Q2 2026 WESCO International Inc Earnings Call

July 30, 2026

Operator: Hello, and welcome to WESCO's 2026 Q2 earnings call. I would like to remind you that all lines are in the listen-only mode throughout the presentation. If you would like to ask a question, please press star followed by one on your telephone keypad. Please note this event is being recorded. I will now hand the call over to Scott Gaffner, SVP, Investor Relations, to begin.

Operator: Hell o, and welcome to WESCO's 2026 Q2 earnings call. I would like to remind you that all lines are in the listen-only mode throughout the presentation. If you would like to ask a question, please press star followed by one on your telephone keypad. Please note this event is being recorded. I will now hand the call over to Scott Gaffner, SVP, Investor Relations, to begin.

Speaker #1: Hello, and welcome to WESCO's 2026 second quarter earnings call. I would like to remind you that all lines are in the listen-only mode throughout the presentation.

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

Speaker #1: I will now hand the call over to Scott Gaffner, SVP 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 will 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 you can find on our website at wesco.com. On this call this morning, we have John Engel, WESCO's Chairman, President, and CEO, and Neil Dev, Executive Vice President and CFO. I'll turn over the call 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.

Scott Gaffner: 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.

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 will 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 you can find on our website at wesco.com.

Scott Gaffner: Additionally, today, we will 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 you can find on our website at wesco.com. On this call this morning, we have John Engel, WESCO's Chairman, President, and CEO, and Neil Dev, Executive Vice President and CFO. I'll turn over the call to John.

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

Speaker #3: Thank you, Scott. Good morning, everyone. Thank you for joining our call today. We delivered exceptional results in the second quarter, and it reflects continuing strong execution, market-out performance, and accelerating momentum across our entire business.

John J. Engel: Thank you, Scott. Good morning, everyone. Thank you for joining our call today. We delivered exceptional results in Q2, and it reflects continuing strong execution, market outperformance, and accelerating momentum across our entire business. We achieved record sales, record backlog, record adjusted EBITDA, and record adjusted earnings per share, all of which exceeded our plan. Free cash flow generation was also positive and exceeded our expectations. Key milestones and highlights for Q2 included: The first highlight was sales. Record sales were up 13%. We have now posted four consecutive quarters of double-digit sales growth for our WESCO enterprise, fueled by data centers. Beyond our outsized growth in data centers, demand remains strong across the rest of our diversified portfolio end-end markets as customers continue to invest in major infrastructure projects. Sales growth was broad-based across all three of our business units.

Speaker #3: We achieved record sales, record backlog, record adjusted EBITDA, and record adjusted earnings per share, all of which exceeded our plan. Free cash flow generation was also positive and exceeded our expectations.

Speaker #3: Key milestones and highlights for the second quarter included the first highlight was sales. Record sales were up 13%. We have now posted four consecutive quarters of double-digit sales growth for our WESCO Enterprise.

John J. Engel: Key milestones and highlights for Q2 included: The first highlight was sales. Record sales were up 13%. We have now posted four consecutive quarters of double-digit sales growth for our WESCO enterprise, fueled by data centers. Beyond our outsized growth in data centers, demand remains strong across the rest of our diversified portfolio end-end markets as customers continue to invest in major infrastructure projects. Sales growth was broad-based across all three of our business units.

Speaker #3: Fueled by data centers. Beyond our outsized growth in data centers, demand remains strong across the rest of our diversified portfolio and end markets, as customers continue to invest in major infrastructure projects.

Speaker #3: Sales growth was broad-based across all three of our business units. Very importantly, X data centers, we delivered mid-single-digit sales growth across WESCO in the second quarter.

John J. Engel: Very importantly, ex data centers, we delivered mid-single digit sales growth across WESCO in Q2. This highlights the strength of our diversified portfolio, and it provides another proof point that we're benefiting from the multiple secular trends in CSS, EES, and UBS. Our second highlight of this exceptional quarter was profitability. Record adjusted EBITDA was up 24%. Record adjusted EPS was up 35%, and adjusted EBITDA margin expanded 60 basis points to 7.3% for WESCO overall. Even more importantly, we significantly improved the profitability of each of our three business units. CSS achieved a record 10.2% EBITDA margin, establishing itself as a double-digit EBITDA margin business. It's great to get CSS above the 10% mark. EES expanded operating margins 110 basis points to 9.2% EBITDA. It's great to get EES back above 9% EBITDA.

Speaker #3: This highlights the strength of our diversified portfolio, and it provides another proof point that we're benefiting from the multiple secular trends in CSS, EES, and UBS.

Speaker #3: Our second highlight of this exceptional quarter was profitability. Record adjusted EBITDA was up 24%. Record adjusted EPS was up 35%. And adjusted EBITDA margin expanded 60 basis points to 7.3% for WESCO overall.

Speaker #3: Even more importantly, we significantly improved the profitability of each of our three business units. CSS achieved a record 10.2% EBITDA margin. Establishing itself as a double-digit EBITDA margin business.

John J. Engel: Even more importantly, we significantly improved the profitability of each of our three business units. CSS achieved a record 10.2% EBITDA margin, establishing itself as a double-digit EBITDA margin business. It's great to get CSS above the 10% mark. EES expanded operating margins 110 basis points to 9.2% EBITDA. It's great to get EES back above 9% EBITDA.

Speaker #3: It's great to get CSS above the 10% mark. ESS expanded operating margins 110 basis points to 9.2% EBITDA. It's great to get EES back above 9% EBITDA.

Speaker #3: And UBS returned to a 10% EBITDA margin business. It's great to have UBS return above 10% too, because I think, as you know, we fell below 10% over the last two quarters.

John J. Engel: UBS returned to a 10% EBITDA margin business. It is great to have UBS return above 10% too, because I think, as you know, we fell below 10% over the last two quarters. Our third major highlight, again, for this exceptional quarter was backlog. Record backlog we have posted now for three quarters in a row, and backlog was up a whopping 60% in Q2. This was driven by strong double-digit growth across all three business units and reflects the continued effectiveness of our One WESCO cross-selling strategy. CSS backlog was up 95%, essentially doubling. EES backlog was up 30%, and UBS backlog was up 80%. All three SBUs posted record backlogs. This impressive backlog growth was fueled by multi-year customer commitments, demonstrating our transformation into a leading infrastructure solutions provider, serving the communications, the security, the electrical, the utility, and the power markets.

Speaker #3: Our third major highlight, again, for this exceptional quarter was backlog. Record backlog, we posted now for three quarters in a row, and backlog was up a whopping 60% in the second quarter.

Speaker #3: This was driven by strong double-digit growth across all three business units, and reflects the continued effectiveness of our One WESCO cross-selling strategy. CSS backlog was up 95%, essentially doubling.

John J. Engel: This was driven by strong double-digit growth across all three business units and reflects the continued effectiveness of our One WESCO cross-selling strategy. CSS backlog was up 95%, essentially doubling. EES backlog was up 30%, and UBS backlog was up 80%. All three SBUs posted record backlogs. This impressive backlog growth was fueled by multi-year customer commitments, demonstrating our transformation into a leading infrastructure solutions provider, serving the communications, the security, the electrical, the utility, and the power markets.

Speaker #3: EES backlog was up 30%, and UBS backlog was up 80%. All three SBUs posted record backlogs. This impressive backlog growth was fueled by multi-year customer commitments, demonstrating our transformation into a leading infrastructure solutions provider, serving the communications, the security, the electrical, the utility, and the power markets.

Speaker #3: Another major milestone I wanted to call out this quarter was a significant multi-year grid services award in our UBS business, and this award was from a hyperscale data center customer.

John J. Engel: Another major milestone I wanted to call out this quarter was a significant multi-year Grid Services award in our UBS business, and this award was from a hyperscale data center customer. This win represents a very important step in diversifying our UBS customer base and expanding our comprehensive data center offerings to include power solutions, end-to-end power solutions, and that is in addition to our extensive white space and gray space product and service offerings. Finally, as recently announced, we strengthened our end-to-end capabilities and cooling solutions for data center customers through the acquisition of Singapore-based Newark Engineering, and that acquisition closed on 1 July. We are very pleased with our exceptional Q2 results and our accelerating business momentum.

Speaker #3: This win represents a very important step in diversifying our UBS customer base, and expanding our comprehensive data center offerings to include power solutions. And to end power solutions.

Speaker #3: And that's in addition to our extensive white space and gray space product and service offerings. Finally, as recently announced, we strengthened our end-to-end capabilities and cooling solutions for data center customers through the acquisition of Singapore-based Newark Engineering and that acquisition closed on July 1st.

John J. Engel: Finally, as recently announced, we strengthened our end-to-end capabilities and cooling solutions for data center customers through the acquisition of Singapore-based Newark Engineering, and that acquisition closed on 1 July.

Speaker #3: We're very pleased with our exceptional second quarter results and our accelerating business momentum. The power of our customer value proposition, our global capabilities, and our leading portfolio of product service and solutions is very clear.

John J. Engel: We are very pleased with our exceptional Q2 results and our accelerating business momentum. The power of our customer value proposition, our global capabilities, and our leading portfolio of product services and solutions is very clear, and it is very clear as we continue to outperform the market. As a result, we are significantly raising our full-year outlook for sales, EBITDA, and EPS, and this reflects the favorable secular growth trends and our confidence in continued strong execution.

John J. Engel: The power of our customer value proposition, our global capabilities, and our leading portfolio of product services and solutions is very clear, and it is very clear as we continue to outperform the market. As a result, we are significantly raising our full-year outlook for sales, EBITDA, and EPS, and this reflects the favorable secular growth trends and our confidence in continued strong execution. As a market leader and with positive momentum building across our business, I am bullish that WESCO will continue to outperform our markets and deliver superior value to our customers, our suppliers, and our shareholders in H2 2026 and beyond. With that, I will turn it over to Neil to take you through our Q2 results and our raised full-year outlook in more detail. Neil?

Speaker #3: And it's very clear as we continue to outperform the market. As a result, we're significantly raising our full-year outlook for sales EBITDA and EPS.

Speaker #3: And this reflects the favorable secular growth trends and our confidence in continued strong execution. As the market leader, and with positive momentum building across our business, I'm bullish that WESCO will continue to outperform our markets and deliver superior value to our customers, our suppliers, and our shareholders in the second half of 2026 and beyond.

John J. Engel: As a market leader and with positive momentum building across our business, I am bullish that WESCO will continue to outperform our markets and deliver superior value to our customers, our suppliers, and our shareholders in H2 2026 and beyond. With that, I will turn it over to Neil to take you through our Q2 results and our raised full-year outlook in more detail. Neil?

