted EBITDA margin decreased 120 basis points to 9.6%, primarily driven by gross margin pressure and higher SG&A as a percentage of sales.

Speaker #2: Backlog increased 16% year over year. We are seeing increasing interest in our grid services-enabled power capabilities, from hyperscalers and other data center funnel of sales opportunities, and we are bullish that we will benefit from AI-driven data center investments and other major power-related infrastructure projects over the long term.

Speaker #1: Adjusted EBITDA was $131 million, down 5% versus the prior year, and adjusted EBITDA margin decreased 120 basis points to 9.6%. This was primarily driven by gross margin pressure and higher SG&A as a percentage of sales.

Speaker #2: Adjusted EBITDA was $131 million, down 5% versus the prior year, and adjusted EBITDA margin decreased 120 basis points to 9.6%. Primarily driven by gross margin pressure and higher SG&A as a percentage of sales.

Speaker #1: Recall that UBS is accretive to total company adjusted EBITDA margin, given its higher margin profile and the improved growth rates will lead to even higher margins over time, given the operating leverage.

Speaker #1: Turning to slide 9, I want to take a moment to review the continued momentum we're seeing in the broader data and WESCO's role in net growth.

Speaker #2: Recall that UBS is accretive to total company adjusted EBITDA margin, given its higher margin profile and the improved growth rates will lead to even higher margins over time, given the operating leverage.

Indraneel Dev: Recall that UBS is accretive to total company-adjusted EBITDA margin, given its higher margin profile, and the improved growth rates will lead to even higher margins over time, given the operating leverage. Turning to slide 9. I want to take a moment to further review the continued momentum we're seeing in the broader data center market and WESCO's role in that growth. Data center sales continued to scale in Q1, reaching approximately $1.4 billion, up about 70% year-over-year, and representing 24% of total company sales in the quarter. Notably, the data center end market is now WESCO's largest end market across all three SBUs and support a diverse set of customers with a diverse set of WESCO capabilities. On a trailing twelve-month basis, data center sales are now approximately $4.8 billion or 20% of WESCO's total sales.

Speaker #1: Data centers continue to scale in the first quarter. Weekly 1.4 billion, up about 70% year over year, and presenting 24% of total company sales.

Speaker #2: Turning to slide nine, I want to take a moment to further review the continued momentum we're seeing in the broader data center market and WESCO's role in that growth.

Speaker #2: Data center sales continue to scale in the first quarter, reaching approximately 1.4 billion. Up about 70% year over year, and representing 24% of total company sales in the quarter.

Speaker #1: Across all three SBUs, and support a diverse set of customers, a diverse set of WESCO capabilities. On a trailing 12-month basis, data center sales are now approximately $4.8 billion, or 20% of WESCO's total sales.

Speaker #2: Notably, the data center end market is now WESCO's largest end market across all three SBUs, and support a diverse set of customers, with a diverse set of WESCO capabilities.

Speaker #1: This underscores both the strength of the secular demand environment and the expanding scope of what we provide customers across all business units, and across the full life cycle.

Speaker #2: On a trailing 12-month basis, data center sales are now approximately $4.8 billion, or 20% of WESCO's total sales. This underscores both the strength of the secular demand environment and the expanding scope of what we provide customers across all business units, and across the full life cycle.

Speaker #1: Turning to slide 10, this highlights our end-to-end data center offering and the role we play across the full life cycle. With exposure across CSS, EES, and UBS.

Indraneel Dev: This underscores both the strength of the secular demand environment and the expanding scope of what we provide customers across all business units and across the full life cycle. Turning to slide 10. This highlights our end-to-end data center offering and the role we play across the full life cycle with exposure across CSS, EES, and UBS. WESCO supports hyperscale, multi-tenant, colocation, and enterprise customers with a comprehensive portfolio of products, services, and solutions that span power, connectivity, and ongoing operations. Our expanding capabilities and global ecosystem position us as a trusted partner as customers build, scale, and operate increasingly complex data center environments. Turning to slide 11. We delivered strong free cash flow of $213 million in Q1. Free cash flow was 128% of adjusted net income.

Speaker #1: WESCO supports hyperscale, multi-tenant, colocation, and enterprise customers with a comprehensive portfolio of products, services, and solutions that span power, connectivity, and ongoing operations. Our expanding capabilities and global ecosystem position us as a trusted partner as customers build, scale, and operate increasingly complex data center environments.

Speaker #2: Turning to slide 10. This highlights our end-to-end data center offering and the role we play across the full life cycle. With exposure across CSS, EES, and UBS.

Speaker #2: WESCO supports hyperscale, multi-tenant, colocation, and enterprise customers with a comprehensive portfolio of products, services, and solutions that span power, connectivity, and ongoing operations. Our expanding capabilities and global us as a trusted partner as customers build, scale, and operate increasingly complex data center environments.

Speaker #1: Turning to slide 11, we delivered strong free cash flow of $213 million in the first quarter. Free cash flow was $128% of adjusted net income.

Speaker #1: Despite sequential sales growth, networking capital was a source of cash in the quarter. Largely driven by timing of inventory purchases and accounts payable. Moving to slide 12, during the quarter, we executed a highly successful $1.5 billion bond refinancing that was upsized relative to the initial launch.

Speaker #2: Turning to slide 11. We delivered strong free cash flow of $213 million in the first quarter. Free cash flow was $128% of adjusted net income.

Speaker #2: Despite sequential sales growth, net working capital was a source of cash in the quarter, largely driven by timing of inventory purchases and accounts payable.

Indraneel Dev: Despite sequential sales growth, net working capital was a source of cash in the quarter, largely driven by timing of inventory purchases and accounts payable. Moving to slide 12. During the quarter, we executed a highly successful $1.5 billion bond refinancing that was upsized relative to the initial launch, reflecting strong investor demand and record pricing. Notably, we achieved the lowest coupon WESCO has ever achieved 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 our 2028 senior notes, improve liquidity, and further strengthen the balance sheet. This refinancing meaningfully improves our debt maturity profile and is expected to generate more than $20 million in annualized interest expense savings. We exited the quarter at 3.2x net debt to adjusted EBITDA.

Speaker #1: Reflecting strong investor demand and record pricing. Notably, we achieved the lowest coupon WESCO has ever achieved on a senior notes offering and the lowest for a double B-rated five-year note issued since 2021.

Speaker #2: Moving to slide 12. During the quarter, we executed a highly successful $1.5 billion bond refinancing that was upsized relative to the initial launch. Reflecting strong investor demand and record pricing.

Speaker #1: The net proceeds will be used to redeem our 2028 senior notes improved liquidity and further strengthen the balance sheet. This refinancing meaningfully improves our debt maturity profile and is expected to generate more than $20 million in annualized interest expense savings.

Speaker #2: Notably, we achieved the lowest coupon WESCO has ever achieved on a senior notes offering and the lowest for a BB-rated five-year note issued since 2021.

Speaker #2: The net proceeds will be used to redeem our 2028 senior notes improved liquidity and further strengthen the balance sheet. This refinancing meaningfully improves our debt maturity profile and is expected to generate more than $20 million in annualized interest expense savings.

Speaker #1: We exited the quarter at 3.2 times net debt to adjusted EBITDA. Additionally, we repurchased $25 million of shares during the quarter towards offsetting dilution.

Speaker #1: Within moving to slide 13, within CSS, we have raised our 2026 outlook to low double-digit growth. Reflecting sales and up 20 plus percent for the year.

Speaker #2: We exited the quarter at 3.2 times net debt to adjusted EBITDA. Additionally, we repurchased $25 million of shares during the quarter towards offsetting dilution.

Indraneel Dev: Additionally, we repurchased $25 million of shares during the quarter towards offsetting dilution. Moving to slide 13. Within CSS, we have raised our 2026 outlook to low double-digit growth, reflecting the continued strength and visibility we are seeing in data centers. Data center sales are now expected to be up 20%+ for the year. Given the size of the market, we intend to continue to focus on healthy EBITDA margin business. Our outlook for EES and UBS remains unchanged. Moving to slide 14. We are increasing our outlook for the full year given strong Q1 results. Before I get into the details, I want to address our position relative to the current macroeconomic uncertainty. Through Q1 and into April, we have seen no meaningful disruption to our revenue or profitability.

Speaker #1: Given the size of the market, we intend to continue to focus on healthy EBITDA margin business. Our outlook for EES and UBS remains unchanged.

Speaker #2: Within moving to slide 13. Within CSS, we have raised our 2026 outlook to low double-digit growth. Reflecting the continued strength and visibility we are seeing in data centers, data center sales are now expected to be up 20 plus percent for the year.

Speaker #1: Moving to slide 14, we are increasing our outlook for the full year given strong first quarter results. Before I get into the details, I want to address our position relative to the current macroeconomic uncertainty.

Speaker #2: Given the size of the market, we intend to continue to focus on healthy EBITDA margin business. Our outlook for EES and UBS remains unchanged.

Speaker #1: Through the first quarter and into April, we have seen no meaningful disruption to our revenue or profitability. But we continue to monitor the situation closely and kept this backdrop in mind for our outlook.

Speaker #2: Moving to slide 14. We are increasing our outlook for the full year given strong first quarter results. Before I get into the details, I want to address our position relative to the current macroeconomic uncertainty.

Speaker #1: In the Middle East, I am pleased to report that all of our employees are safe. From a company perspective, 1% of our sales in the region, with the majority of those sales related to our CSS business.

Speaker #2: Through the first quarter and into April, we have seen no meaningful disruption to our revenue or profitability. But we continue to monitor the situation closely and kept this backdrop in mind for our outlook.

Speaker #1: The secondary impacts on are more tangible but have so far been manageable. Our teams are focused on passing these cost increases to our customers where appropriate, and limiting the time that transportation quotes are valid to minimize overall risk.

Indraneel Dev: We continue to monitor the situation closely and kept this backdrop in mind for our outlook. In the Middle East, I am pleased to report that all of our employees are safe. From a company perspective, we generate less than 1% of our sales in the region, with the majority of those sales related to our CSS business. The secondary impacts on transportation costs are more tangible, but have so far been manageable. Our teams are focused on passing these cost increases to our customers where appropriate and limiting the time that transportation quotes are valid to minimize overall risk. On the tariff front, the overall impact to WESCO is not material. As a reminder, WESCO is the importer of record for a small percentage of our cost of goods sold, typically low single digits. We typically increase prices when needed to maintain margins.

Speaker #2: In the Middle East, I am pleased to report that all of our employees are safe. From a company perspective, we generate less than 1% of our sales in the region with the majority of those sales related to our CSS business.

Speaker #1: On the tariff front, the overall impact to WESCO is not material. As a reminder, WESCO is the importer of record for a small percentage of our cost of goods sold, typically low single digits.

Speaker #2: The secondary impacts on transportation costs are more tangible but have so far been manageable. Our teams are focused on passing these cost increases to our customers where appropriate and limiting the time that transportation quotes are valid to minimize overall risk.

Speaker #1: We typically increase prices when needed to maintain margins. At this point, we don't expect any material recoveries from the IEPA decision. Based on the strong start to the year, we are raising our full year 2026 outlook.

Speaker #2: On the tariff front, the overall impact to WESCO is not material. As a reminder, WESCO is the importer of record for a small percentage of our cost of goods sold, typically low single digits.

Speaker #1: We now expect reported sales growth of 6 to 9 percent, with organic sales growth of 5 to 8 percent, which implies reported sales of approximately $24.9 to $25.6 billion.

Speaker #2: We typically increase prices when needed to maintain margins. At this point, we don't expect any material recoveries from the IEPA decision. Based on the strong start to the year, we are raising our full year 2026 outlook.