Speaker #3: So with that, I'll turn it over to Neil to take you through our second quarter results, and our raised full-year outlook in more detail.

Speaker #3: Neil.

Speaker #4: Thank you, John. And good morning, everyone. As John highlighted, we delivered a record quarter. Reflecting strong demand across our end markets with excellent execution, and strong momentum across the portfolio.

Indraneel Dev: Thank you, John, and good morning, everyone. As John highlighted, we delivered a record quarter, reflecting strong demand across our end markets with excellent execution and strong momentum across the portfolio. Before turning to the quarter in more detail, let me start with a few highlights. We delivered record sales, adjusted EBITDA, and adjusted earnings per share. Growth was broad-based across the portfolio, with contributions from all three business units and strength across multiple end markets, highlighting the diversified nature of our growth profile. Margin expansion continued, driven by gross margin improvement and strong operating leverage on higher sales growth. As a result of our exceptional H1 results and accelerating business momentum, we are raising our full-year outlook for sales, adjusted EBITDA, and adjusted EPS. With that, let me turn to our Q2 results, starting on slide four.

Speaker #4: Before turning to the quarter in more detail, let me start with a few highlights. We delivered record sales, adjusted EBITDA, and adjusted earnings per share.

Speaker #4: Growth was broad-based across the portfolio, with contributions from all three business units and strength across multiple end markets, highlighting the diversified nature of our growth profile.

Indraneel Dev: Margin expansion continued, driven by gross margin improvement and strong operating leverage on higher sales growth. As a result of our exceptional H1 results and accelerating business momentum, we are raising our full-year outlook for sales, adjusted EBITDA, and adjusted EPS.

Speaker #4: Margin expansion continued, driven by gross margin improvement and strong operating leverage on higher sales growth. As a result of our exceptional first-half results and accelerating business momentum, we are raising our full-year outlook for sales, adjusted EBITDA, and adjusted EPS.

Speaker #4: With that, let me turn to our second quarter results, starting on slide 4. Both profitability stepped up meaningfully in the second quarter. Sales reached a record 6.7 billion, with both reported and organic growth of 13%.

Indraneel Dev: With that, let me turn to our Q2 results, starting on slide four. Both the top line and profitability stepped up meaningfully in Q2. Sales reached a record $6.7 billion, with both reported and organic growth of 13%, driven by an estimated 3% price benefit and solid volume growth across all 3 SBUs. While data center remains a key growth driver for the company, growth this quarter was broad-based and diversified, with mid-single-digit year-over-year sales growth excluding data center.

Indraneel Dev: Both the top line and profitability stepped up meaningfully in Q2. Sales reached a record $6.7 billion, with both reported and organic growth of 13%, driven by an estimated 3% price benefit and solid volume growth across all 3 SBUs. While data center remains a key growth driver for the company, growth this quarter was broad-based and diversified, with mid-single-digit year-over-year sales growth excluding data center. Adjusted EBITDA grew 24% to a record $487 million, and margin expanded 60 basis points to 7.3% of sales. Gross margins expanded by 70 basis points as a result of favorable sales mix during the quarter and continued execution of our margin improvement initiatives. SG&A for the quarter was 14.5% of sales, compared to 14.4% for the year-ago quarter, primarily driven by higher incentive compensation, partially offset by operating leverage in the core business.

Speaker #4: Driven by an estimated 3% price benefit and solid volume growth across all three SBUs. While data center remains a key growth driver for the company, growth this quarter was broad-based, and diversified, with mid single-digit year-over-year sales growth excluding data center.

Speaker #4: Adjusted EBITDA grew 24% to a record 487 million, and margin expanded 60 basis points to 7.3% of sales. Gross margins expanded by 70 basis points.

Indraneel Dev: Adjusted EBITDA grew 24% to a record $487 million, and margin expanded 60 basis points to 7.3% of sales. Gross margins expanded by 70 basis points as a result of favorable sales mix during the quarter and continued execution of our margin improvement initiatives. SG&A for the quarter was 14.5% of sales, compared to 14.4% for the year-ago quarter, primarily driven by higher incentive compensation, partially offset by operating leverage in the core business.

Speaker #4: As a result of favorable sales mix during the quarter, and continued execution, of our margin improvement initiatives. SG&A for the quarter was 14.5% of sales compared to 14.4% for the year ago quarter.

Speaker #4: Primarily driven by higher incentive compensation, partially offset by operating leverage in the core business. Turning to slide 5, adjusted earnings per share increased 35% to a record $4.57.

Indraneel Dev: Turning to slide five, adjusted earnings per share increased 35% to a record $4.57. The improvement was driven primarily by strong operating performance, including higher sales and margin expansion. EPS growth also benefited from a lower tax rate, the absence of preferred dividends, and a lower share count, partially offset by higher interest expense. Turning to CSS on slide six. CSS delivered an outstanding quarter, with reported and organic sales growth of 18%, driven by continued data center momentum. Sales for Wesco Data Center Solutions increased approximately 45%, driven by broad-based growth across our data center customer base. Security and Enterprise Network Infrastructure grew low single digit, and both grew high single digit, including data center projects. Backlog ended the quarter at a record level, up approximately 95% versus the prior year, underscoring the durability of demand in data center projects and providing meaningful revenue visibility.

Speaker #4: The improvement was driven primarily by strong operating performance including higher sales, and margin expansion. EPS growth also benefited from a lower tax rate, the absence of preferred dividends, and a lower share count, partially offset by higher interest expense.

Speaker #4: Turning to CSS on slide 6, CSS delivered an outstanding quarter. With reported and organic sales growth of 18%, driven by continued data center momentum, sales for WESCO data center solutions increased approximately 45%, driven by broad-based growth across our data center customer base.

Indraneel Dev: Turning to CSS on slide six. CSS delivered an outstanding quarter, with reported and organic sales growth of 18%, driven by continued data center momentum. Sales for Wesco Data Center Solutions increased approximately 45%, driven by broad-based growth across our data center customer base.

Speaker #4: Security and enterprise network infrastructure grew low single-digit, and both grew high single-digit, including data center projects. Backlog end of the quarter at a record level, up approximately 95% versus the prior year.

Indraneel Dev: Security and Enterprise Network Infrastructure grew low single digit, and both grew high single digit, including data center projects. Backlog ended the quarter at a record level, up approximately 95% versus the prior year, underscoring the durability of demand in data center projects and providing meaningful revenue visibility.

Speaker #4: Underscoring the durability of demand in data center projects and providing meaningful revenue visibility. Adjusted EBITDA increased 37%, and adjusted EBITDA margin expanded 140 basis points to a record 10.2%.

Indraneel Dev: Adjusted EBITDA increased 37%, and adjusted EBITDA margin expanded 140 basis points to a record 10.2%, both our first double-digit EBITDA margin quarter in CSS history. Moving to slide seven. A key strategic highlight in the quarter was our acquisition of Newark Engineering Group, which further strengthens our position in the mission-critical data center infrastructure. Newark expands our capabilities in engineered cooling solutions and life-cycle services while strengthening our presence in the fast-growing Southeast Asia region. The addition of Newark enhances our ability to serve customers across the full data center life cycle, from design and installation through ongoing operations, maintenance, and optimization. Turning to EES on slide eight. EES delivered an excellent quarter, with sales growth of 11%. Volume was up approximately 6%, and price contributed approximately 5%, with about 1 point coming from commodity inflation.

Speaker #4: Both our first double-digit EBITDA margin quarter in CSS history. Moving to slide 7, a key strategic highlight in the quarter was our acquisition of Newark Engineering Group, which further strengthens our position in emission-critical data center infrastructure.

Speaker #4: Newark expands our capabilities in engineered cooling solutions and life cycle services, while strengthening our presence in the fast-growing Southeast Asia region. The addition of Newark enhances our ability to serve customers across the full data center life cycle, from design and installation through ongoing operations, maintenance, and optimization.

Indraneel Dev: The addition of Newark enhances our ability to serve customers across the full data center life cycle, from design and installation through ongoing operations, maintenance, and optimization. Turning to EES on slide eight. EES delivered an excellent quarter, with sales growth of 11%. Volume was up approximately 6%, and price contributed approximately 5%, with about 1 point coming from commodity inflation.

Speaker #4: Turning to EES on slide 8, EES delivered an excellent quarter, with sales growth of 11%. Volume was up approximately 6%, and price contributed approximately 5%, with about 1 point coming from commodity inflation.

Indraneel Dev: Construction grew high single digit on robust data center infrastructure investments and project activity. Industrial grew low single digit on solid MRO demand and increased project activity. OEM was up strong double digits, supported by strength across semiconductor, electrification, and data center customers. Data center sales increased more than 70% year-over-year and remained a strong growth driver, now representing about 8% of EES sales. Excluding data center, EES grew high single digit, supported by ongoing infrastructure investment, industrial project activity, and strength in OEM. This performance further highlights the diversified growth profile of our business. Backlog ended the quarter at a record level, up approximately 30% versus the prior year, with double-digit backlog growth across industrial, OEM, and construction. Adjusted EBITDA increased 27%, and adjusted EBITDA margin expanded 110 basis points to 9.2%.

Speaker #4: Construction grew high single digits on robust data center infrastructure investments and project activity. Industrial grew low single digits on solid MRO demand and increased project activity.

Speaker #4: OEM was up strong double digits, supported by strength across semiconductor electrification and data center customers. Data center sales increased more than 70% year over year, and remained a strong growth driver, now representing about 8% of EES sales.

Speaker #4: Excluding data center, EES grew high single-digit, supported by ongoing infrastructure investment, industrial project activity, and strengthened OEM. This performance further highlights the diversified growth profile of our business.

Indraneel Dev: Excluding data center, EES grew high single digit, supported by ongoing infrastructure investment, industrial project activity, and strength in OEM. This performance further highlights the diversified growth profile of our business. Backlog ended the quarter at a record level, up approximately 30% versus the prior year, with double-digit backlog growth across industrial, OEM, and construction. Adjusted EBITDA increased 27%, and adjusted EBITDA margin expanded 110 basis points to 9.2%.

Speaker #4: Backlog end of the quarter at a record level, up approximately 30% versus the prior year. With double-digit backlog growth across industrial, OEM, and construction, adjusted EBITDA increased 27%, and adjusted EBITDA margin expanded 110 basis points to 9.2%.

Speaker #4: The margin improvement was driven by strong gross margin expansion, to a record 24.4%, partially offset by slightly higher SG&A expense associated with variable compensation on increased sales and profit growth.