Indraneel Dev: At this point, we don't expect any material recoveries from the IEEPA decision. Based on the strong start to the year, we are raising our full year 2026 outlook. We now expect reported sales growth of 6% to 9%, with organic sales growth of 5% to 8%, which implies reported sales of approximately $24.9 to 25.6 billion. Our assumptions around foreign exchange and pricing remain unchanged. On profitability, we continue to expect adjusted EBITDA margin in the range of 6.6% to 7%, essentially increasing our EBITDA guidance in dollar terms. We are raising our adjusted diluted EPS outlook to $15 to 17 per share, reflecting earnings leverage demonstrated in Q1, as well as slight adjustments to the expected tax rate for the year.

Speaker #1: Our assumptions around foreign exchange and pricing remain unchanged. On profitability, we continue to expect adjusted EBITDA margin in the range of 6.6 to 7 percent.

Speaker #2: We now expect reported sales growth of 6% to 9%, with organic sales growth of 5% to 8%. Which implies reported sales of approximately $24.9 to $25.6 billion.

Speaker #1: Essentially increasing our EBITDA guidance in dollar terms. We are raising our adjusted diluted EPS outlook to $15 to $17 per share, reflecting earnings leverage demonstrated in the first quarter, as well as slight adjustments to the expected tax rate for the year.

Speaker #2: Our assumptions around foreign exchange and pricing remain unchanged. On profitability, we continue to expect adjusted EBITDA margin in the range of 6.6% to 7%.

Speaker #1: There is no change to our outlook on interest expense based on our current view of no rate cuts this year and factoring in timing of the debt raise and subsequent paydown.

Speaker #2: Essentially increasing our EBITDA guidance in dollar terms. We are raising our adjusted diluted EPS outlook to 15% to 17 dollars per share. Reflecting earnings leverage demonstrated in the first quarter, as well as slight adjustments to the expected tax rate for the year.

Speaker #2: There is no change to our current view of no rate cuts this year and factoring in timing of the debt raise and subsequent paydown.

Indraneel Dev: There is no change to our outlook on interest expense based on our current view of no rate cuts this year and factoring in timing of the debt raise and subsequent paydown. We continue to expect free cash flow of $500 to 800 million as we maintain working capital discipline supporting higher growth. As a reminder, our historical pattern is typically about 70% of our annual cash flow is generated in H2 of the year. Turning to slide 15. While April is not entirely closed out, month to date, sales per workday are up about 10% year-over-year, with growth continuing to be led by CSS. For the quarter, we expect reported sales to be up high single digits.

Speaker #2: Finally, we continue to expect free cash flow of $500 to $800 million as we maintain working capital discipline supporting higher growth. As a reminder, our historical pattern is typically about 70% of our annual cash flow is generated in the second half of the year.

Speaker #2: Turning to slide 15. While April is not entirely closed out, month to date, sales per workday are up about 10% year over year. With growth continuing to be led by CSS.

Speaker #2: For the quarter, we expect reported sales to be up high single digits. Recall that more than 50% of our sales are related to project activity and the mix of project sales is higher in the second and third quarter.

Indraneel Dev: Recall that more than 50% of our sales are related to project activity, and the mix of project sales is higher in Q2 and Q3 due to increased construction activity. The timing of project billings at the end of the quarter will determine where we land in the high single-digit range. On margins, Q2 EBITDA margin is expected to be about flat year over year and within our full year guidance range. Higher incentive compensation, approximately 25 basis points, accounts for most of the year-over-year pressure, and we continue to expect double-digit growth in adjusted EPS. As you think about our outlook, keep in mind that we had strong sales growth and good EBITDA margins in Q2, Q3, and Q4 of last year. On a two-year stacked basis, growth is expected to remain strong and consistent with the outlook we've provided.

Speaker #2: Due to increased construction activity, the timing of project billings at the end of the quarter will determine where we land in the high single digit range.

Speaker #2: On margins, second quarter EBITDA margin is expected to be about flat year over year. And within our full year guidance range, higher incentive compensation approximately 25 basis points accounts for most of the year-over-year pressure.

Speaker #2: And we continue to expect double-digit growth in adjusted EPS. As you think about our outlook, keep in mind that we had strong sales growth and good EBITDA margins in second, third, and fourth quarter of last year.

Speaker #2: On a two-year stacked basis, growth is expected to remain strong and consistent with the outlook we've provided. We've covered a lot of material this morning, so let me briefly recap the key points before we open the call to your questions.

Indraneel Dev: We've covered a lot of material this morning, so let me briefly recap the key points before we open the call to your questions. In summary, we delivered an excellent start to the year with double-digit sales growth, margin expansion, and over 50% earnings per share growth. AI-driven data centers and related investments from our customers remain a key driver of growth across several product categories and verticals. We generated strong cash flow and improved our leverage and debt maturity profile during the quarter. Despite macroeconomic uncertainty, we are confident in our positive business momentum and are raising our full-year outlook. As we lean in to support organic growth, there is no change to our previously communicated capital allocation priorities and guiding principles. With that, operator, we can now open the call to questions.

Speaker #2: In summary, we delivered an excellent start to the year with double-digit sales growth, margin expansion, and over 50% earnings per share growth. AI-driven data centers and related investments from our customers remain a key driver of growth across several product categories and verticals.

Speaker #2: We generated strong cash flow and improved our leverage and debt maturity profile during the quarter. Despite macroeconomic uncertainty, we are confident in our positive business momentum and our raising our full year outlook.

Speaker #2: As we lean in to support organic growth, there is no change to our previously communicated capital allocation priorities and guiding principles. With that, operator, we can now open the call to questions.

Speaker #2: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star followed by one on your telephone keypad.

Operator: Thank you. We will now begin the question-and-answer session. If you would like to ask a question, please press star followed by 1 on your telephone keypad. Please limit your questions to 1 question and 1 follow-up. Our first question today comes from David Manthey with Baird. Please go ahead.

Speaker #2: Please limit your questions to one question and one follow-up. Our first question today comes from David Manthey with Baird. Please go ahead.

Speaker #3: All right. Thank you. Good morning, guys.

David Manthey: All right. Thank you. Good, good morning, guys.

Indraneel Dev: Morning, Dave.

Speaker #4: Morning, Dave. CSS looks like yeah, good morning, John. CSS doing amazing, so I'll focus on EES and UBS with my questions first thing here.

Indraneel Dev: Morning, Dave.

David Manthey: Yeah. Good morning, John. CSS doing amazing, so I'll focus on EES and UBS with my questions first thing here. First on lead times, I know within the industrial business you mentioned project timing as the reason for that small decline there. With switchgear components stretching well over a year and medium voltage switchgear sometimes saying 40, 60-week lead times, you're clearly navigating any shortages in the market out there well overall. Could you just talk about the specific issues? Where are the pinch points? Is that what you mean by project timing?

Speaker #4: First, on lead times, I know within the industrial business, you mentioned project timing as the reason for that small decline there. And with switchgear components stretching well over a year and medium voltage switchgear sometimes same, 40, 60 week lead times, you're clearly navigating any shortages in the market out there well overall.

Speaker #4: But could you just talk about the specific issues where the pinch points, and is that what you mean by project timing?

Speaker #3: Yeah. Well, great question, Dave. And your lead times are comments are accurate. We're still seeing extended lead times in a couple of critical categories.

Indraneel Dev: Yeah, well, great question, Dave. Your lead times are, you know, comments are accurate. We're still seeing extended lead times in a couple critical categories. Honestly, we've been facing those extended lead times, you know, since the pandemic, and we've been managing the business well. I think this is just more of a very specific intra-quarter project timing issue. I'll give you my views of industrial. I've mentioned this before, I know. I really believe we're at the beginning of an industrial super cycle. In the US, in particular, it's driven by AI-driven infrastructure investments. Clearly, the need for increased power generation, not just for AI data centers, but for all these mega projects, and a fundamental secular trend that I think is becoming more apparent every day regarding reshoring.

John Engel: Yeah, well, great question, Dave. Your lead times are, you know, comments are accurate. We're still seeing extended lead times in a couple critical categories. Honestly, we've been facing those extended lead times, you know, since the pandemic, and we've been managing the business well. I think this is just more of a very specific intra-quarter project timing issue. I'll give you my views of industrial. I've mentioned this before, I know. I really believe we're at the beginning of an industrial super cycle. In the US, in particular, it's driven by AI-driven infrastructure investments. Clearly, the need for increased power generation, not just for AI data centers, but for all these mega projects, and a fundamental secular trend that I think is becoming more apparent every day regarding reshoring.

Speaker #3: But honestly, we've been facing those extended lead times since the pandemic. And we've been managing the business well. I think if this is just more of a very specific intra-quarter project timing issue, I'll give you my views of industrial.

Speaker #3: I've mentioned this before, I know. I really believe we're at the beginning of an industrial supercycle in the US in particular. It's driven by AI-driven infrastructure investments.

Speaker #3: Clearly, the need for increased power generation, not just for AI data centers, but for all these mega projects. And a fundamental secular trend that I think is becoming more apparent every day regarding reshoring and the secular trends are going to play out over many years.

Indraneel Dev: These secular trends are gonna play out over many years, and they really expand WESCO's opportunity set. Specifically relative to your question in Q1, I'd ask you to look at kind of our short cycle business. Neil highlighted it in his commentary. Our industrial stock and flow, the short cycle business, MRO supplies and such, that was up in line. Mid-single-digit growth with recent recovery in industrial production. That's really a good important leading indicator. It was offset for us with some project timing issues. Relative to the project timing issues, however, our book-to-bills were exceptionally strong in EES and particularly in industrial in Q1. We have double-digit backlog growth in the industrial portion of EES. That supports a future improving trend for industrial. Again, consistent with my overall views of the cycle.

John Engel: These secular trends are gonna play out over many years, and they really expand WESCO's opportunity set. Specifically relative to your question in Q1, I'd ask you to look at kind of our short cycle business. Neil highlighted it in his commentary. Our industrial stock and flow, the short cycle business, MRO supplies and such, that was up in line. Mid-single-digit growth with recent recovery in industrial production. That's really a good important leading indicator. It was offset for us with some project timing issues. Relative to the project timing issues, however, our book-to-bills were exceptionally strong in EES and particularly in industrial in Q1. We have double-digit backlog growth in the industrial portion of EES. That supports a future improving trend for industrial. Again, consistent with my overall views of the cycle.

Speaker #3: And they really expand WESCO's opportunity set. Specifically for your relative to your question in Q1, I'd ask you to look at kind of our short cycle business, Neil highlighted it in his commentary.

Speaker #3: Our industrial stock and flow, the short cycle business, MRO, supplies, and such. That was up in line. Mid-single digit growth with recent recovery and industrial production.

Speaker #3: And so that's really a good, important leading indicator. It was offset for us with some project timing issues. Relative to the project timing issues, however, our booked bills were exceptionally strong in EES and particularly in industrial in the first quarter.

Speaker #3: And we have double-digit backlog growth in the industrial portion of EES. So that supports a future improving trend for industrial. Again, consistent with my overall views of the cycle.

Speaker #4: Yep. Thanks for that, John. And I agree. Maybe I could ask Neil, from the first conversation that you and I had, I get the impression that you're a deal guy at heart.

David Manthey: Yep. Thanks for that, John.

Indraneel Dev: Yeah.

John Engel: Yeah.

David Manthey: I agree. Maybe I could ask Neil, you know, from the first conversation that you and I had, I get the impression that you're a deal guy at heart. Could you just discuss, as you settle in here, how you find the WESCO M&A process and what you think about the pipeline, your general thoughts on consolidation going forward?

Speaker #4: And could you just discuss, as you settle in here, how you find the WESCO M&A process and what you think about the pipeline, your general thoughts on consolidation going forward?

Speaker #5: Yeah, Dave. So I think from the WESCO perspective, as I've spent a lot of time on the operations, one thing I would mention, I'm more of an operations guy than a deal guy.

Indraneel Dev: Yeah, Dave. You know, I think from the WESCO perspective, as I've spent a lot of time on the operations, one thing I would mention, I'm more of an operations guy than a deal guy, first of all. I do like to get into the operations side of deals. I would say we have a great team here evaluating deals. We're gonna be very active but also very disciplined, right? We wanna make sure that there is fit in terms of our strategy and where we wanna take the business. And we wanna play into a lot of the mega trends that we are seeing in the marketplace, right?

Speaker #5: First of all. But I do like to get into the operations side of deals. And so I would say we have a great, great team here, evaluating deals.

Speaker #5: And we're going to be very active, but also very, very disciplined. Right? We want to make sure that there is fit in terms of our strategy and where we want to take the business.

Speaker #5: And we want to play into a lot of the mega trends that we are seeing in the marketplace. Right? So it's all about how a deal accelerates our overall growth and profitability.

Indraneel Dev: It's all about how a deal accelerates our overall growth and profitability and, you know, not just something that we would buy to leave standalone. Like we've talked about, Dave, like the margin profile is another real important driver for us. We're very focused on it. We've launched a number of initiatives on that front. M&A will be another lever. Dave, just one thing back on your earlier question, not specific to EES and UBS, but I came from the infrastructure side, building a lot of infrastructure. One of the things that right now we see prior to my role at here and we will see some of the secondary effects here, is the throttling factor for building infrastructure really are two things: lead time and skilled labor.

Speaker #5: And not just something that we would buy to leave standalone. And like we've talked about, Dave, the margin profile is another real important driver for us.

Speaker #5: We're very focused on it. We've launched a number of initiatives on that front. And M&A will be another lever. And Dave, just the one thing back on your earlier question, not specific to EES and UBS, but I came from the infrastructure side, building a lot of infrastructure.

Speaker #5: And one of the things that right now we see prior to my role at here, and we'll see some of the secondary FX here, is the throttling factor for building infrastructure really are two things: lead time and skilled labor.

Speaker #5: And that's been true for a number of years. And we'll continue to be true going forward. Right? So it's not the appetite for investment.

Indraneel Dev: That's been true for a number of years and will continue to be true going forward, right? It's not the appetite for investment, it's not the allocation of capital. It's really those two things that's calibrating the spend quarter over quarter from a customer's perspective, not our perspective.

Speaker #5: It's not the allocation of capital. It's really those two things that's calibrating the spend quarter over quarter from a customer's perspective, not our perspective.

Speaker #4: All right. I appreciate your thoughts, Neil. Thank you. And thanks, John.

David Manthey: All right. I appreciate your thoughts, Indraneel. Thank you. Thanks, John.

Speaker #3: Thanks, Dave.

John Engel: Thanks, Dave.

Speaker #1: The next question comes from Deane Dray, with RBC Capital Markets. Please go ahead.

Operator: The next question comes from Deane Dray with RBC Capital Markets. Please go ahead.

Speaker #6: Hi. This is Kenny Steeman for Deane today. I did want to ask you about data center. Can you unpack the data center strengths given you're a clearly outperforming the peers here?

Kenny Steem: Hi, this is Kenny Steem. I'm for Deane today. I did wanna ask you about data center. Can you unpack the data center strength given you're clearly outperforming the peers here? You know, where are you gaining share of wallet? You know, how is the growth rate different across the gray space, white space, and services? Maybe a related question to that is what's driving the step down in data center growth rate in the H2 in your guidance? Thank you.

Kenny Sim: Hi, this is Kenny Sim. I'm for Deane today. I did wanna ask you about data center. Can you unpack the data center strength given you're clearly outperforming the peers here? You know, where are you gaining share of wallet? You know, how is the growth rate different across the gray space, white space, and services? Maybe a related question to that is what's driving the step down in data center growth rate in the H2 in your guidance? Thank you.

Speaker #6: Where are you gaining share of wallet? How's the growth rate different across the great space, white space, and services? And maybe a related question to that is, what's driving the step-down in data center growth rate in the back half in your guidance?

Speaker #6: Thank you.

Speaker #3: Yeah. Good morning. We've outlined white space, grey space growth rates again white space ostensibly supported and provided by our CSS business, deep roots go back in the legacy annexer.

John Engel: Good morning. We've outlined white space, gray space growth rates. White space ostensibly you know, supported and provided by our CSS business deep roots go back into legacy Anixter. They've been a data center business for decades. That grew north of 60% in the quarter, very and is the driver of the backlog growth in CSS, a major driver. Very strong growth rates in white space. Services are embedded in that. We don't break that out separately. For the gray space ostensibly served by EES, that was up over 100% in the quarter. Again, services are baked into that. Yeah, we're very confident that we're outperforming the market meaningfully. Again, we're uniquely positioned with our portfolio because we have the datacom related solutions a la white space with CSS.

[Company Representative] (WESCO): Within the rest of the portfolio, security delivered high single-digit growth while enterprise network infrastructure declined mid-single digits due to weakness in the service provider market. However, including data center-related sales, enterprise network infrastructure grew high teens year over year. Overall, organic growth was driven primarily by volume, up about 21%, with price contributing approximately 1%. Backlog ended the quarter at a record level and was up approximately 40% versus the prior year, reflecting continued strong data center project activity and order rates. Profitability also improved meaningfully, and our focus remains on margin expansion as we scale the business, particularly in our data center markets. Adjusted EBITDA increased 41% to $223 million, and Adjusted EBITDA margin expanded 110 basis points to 9%.

Speaker #3: Again, they've been a data center business for decades. That grew north of 60% in the quarter. And it is the driver of the backlog growth in CSS, a major driver.

Speaker #3: So very strong growth rates in white space. Services are embedded in that. We don't break that out separately. For the grey space, ostensibly served by EES, that was up over 100% in the quarter.

Speaker #3: And again, services are baked into that. So yeah, we're very confident that we're outperforming the market meaningfully. And again, we're uniquely positioned with our portfolio because we have the data-com related solutions, a la white space with CSS, we have the core electrical infrastructure solutions, and connectivity solutions, a la supported by our EES business.

John Engel: We have the core electrical infrastructure solutions and connectivity solutions a la supported by our EES business, and we have the power solutions supported by our WESCO business, which is our grid services in particular. It's tucked in under our WESCO business. Relative to the outlook, look, we took investors through that when we provided our full year guide. We think it was appropriate originally. We obviously have stepped it up meaningfully now given this exceptional start to Q1.

Speaker #3: And we have the power solutions supported by our UBS business, which is our grid services in particular that's tucked in under our UBS business.

Good morning. Um, the we, we've outlined, uh, White space, gray, space, growth rates again, white space ostensibly, you know, supported and provided by our CSS business. Deep roots, go back into the Legacy, an extra and they've been a data center business. For decades That Grew north of 60% in the quarter vary and is it is the driver of the backlog growth in CSS a major driver, so very strong growth rates in white. Space services, are embedded in that we don't break that out separately for the grey space extensively, served by EES that was up over a 100%.

Speaker #3: So relative to the outlook, look, we took investors through that when we provided our full-year guide. We think it was appropriate. Originally, we obviously have stepped it up meaningfully now given this exceptional start to Q1.

[Company Representative] (WESCO): Importantly, despite some modest pressure on gross margin from large data center projects, we generally see healthy and accretive EBITDA margins for Wesco Data Center Solutions. Moving to slide 7. EES delivered solid growth in the quarter, with organic sales up 7% and reported sales up 9% year over year. Growth was driven by strong execution in OEM and construction. OEM was up mid-teens, driven by strength in the semiconductor and data center markets. Construction was up low double digits, supported by robust wire and cable demand and continued infrastructure project activity. industrial was down low single digits, primarily reflecting project timing impacts. Our industrial stock and flow business grew mid-single digits in Q1, and backlog was up double digits, supporting an improving trend.

Kenny Steem: Thank you. I appreciate that. Just on sticking with CSS, another really good double-digit incremental margins for this segment this quarter. Just curious what needs to happen for this double-digit incremental margins to be, you know, sustainable and potentially move towards the mid-teens given you're still executing on these large projects?

Speaker #6: Thank you. I appreciate that. And just speaking with CSS, another really good double-digit incremental margins for the segment this quarter just curious what needs to happen for this double-digit incremental margins to be in a sustainable and potentially move towards the meetings given you're still executing on this large project?

Kenny Sim: Thank you. I appreciate that. Just on sticking with CSS, another really good double-digit incremental margins for this segment this quarter. Just curious what needs to happen for this double-digit incremental margins to be, you know, sustainable and potentially move towards the mid-teens given you're still executing on these large projects?

Uh, in the quarter and again, services are are baked into that. So, uh, yeah, we're very confident that we're outperforming the market meaningfully. And again, we're uniquely positioned with our portfolio because we have the data Comm, related Solutions, Allah, white, space with CSS. We have the core electrical infrastructure Solutions, and connectivity Solutions. I'll uh, supported by our EES business, and we have the Power Solutions supported by

Speaker #3: Yeah. Look, we've been very clear on how we're managing that business. And first, let me say, and I've got to say this, we have a new CSS leader.

John Engel: Yeah. Look, we've been very clear on how we're managing that business. First let me say, I've got to say this, we have a new CSS leader. He's been at the helm now kind of 4 quarters. He took the business that had positive momentum, clearly, 4 quarters ago, he's accelerated that momentum and stepped up the performance meaningfully. I think you see that in the results. We are very aggressively managing our gross margins, you can see that they remain stable. Obviously, we're trying to expand gross margins too, we'd love to do that over time. We've got stable gross margins in CSS, we have outstanding operating cost leverage. That's what I really wanted to highlight to you. To be at 9% EBITDA for Q1, we're thrilled with that, quite frankly.

By our UBS business, which is our grid service grid services in particular that's tucked in under under our UBS business. So relative to the outlook look, uh, we took investors through that. When we provided our full year guide, we think it was appropriate. Originally, we obviously have stepped it up meaningfully. Now given this exceptional start to q1.

Thank, thank you. I appreciate that. And

Speaker #3: He's been at the helm now kind of four quarters. He took the business that had positive momentum, clearly, four quarters ago, and he's accelerated that momentum and stepped up the performance.

Speaker #3: Meaningfully, I think you see that in the results. We are very aggressively managing our gross margins. And you can see that they remain stable.

Just then sticking with CSS. Um, another really good double digit incremental margins for the segment. This quarter just curious what needs to happen for this. Double digit income at a margins to be in the sustainable and potentially move towards the meetings within your still executing on this large project.

Speaker #3: Obviously, we're trying to expand gross margins too. And we'd love to do that over time. But we've got stable gross margins in CSS, and we have outstanding operating cost leverage.

[Company Representative] (WESCO): Data center sales in EES were up over 100% year-over-year and represented about 10% of EES sales, highlighting the continued scaling of our exposure to this secular growth trend. Overall, organic growth was driven by solid underlying demand, with volume contributing approximately 3% and pricing contributing about 4%. Importantly, backlog ended the quarter at a record level, up 14% versus the prior year, supported by strong order activity and pipeline conversion. Profitability improved meaningfully in the quarter. Adjusted EBITDA increased 30% to $185 million. Adjusted EBITDA margin expanded 130 basis points to 8.2%, driven by higher gross margins and strong operating leverage. Turning to slide eight. UBS delivered 6% organic sales growth in Q1, supported by improving demand and an increasing backlog.