Indraneel Dev: The margin improvement was driven by strong gross margin expansion to a record 24.4%, partially offset by slightly higher SG&A expense associated with variable compensation on increased sales and profit growth. Turning to UBS on slide nine. Sales increased 7%, reflecting strengthening demand trends across the business. Utility delivered mid-single-digit growth, supported by strong IOU performance, improving public power trends, and increased traction for power solutions from our Grid Services portfolio. Broadband posted strong mid-teens growth, driven by increased project activity and customer share gains, with strength across both US and Canadian operations. Adjusted EBITDA increased 2%, and the business returned to 10% EBITDA margin this quarter. As expected and discussed on prior calls, public power competitive dynamics remain a margin headwind in the near term. However, the combination of strengthening demand trends, record backlog, and accelerating momentum in Grid Services positions UBS well.

Speaker #4: Turning to UBS on slide 9, sales increased 7%, reflecting strengthening demand trends across the business. Utility delivered mid-single-digit growth, supported by strong IOU performance, improving public power trends, and increased traction for power solutions from our grid services portfolio.

Indraneel Dev: Broadband posted strong mid-teens growth, driven by increased project activity and customer share gains, with strength across both US and Canadian operations. Adjusted EBITDA increased 2%, and the business returned to 10% EBITDA margin this quarter. As expected and discussed on prior calls, public power competitive dynamics remain a margin headwind in the near term. However, the combination of strengthening demand trends, record backlog, and accelerating momentum in Grid Services positions UBS well.

Speaker #4: Broadband posted strong mid-teens growth, driven by increased project activity and customer share gains, with strength across both U.S. and Canadian operations. Adjusted EBITDA increased 2%, and the business returned to a 10% EBITDA margin this quarter.

Speaker #4: At expected, and discussed on prior calls, public power competitive dynamics remained a margin headwind in the near term. However, the combination of strengthening demand trends, record backlog, and accelerating momentum in grid services positions UBS well.

Speaker #4: Backlog end of the quarter at a record level, up approximately 80% year over year, driven by a significant multi-year grid services award, with a hyperscale data center customer.

Indraneel Dev: Backlog ended the quarter at a record level, up approximately 80% year over year, driven by a significant multi-year Grid Services award with a hyperscale data center customer. As John mentioned, this win represents an important milestone for UBS, expanding our customer base beyond traditional utility and broadband end markets into data center power infrastructure. Moving to slide 10. We believe that our Grid Services offerings position us well to benefit from the significant power infrastructure investments that will be needed over the coming years. Today, our capabilities span a broad set of power solutions that support utilities, data centers, high-voltage industrial applications, renewables, and other power-intensive end markets. As demand for power-intensive AI data center infrastructure continues to increase, customers are engaging Wesco earlier in the life cycle to help solve complex power and infrastructure challenges.

Speaker #4: As John mentioned, this win represents an important milestone for UBS. Expanding our customer base beyond traditional utility and broadband end markets into data center, power infrastructure.

Speaker #4: Moving to slide 10, we believe that our grid services offerings position us well to benefit from the significant power infrastructure investments that will be needed over the coming years.

Indraneel Dev: Moving to slide 10. We believe that our Grid Services offerings position us well to benefit from the significant power infrastructure investments that will be needed over the coming years. Today, our capabilities span a broad set of power solutions that support utilities, data centers, high-voltage industrial applications, renewables, and other power-intensive end markets. As demand for power-intensive AI data center infrastructure continues to increase, customers are engaging Wesco earlier in the life cycle to help solve complex power and infrastructure challenges.

Speaker #4: Today, our capabilities span a broad set of power solutions, that support utilities, data centers, high-voltage industrial applications, renewables, and other power-intensive end markets. As demand for power-intensive AI data center infrastructure continues to increase, customers are engaging WESCO earlier in the life cycle to help solve complex power and infrastructure challenges.

Speaker #4: This is creating new opportunities to cross-sell into existing customer relationships and expand our participation across large-scale projects. Moving to slides 11 and 12, in the second quarter, data center sales reached approximately $1.5 billion, up approximately 45% year over year.

Indraneel Dev: This is creating new opportunities to cross-sell into existing customer relationships and expand our participation across large-scale projects. Moving to slide 11 and 12. In Q2, data center sales reached approximately $1.5 billion, up approximately 45% year over year. As we discussed last quarter, Wesco's differentiated power to compute model positions us across the full data center life cycle, from the grid to the building, to the rack and equipment. This integrated approach continues to create growth opportunities across all three business units while expanding the scope of products, services, and solutions we provide to our customers. We will continue to enhance our value proposition with organic investments and targeted bolt-on acquisitions. Turning to slide 13. During Q2, free cash flow was $32 million. Despite double-digit top-line growth over the past 4 quarters, our working capital intensity remains at approximately 20% of sales.

Speaker #4: As we discussed last quarter, WESCO's differentiated power-to-compute model positions us across the full data center life cycle, from the grid to the building, to the rack, and equipment.

Speaker #4: This integrated approach continues to create growth opportunities across all three business units, while expanding the scope of products, services, and solutions we provide to our customers.

Indraneel Dev: This integrated approach continues to create growth opportunities across all three business units while expanding the scope of products, services, and solutions we provide to our customers. We will continue to enhance our value proposition with organic investments and targeted bolt-on acquisitions. Turning to slide 13. During Q2, free cash flow was $32 million. Despite double-digit top-line growth over the past 4 quarters, our working capital intensity remains at approximately 20% of sales. For the H1 of the year, we generated $246 million in free cash flow.

Speaker #4: We will continue to enhance our value proposition with organic investments and targeted bolt-on acquisitions. Turning to slide 13, during the second quarter, free cash flow was $32 million.

Speaker #4: Despite double-digit top-line growth over the past four quarters, our working capital intensity remains at approximately 20% of sales. For the first half of the year, we generated $246 million in free cash flow.

Indraneel Dev: For the H1 of the year, we generated $246 million in free cash flow. Moving to slide 14. We are raising our full-year sales growth outlook across all three business units, reflecting accelerating momentum throughout the portfolio. Within CSS, we now expect reported sales growth of mid to high teens year over year on a percentage basis, which is primarily driven by our higher expectations for our data center business. We are raising our CSS data center sales outlook to 30-plus% year over year, reflecting continued strength in hyperscale and data center-related demand. We are also raising our outlook for EES to high single-digit sales growth year over year, reflecting diversified strength across construction, industrial, and OEM. Finally, we are raising our outlook for UBS to mid-single-digit sales growth year over year, reflecting improving trends across all of our utility businesses and for our broadband business.

Speaker #4: Moving to slide 14, we are raising our full-year sales growth outlook across all three business units, reflecting accelerating momentum throughout the portfolio. Within NCSS, we now expect reported sales growth of mid- to high-teens year over year on a percentage basis, which is primarily driven by our higher expectations for our data center business.

Indraneel Dev: Moving to slide 14. We are raising our full-year sales growth outlook across all three business units, reflecting accelerating momentum throughout the portfolio. Within CSS, we now expect reported sales growth of mid to high teens year over year on a percentage basis, which is primarily driven by our higher expectations for our data center business.

Speaker #4: We are raising our CSS data center sales outlook to 30-plus percent year over year, reflecting continued strength in hyperscale and data center-related demand. We are also raising our outlook for EES to high single-digit sales growth year over year, reflecting diversified strength across construction, industrial, and OEM.

Indraneel Dev: We are raising our CSS data center sales outlook to 30-plus% year over year, reflecting continued strength in hyperscale and data center-related demand. We are also raising our outlook for EES to high single-digit sales growth year over year, reflecting diversified strength across construction, industrial, and OEM. Finally, we are raising our outlook for UBS to mid-single-digit sales growth year over year, reflecting improving trends across all of our utility businesses and for our broadband business.

Speaker #4: Finally, we are raising our outlook for UBS to mid single-digit sales growth year over year, reflecting improving trends across all of our utility businesses, and for our broadband business.

Speaker #4: Moving to slide 15 and our outlook for the remainder of the year. For full year 2026, we are raising our outlook for sales growth, profitability, and earnings per share, reflecting our exceptional first-half performance and continued momentum across the business.

Indraneel Dev: Moving to slide 15 and our outlook for the remainder of the year. For full year 2026, we are raising our outlook for sales growth, profitability, and EPS, reflecting our exceptional H1 performance and continued momentum across the business. We now expect organic sales growth in the range of 9% to 11%, up from 5% to 8% previously. Reported sales growth is now expected to be 10% to 12%, with total reported sales of approximately $26 billion at the midpoint of the range. Consistent with our stronger growth outlook, we are raising our adjusted EBITDA margin outlook to 6.9% to 7.1%, representing an EBITDA raise in dollar terms at the midpoint of over $100 million compared to the previous outlook. We are also increasing our adjusted diluted EPS range to $16 to $17.50, representing a $0.75 raise at the midpoint.

Speaker #4: We now expect organic sales growth in the range of 9 to 11 percent, up from 5 to 8 percent previously. Reported sales growth is now expected to be 10 to 12 percent, with total reported sales of approximately $26 billion at the midpoint of the range.

Speaker #4: Consistent with our stronger growth outlook, we are raising our adjusted EBITDA margin outlook to $6.9% to $7.1%, representing an EBITDA raise in dollar terms at the midpoint of over $100 million compared to the previous outlook.

Indraneel Dev: Consistent with our stronger growth outlook, we are raising our adjusted EBITDA margin outlook to 6.9% to 7.1%, representing an EBITDA raise in dollar terms at the midpoint of over $100 million compared to the previous outlook. We are also increasing our adjusted diluted EPS range to $16 to $17.50, representing a $0.75 raise at the midpoint.

Speaker #4: We are also increasing our adjusted diluted EPS range to $16.00 to $17.50, representing a $0.75 raise at the midpoint. Given the continued growth in the business and the associated working capital requirements, we now expect free cash flow of $300 million to $600 million for the year.

Indraneel Dev: Given the continued growth in the business and the associated working capital requirements, we now expect free cash flow of $300 million to 600 million for the year. The midpoint of our guidance implies mid-single-digit sales growth sequentially in H2 compared to H1, which will require incremental working capital investments. As a reminder, we run a CapEx-light business model with attractive returns on working capital deployed. Over the past few months, we've made several operational and organizational changes to drive more accountability around initiatives to improve working capital intensity and cash flow conversion. There are now a number of initiatives in flight around improving DSO and DIO. As reflected on the slide, we've made some adjustments to D&A, stock-based compensation, interest expense, and effective tax rate.

Speaker #4: The midpoint of our guidance implies mid single-digit sales growth sequentially in the second half of the year, compared to the first half of the year.