Speaker #3: And that's what I really wanted to highlight to you to be at 9% EBITDA for Q1. We're thrilled with that, quite frankly. It's a huge step up.

John Engel: It's a huge step up. Now we've been north of a nine handle on EBITDA margins more than one quarter in a row. We had it in Q4 as well. I think you're seeing the power of our portfolio, our execution, and the inherent operating leverage in our business model showing up in the EBITDA expansion for CSS. It's very consistent with how we run the business. Again, I'll summarize, very focused on gross margins. If we can get every single basis point matters, so we'd love to increase it by as many basis points as we can. We absolutely will ensure the operating cost leverage. You know, we've got very good, strong top-line momentum. I'll also say that the backlog is an all-time record level, growing at 40%.

Speaker #3: Now we've been north of a nine handle on EBITDA margins, more than one quarter in a row. We had it in Q4 as well.

Yeah, well look, we uh we've been very clear on on how we're managing that business. Um, and first, let me say, and I've got to say this, we have a new CSS leader that he's been at the helm. Now kind of 4 quarters. Uh, he took the business that had positive momentum clearly uh, 4 quarters ago and he's accelerated that meta momentum and stepped up the performance. Meaningfully, I think you see that in the results.

Speaker #3: And so I think you're seeing the power of our portfolio, our execution, and the inherent operating leverage in our business model showing up in the EBITDA expansion for CSS.

Speaker #3: And it's very consistent with how we run the business. So again, I'll summarize very focused on gross margins. If we can get every single basis point matters.

Speaker #3: So we'd love to get the increase by as many basis points as we can. We absolutely will ensure the operating cost leverage and we've got very good strong top-line momentum.

Speaker #3: And I'll also say that the backlog is an all-time record level. Growing at 40%, that's well in excess of our first quarter sales growth rate.

John Engel: That's well in excess of our Q1 sales growth rate. As a side note, the backlog growth for all three businesses and segments was well in excess of our Q1 sales rates for each of the three SBUs.

Speaker #3: As a side note, the backlog growth for all three businesses and segments was well in excess of our first quarter sales rates for each of the three SBUs.

[Company Representative] (WESCO): Utility delivered high single-digit growth, driven by strong double-digit growth in investor-owned utilities and continued positive momentum in grid services. Public power was flat year over year, which is encouraging. The market remains highly competitive, and gross margins are expected to remain under pressure given weak sales in transformers and wire and cable, consistent with our prior commentary. Broadband delivered mid-single-digit growth year over year, supported by strength in the US. Overall, organic sales growth reflected approximately 3% volume growth and about 3% pricing. Backlog increased 16% year over year. We are seeing increasing interest in our grid services-enabled power capabilities from hyperscalers and other data center customers. We have a growing funnel of sales opportunities, and we are bullish that we will benefit from AI-driven data center investments and other major power-related infrastructure projects over the long term.

Speaker #4: I appreciate that. Thank you.

Kenny Steem: Appreciate that. Thank you.

Kenny Sim: Appreciate that. Thank you.

Um, we are very aggressively managing our gross margins and you can see that they remain stable. Obviously, we're trying to expand gross margins too, and we'd love to do that over time. But we've got stable gross margins in CSS and we have outstanding operating costs leverage. And that's what I really wanted to highlight to you to be at 9%, even though for q1 we're thrilled with that. Quite frankly, it's a huge step up. Now, we've been north of a 9 handle on IBA. Margins. More than 1 quarter in a row, we had it in Q4 as well. And so I think you're seeing the power of our portfolio, our execution, and the inherent operating leverage in our business model showing up in the EBA expansion for CSS. And it's it's it's very consistent with how we run the business. So again, I'll summarize very focused on growth margins. If we can get every single basis point matters, so we'd love to get the increase it by as many basis points as we

Speaker #1: The next question comes from Sam Darkatsh with Raymond James. Please go ahead.

Operator: The next question comes from Sam Darkatsh with Raymond James. Please go ahead.

Speaker #3: Good morning, John. Good morning, Neil. How are you?

Sam Darkatsh: Good morning, John. Good morning, Neil. How are you?

Speaker #5: Good. Good, Sam. How are you?

John Engel: Good. Good, Sam. How are you?

Speaker #3: I'm well. Thank you for asking. Two questions, and I apologize if this was covered since I got temporarily dropped there for a second. It looks like slide 15 looks like April is coming in, maybe better than March.

Sam Darkatsh: I'm well. Thank you for asking. 2 questions, and I apologize if this was covered since I got temporarily dropped there for a second. It looks like slide 15, looks like April is coming in maybe better than March. The comparisons year-on-year are pretty similar, and you're saying April's up 10. Can you give a little color maybe in terms of what you're seeing, John, in April? I'm really getting at the fact that are you seeing it in stock and flow improving over the last month or two, or is that just timing of projects?

Can we absolutely will ensure the operating costs leverage and I, you know, and we've got very good, strong Topline momentum. And I also say that the backlog is an all-time record level growing at 40%, that's well in excess of our first quarter sales growth rate.

As a side note, the backlog growth for all 3 businesses and segments.

Was well, in excess of our first quarter sales rates for each of the 3 sbus.

I appreciate that. Thank you.

Speaker #3: The comparisons year-on-year are pretty similar when you're saying April's up 10. Can you give a little color, maybe in terms of what you're seeing, John, in April?

The next question comes from Sam Dark Hatch with Raymond James. Please go ahead.

Speaker #3: And I'm really getting at the fact that are you seeing it in stock and flow improving over the last month or two, or is that just timing a project?

Good morning John. Good morning Neil. How are you?

Good, good, Sam. How are you?

Speaker #5: Yeah. Good question, Sam. First, I'd say kind of mixed. We're seeing consistent mix with what we've had in the first quarter. I do want to highlight we still have two days to go.

John Engel: Yeah, good question, Sam Darkatsh. First, I'd say kinda mix. We're seeing consistent mix with what we've had in Q1. I do wanna highlight, we still have 2 days to go. We actually are in the last day, you know, by the time we see the final numbers for yesterday, I'm sure they're out now, but we're in the middle of our call. We have today, which will close the quarter. I will say that we are a very strong book-to-bill rates continuing. Again, mix consistent with Q1. If you look at Q1, you know, we had very nice stock-based sales momentum. It isn't, you know, obviously projects kicked in very nicely.

I'm well, thank you for asking uh, 2 questions and I apologize if this was covered since I got temporarily dropped there for a second. Um, it looks like um slide 15 looks like April.

[Company Representative] (WESCO): Adjusted EBITDA was $131 million, down 5% versus the prior year. Adjusted EBITDA margin decreased 120 basis points to 9.6%, primarily driven by gross margin pressure and higher SG&A as a percentage of sales. Recall that UBS is accretive to total company Adjusted EBITDA margin given its higher margin profile, the improved growth rates will lead to even higher margins over time given the operating leverage. Turning to slide 9. I want to take a moment to further review the continued momentum we're seeing in the broader data center market and Wesco's role in that growth. Data center sales continued to scale in Q1, reaching approximately $1.4 billion, up about 70% year-over-year and representing 24% of total company sales in Q1.

Speaker #5: We actually are in the last day. But by the time we see the final numbers for yesterday, I'm sure they're out now, but we're in the middle of our call.

Is coming in, maybe better than March. Um, the the comparison year on year are pretty similar and you're saying April's up 10,

Speaker #5: And then we have today, which will close the quarter. I will say that we are very strong book-to-bill rates continuing. Again, mixed consistent with Q1.

What you're seeing John in April and I'm I'm really getting at the fact that are you seeing it in stock and flow improving? Um,

Over the last, uh, month or 2. Or is that just timing a project?

Speaker #5: And then if you look at Q1, we had very nice stock-based sales momentum. Obviously, projects kicked in very nicely. But relative to my comments on EES Industrial, we actually had very good stock and flow momentum there.

John Engel: As I like relative to my comments on EES Industrial, you know, we actually had very good stock and flow momentum there. It was the project timing that resulted in that not being a, you know, a net growth in Q1. I feel good about our stock momentum, Sam. I'll just make that comment. I know you're kind of poking at that a bit.

Speaker #5: It was the project timing that resulted in that not being a net growth in Q1. So I feel good about our stock momentum, Sam.

Speaker #5: I'll make that comment. I know you're kind of poking at that a bit.

Speaker #3: Thank you. And then the second question, I think there was a recent presidential determination that authorizes federal purchasing and financing for the electrical grid.

Sam Darkatsh: Thank you. The second question, I think there was a recent presidential determination that authorizes federal purchasing and financing for the electrical grid. How material might this be for you, and when or where would it materialize first?

Yeah, good question, Sam. Um, first I'd say kind of mix. We're seeing the same consistent mix of what we've had in the first quarter. Uh, I want I do want to highlight. We, we still have 2 days to go. We actually are in the last day, you know, but by the time we see the final numbers for yesterday, I'm sure they're out now, but we're in the middle of our call and then we have today which will close the quarter. Um, I will say that we are very strong book, the bill rates continuing again, mixed consistent with q1. And then, if you look at q1, you know, we had, we had very nice. Um,

Speaker #3: How material might this be for you? And when or where would it materialize first?

[Company Representative] (WESCO): Notably, the data center end market now WESCO's largest end market across all three SBUs. Support a diverse set of customers with a diverse set of WESCO capabilities. On a trailing 12-month basis, data center sales are now approximately $4.8 billion or 20% of WESCO's total sales. This underscores both the strength of the secular demand environment and the expanding scope of what we provide customers across all business units and across the full life cycle. Turning to slide 10. This highlights our end-to-end data center offering and the role we play across the full life cycle with exposure across CSS, EES, and UBS. WESCO supports hyperscale, multi-tenant, co-location, and enterprise customers with a comprehensive portfolio of products, services, and solutions that span power, connectivity, and ongoing operations.

Speaker #5: So first, let me say I think the various associations were part of have all been working across the industry and with their industry partners and association members of which we're a participant.

John Engel: First let me say, I think there, you know, the various associations we're part of have all been working across the industry and with their industry partners and association members, of which we're a participant, in really, you know, working proactively with the federal government on addressing the core issues around, you know, supporting this infrastructure build-out in the US. The biggest driver really is power and the power chain piece of that. We would see that, Sam, being supportive of what I see as fundamentally secular growth trends in utility. I've made a strong statement that utility was classically a cyclical industry and has now moved secular growth. Even though we're not seeing that manifest in all the numbers yet, we would see it in our UBS business, we would see it in our EES business.

Stock based sales. Momentum it isn't, you know, obviously projects kicked in very nicely. But as I like, relative to my comments on EES industrial, you know, we actually had very good stock stock and flow momentum. There it was the project timing that, that resulted in that not being, you know, a net growth in q1. So I feel good about our stock momentum Sam. I'll just I'll make that comment. I know you're kind of poking it. That a bit.

Thank you. And then the second question, um, I think there was a

Speaker #5: And really, working proactively with the federal government on addressing the core issues around supporting this infrastructure build-out in the US and the biggest driver really is power and the power chain piece of that.

Recent presidential determination that authorizes Federal purchasing and financing for the uh, for the electrical grid. How, how material might this be for you and when or where would it materialize first?

Speaker #5: So we would see that, Sam, being supportive of what I see as fundamentally secular growth trends in utility. I've made a strong statement that utility was classically a cyclical industry and has now moved secular growth.

Speaker #5: Even though we're not seeing that manifest in all the numbers yet, we would see it in our UBS business. We would see it in our EES business.

So I I first, let me say, I think there, you know, uh, the so various associations were part of have all been working, uh, across the industry and what their industry partners and Association members of which we were a participant in really, you know, working proactively, uh, with the, with the federal government on addressing.

Speaker #5: Again, supportive of the secular trends.