Speaker #4: Which will require incremental working capital investments. As a reminder, we run a CapEx-like business model with attractive returns on working capital deployed. Over the past few months, we've made several operational and organizational changes to drive more accountability around initiatives to improve working capital intensity and cash flow conversion.

Indraneel Dev: Over the past few months, we've made several operational and organizational changes to drive more accountability around initiatives to improve working capital intensity and cash flow conversion. There are now a number of initiatives in flight around improving DSO and DIO. As reflected on the slide, we've made some adjustments to D&A, stock-based compensation, interest expense, and effective tax rate.

Speaker #4: There are now a number of initiatives in flight around improving day sales outstanding and days inventory outstanding. As reflected on the slide, we've made some adjustments to DNA stock-based compensation, interest expense, and effective tax rate.

Speaker #4: As detailed last quarter, we completed the redemption of our 2028 notes, and significantly improved and extended our debt maturity profile. We also repurchased approximately $50 million of WESCO shares, in the first half of the year, including approximately $25 million in the second quarter, largely to asset dilution from equity compensation.

Indraneel Dev: As detailed last quarter, we completed the redemption of our 2028 notes and significantly improved and extended our debt maturity profile. We also repurchased approximately 50 million of Wesco shares in H1, including approximately 25 million in Q2, largely to offset dilution from equity compensation. Additionally, the strength of our operating performance drove another quarter of leverage improvement, ending the quarter at approximately 3x net debt to adjusted EBITDA, compared to 3.4x at year-end. Turning to slide 16. As we reflect on our Q2 overperformance compared to our outlook, the drivers were increased bidding activity and win rates, cross-selling enabled by our One Wesco value proposition resonating with existing customers, favorable project and customer mix, and strong execution across the business.

Speaker #4: Additionally, the strength of our operating performance drove another quarter of leverage improvement, ending the quarter at approximately three times net debt-to-adjusted EBITDA, compared to $3.4 times year-end.

Indraneel Dev: Additionally, the strength of our operating performance drove another quarter of leverage improvement, ending the quarter at approximately 3x net debt to adjusted EBITDA, compared to 3.4x at year-end. Turning to slide 16. As we reflect on our Q2 overperformance compared to our outlook, the drivers were increased bidding activity and win rates, cross-selling enabled by our One Wesco value proposition resonating with existing customers, favorable project and customer mix, and strong execution across the business.

Speaker #4: Turning to slide 16, as we reflect on our second quarter overperformance compared to our outlook, the drivers were increased bidding activity and win rates.

Speaker #4: Cross-selling enabled by our one WESCO value proposition resonating with existing customers. Favorable project and customer mix and strong execution across the business. We continue to see favorable demand trends across the business, to start the third quarter with preliminary July month-to-date sales per workday, up approximately mid-teens on a percentage basis.

Indraneel Dev: We continue to see favorable demand trends across the business to start Q3 with preliminary July month-to-date sales per workday up approximately mid-teens on a percentage basis. Based on current customer forecasts and the backdrop of record sales per workday in September 2025, we expect Q3 sales to grow low double digits year-over-year. Adjusted EBITDA margin is expected to be slightly lower sequentially, reflecting the anticipated mix of business expected in the quarter. We've covered a lot of material this morning. Let me briefly recap the key points before we open the call to your questions. In summary, we delivered double-digit top-line growth for four consecutive quarters. We delivered record results across the company, including record sales, adjusted EBITDA, and adjusted EPS, while continuing to expand margins. Data center remained a key growth driver for the company.

Speaker #4: Based on current customer forecasts and the backdrop of record sales per workday in September 2025, we expect third-quarter sales to grow in the low double digits year over year.

Speaker #4: Adjusted EBITDA margin is expected to be slightly lower sequentially, reflecting the anticipated mix of business expected in the quarter. 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: Adjusted EBITDA margin is expected to be slightly lower sequentially, reflecting the anticipated mix of business expected in the quarter. We've covered a lot of material this morning. Let me briefly recap the key points before we open the call to your questions. In summary, we delivered double-digit top-line growth for four consecutive quarters. We delivered record results across the company, including record sales, adjusted EBITDA, and adjusted EPS, while continuing to expand margins.

Speaker #4: In summary, we delivered double-digit top-line growth for four consecutive quarters. We delivered record results across the company, including record sales, adjusted EBITDA, and adjusted earnings per share, while continuing to expand margins.

Speaker #4: Data center remained a key growth driver for the company. Growth was broad-based across the portfolio, with strong sales growth excluding data center. A major multi-year grid services win represents a major milestone for UBS, in terms of customer diversification and meaningfully expands our data center product portfolio to now include power solutions.

Indraneel Dev: Data center remained a key growth driver for the company. Growth was broad-based across the portfolio, with strong sales growth excluding data center. A major multi-year Grid Services win represents a major milestone for UBS in terms of customer diversification and meaningfully expands our data center product portfolio to now include power solutions.

Indraneel Dev: Growth was broad-based across the portfolio, with strong sales growth excluding data center. A major multi-year Grid Services win represents a major milestone for UBS in terms of customer diversification and meaningfully expands our data center product portfolio to now include power solutions. We've made meaningful progress towards our long-term margin goals, with two of our three business units at double-digit EBITDA margin this quarter. We further strengthened our balance sheet during the quarter with lower leverage and an improved debt maturity profile. We are raising our full-year outlook for sales, adjusted EBITDA, and adjusted earnings per share. Despite higher working capital to support double-digit sales growth, we expect to continue to deliver solid free cash flow. As we lean in to support 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 #4: We've made meaningful progress towards our long-term margin goals, with two of our three business units at double-digit EBITDA margin this quarter. We further strengthened our balance sheet during the quarter, with lower leverage and an improved debt maturity profile.

Indraneel Dev: We've made meaningful progress towards our long-term margin goals, with two of our three business units at double-digit EBITDA margin this quarter. We further strengthened our balance sheet during the quarter with lower leverage and an improved debt maturity profile. We are raising our full-year outlook for sales, adjusted EBITDA, and adjusted earnings per share.

Speaker #4: We are raising our full-year outlook for sales, adjusted EBITDA, and adjusted earnings per share. Despite higher working capital to support double-digit sales growth, we expect to continue to deliver solid free cash flow.

Indraneel Dev: Despite higher working capital to support double-digit sales growth, we expect to continue to deliver solid free cash flow. As we lean in to support 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 #4: As we lean in to support growth, there is no change to our priorities and guiding principles. With that, operator, we can now open the call to questions.

Speaker #1: 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 one on your telephone keypad. Please limit yourself to one question and one follow-up. The first question will come from Deane Dray with RBC Capital Markets. Please go ahead.

Speaker #1: Please limit yourself to one question and one follow-up. The first question will come from Dean Dre with RBC Capital Markets. Please go ahead.

Speaker #2: Thank you. Good morning, everyone.

Deane Dray: Thank you. Good morning, everyone.

Speaker #3: Morning, Dean.

Indraneel Dev: Morning, Deane.

Speaker #2: Hey. Is obviously lots of excitement about the data center growth and how that continues. But your growth this quarter is so much more broad-based.

John J. Engel: Morning, Deane.

Deane Dray: Hey. There is obviously lots of excitement about the data center growth and how that continues, but your growth this quarter is so much more broad-based. It really begs the question, John, what do you see as the drivers here? What does this say about the macro? Any sense about the sustainability visibility that you have on this growth rate?

Speaker #2: So it really begs the question, John, what do you see as the drivers here? What does this say about the macro? And any sense about the sustainability, visibility that you have on this growth rate?

Speaker #3: Thanks, Dean. And thanks for that question. I addressed some of that in my opening comments, but let me come back and hit it more broadly.

Indraneel Dev: Thanks, Deane, and thanks for that question. I addressed some of that in my opening comments, but let me come back and hit it more broadly. First, I have to say we feel terrific about our positioning to capture the, I will use the term, hyperscale growth for these AI-driven data centers. No doubt about it. We are getting great momentum across our entire business. It is not just a CSS-driven opportunity, it is a One WESCO play. With that said, we are not a one-trick pony. We are benefiting from multiple secular growth trends, and you are seeing that starting to contribute meaningfully to our results. In Q2, our non-data center sales were up mid-single digits. I will remind everyone that data centers as a mix of our total sales are a little over 20% on a trailing 12-month basis.

Speaker #3: First, I have to say we feel terrific about our positioning to capture the, I'll use the term, hyper-sales growth for these AI-driven data centers.

Speaker #3: No doubt about it. And we're getting great momentum across our entire business. It's not just the CSS-driven opportunity. It's a one WESCO play. With that said, we're not a one-trick pony.

Speaker #3: We're benefiting from multiple secular growth trends and you're seeing that starting to contribute meaningfully to our results. In the second quarter, our non-data center sales were up mid-single digits.

Indraneel Dev: In Q2, our non-data center sales were up mid-single digits. I will remind everyone that data centers as a mix of our total sales are a little over 20% on a trailing 12-month basis. That says that we got a remainder portion of the portfolio, 75% to 80% of the business, and that is diversified, and it is very well positioned to benefit from multiple secular trends. The infrastructure build-out, all things power around the power chain, supporting the increased demand for electricity, the reshoring, which we see kicking into gear as well, back to US and North American markets.

Speaker #3: And I'll remind everyone that data centers as a mix of our total sales are a little over 20% on a trailing 12-month basis. So that says we've got a remainder portion of the portfolio, 75 to 80 percent of the business, and that's diversified and it's very well positioned.

Indraneel Dev: That says that we got a remainder portion of the portfolio, 75% to 80% of the business, and that is diversified, and it is very well positioned to benefit from multiple secular trends. The infrastructure build-out, all things power around the power chain, supporting the increased demand for electricity, the reshoring, which we see kicking into gear as well, back to US and North American markets. What we think is, and I have spoken about this at length, an impending industrial super cycle. I think we are in the early innings. In terms of our outlook and our visibility, Deane, I think that is why I spiked out backlog growth, all three SBUs at record levels. These are eye-popping growth numbers for us. You have covered the company a long time. This is just, it is very telling. I think our confidence is reflected in our raise for the year.

Speaker #3: The benefit from multiple secular trends—the infrastructure build-out, all things power around the power chain, supporting increased demand for electricity, the reshoring, which we see kicking into gear as well, back to U.S. and North American markets—and then what we think is, and I've spoken about this at length, an impending industrial supercycle.

Indraneel Dev: What we think is, and I have spoken about this at length, an impending industrial super cycle. I think we are in the early innings. In terms of our outlook and our visibility, Deane, I think that is why I spiked out backlog growth, all three SBUs at record levels. These are eye-popping growth numbers for us. You have covered the company a long time. This is just, it is very telling. I think our confidence is reflected in our raise for the year. I think it sets the table for a very strong 2027 as well.