John Engel: Again, supportive of the secular trends.

Speaker #3: Thank you much.

Sam Darkatsh: Thank you much.

The core core issues around, you know, supporting this infrastructure build out in the US. And the biggest driver really is power and the power chain piece of that.

Speaker #1: The next question comes from Guy Hardwick with Barclays. Please go ahead.

Operator: The next question comes from Guy Hardwick with Barclays. Please go ahead.

[Company Representative] (WESCO): Our expanding capabilities and global ecosystem position us as a trusted partner as customers build, scale, and operate increasingly complex data center environments. Turning to slide 11. We delivered strong free cash flow of $213 million in Q1. Free cash flow was 128% of adjusted net income. Despite sequential sales growth, net working capital was a source of cash in the quarter, largely driven by timing of inventory purchases and accounts payable. Moving to slide 12. During the quarter, we executed a highly successful $1.5 billion bond refinancing that was upsized relative to the initial launch, reflecting strong investor demand and record pricing. Notably, we achieved the lowest coupon Wesco has ever achieved on a senior notes offering and the lowest for a BB-rated five-year note issued since 2021.

Speaker #4: Hi. Good morning. John, I wanted to just click on the point you brought up earlier about backlog growing faster than sales in Q1. So organic sales up 12, backlog up 22%.

Guy Hardwick: Hi, good morning. John, I wanted to just click on the that point you brought up earlier about backlog growing faster than sales in Q1. Organic sales up 12, backlog up 22%. At what point does the sales catch up with backlog? Or does backlog really underpin, you know, 2027 revenues? I think, 'cause I think you said that they're lengthening somewhat.

Speaker #4: At what point does sales catch up with backlog, or does backlog really underpin 2027 revenues? I think because I think you said that they're lengthening somewhat.

So you we would see that Sam being supportive of what I see as fundamentally SEC. Secular growth Trends in utility I I've made a strong statement that utility was classically, a cyclical industry and has now moved secular growth even though we're not seeing that manifest in all the numbers yet, we would see it in our UBS business. We would see it in our EES business.

Again, supportive of the secular trends.

Thank you, much.

Speaker #3: Yeah. Yeah. It's a great question, Guy. Good morning, by the way. I think again, backlog only represents a piece of our business, and we've said this before.

John Engel: Yeah, it's a great question, Guy. Good morning, by the way. I think, you know, again, backlog only represents a piece of our business, and we've said this before, long-term multi-year alliance agreements for utility customers, multi-year national account, global account agreements in industrial. There's also some in CSS. They don't all get loaded in the backlog because we're loading in the actual POs. We may have a multi-year agreement, we're only loading in the POs when we get the POs. With that said, we've been reporting consistently the trend on backlog. The fact that growth rate is materially higher than our sales growth rate, that bodes well for, you know, this balance of 2026, it's also a look into 2027, which is the heart of your question.

The next question comes from guy Hardwick with Barkley's. Please go ahead.

Speaker #3: Long-term multi-year alliance agreements for utility customers multi-year national account, global account agreements, and industrial. There's also some in CSS. They don't all get loaded into backlog because we're loading in the actual POs.

Speaker #3: We may have a multi-year agreement, but we're only loading in the POs when we get the POs. With that said, we always we've been reporting consistently the trend on backlog.

Hi. Good morning Janna. I wanted to just uh click on the uh that point you brought up earlier about backlog growing faster than sales in q1. So organic sales up. 12, back blog up 22% at. What point does do sales catch up with backlog or does backlog? Really underpin? You know, 2027 uh, revenues to what? I think because I think he said that they they're lengthening somewhat.

Yeah.

Speaker #3: So the fact that that growth rate is materially higher than our sales growth rate that bodes well for this balance of 2026, but it's also a look into 2027, which is the hardier question.

Yeah, it's it's a great question guy. Good morning by the way, I think, I think, you know, again.

[Company Representative] (WESCO): The net proceeds will be used to redeem our 2028 senior notes, improve liquidity, and further strengthen the balance sheet. This refinancing meaningfully improves our debt maturity profile and is expected to generate more than $20 million in annualized interest expense savings. We exited the quarter at 3.2x net debt to Adjusted EBITDA. Additionally, we repurchased $25 million of shares during the quarter towards offsetting dilution. Moving to slide 13. Within CSS, we have raised our 2026 outlook to low double-digit growth. Reflecting the continued strength and visibility we are seeing in data centers, data center sales are now expected to be up 20%+ for the year. Given the size of the market, we intend to continue to focus on healthy Adjusted EBITDA margin business. Our outlook for EES and UBS remains unchanged. Moving to slide 14.

Speaker #3: Because we have when you look at the projects that are in the backlog, a number of them also ship in 2027, and there's some longer lead item items that we're quoting for '27, '28.

John Engel: You know, 'cause we have, you know, when you look at the projects that are in the backlog, you know, a number of them also ship in 2027, and there's some longer lead items that, you know, we're quoting, you know, for 2027, 2028. You know, like some transformer business and utility. It's, I'd ask you to kind of think about that just as the trend, the relative growth rate of that versus sales, and it speaks to, you know, kind of the rising demand curve that our portfolio is capturing.

Backlog only rep represents a piece of our business and we've said this before, long term, multi-year Alliance agreements for utility, customers, multi-year national account Global account agreements and Industrial. There's also some in CSS, they don't all get loaded in the backlog because we're loading in a actual PS. We may have a multi-year agreement for only loading in the PS when we get the PS with that said.

Speaker #3: I like some Transformer business in utility. So it's I'd ask you to kind of think about that just as the trend, the relative growth rate of that versus sales and it speaks to kind of the rising demand curve that our portfolio is capturing.

We always, we've been reporting consistently the trend on backlog. So, the fact that that growth rate is materially higher than our sales growth rate that bod well

Speaker #4: And just to follow up, the 14% backlog growth in EES, just one which is the fastest for three years. I was just wondering how much of that was driven by data center projects.

Guy Hardwick: Just to follow up, the 14% backlog growth in EES, which is the fastest in 3 years. I was just wondering how much of that was driven by data center projects.

For for, you know, this balance of 2026. But it's also a look into 2027 which is the heart of your question, you know? Because we have, you know, when you look at the projects that are in the backlog,

Speaker #5: Yeah. We haven't disclosed that number. We haven't shared it. But think about the math here for a minute. Data centers for the gray space, EES is exposure to data centers.

John Engel: We haven't disclosed that number. We haven't shared it. Think about the math here for a minute. You know, data centers for the gray space, EES' exposure to data centers was up 100% year over year. It's only 10% of EES' sales. You should think about that 14% as being a very, to your point, Guy, a very healthy number for EES overall. You know, here's a case where and I got to make the comment now, it's actually pretty important. You know, 2 of our 3 SBU leaders are new in their jobs in the last year. CSS, we promoted from within 4 quarters ago. EES, we went outside and hired a leader. He returned to the electrical industry.

John Engel: We haven't disclosed that number. We haven't shared it. Think about the math here for a minute. You know, data centers for the gray space, EES' exposure to data centers was up 100% year-over-year. It's only 10% of EES' sales. You should think about that 14% as being a very, to your point, Guy, a very healthy number for EES overall. You know, here's a case where and I got to make the comment now, it's actually pretty important. You know, 2 of our 3 SBU leaders are new in their jobs in the last year. CSS, we promoted from within 4 quarters ago. EES, we went outside and hired a leader. He returned to the electrical industry.

Speaker #5: Was up 100% year over year, but it's only 10% of EES's sales. So I would you should think about that 14% as being a to your point, Guy, a very healthy number for EES overall.

You know, a number of them also ship in 2027 and there's some longer lead item items that you know, we're quoting, you know, for 2728, you know, I like some Transformer business and utility. So it it's uh, I I'd ask you to kind of think about that, just as the trend, the relative growth rate of that versus sales and it speaks to, you know, kind of the rising demand curve that that our portfolio is capturing

Just a follow up the 14%. Backlog growth in EES just 1, which is the fastest for 3 years. So I was just wondering how much of that was driven by data center projects.

Speaker #5: And here's a case where and I got to make the comment now. It's actually pretty important. Two of our three SBU leaders are new in their jobs in the last year.

[Company Representative] (WESCO): We are increasing our outlook for the full year given strong Q1 results. Before I get into the details, I want to address our position relative to the current macroeconomic uncertainty. Through Q1 and into April, we have seen no meaningful disruption to our revenue or profitability. We continue to monitor the situation closely and kept this backdrop in mind for our outlook. In the Middle East, I am pleased to report that all of our employees are safe. From a company perspective, we generate less than 1% of our sales in the region, with the majority of those sales related to our CSS business. The secondary impacts on transportation costs are more tangible but have so far been manageable.

Speaker #5: CSS, we promoted from within four quarters ago. EES, we went outside and hired a leader he returned to the electrical industry he's now been at the helm for three quarters.

We haven't disclosed that number we haven't shared it but but I but think about the math here for a minute, you know, data centers. For the grey space, EES is exposure to Data. Centers was up uh 100% year-over-year but it's only 10% of EES is sales.

John Engel: He's now been at the helm for 3 quarters, he is off to an outstanding start, as is our CSS leader, as I mentioned earlier. Look at the momentum vector and the profit quality improvement of EES starting in Q3 last year, Q4, and now Q1. This is his 3rd quarter since he's joined us. You know, it's a big deal to have 2 of your 3 business leaders, you know, new in the saddle in the last year. I think we're seeing stepped-up execution in both of those businesses.

Speaker #5: And he is off to an outstanding start as our CSS leader as I mentioned earlier. And look at the momentum vector and the profit quality improvement of EES starting in Q3 last year, Q4, and now Q1.

Speaker #5: This is his third quarter since he's joined us. So it's a big deal to have two of your three business leaders new in the saddle in the last year.

Speaker #5: I think we're seeing stepped-up execution in both of those businesses.

[Company Representative] (WESCO): Our teams are focused on passing these cost increases to our customers where appropriate and limiting the time that transportation quotes are valid to minimize overall risk. On the tariff front, the overall impact to Wesco is not material. As a reminder, Wesco is the importer of record for a small percentage of our cost of goods sold, typically low single digits. We typically increase prices when needed to maintain margins. At this point, we don't expect any material recoveries from the IEEPA decision. Based on the strong start to the year, we are raising our full year 2026 outlook. We now expect reported sales growth of 6% to 9%, with organic sales growth of 5% to 8%, which implies reported sales of approximately $24.9 billion to $25.6 billion. Our assumptions around foreign exchange and pricing remain unchanged.

Speaker #4: Thank you.

Guy Hardwick: Thank you.

So I I would you you should think about that 14% as being a very, to your point guy, a very healthy number for EES overall and you know, here's a case where and I got to make the comment now, it's actually pretty important. You know, 2 of our 3, SB leaders are are new in their jobs in the last year. CSS. We promoted from within 4 quarters ago. EES we went outside and hired a a leader, he returned to the electrical industry. Uh, he's now been at the helm for 3 quarters and uh, he is off to an outstanding start as, as our CSS leader, as I mentioned earlier, and look at the momentum vector.

Speaker #1: The next question comes from Christopher Glynn with Oppenheimer. Please go ahead.

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

And the prophet quality improvement of EES.

Christopher Glynn: Thanks. Good morning. Exciting start to the year here. Just wanted to feed off that last topic. You were going into the EES margin trends and some of the execution there. The gross margin clearly sequentially has been really strong trend and now year over year standing out.

Speaker #5: Thanks. Good morning. Exciting start to the year here. I just wanted to feed off that last topic you were going into the EES margin trends and some of the execution there.

Starting in Q3 last year Q4 and now q1. This is his third quarter since he's joined us. So, uh, you know, it's a big deal to have 2 of your 3 uh, Business Leaders.

Speaker #5: So the gross margin clearly sequentially has been really strong trend. And now year over year, standing out and nice outperformance on the EBITDA margin this quarter, particularly from a normal kind of sequential seasonal pattern that was long seen.

Uh, you know, new in the saddle in the last year. I think we're seeing stepped up execution in both of those businesses.

Thank you.

Christopher Glynn: You know, nice outperformance on the EBITDA margin this quarter, particularly from a normal kind of sequential seasonal pattern that was long seen. I think the normal seasonality of the Q2 profitability ramp from EES is sort of downplayed in the suggested enterprise margin for the Q2. Just curious if kind of the seasonal margin swings, if you're seeing those level off and that's sort of moderating the kinda Q2 forecast over the Q1 given that the baseline shifted upward in the Q1.

The next question comes from, Christopher Glenn with Oppenheimer. Please go ahead.

Speaker #5: I think the normal seasonality of the two-Q profitability ramp from EES is sort of downplayed in the suggested enterprise margin for the second quarter.

Speaker #5: So just curious if kind of the seasonal margin swings, if you're seeing those level off and that's sort of moderating the kind of two-Q forecast over the first quarter, given that the baseline shifted upward in the first quarter.

[Company Representative] (WESCO): On profitability, we continue to expect Adjusted EBITDA margin in the range of 6.6% to 7%, essentially increasing our EBITDA guidance in dollar terms. We are raising our Adjusted diluted EPS outlook to $15 to $17 per share, reflecting earnings leverage demonstrated in Q1, as well as slight adjustments to the expected tax rate for the year. There is no change to our outlook on interest expense based on our current view of no rate cuts this year and factoring in timing of the debt raise and subsequent pay down. Finally, we continue to expect Free cash flow of $500 to 800 million as we maintain working capital discipline supporting higher growth. As a reminder, our historical pattern is typically about 70% of our annual cash flow is generated in H2 of the year. Turning to slide 16.

Uh, thanks. Good morning, exciting. Uh, start to the year here. Um, just wanted to uh, feed off that last uh, topic you were going into the es margin Trends and some of the execution there. Um, so the growth margin, clearly sequentially has been really strong Trend and now year-over-year standing out in, you know, nice outperformance on the E, but margin, this quarter, particularly from a, a normal kind of sequential seasonal, pattern, that was long seen.

Speaker #5: So first, let me comment on EES specifically. And again, we're not guiding gross margins or op margins by SBU for Q2. We don't got it that level.

John Engel: First, let me comment on EES specifically. Again, we're not, we're not guiding gross margins or op margins by SBU for Q2. You know, we don't guide at that level. Neil will make a comment on EBITDA margins overall for Q2, because I think that's what you're kind of poking at. Again, back to the new leader effect. You know, when you have a new leader takes a look at the business, looks at every potential lever. There's a very strong focus on profitable growth, stepping up the top line growth rate. I think we're seeing that in EES, that's priority one, and priority, the other priority one or two equal number one priorities is to make sure we're getting inherently good margin expansion. We're confident we'll get the operating cost leverage, Chris.

Speaker #5: And then Neil will make a comment on EBITDA margins overall for Q2 because I think that's what you're kind of poking at. But again, back to the new leader effect, when you have a new leader, it takes a look at the business, looks at every potential lever.

Um, I I think the, the normal seasonality of the 2q profitability Ram from EES is sort of downplayed in the suggested, uh, Enterprise margin for the second quarter. So just curious, if kind of the, the seasonal margin swings, if you're seeing those level off and that's sort of moderating, the kind of 2q, uh, forecast over the first quarter given given that the Baseline shifted upward in the first quarter.

Speaker #5: So there's a very strong focus on profitable growth, stepping up the top-line growth rate. I think we're seeing that in EES. And there's that's priority one.

Speaker #5: And priority the other priority one, they're two equal number of priorities, is to make sure we're getting inherently good margin expansion. We're confident we'll get the operating cost leverage, Chris.

Speaker #5: You know how our business model works. When we get the sales growth, we're very disciplined around managing the SG&A leverage and ensuring the pull-through on the sales growth.

John Engel: You know how the, our business model works. When we get the sales growth, we're very disciplined around managing the SG&A leverage and ensuring the pull-through on the sales growth. There's been a particular emphasis and focus on looking at all margin improvement levers in EES over the last 3 quarters by our new leader and his team. We're making very good progress. This was a very encouraging start in terms of the profit quality of EES. Relative to our overall outlook of flattish EBITDA margins for the enterprise in Q2, there's some interesting timing dynamics when you look at sequentials that I'll hand it to Neil to take you through.

So first let me comment on EES specifically um and again we're not we're not guiding gross margins or margins by sbu for Q2. Uh you know we don't got it at that level and then Neil will make a comment on Evita margins overall for Q2 because I think that's what you're kind of poking at

Speaker #5: So we've there's been a particular emphasis and focus on looking at all margin improvement levers in EES over the last three quarters by our new leader and his team.

Speaker #5: And we're making very good progress. This was a very encouraging start in terms of the profit quality of EES. Relative to our overall outlook of slattish EBITDA margins for the enterprise in Q2, there's some interesting timing dynamics when you look at sequentials that I'll hand it to Neil to take you through.

Speaker #6: Sure. Thanks, John. So Chris, I think a few things to highlight. One is I cited in my prepared remarks if you look at our incentive comp and performance last year versus this year, that was about 25 basis points of overall 25 to 30, call it, of overall headwind in terms of EBITDA margin at an enterprise level.

Indraneel Dev: Sure. Thanks, John. Chris, I think few things to highlight. One is, I said it in my prepared remarks. If you look at our incentive comp and performance last year versus this year, that was about 25 basis points of overall, 25 to 30, call it, of overall headwind in terms of in EBITDA margin at an enterprise level. That's one of the drivers. If you think about it sequentially, typically we see step down in revenue Q4 to Q1. We had a lot of the old, you know, operating leverage that you see in the business in terms of sequential improvement in EBITDA margin. That was accelerated into Q1 of this year. Sequentially, the, you know, improvement is a little muted.

But, uh, again back to the, the new leader effect. Uh, you know, when you have a new leader, takes a look at the business looks at every potential lever so there's a very strong focus on on profitable growth. Stepping up the Topline growth rate. I think we're seeing that in AES and there's that's priority 1 and priority the other priority 1 or 2 equal number of priorities. Just to make sure we're getting inherently, good margin expansion. We're confident we'll get the operating costs leveraged. Chris, you know how the, our business model works, when we get the sales growth, we're very disciplined around managing the sdna, uh, leverage and, and ensuring the pull through on, on, on the, on the sales growth. So, uh, We've we, there's been a particular emphasis in focus on looking at all margin Improvement, levers, any EES over the last 3 quarters by our new leader and his team and, and we're making very good progress. This is, this was a very encouraging, start terms of the profit quality of the es relative to our overall.

Outlook of flattish ebita margins for the Enterprise in Q2. There's some interesting timing Dynamics when you look at sequential that I'll I'll hand it to Neil to take you through.

Speaker #6: So that's one of the drivers. If you think about it sequentially, typically, we see step-down in revenue fourth quarter to first quarter. So we had a lot of the operating leverage that you see in the business in terms of sequential improvement in EBITDA margin.

Speaker #6: That was accelerated into first quarter of this year. So sequentially, the improvement is a little muted. A couple of other things to highlight. One is we are in an inflationary environment.

Indraneel Dev: Couple of other things to highlight. One is, you know, we are in an inflationary environment. I would say we're doing a pretty good job managing that. We're trying to pass that along to customers where appropriate, where the market will bear. That's a factor. One other thing is that if you look at the growth of our data center business, we are making some investments, very disciplined in facility expansion and capability expansions that shows up on our cost side. Those are, think about it as, you know, small step function investments. We'll see the benefit for those over several quarters. We'll see the operating leverage from that investment. That also mutes a little bit of the margin expansion year over year.

Sure, thanks John. Um, so uh, Chris I think um, few things to highlight 1 is, um, I set it in my prepared remarks. Uh, if you look at our incentive calm and performance last year versus this year, um, that was about 25-30. Call that overall, uh, headwind in terms of uh, over in ebit off margin, uh, at an Enterprise level.

Speaker #6: But I would say we're doing a pretty good job managing that. And we're trying to pass that along to customers where appropriate, where the market will bear.

Speaker #6: That's a factor. And one other thing is that if you look at the growth of our data center business, we are making some investments very disciplined in facility expansion and capability expansions that shows up on our cost side.

Speaker #6: But those are think about it as small step function investments but we'll see the benefit for those. Over several quarters, and we'll see the operating leverage from that investment.

Speaker #6: That also mutes a little bit of the margin expansion year over year.

Speaker #4: Great color. Thanks. Yeah, I think I'll leave it there. Oh, well, actually, one on WDCS. I think you mentioned that's now mixed accretive in CSS.

Christopher Glynn: Great color. Thanks. Well, actually one on WDCS. I think you mentioned that's now mix accretive in CSS. Just kinda, you know, curious, maybe double-click on that. I imagine if we look at your historical top 5 to 10 suppliers for WESCO Enterprise, that there's probably been some swapping there as WDCS has ramped so prolifically. Wondering if there's anything kind of interesting in that vein.

Speaker #4: Just kind of curious maybe double-click on that. And I imagine if we look at your historical top 5 to 10 suppliers, for WESCO Enterprise, that there's probably been some swapping there as WDCS has ramped.

Quarter to first quarter or so we had a lot of the old you know operating leverage that you see in the business in terms of sequential Improvement in ibida margin, that was accelerated into first quarter of of this year. So sequentially. The, you know, Improvement is a little muted, couple of other things to the Highlight 1 is, you know, we are in an inflationary environment. But I would say we're doing a pretty good job managing that. And we're trying to pass that along to customers where, where appropriate where the market will bear. Um, that's that's, that's a factor. And, uh, 1 of other thing, is that, if you look at the growth of our data center on our business, we are making some Investments, very disciplined, and facility expansion and capability, expansions that shows up on our cost side. But those are think about it as, um, you know, small step function Investments but we'll see the benefit for those, uh, over several quarters.

Speaker #4: So prolifically, wondering if there's anything kind of interesting in that vein.

Um, and we'll see the operating leverage from that, um, that investment. That also mutes a little bit of the margin expansion year over year.

Speaker #5: So I'll make so yeah, Neil Haddon has prepared remarks. We thought it was very important for our investors to understand that WDCS, this exceptional growth we're getting, and the way we're managing the margin profile of the business we're taking on, we're being very judicious in terms of what we bid and then we're applying our value proposition to these customer opportunities that we are getting very good margin pull-through.

John Engel: Yeah, Neil had in his prepared remarks, we thought it was very important for our investors to understand that WDCS, this exceptional growth we're getting and the way we're managing the margin profile of the business we're taking on, we're being very judicious in terms of what we bid, and then we're applying our value proposition to these customer opportunities, we are getting very good margin pull-through. It's quote-unquote "accretive," as Neil outlined, to CSS, which is very encouraging because that's, again, this strong secular growth trend and the exceptional growth we're getting there. It's a very positive driver. Chris, we have had some movement in the top five, ten, five to ten suppliers for overall WESCO.

Great color, thanks. Um, yeah, I think I'll leave it there. Oh, well, actually, one on WDC. I think you mentioned that's, you know, a mix of creative and CCS. Um, just kind of, uh, you know, curious—maybe double-click on that. And I imagine if we look at your historical top 5 to 10 suppliers, uh,

Speaker #5: It's quote-unquote "accretive." As Neil outlined, to CSS. Which is very encouraging because that's, again, this strong secular growth trend and the exceptional growth we're getting there.