Speaker #3: I think we're in the early innings. So in terms of our outlook and our visibility, Dean, I think that's why I spiked out backlog growth, all three SKUs at record levels.

Speaker #3: These are eye-popping growth numbers for us. You've covered the company a long time. This is just, it's very telling. And I think our confidence is reflected in our raise for the year.

Speaker #3: I think it sets the table for a very strong 2027 as well.

Indraneel Dev: I think it sets the table for a very strong 2027 as well.

Deane Dray: That's really good color. My follow-up question, I'm tempted to talk about the margin improvements because that's fabulous, and congrats to the team there. I actually want to put the spotlight on this acquisition of Newark Engineering. Because the strategic rationale that you list there really should enhance your capabilities in data center globally. Just can you talk about what does this mean for your international aspirations? I know your name is WESCO International. Just what does that say about the data center opportunities globally, and how does this have parallels with Rahi? Because Rahi was such a good acquisition right at the doorstep of all the data center growth spike that you've been part of. A lot to unpack there, but love to hear it. Thanks.

Speaker #2: That's really good color. And my follow-up question—I'm tempted to talk about the margin improvements, because that's fabulous, and congrats to the team there.

Speaker #2: But I actually want to put the spotlight on this acquisition of Newark Engineering. Because the strategic rationale that you list there really should enhance your capabilities in data center, globally.

Deane Dray: Because the strategic rationale that you list there really should enhance your capabilities in data center globally. Just can you talk about what does this mean for your international aspirations? I know your name is WESCO International. Just what does that say about the data center opportunities globally, and how does this have parallels with Rahi? Because Rahi was such a good acquisition right at the doorstep of all the data center growth spike that you've been part of. A lot to unpack there, but love to hear it. Thanks.

Speaker #2: But can you just talk about what this means for your international aspirations? I know your name is WESCO International, so what does this say about the data center opportunities globally?

Speaker #2: And how does this have parallels with Rahi? Because Rahi was such a good acquisition right at the doorstep of all this data center growth spike that you've been part of.

Speaker #2: So a lot to unpack there, but love to hear a thing.

John J. Engel: Well, thanks for tying it back to Rahi, because I think that really is where I wanted to start, Deane. By putting Anixter and WESCO together, which actually preceded Rahi, in the beginning of the pandemic, we did create a new company. I think we're seeing the benefits of this strong and diverse portfolio, as I kind of outlined earlier. As you look at what we've done on the acquisition front post Anixter, it started with Rahi. It was back in 2022, and that gave us increased end user customer access. Rahi was also global, which I'll remind everyone. It did allow us to add some additional capabilities to our portfolio. It was end user-driven, like core Anixter was. We added entroCIM then, following Rahi. Facility services, we added Ascent. Then we now add Newark Engineering, which is cooling solutions.

Speaker #3: Yeah. Well, and thanks for tying it back to Rahi, because I think that really is the first place where I wanted to start, Dean. By putting Annexure and WESCO together, which actually preceded Rahi at the beginning of the pandemic, we did create a new company.

Speaker #3: I think we're seeing the benefits of this strong and diverse portfolio. As I kind of outlined earlier, but as you looked about, as you look at what we've done on the acquisition front post-annexure, it started with Rahi.

Speaker #3: It was back in 2022. And that gave us increased customer, end-user customer access. Rahi was also global, which I'll remind everyone. But it did allow us to add some additional capabilities to our portfolio.

John J. Engel: Rahi was also global, which I'll remind everyone. It did allow us to add some additional capabilities to our portfolio. It was end user-driven, like core Anixter was. We added entroCIM then, following Rahi. Facility services, we added Ascent. Then we now add Newark Engineering, which is cooling solutions. What we've been doing systematically is expanding our end-to-end solutions capabilities to support the data center customers across the entire life cycle.

Speaker #3: It was end-user driven, like core annexure was. We added EntrySim then, following Rahi, facility services. We added Ascent. And then we now add Newark Engineering.

Speaker #3: Which is cooling solutions. And so, what we've been doing systematically is expanding our end-to-end solutions capabilities to support the data center customers across the entire lifecycle.

John J. Engel: What we've been doing systematically is expanding our end-to-end solutions capabilities to support the data center customers across the entire life cycle. It's really an important point. We're in 55 countries around the world. If you look at our end user relationships with hyperscale data center customers, the MTDCs, the multi-tenant data center customers, and our enterprise class customers, where they have captive data centers, all of those companies are very large, are global, and they're running a global expansion play and global deployment play. We are uniquely positioned with our global footprint, the breadth of our portfolio, to really serve them around the world. We're focused on that expansion, expanding the portfolio. We've got the global execution capabilities, and Newark adds to that. Newark, again, expands the portfolio meaningfully. Yes, it's in the southeast portion of Asia today.

Speaker #3: It's really an important point. And we're in 55 countries around the world. If you look at our end-user relationships with hyperscale data center customers, the MTDCs, the multi-tenant data center customers, and our enterprise-class customers, where they have captive data centers, all of those companies are very large, are global, and they're running a global expansion play.

John J. Engel: It's really an important point. We're in 55 countries around the world. If you look at our end user relationships with hyperscale data center customers, the MTDCs, the multi-tenant data center customers, and our enterprise class customers, where they have captive data centers, all of those companies are very large, are global, and they're running a global expansion play and global deployment play.

Speaker #3: And global deployment play. And so we are uniquely positioned with our global footprint, the breadth of our portfolio, to really serve them around the world.

John J. Engel: We are uniquely positioned with our global footprint, the breadth of our portfolio, to really serve them around the world. We're focused on that expansion, expanding the portfolio. We've got the global execution capabilities, and Newark adds to that. Newark, again, expands the portfolio meaningfully. Yes, it's in the southeast portion of Asia today. Very strong end user customer relationships, our same customers that we have.

Speaker #3: And this is really so we're focused on that expansion, expanding the portfolio. We've got the global execution capabilities. And Newark adds to that. So Newark, again, expands the portfolio meaningfully.

Speaker #3: Yes, it's in the Southeast portion of Asia today, very strong end-user customer relationships. Our same customers that we have. So we essentially expanded the portfolio.

John J. Engel: Very strong end user customer relationships, our same customers that we have. We essentially expanded the portfolio. We've dramatically strengthened across Southeast Asia, those markets. By the way, that data center growth market is incredibly exciting, growing at a rapid rate. We have the opportunity now to expand and do the One WESCO play for Newark across broader geographies, okay? Bringing the strength of WESCO into Newark. What we're specifically adding, though, and I'll just end on this point, it's mission-critical cooling and thermal management expertise. We did not have that in our portfolio. It allows us to engage the customer a little bit earlier in the data center life cycle, which will be very helpful. Again, I talked about very nice cross-selling opportunities.

John J. Engel: We essentially expanded the portfolio. We've dramatically strengthened across Southeast Asia, those markets. By the way, that data center growth market is incredibly exciting, growing at a rapid rate. We have the opportunity now to expand and do the One WESCO play for Newark across broader geographies, okay? Bringing the strength of WESCO into Newark.

Speaker #3: We've dramatically strengthened across Southeast Asia, those markets. By the way, that data center growth market is incredibly exciting, growing at a rapid rate. But we have the opportunity now to expand and do the one WESCO play for Newark across broader geographies.

Speaker #3: Okay? And then bringing the strength of WESCO into Newark. And so what we're specifically adding, though, and I'll just end on this point, it's mission-critical cooling and thermal management expertise.

John J. Engel: What we're specifically adding, though, and I'll just end on this point, it's mission-critical cooling and thermal management expertise. We did not have that in our portfolio. It allows us to engage the customer a little bit earlier in the data center life cycle, which will be very helpful.

Speaker #3: We did not have that in our portfolio. And it allows us to engage the customer a little bit earlier in the data center lifecycle.

Speaker #3: Which will be very helpful. Again, I talked about very nice cross-selling opportunities. And the capabilities they have design engineering capabilities around mission-critical HVAC systems, in-house fabrication and assembly capability, installation, after-sales servicing, and support.

John J. Engel: Again, I talked about very nice cross-selling opportunities. The capabilities, they have design engineering capabilities around mission-critical HVAC systems, in-house fabrication and assembly capability, installation, after-sale servicing and support.

John J. Engel: The capabilities, they have design engineering capabilities around mission-critical HVAC systems, in-house fabrication and assembly capability, installation, after-sale servicing and support. A little longer answer, Deane, I think I wanted to clearly address the question by saying, think of this as a continuum. We've got a leading position to serve global data center customers. If you look at the acquisitions we've done post Anixter, they're tuck-ins, they're more than tuck-ins because they actually have been expanding the portfolio and we're leveraging them, our One WESCO selling model across the globe.

Speaker #3: So a little longer answer, Dean, but I think I wanted to clearly address the question by saying this is think of this as a continuum.

John J. Engel: A little longer answer, Deane, I think I wanted to clearly address the question by saying, think of this as a continuum. We've got a leading position to serve global data center customers. If you look at the acquisitions we've done post Anixter, they're tuck-ins, they're more than tuck-ins because they actually have been expanding the portfolio and we're leveraging them, our One WESCO selling model across the globe.

Speaker #3: We've got a leading position to serve global data center customers. And if you look at the acquisitions we've done post-annexure, they're tuck-ins, but they're more than tuck-ins, because they actually have been expanding the portfolio and we're leveraging them.

Speaker #3: Our one WESCO selling model across the globe.

Speaker #2: Great. It was great color. Thank you. And congrats to the team.

Deane Dray: Great. It was great color. Thank you, and congrats to the team.

Speaker #3: Thank you.

John J. Engel: Thank you.

Speaker #1: The next question will come from Sam Darkesh with Raymond James. Please go ahead.

Operator: The next question will come 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 #4: Good morning, Sam.

John J. Engel: Morning, Sam.

Indraneel Dev: Good morning.

Speaker #3: So a couple of questions. The first topic would be gross margins, specifically around data center. I mean, I'm noticing CSS and EES gross margins were up pretty materially year on year.

Sam Darkatsh: A couple questions. The first topic would be gross margins, specifically around data center. I am noticing CSS and EES gross margins were up pretty materially year-on-year, and I am wondering, has the data center gross margin dynamic switched? I mean, is it now more stock and flow? Is the price cost turning positive, which may overwhelm the lower project mix? I guess related to that, if you could address the gross margin for the Grid Services award versus your overall UBS gross margins.

Speaker #3: And I'm wondering, have the data center gross margin dynamics switched? I mean, is it now more stock and flow? Is the price-cost turning positive, which may overwhelm the lower project mix?