For WESCO Enterprise, there's probably been some swapping there, as, uh,

Speaker #5: So it's a very positive driver. Chris, we have had some movement in the top 5, 10, 5 to 10 suppliers for overall WESCO. I'm not going to go through that in this call, but clearly, we have and you just look at the growth rates of CSS.

John Engel: I'm not gonna go through that in this call, but, you know, clearly we have, and you just look at the growth rates of CSS. A number of those, you know, suppliers are experiencing meaningfully greater growth than some of our other suppliers. With that said, you know, Look at our overall momentum vector as the company. This is the Q3 in a row for the overall WESCO enterprise of double-digit growth. That's really terrific to see, and I think the rising tide we're creating with our suppliers is raising a number of their boats.

Speaker #5: So a number of those suppliers have experiencing meaningfully greater growth than some of our other suppliers with that said. Because look at our overall momentum vector as the company is the third quarter in a row for the overall WESCO Enterprise, a double-digit growth.

So I I'll make so yeah, Neil had in his prepared remarks we thought it was very important for for our investors to understand that.

Speaker #5: That's really terrific to see. And I think the rising tide we're creating with our suppliers is raising a number of their boats.

Chris, we have had some movement in the top 5, 10 5 to 10 suppliers for overall Wesco. I'm not going to go through that in this call but, you know, clearly, we have and you just look at the growth rates of CSS. So a number of those, you know, suppliers have experiencing and meaningfully greater growth.

Speaker #7: Was there a follow-up, Mr. Glenn?

Operator: Was there a follow-up, Mr. Glynn?

Speaker #5: Oh, no. Sorry. Just taking all that down. Appreciate the color. And talk soon. Thanks.

Christopher Glynn: No, sorry. Just taking all that down. Appreciate the color and talk soon. Thanks.

Speaker #7: Thanks. Thanks, Chris.

John Engel: Thanks. Thanks, Chris.

Then some of the, some of our other suppliers with that said, um, you know, because look at our overall momentum. Vector is the companies, the third quarter in a row for the overall Westco Enterprise.

Speaker #1: The next question comes from Ken Newman with KeyBank Capital Markets. Please go ahead.

Operator: The next question comes from Ken Newman with KeyBanc Capital Markets. Please go ahead.

Of double digit growth.

Speaker #8: Hey, thanks. Morning, guys. Neil. From the team and looking forward to working with you.

Ken Newman: Hey, thanks. Morning, guys. Neil,

Ken Newman: Thanks. Morning, guys. Neil,

John Engel: Morning, Ken.

Ken Newman: ... welcome to the team, and looking forward to working with you. Morning, John.

Ken Newman: Welcome to the team, and looking forward to working with you. Morning, John.

That's really terrific to see. And I, I think the rising tide we're creating with our suppliers, is raising a number of their boats.

Speaker #9: Morning, John.

Speaker #10: Thanks, Ken.

John Engel: Thanks, Ken.

Ken Newman: Yeah, no problem. Maybe, just for my first question, just thinking about the pricing side that you had this quarter, the 3% net price. Can you help us just quantify, you know, just how much of that was from carryover benefits from last year versus incremental pricing that I know wasn't baked into the outlook? Just any color that you're seeing from supplier pushes on pricing as we exited the quarter.

Speaker #8: Yeah, no problem. Maybe just for my first question, just thinking about the pricing side that you had this quarter, the 3% net price, can you help us just quantify just how much of that was from carryover benefits from last year versus incremental pricing that I know wasn't baked into the outlook?

Was there a follow-up? Mr. Glenn.

Oh, uh, no, sorry. Um, just, uh, taking all that down. Appreciate the color, and, uh, talk soon. Thanks. Thanks, Chris.

Speaker #8: And then just any color that you're seeing from supplier pushes on pricing as we exited the quarter.

The next question comes from Ken Neumann with keybanc. Capital markets, please go ahead.

Speaker #10: Yeah. So again, I think most of that is carryover benefit because if you think about the timing of when we get the notices, and the actual yield, and what flows through into the financials, I would say most of that is carryover benefit.

John Engel: Yeah. Again, I think most of that is carryover benefit, because if you think about the timing of when we get the notices and the actual yield and what flows through into the financials, I would say most of that is carryover benefit. Couple of things to keep in mind is, you know, as you think about the business going forward, CSS is our largest business unit right now, right, which the price impact has been, you know, small compared to the other two business units. Increasingly, we're doing a lot of projects where the pricing is negotiated with special pricing agreements. Just a comment to keep in mind as you think about our outlook going forward.

Hey, thanks. Good morning, guys. Neil, uh, team, and look forward to working with you. Morning, John. Thanks, Scott. Um,

Speaker #10: A couple of things to keep in mind is as you think about the business going forward, CSS is our largest business unit right now, right?

Yeah, no problem. Maybe. Uh, just for my first question. Um, just thinking about the pricing side that you had this quarter, the 3% net price, can you help us just quantify, you know, just how much of that was from carryover benefits from last year, versus incremental pricing? That I know wasn't baked into the Outlook and then just any color that you're seeing from supplier pushes on pricing as we exited the quarter.

Speaker #10: And which the price impact has been small compared to the other two business units. And increasingly, we're doing a lot of projects where the pricing is negotiated with special pricing agreements.

Speaker #10: So just a comment to keep in mind as you think about our outlook going forward.

Speaker #8: Understood. And then for the follow-up, obviously, really strong growth in data center, particularly in the white space side. I'm trying to maybe contextualize what you saw in the gray space versus the white space.

Ken Newman: Understood. For the follow-up, you know, is obviously really strong growth in data center, particularly in the white space side. You know, I'm trying to maybe contextualize what you saw in the gray space versus the white space. If you could just talk about how much of the white space growth this quarter you saw was maybe a translation or a transition from projects you won in gray space a few years ago. Then, you know, how do we think about the potential of that 100% growth in gray space this quarter, maybe transitioning for white space activity over the next 12 to 18 months?

Speaker #8: And if you could just talk about how much of the white space growth this quarter you saw was maybe a translation or a transition from projects you want in gray space a few years ago?

Speaker #8: And then how do we think about the potential of that 100% growth in gray space this quarter maybe transitioning for white space activity over the next 12 to 18 months?

So just a comment to keep in mind as you think about our Outlook going forward.

Understood.

John Engel: It's a very good question. I would tell you that, you know, we're working the One WESCO solution, which is obviously on all future bid opportunities. It may be just for a portion of the white space, it may be a portion of the gray space. It could be uniquely for a piece of the power solution with UBS. We're pulling in all three SBUs. Even irrespective of what the RFP is for, we're going in with our full value prop saying, Look, okay, we'll bid the RFP, but look at all the other things we can do for you. I think that has excellent momentum, Ken.

Speaker #10: It's a very good question. So I would tell you that we're working the one WESCO solution, which is obviously on all future bid opportunities.

Uh and then for the follow-up, you know, is obviously really strong growth in data center, particularly in the white space side. You know I'm I'm trying to maybe can textualize what you saw in the grey Space versus the white space and if you could just talk about

Speaker #10: It may be just for a portion of the white space. It may be a portion of the gray space. It could be uniquely for a piece of the power solution with UBS.

How much of the white space growth this quarter? You saw was maybe a translation or a transition from projects you want to engage space a few years ago.

Speaker #10: We're pulling in all three SBUs and even irrespective of what the RFP is for, we're going in with our full value prop saying, "Look, okay, we'll bid the RFP.

Speaker #10: But look at all the other things we can do with you. Do for you." And I think that has excellent momentum, Ken. But in terms of your specific question, the EES growth we got, the majority of that that we got in Q1 was not linked to a prior CSS or white space win.

Uh and then you know, how do we think about the potential of that 100% growth in gray space? This quarter uh, maybe transitioning for white space activity over the next 12 to 18 months?

Dude, it's it's a very good question. Um, so I would tell you that

John Engel: But in terms of your specific question, the EES growth we got, the majority of that we got in Q1 was not linked to a prior CSS or white space win. Not. You know, if you look at how the market fundamentally works today, the natural market procures gray space and white space at different times of the build cycle, and power altogether is addressed differently much earlier in the build cycle, and by different people making those decisions. What does that mean for our mix?

John Engel: In terms of your specific question, the EES growth we got, the majority of that we got in Q1 was not linked to a prior CSS or white space win. Not. You know, if you look at how the market fundamentally works today, the natural market procures gray space and white space at different times of the build cycle, and power altogether is addressed differently much earlier in the build cycle, and by different people making those decisions. What does that mean for our mix?

Speaker #10: Not. If you look at how the market fundamentally works today, the natural market procures gray space and white space at different part-times of the build cycle and power altogether is addressed differently.

Um, you know, we're working the 1 West Coast solution which is obviously on all future bid opportunities. It may be just for a portion of the white space. It may be a poor portion of the grey space. It could be uniquely for a piece of the power solution with UBS. We're pulling in all the all 3 SB used and even irrespective of what the RP is for. We're going in with our full value prop saying look, okay, we'll bid, the RP, but look at all the other things we can do with you, do for you. And I think that has excellent momentum Ken

Speaker #10: Much earlier in the build cycle. And by different people making those decisions. So what does that mean for our mix? What that means for our mix in the in the real-time basis is we're not seeing a lot of that linkage yet.

um, but but in terms of your specific question,

John Engel: What that means for our mix in the real-time basis is we're not seeing a lot of that linkage yet, but we clearly are putting shots on goal with our broader value proposition, and we're very confident that that has huge needle-moving potential for the overall WESCO going forward as we aggressively go after this secular trend. Again, I couldn't be more pleased with the 100% growth in gray space in Q1 for EES. That just shows that we're putting an awful lot of shots on goal. Now, again, it's, you know, just roughly 20% of our overall sales mix, still very encouraging growth rate.

the the EES growth, we got the majority of that that we got in q1 was not linked to a prior CSS or whitespace win, not

Speaker #10: But we clearly are putting shots on goal with our broader value proposition. And we're very confident that that has huge needle-moving potential for the overall WESCO going forward as we go after aggressively go after this secular trend.

you know, it's if you look at how the market fundamentally works today,

Speaker #10: And again, I couldn't be more pleased with the 100% growth in gray space in Q1 for EES. That just shows that we're putting an awful lot of shots on goal.

The natural market procures greyspace and whitespace at different part times of the build cycle, and power altogether is addressed differently, much earlier in the build cycle and by different people making those decisions.

Speaker #10: Now, again, it's again just roughly 20% of our overall sales mix. But still, very encouraging growth rate.

So what does that mean for our mix? What that means for our mix in the in the you know in in the real time basis is we're not seeing a lot of that linkage yet.

Speaker #5: Just one minor point, Ken, to add to John as a new guy coming in. I've been super impressed in terms of the coordinated effort that we have across all three SBUs in terms of our go-to-market effort on the data center side.

Ken Newman: Just one minor point, Ken, to add to John. As a new guy coming in, I've been super impressed in terms of the coordinated effort that we have across all three SBUs in terms of our go-to-market effort on the data center side. We really go to market as One WESCO across all three SBUs, across the white and gray space. Every customer buys differently and so then we let the customer decide in terms of where our value proposition resonates or not.

Indraneel Dev: Just one minor point, Ken, to add to John. As a new guy coming in, I've been super impressed in terms of the coordinated effort that we have across all three SBUs in terms of our go-to-market effort on the data center side. We really go to market as One WESCO across all three SBUs, across the white and gray space. Every customer buys differently and so then we let the customer decide in terms of where our value proposition resonates or not.