Speaker #3: And I guess related to that, if you could address the gross margin for the grid services award versus your overall UBS gross margins.

Speaker #4: Yeah, thanks for that, Sam. Again, good morning. The I'll take you back six quarters. And six to seven quarters, and that's when the CSS sales started to meaningfully inflect up.

John J. Engel: Yeah, thanks for that, Sam. Again, good morning. I will take you back six quarters, six to seven quarters, that is when the CSS sales started to meaningfully inflect up, we had a bit of gross margin pressure in CSS. If you go back to seven quarters ago, we were very clear that we had very high confidence we would be able to improve margins as we start executing those projects with customers. That these were front-end margins only, but as we start executing the projects, there will be other products that are pulled through, and we will be increasing our services content over time through the project execution and in post-project deployment. That is what you are seeing. We have been working hard at that. If you look at CSS gross margins, the heart of your question, first part of your question, look at that.

Speaker #4: And we had a bit of gross margin pressure in CSS. And if you go back to seven quarters ago, we were very clear that we had very high confidence we would be able to improve margins.

Speaker #4: As we start executing those projects with customers. That these were front-end margins only, but as we start executing the projects, there'd be other products that are pulled through.

John J. Engel: That these were front-end margins only, but as we start executing the projects, there will be other products that are pulled through, and we will be increasing our services content over time through the project execution and in post-project deployment. That is what you are seeing.

Speaker #4: And we would be increasing our services content over time, through the project execution and then post-project deployment. That's what you're seeing. So we've been working hard at that.

John J. Engel: We have been working hard at that. If you look at CSS gross margins, the heart of your question, first part of your question, look at that. I think we are building a very nice trend, we are seeing the result of what I outlined six to seven quarters ago. It speaks to our value proposition with those end user customers and the fact that we are able to be more of a one-stop shop solving their critical needs through project design, project implementation, construction, and deployment.

Speaker #4: If you look at CSS gross margins, the harder your question, first part of your question, look at that. I think we're building a very nice trend.

John J. Engel: I think we are building a very nice trend, we are seeing the result of what I outlined six to seven quarters ago. It speaks to our value proposition with those end user customers and the fact that we are able to be more of a one-stop shop solving their critical needs through project design, project implementation, construction, and deployment. Those phases are critical for data center build. For EES, I could not be more pleased with the broad-based gross margin momentum we are getting. I will tell you, both CSS and EES, I have to highlight it, we have a new leader effect. We got a new leader in CSS. This is his fifth quarter under his belt. We have a new leader, and he was promoted from within, so he came out of the Anixter side of the equation. We have a new leader in EES.

Speaker #4: And so we're seeing now that seeing the result of what I outlined six to seven quarters ago. And it speaks to our value proposition with those end-user customers.

Speaker #4: And the fact that we're able to be more of a one-stop shop, solving their critical needs through project design, project implementation, construction, and deployment.

John J. Engel: Those phases are critical for data center build. For EES, I could not be more pleased with the broad-based gross margin momentum we are getting. I will tell you, both CSS and EES, I have to highlight it, we have a new leader effect. We got a new leader in CSS. This is his fifth quarter under his belt. We have a new leader, and he was promoted from within, so he came out of the Anixter side of the equation. We have a new leader in EES.

Speaker #4: Those phases are critical for data center build. For EES, I couldn't be more pleased with the broad-based gross margin momentum we're getting.

Speaker #4: I will tell you both CSS and EES is I have to highlight it. We have a new leader effect. We got a new leader in CSS.

Speaker #4: He's got—this is his fifth quarter under his belt. We have a new leader, and he was promoted from within, so he came out of that side of the equation.

Speaker #4: And we have a new leader in EES. This is his fourth quarter under his belt. And we went outside to bring him onto the team.

John J. Engel: This is his fourth quarter under his belt, we went outside to bring him onto the team. I think you are seeing a special cause driver, quote unquote, is a new leader effect in both sales growth and profitability for those two businesses. Finally on UBS, which is the final part of your question, I remain incredibly bullish on the outlook for UBS overall, and especially utility. Both utility and broadband. In terms of utility, we are seeing margins stabilize on a sequential basis. It is nice to get EBITDA margins back up above 10. I think what you are going to see very clearly, and we wanted to signal this, the margins for Grid Services are accretive at the operating margin line to UBS. As Grid Services kicks into gear, and it will kick into gear very strongly, it is going to be margin accretive.

Speaker #4: And I think you're seeing a special cause driver—quote, unquote—a new leader effect in both sales growth and profitability for those two businesses.

Speaker #4: And then finally on UBS, which is your final part of your question, I remain incredibly bullish on the outlook for UBS overall, and especially utility.

John J. Engel: Finally on UBS, which is the final part of your question, I remain incredibly bullish on the outlook for UBS overall, and especially utility. Both utility and broadband. In terms of utility, we are seeing margins stabilize on a sequential basis. It is nice to get EBITDA margins back up above 10. I think what you are going to see very clearly, and we wanted to signal this, the margins for Grid Services are accretive at the operating margin line to UBS.

Speaker #4: Both utility and broadband. But in terms of utility, we're seeing margins stabilize. On a sequential basis, it's nice to get EBITDA margins back up above 10.

Speaker #4: But I think what you're going to see very clearly—and we wanted to signal this—the margins for grid services are accretive at the operating margin line to UBS.

Speaker #4: So as grid services kicks into gear, and it will kick into gear very strongly, it's going to be margin accretive. And we've now strung two quarters in a row of double-digit growth for grid services.

John J. Engel: As Grid Services kicks into gear, and it will kick into gear very strongly, it is going to be margin accretive. We've now strung two quarters in a row of double-digit growth for Grid Services, as we outlined in our original outlook for 2026, we expect double-digit growth for Grid Services across the entire year. Message is: public power is stabilized and improving.

John J. Engel: We've now strung two quarters in a row of double-digit growth for Grid Services, as we outlined in our original outlook for 2026, we expect double-digit growth for Grid Services across the entire year. Message is: public power is stabilized and improving. We actually returned to growth in public power this quarter. IOUs are chugging along nicely, double-digit growth in the quarter. Still got the margin pressures in public power, Grid Services is really accelerating, and we talked about the big new win that will ship over multiple years, and that's margin accretive. That rounds it out, Sam.

Speaker #4: And as we outlined in our original outlook for 2026, we expect double-digit growth for grid services across the entire year. So message is, public power is stabilized and improving.

Speaker #4: We actually returned to growth in Public Power this quarter. IOUs are chugging along nicely, with double-digit growth in the quarter. Still got the margin pressures in Public Power, but Grid Services is really accelerating.

John J. Engel: We actually returned to growth in public power this quarter. IOUs are chugging along nicely, double-digit growth in the quarter. Still got the margin pressures in public power, Grid Services is really accelerating, and we talked about the big new win that will ship over multiple years, and that's margin accretive. That rounds it out, Sam.

Speaker #4: And we talked about the big new win that will ship over multiple years, and that's margin-accretive.

Speaker #3: That rounds it out. Yeah, terrific, comprehensive answer. Thank you. My second question—and I recognize that this is going to sound like looking a gift horse in the mouth, so apologies.

Sam Darkatsh: Terrific comprehensive answer. Thank you. My second question, I recognize that this is going to sound like looking a gift horse in the mouth, apologies. I was a little surprised at the Q3 EBITDA margin guide being a bit lower than the Q2. I recognize you're calling mix out, you're also going to have, I don't know, what, $300 or $400 million of extra sales incrementally. What's happening there that margins are coming in a little bit? Related to that, at what point are you expecting OpEx leverage on a year-on-year basis? Thanks.

Speaker #3: But I was a little surprised at the third quarter EBITDA margin guide being a bit lower than the second quarter. I recognize you're calling mix out, but you're also going to have, I don't know what, 300, 400 million dollars of extra sales incrementally.

Speaker #3: So what's happening there that margins are coming in a little bit, and then related to that, at what point are you expecting OpEx leverage on a year-on-year basis?

Speaker #3: Thanks.

Speaker #4: So Sam, I think it's the short answer is it's largely mixed. So if you look at second quarter, we had a significant margin improvement, right?

Indraneel Dev: Sam, I think the short answer is it's largely mix. If you look at Q2, we had a significant margin improvement, right? One of the driver was mix. Obviously, as we grew the revenue base across the different business units, mix plays a big part with some of the bigger, chunkier projects that we now deliver on. That's the dynamic that we see going into Q3. It's largely mix.

Speaker #4: And one of the drivers was mix. So obviously, as we grew the revenue base, across the different business units, mix plays a big part with some of the bigger chunkier projects that we now deliver on.

Speaker #4: And that’s the dynamic that we see going into the third quarter, so it’s largely mix.

Speaker #3: And on the operating leverage comment, Sam, look, we also had some true up of incentive compensation in this quarter. So we're clearly we're exceeding our internal plan commitments.

John J. Engel: On the operating leverage comment, Sam, look, we also had some true-up of incentive compensation in this quarter. We're clearly exceeding our internal plan commitments. It's a nice problem to have. Just in terms of operating model, look, we've geared up, and you can see us now operating at a much higher organic sales growth rate on a top line. To string 4 quarters in a row at double digits is strong. Operating model-wise, we do absolutely expect to get very strong operating cost leverage as you look out 2027, 2028, 2029. That's a key part of our recipe.

Speaker #3: So, it's a nice problem to have. But just in terms of our operating model—look, we've geared up, and you can see us now operating at a much higher organic sales growth rate on the top line.

Speaker #3: The string, four quarters in a row at double digits, is strong. Operating model-wise, we do absolutely expect to get very strong operating cost leverage.

Speaker #3: As you look out, 2027, 2028, 2029, that's a key part of our recipe.

Speaker #4: And just one other thing I would add, Sam, is just what John highlighted in his comments about data center, the operating leverage really is important to look at the EBITDA line for us now.

Indraneel Dev: Just one other thing I would add, Sam, is just what John highlighted in his comments about data center. The operating leverage really is important to look at the EBITDA line for us now because of some of the services that we're wrapping in. It's a combination of SG&A and really focusing on the EBITDA line, which you're seeing clearly come through.

Speaker #4: Because of some of the services that we're wrapping in. So it's a combination of SG&A and really focusing on the EBITDA line, which you're seeing clearly come through.

Speaker #1: The next question will come from David Manthe with Baird. Please go ahead.

Operator: The next question will come from David Manthey with Baird. Please go ahead.

Speaker #5: Thank you. Good morning, everyone.

David Manthey: Thank you. Good morning, everyone.

John J. Engel: Morning, Dave.

Speaker #4: Good morning, Dave.

Speaker #5: First on grid services, John, who's the buyer here? You saw this direct to customer? Is there an integrator involved? And then second, how did this type of grid to data center connection application get purchased in the past before you stood up this operation?

David Manthey: First on Grid Services, John. Who is the buyer here? Do you sell this direct to customers? Is there an integrator involved? Second, how does this type of grid-to-data center connection application get purchased in the past before you stood up this operation?

Speaker #4: Yeah, thanks, Dave. It's not through an integrator. It's a direct to a very large very, very large hyperscaler end user customer. So that's the first point.

John J. Engel: Thanks, David. It is not through an integrator. It is direct to a very large hyperscaler end user customer. That is the first point. We cannot disclose who the customer is. We are not at liberty to do that, but we are thrilled, though, again, that it is direct with the end user. By the way, this business, Grid Services, is working with a series of end users. How did this develop? I would tell you, if you take a multi-decade look at this products and services and this full solution that comprise of what we call our Grid Services business, it was served direct, David, to the heart of your question. It was manufacturers direct to the end user. We organically built up this Grid Services business over the last five to six years.

Speaker #4: And we can't disclose who the customer is. We're not at liberty to do that. But we're thrilled, though, again, that it's direct with the end user.

Speaker #4: And by the way, this business grid services is working with a series of end users. How did this develop? I would tell you, if you take a multi-decade look at the products and services in this full solution that comprise what we call our grid services business, it was served direct.

John J. Engel: How did this develop? I would tell you, if you take a multi-decade look at this products and services and this full solution that comprise of what we call our Grid Services business, it was served direct, David, to the heart of your question. It was manufacturers direct to the end user.

Speaker #4: Dave, to the heart of your question, it was manufacturers direct to the end user. And we organically build up this grid services business over the last five to six years.

John J. Engel: We organically built up this Grid Services business over the last five to six years. If you go back to our last Investor Day a couple of years ago, we did reference it. I pointed to it as kind of inside the house. No acquisition served it, organic build. James Cameron touched upon it at our Investor Day as well.

Speaker #4: If you go back to our last investor day a couple of years ago, we did reference it. I pointed to it as a kind of inside the house.

John J. Engel: If you go back to our last Investor Day a couple of years ago, we did reference it. I pointed to it as kind of inside the house. No acquisition served it, organic build. James Cameron touched upon it at our Investor Day as well. Again, that was a few years ago at our Investor Day. It was a $300-plus million business last year, we grew it over the last five to six years. We have now strung three quarters of double-digit growth in a row, Q4, Q1, Q2. We expect that to continue, as I said. It is just a terrific set of service capabilities. Why? Kind of right to win there and right to continue to win. It is our global supply base, it is our global supply chain management capabilities, it is our global project execution capabilities, and our logistical capabilities as well.

Speaker #4: No acquisition served it. Organic build, Jim Cameron touched upon it at our investor day as well. Again, that was a few years ago at our investor day.

John J. Engel: Again, that was a few years ago at our Investor Day. It was a $300-plus million business last year, we grew it over the last five to six years. We have now strung three quarters of double-digit growth in a row, Q4, Q1, Q2. We expect that to continue, as I said. It is just a terrific set of service capabilities. Why? Kind of right to win there and right to continue to win.

Speaker #4: It was a 300 plus million dollar business last year. So we grew it over the last five to six years. We've now struck three quarters of double-digit growth in a row.

Speaker #4: Q4, Q1, Q2—we expect that to continue, as I said. And so, it's just a terrific set of service capabilities. Why? Kind of right to win there, and right to continue to win.

Speaker #4: It's our global supply base. It's our global supply chain management capabilities. It's our global project execution capabilities. And stitch that with our logistical capabilities as well.

John J. Engel: It is our global supply base, it is our global supply chain management capabilities, it is our global project execution capabilities, and our logistical capabilities as well. Stitching that all together with our services abilities to support major construction builds. We have those capabilities in the power portion of the value chain.

Speaker #4: Stitching that all together with our services' abilities to support major construction builds. We have those capabilities in the Power portion of the value chain.

John J. Engel: Stitching that all together with our services abilities to support major construction builds. We have those capabilities in the power portion of the value chain. What is really important here is that Grid Services, again, we are five to six years in the making here of this organic build, has really been serving utilities principally till now. This is a landmark win, quite frankly, which is why we spiked it out. It is also why I profiled Grid Services when we gave our Q4 earnings results earlier this year when we outlined our initial guide. This is a long-cycle business. This drove the 80% growth rate in backlog for UBS. Even if you strip this out, UBS growth was still well above 20% to 30% backlog growth. Still good backlog growth in utility. This will ship over multiple years.

Speaker #4: What's really important here is that grid services again, we're five to six years into making here of this organic build, has really been serving utilities principally till now.

John J. Engel: What is really important here is that Grid Services, again, we are five to six years in the making here of this organic build, has really been serving utilities principally till now. This is a landmark win, quite frankly, which is why we spiked it out. It is also why I profiled Grid Services when we gave our Q4 earnings results earlier this year when we outlined our initial guide. This is a long-cycle business. This drove the 80% growth rate in backlog for UBS.

Speaker #4: And so this is a landmark win, quite frankly, which is why we spiked it out. And it's also why I profile grid services when we gave our Q4 earnings results earlier this year when we outlined our initial guide.

Speaker #4: This is a long cycle business. This drove the 80% growth rate and backlog for UBS. But even if you strip this out, UBS growth was still well above 20 to 30% backlog growth.

John J. Engel: Even if you strip this out, UBS growth was still well above 20% to 30% backlog growth. Still good backlog growth in utility. This will ship over multiple years. We've got some other wins, but this is a notable single win with a data center end user customer. I'll end on this note.

Speaker #4: So still good backlog growth in utility. But this will ship over multiple years. It's with we've got some other wins, but this is a notable single win with a data center end user customer.

John J. Engel: We've got some other wins, but this is a notable single win with a data center end user customer. I'll end on this note. The Grid Services value proposition and what we're providing to customers, working with our supplier partners, and these are global supplier partners, it applies to utilities and the utility industry. It applies to data centers. It applies to any and all high voltage, medium to high voltage industrial applications. It applies to renewables. Think of this Grid Services play, even though it's tucked under UBS, it is absolutely a One WESCO play. Like data centers are a One WESCO play, but it's bigger than data centers. We spiked it out purposely. Obviously, it's a big driver of our backlog growth.

Speaker #4: And I'll end on this note. The grid services value proposition and what we're providing to customers working with our supplier partners and these are global supplier partners.

John J. Engel: The Grid Services value proposition and what we're providing to customers, working with our supplier partners, and these are global supplier partners, it applies to utilities and the utility industry. It applies to data centers. It applies to any and all high voltage, medium to high voltage industrial applications. It applies to renewables. Think of this Grid Services play, even though it's tucked under UBS, it is absolutely a One WESCO play.

Speaker #4: It applies to utilities and the utility industry. It applies to data centers. It applies to any and all high-voltage, medium- to high-voltage industrial applications.

Speaker #4: It applies to renewables. So think of this grid services play, even though it's tucked under UBS, it is absolutely a one WESCO play. It's like data centers are a one WESCO play, but it's bigger than data centers.

John J. Engel: Like data centers are a One WESCO play, but it's bigger than data centers. We spiked it out purposely. Obviously, it's a big driver of our backlog growth. The margins, again, are accretive to UBS, this just sets us up very well, I think, especially as we move into next year, because this is a longer cycle business of getting that margin accretive growth for UBS.

Speaker #4: So we spiked it out purposely. Obviously, it's a big driver of our backlog growth. And the margins, again, are accrued of the UBS. So this just sets us up very well, I think, especially as we move into next year because this is a longer cycle business of getting that margin accrued of growth for UBS.

John J. Engel: The margins, again, are accretive to UBS, this just sets us up very well, I think, especially as we move into next year, because this is a longer cycle business of getting that margin accretive growth for UBS.

Speaker #5: Sounds good. Thanks, John. And then on the core EES trends X data centers, one of your big competitors noted that their progression was more limited in the core electrical outside of DCs.

David Manthey: Sounds good. Thanks, John. On the core EES trends, ex data centers, one of your big competitors noted that their progression was more limited in the core electrical outside of DC, it's encouraging to see Wesco growing high single digits outside of that specific vertical. Could you just talk a little bit more broadly about where you're seeing acceleration and if there's any markets that are yet to inflect in that sort of core OEM and medium voltage market?

Speaker #5: So it's encouraging to see WESCO growing high single digits outside of that specific vertical. Could you just talk a little bit more broadly about where you're seeing acceleration, and if there are any markets that are yet to inflect in that sort of core OEM and medium voltage market?

Speaker #4: Yeah, yeah. It's a great question, Dave. I couldn't be more pleased with really EES accelerating this quarter. 11% sales growth—really nice to see.

John J. Engel: Yeah. It's a great question, Dave. I couldn't be more pleased with really EES accelerating this quarter. 11% sales growth, really nice to see. By the way, if you strip out data centers, it's still 8+% growth. EES is 8+% high single-digit growth ex data centers. That speaks to the breadth and strength of the portfolio, these multiple secular growth trends. Let's double-click on EES. OEM being up over 20%, that's always been a leading indicator for us for the industrial market. It's, again, really healthy margins. Having that 20+% growth is very strong, that's an indicator of the beginning of this, I'll call it, broader industrial super cycle because of where we play in the value chain. Industrial was only up low single digits. As good as EES was with the 11% growth, that's with industrial being up low single digits.

Speaker #4: By the way, if you strip out data centers, it's still a plus percent growth. So EES is a plus percent, high single digit growth X data centers.

Speaker #4: That speaks to the breadth and strength of the portfolio—these multiple secular growth trends. So let's double-click on EES. OEM being up over 20%, and that's always been a leading indicator for us for the industrial market.

John J. Engel: OEM being up over 20%, that's always been a leading indicator for us for the industrial market. It's, again, really healthy margins. Having that 20+% growth is very strong, that's an indicator of the beginning of this, I'll call it, broader industrial super cycle because of where we play in the value chain. Industrial was only up low single digits. As good as EES was with the 11% growth, that's with industrial being up low single digits.

Speaker #4: Again, really healthy margins—having that 20-plus percent growth is very strong. And that’s an indicator of the beginning of this, I’ll call it, broader industrial super cycle because of where we play in the value chain.

Speaker #4: Industrial was only up low single digits. So as good as EES was with the 11% growth, that's with industrial being up low single digits.