Speaker #5: So we really go-to-market as one WESCO across all three SBUs. Across the wide and gray space. But every customer buys differently. And so then we let the customer decide in terms of where our value proposition resonates or not.

But we clearly are putting shots on the goal with our broader value proposition. And we're very confident that that has huge needle. Moving potential for the overall Westco going forward as we go after aggressively go after this secular Trend. And again I couldn't be more pleased with the 100% growth in gray space in q1 for EES that just shows that we're putting an awful lot of shots on goal. Now, again, it's again, you know, just roughly 20% of our overall sales mix, um, but still very encouraging growth rate.

Speaker #8: Very helpful. Appreciate it.

Ken Newman: Very helpful. Appreciate it.

Speaker #1: The last question today will be from Patrick Baumann with JPMorgan. Please go ahead.

Operator: The last question today will be from Patrick Baumann with J.P. Morgan. Please go ahead.

Operator: The last question today will be from Patrick Baumann with JPMorgan. Please go ahead.

Speaker #5: Good morning.

Patrick Baumann: Good morning.

Speaker #10: Morning, Patrick. I had one quickly well, maybe not quickly. I don't know. It's up to you. On digital transformation. So it seems like those costs are stepping up here in the first quarter.

John Engel: Morning, Patrick.

Patrick Baumann: I had one quickly, or maybe not quickly, I don't know, it's up to you, on digital transformation. It seems like those costs are stepping up here in Q1 in terms of, you know, what's outside the P&L. So I guess a couple questions here. What are you spending that on? Like, what are those costs for? What's the path and timing of the ERP rollout? Can you talk to your confidence and execution on that? What happens to those costs, you know, on day one when those ERP systems turn on? How long does it take you to realize the benefits of this plan? I know there's a lot there, so I'll leave it to you to see how you want to answer it.

Just 1 minor Point. Uh, can to add to Gian as a new uh new guy coming in. I've been super impressed in terms of the coordinated effort that we have across all 3 sbus in terms of our go to market effort on the data center side. So we really go to market as 1 wco across all 3, sbus across the wide and gray space, but every customer buys differently. And and so then we let the customer decide uh, in terms of where our value proposition resonates or not,

Very helpful. Appreciate it.

Speaker #10: In terms of what's outside the P&L. So I guess a couple of questions here. What are you spending that on? What are those costs for?

The last question today will be from Patrick Bowman with JT Morgan. Please go ahead.

Speaker #10: What's the path and timing of the ERP rollout? Can you talk to your confidence in execution on that? And then what happens to those costs on day one when those ERP systems turn on?

Good morning.

Morning morning, Patrick.

Um, I I had 1 uh, uh, uh quickly. Um, well, maybe not quickly. I don't know. It's up to you, um, on on digital transformation.

Speaker #10: And then how long does it take you to realize the benefits of this plan? I know there's a lot there. So I'll leave it to you to see how you want to answer it.

So it seems like those costs are stepping up here in the first quarter in terms of, um, you know, what's outside the P&L. Um,

Speaker #10: Well, let me first say that our last fulsome update was at our investor day year before last. We outlined that program. And we laid out still at that point extensive activities remaining for design, build.

John Engel: Well, well, well, let me first say that our last Folsom update was at our investor day year before last. We outlined that program, and we laid out, you know, still, at that point, extensive activities remaining for design build. We had not really begun deployment in any form or fashion at that point. We've not given a Folsom update, which we will do next time we have at our next investor day. At least I'll address your question by saying outstanding progress on the design build. We continue to grind away at that. Our resources are focused on that, and we've begun deployment. This is a really important point.

Uh, so I guess a couple of questions here. What are you spending that on? Like, what are those costs for? What's the path and timing of the ERP rollout?

Can you talk to your confidence and execution on that and then, you know, what happens to those costs?

Speaker #10: We had not really begun deployment in any form or fashion at that point. We've not given a fulsome update which we will do next time we have our at our next investor day.

you know on day 1, when those Erp uh systems turn on

Um, and then, how long does it take you to realize the benefits of this plan? I know there's a lot there. So I'll leave it to you to see how you want to answer it.

Speaker #10: But at least I'll address your question by saying outstanding progress on the design, build. We continue to grind away at that. Our resources are focused on that.

Speaker #10: And we've begun deployment. And so this is a really important point. We have a very small number of locations in each of the three businesses that have been deployed.

John Engel: We have a very small number of locations in each of the three businesses that have been deployed, and that's been part of our agile design, and build process, and increasing capabilities being brought to bear in our design build that we're, you know, releasing and deploying in those various locations. We had a notable milestone in Q1 where we have 1 operation, 1 P&L operation, end-to-end P&L operation as part of CSS that's been fully deployed on our new digital platform. That occurred literally at the very end of Q1. Now we have an end-to-end operation with the latest instance that has the most capabilities deployed to date.

Speaker #10: And that's been part of our agile design, and build process. And increasing capabilities being brought to bear in our design, build that we're releasing and deploying in those various locations.

Speaker #10: We had a notable milestone in the first quarter where we have one operation, one P&L operation end-to-end P&L operation as part of CSS that's been fully deployed on our new digital platform.

Speaker #10: And that occurred literally at the very end of the first quarter. And so now we have an end-to-end operation. With the latest instance that has the most capabilities deployed to date, we still have design, build activities that continue through the through this year.

John Engel: We still have design build activities that continue through the, you know, through this year, and into, in the beginning part of next year. Our deployment starts to phase in and accelerate. Completely consistent with what we outlined at our investor day. It's a phased deployment. Unlike an ERP transition, where it's a knife-edge switch and you put the enterprise at risk, we control the phasing of the deployment to make sure that, you know, we don't disrupt the business, and we can manage the change management associated with the deployment. In addition, it's of our utmost priority that we do not disrupt our current business momentum. We have excellent, improving positive business momentum, and we want to make sure that we execute against that, as evidenced by our Q1 results.

Speaker #10: And in the beginning part of next year. But then our deployment starts to phase in and accelerate. Completely consistent with what we outlined at our investor day.

Speaker #10: It's a phased deployment. And unlike an ERP transition where it's a knife-edge switch and you put the enterprise at risk, we control the phasing of the deployment to make sure that we don't disrupt the business and we can manage the change management associated with the deployment.

Speaker #10: In addition, it's of the our utmost priority. That we do not disrupt our current business momentum. We have excellent improving positive business momentum. And we want to make sure that we execute against that as evidenced by our first quarter results.

Speaker #10: So let's just be very clear. That's our priority. And again, we'll have a phased deployment. So no change to kind of program design, build, deployment schema.

John Engel: Let's just be very clear, that's our priority. Again, we'll have a phased deployment. No change to kind of program design build deployment schema. Huge milestone in Q1 where we have one end-to-end P&L operation now deployed, and we're seeing how that's operating. The benefits will phase in over a multiyear period, similar to what we outlined at our investor day, where we said it's a two-speed margin improvement profile going forward, EBITDA margin profile. We're grinding away to get operating margin expansion as we complete design build and deployment. Once that's complete, there's a step function increase in the margin expansion because all the one-time investments are done. Very much looking forward to those benefits. Again, they're not hitting our P&L at all yet. That's all futures. That's to come.

Speaker #10: Huge milestone in Q1 where we have one end-to-end P&L operation. Now deployed. And we're seeing how that's operating. And the benefits will phase in over a multi-year period similar to what we outlined at our investor day where we said it's a two-speed margin improvement profile going forward.

Speaker #10: EBITDA margin profile. We're grinding away to get operating margin expansion as we complete design, build, and deployment. But once that's complete, there's a step function increase in the margin expansion because all the one-time investments are done.

Speaker #10: So very much looking forward to those benefits again, they're not hitting our P&L at all yet. So that's all futures. That's to come.

Speaker #8: Thanks for that.

Patrick Baumann: Thanks for that.

John Engel: On your-

Speaker #5: On your question, on your question on the disclosures, obviously, we provide a fair amount of disclosure in terms of what's excluded from EBITDA. Going from EBITDA to adjusted EBITDA.

Patrick Baumann: Marsh.

Indraneel Dev: Pat, on your question on like the disclosures, obviously, we provide a fair amount of disclosure in terms of what's excluded from EBITDA, going from EBITDA to adjusted EBITDA. Just like most company, the objective is to really give you visibility to things that, like John mentioned, are one time in nature. Yeah, we'll reevaluate that every year when we do our reporting. But you got full visibility.

Speaker #5: And just like most companies, the objective is to really give you visibility to things that like John mentioned are one-time in nature. And yeah, we'll reevaluate that every year when we do our reporting.

Speaker #5: But you got full visibility.

Patrick Baumann: Thanks for that. My last question I just wanted to touch on, which it was asked earlier in the call, just bear with me on this. Your data center revenue in the quarter was $1.4 billion. You know, you annualize that, you're at $5.6 billion. I think that would be up kind of 30% versus what you reported last year. You know, in the quarter, you're up 70%. You have hyperscaler CapEx that's going up 70% this year. Help us kind of understand what tails off. Is it, you know, some big projects or jobs that, you know, that top out in Q1?

Speaker #8: Thanks for that. And my last asked earlier in the call. But just bear with me on this. So your data center revenue in the quarter was a billion four.

Speaker #8: You annualize that. You're at 5.6 billion. I think that would be up kind of 30%. Versus what you reported last year. But in the quarter, you're up 70%.

Speaker #8: You've hyperscale or CapEx that's going up 70% this year. So help us kind of understand what tails off. Is it some big projects or jobs that top out in the first quarter?

Patrick Baumann: The 20% growth just seems like, it's great, but in context of what you've been putting up, it's something, seems like, you know, maybe it's, you know, project timing. I don't know. If you could help us understand that.

Speaker #8: Because the 20% growth just seems like it's great. But in context of what you've been putting up, it's something seems like maybe it's project timing.

Speaker #8: I don't know. If you could help us understand that.

Speaker #5: Yeah. We addressed it earlier in the call. And you gave it the answer in the last part of your question.

John Engel: We addressed it earlier in the call, and you gave it the answer in the last part of your question.

Speaker #8: Project timing.

Patrick Baumann: Project timing.

John Engel: That is the answer. Yeah. Again, look, we had a lot of questions when we gave our initial outlook for 2026 when we reported our Q4 results. We went, you know, we've taken all of you through that kind of our views on this, and it was project timing then. It's project timing now. With that said, it's an exceptional start to Q1. We're thrilled with the start.

Speaker #5: That is the answer. Yeah. And again, look, we had a lot of questions when we gave our initial outlook for 2026 when we reported our Q4 results.

Speaker #5: And we went we've taken all of you through that kind of our views on this. And it was project timing then. It's project timing now.

Speaker #5: With that said, it's an exceptional start to Q1. We're thrilled with the start.

Speaker #8: Thanks a lot. Best of luck.

Patrick Baumann: Thanks a lot. Best of luck.

Speaker #1: This concludes our questions.

Operator: This concludes our.

John Engel: Okay. I think. Yep. Thank you. I think we've addressed all your questions. We're gonna bring the call to a close. There's no one left in the queue, which is great. We've got a lot of calls lined up for today and tomorrow. We look forward to speaking with you in the follow-ups. Thank you all for your support. It's very much appreciated. We expect to announce our Q2 earnings on Thursday, 30 July. Have a great day.

Speaker #5: Okay. I think yep. Thank you. I think we've addressed all your questions. So we're going to bring the call to a close. There's no one left in the queue, which is great.

Speaker #5: We've got a lot of calls lined up for today and tomorrow. We look forward to speaking with you in the follow-ups. Thank you all for your support.

Speaker #5: It's very much appreciated. We expect to announce our second quarter earnings on Thursday, July 30th. So have a great day.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Q1 2026 WESCO International Inc Earnings Call

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