Speaker #4: The future's very bright. I'm bullish on industrial. As that improves and kicks in—and by the way, we have backlog growth for industrial OEM and for construction— all three elements of EES are at a double-digit growth rate.

John J. Engel: The future's very bright. I'm bullish on industrial. As that improves and kicks in, by the way, the backlog growth, we have backlog growth for industrial OEM and for construction, all three elements of EES at a double-digit growth rate, but very strong backlog growth and book-to-bill ratio in industrial. I think the future's bright. Again, I think we're at the beginning of early innings of this super cycle. If you look at construction, it was up high single digits. Yes, data centers helps that, but it's the broader infrastructure investments, Dave, that we've been reading about, quite frankly, for not one year, but two years, two and a half years plus.

Speaker #4: But very strong backlog growth and book-to-bill ratio in Industrial. So I think the future's bright. Again, I think we're at the beginning, or early innings, of this supercycle.

Speaker #4: And then if you look at construction, it was up high single digits. And yes, data centers help that, but it's the broader infrastructure investments, Dave, that we've been reading about, quite frankly, for not one year, but two years—two and a half years plus.

John J. Engel: If you look at construction, it was up high single digits. Yes, data centers helps that, but it's the broader infrastructure investments, Dave, that we've been reading about, quite frankly, for not one year, but two years, two and a half years plus. Where EES plays in that cycle, the gear goes in earlier, but there's a whole series of other electrical products and supplies that get installed as part of the major infrastructure projects after gear, much later than gear. I think you're starting to see that kick in. I'm really pleased with the breadth and strength across EES.

Speaker #4: And where EES plays in that cycle, the gear goes in earlier, but there's a whole series of other electrical products and supplies that get installed as part of the major infrastructure projects after gear, much later than gear.

John J. Engel: Where EES plays in that cycle, the gear goes in earlier, but there's a whole series of other electrical products and supplies that get installed as part of the major infrastructure projects after gear, much later than gear. I think you're starting to see that kick in. I'm really pleased with the breadth and strength across EES.

Speaker #4: So I think you're starting to see that kick in. So I'm really pleased with the breadth and strength across the EES.

Speaker #5: Perfect. Thanks, John.

David Manthey: Perfect. Thanks, John.

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

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

Speaker #6: Hi, good morning. Congratulations on the outstanding results. Just to be, maybe, a little bit pejorative, John—has there been any sign of any of your end markets being kind of crowded out by data center AI spend?

Guy Hardwick: Hi. Good morning. Congratulations on the outstanding results. Just to be maybe a little bit pejorative, John, has there been any sign of any of your end markets being kind of crowded out by data center AI spend? You look at ENI and security, they only grew low single digits and maybe if there's a bit of inflation there, then there may be that fact. Are there any examples you think of where some of your businesses may be being impacted by resources being switched to data center and AI investment?

Speaker #6: I mean, if you look at E&I and Security, they only grew low single digits, and maybe if there's a bit of inflation there, then maybe they're flat.

Speaker #6: Are there any examples you think of where some of your businesses may be being impacted by resources being switched to data center and AI investment?

Speaker #4: Yeah, I wouldn't call out our business guy. I guess the way I'd answer it is this—and I think it's more of an industry-wide phenomenon.

John J. Engel: Yeah, I wouldn't call out our business, Guy. I guess the way I'd answer it is this, and I think it's more of an industry-wide phenomenon. When you think about the amount of capital that's being spent in this rising demand curve for data centers, where is it driving demand? It's driving power demand, significantly increasing energy demand, and it's also driving the need for construction labor. It's not a WESCO-specific item, and I wouldn't call that out as driving any parts of our business ex data center. Again, that's why I spiked out EES is 8%+ growth ex data center. Overall, WESCO is mid-single-digit growth, let's say, ex data center. The constraint is power and labor.

Speaker #4: So when you think about the amount of capital that's being spent in this rising demand curve for data centers, where is it driving demand?

Speaker #4: It's driving power demand. Significantly increasing energy demand. And it's also driving the need for construction labor. So it's not a WESCO specific item, and we're not really I wouldn't call that out as driving any parts of our business X data center.

John J. Engel: It's driving power demand, significantly increasing energy demand, and it's also driving the need for construction labor. It's not a WESCO-specific item, and I wouldn't call that out as driving any parts of our business ex data center. Again, that's why I spiked out EES is 8%+ growth ex data center. Overall, WESCO is mid-single-digit growth, let's say, ex data center. The constraint is power and labor.

Speaker #4: Again, that's why I spiked out EES is a plus percent growth X data center overall WESCO is six plus mid single digit growth, let's say.

Speaker #4: X data center. But the constraint is power and labor. And so what's happening is when you look across the entire construction value chain, getting solving the power solution, and there's a variety of in front of the meter and behind the meter solutions that are being worked, is the ultimate largest governor but then the next closest governor is construction labor.

John J. Engel: What's happening is when you look across the entire construction value chain, solving the power solution, and there's a variety of in front of the meter and behind the meter solutions that are being worked is the ultimate largest governor, the next closest governor is construction labor. To the extent the data center ends up consuming that labor, demand exceeds supply, it could just shift the timing around of other construction projects. With all that said, we're not seeing that because look at our EES business, we're not residential construction. We're non-resi construction, and we grew again high single digits in construction in Q2, which we feel really good about. It's a great question because I think it's important for everyone to understand that from an industry standpoint. Bottom line is this: demand's outstripping supply across the value chain.

Speaker #4: And so to the extent that data center ends up consuming that labor, demand exceeds supply, it could just shift the timing around of other construction projects.

Speaker #4: With all that said, we're not seeing that, because look at our EES business. We're not residential construction; we're non-resi construction. And we grew again, high single digits, in construction.

John J. Engel: With all that said, we're not seeing that because look at our EES business, we're not residential construction. We're non-resi construction, and we grew again high single digits in construction in Q2, which we feel really good about. It's a great question because I think it's important for everyone to understand that from an industry standpoint. Bottom line is this: demand's outstripping supply across the value chain. Starts with power, followed by labor, there's some other constraints as well.

Speaker #4: In the second quarter, which we feel really good about. And so—but it's a great question because I think it's important for everyone to understand that, from an industry standpoint.

Speaker #4: Bottom line is this: demand is outstripping supply across the value chain. It starts with power, followed by labor, and then there are some other constraints as well.

John J. Engel: Starts with power, followed by labor, there's some other constraints as well.

Guy Hardwick: Thank you. Just quickly, Neil, could you possibly expand on what those initiatives to improve DSOs and DIOs? It does look like the reduction in the free cash regardless is entirely accounted for by the increase in the top line. Maybe is there a target for where you think you can get working capital to sales in, say, one year time, two years' time?

Speaker #6: Thank you. Just quickly, Neil, could you possibly expand on what those initiatives to improve DSOs and DIOs? Does look like the reduction in the free cash regarding this entire counterful by the increase in the top line.

Speaker #6: So maybe is there a target for where you think you can get working capital to sales and say one-year time, two years time?

Speaker #4: Sure. So we have a series of initiatives. It starts with the commercial front end. And so we're being very diligent in terms of a lot of our payment terms with customers.

Indraneel Dev: Sure. We have a series of initiatives. It starts with the commercial front end. We're being very diligent in terms of a lot of our payment terms with customers, thinking through not only just the payment term, thinking through how long we hold inventory, having protections in the contracts to make sure we limit that, et cetera. There is a big effort on the commercial front. We've made some other organizational changes to put focus on just the pure collections engine, if you will. We're compressing timelines. We're resolving customer disputes faster. A number of tactical initiatives, Guy, that we expect to bring in some of our DSO days. Similarly, also on the inventory side.

Speaker #4: Thinking through not only the payment terms, but also how long we hold inventory, having protections in the contracts to make sure we limit that, etc., etc.

Speaker #4: So there is a big effort on the commercial front. We've made some other organizational changes to put focus on just the pure collections engine, if you will.

Speaker #4: So we're compressing timelines for resolving customer disputes faster. So a number of tactical initiatives, guy, that we expect to bring in. Some of our DSO days.

Indraneel Dev: A number of tactical initiatives, Guy, that we expect to bring in some of our DSO days. Similarly, also on the inventory side. As we invest more in digital transformation and now layering in AI, we have tools that we've never had before in terms of looking at our entire data lake and analyzing what can be done in terms of compressing that cycle. I'll just underline that point by saying that's one of my top priorities. I'm personally spending a lot of time in that area.

Speaker #4: And similarly, also on the inventory side. As we invest more in digital transformation and now layering in AI, we have tools that we've never had before in terms of looking at our entire data lake and analyzing what can be done from in terms of compressing that cycle.

Indraneel Dev: As we invest more in digital transformation and now layering in AI, we have tools that we've never had before in terms of looking at our entire data lake and analyzing what can be done in terms of compressing that cycle. I'll just underline that point by saying that's one of my top priorities. I'm personally spending a lot of time in that area.

Speaker #4: And I'll just underline that point by saying that's one of my top priorities. Personally spending a lot of time in that area.

Speaker #6: Thank you.

Guy Hardwick: Thank you.

Speaker #1: The next question will come from Steve Volkman with Jefferies. Please go ahead.

Operator: The next question will come from Stephen Volkmann with Jefferies. Please go ahead.

Speaker #6: Great. Good morning, guys. Neil, I think you said that there'd be a little bit of a mixed impact on margins in the third quarter.

Stephen Volkmann: Great. Good morning, guys. Neil, I think you said that there would be a little bit of a mix impact on margins in Q3. Since it's kind of hard to see into that on our side, any words of wisdom relative to the different segments and how we should think about that?

Speaker #6: Since it's kind of hard to see into that on our side, any words of wisdom relative to the different segments? I wish to think about that.

Indraneel Dev: Well, Steve, sometimes it's hard for us to see that in terms of the timing of these large projects. That is our best estimate at this point, given what we anticipate in terms of project mix across all the SBUs. There is some variability to that, but that's the best guidance I can give you at this point.

Speaker #4: Well, Steve, sometimes it's hard for us to see that. In terms of the timing of these large projects, but that is our best estimate at this point.

Speaker #4: Given what we anticipate in terms of project mix, across all the SBUs, and there is some variability to that, but that's the best guidance I can give you at this point.

Speaker #6: Okay. Maybe a bigger picture question, then. Back to grid services, John. So, I'm curious how you think about the competitive dynamics there. Is it the same competitor group in grid services that you would see in your standard distribution business?

Stephen Volkmann: Okay. Maybe a bigger picture question then. Back to Grid Services, John. I'm curious how you think about the competitive dynamics there. Is it the same competitor group in Grid Services that you would see in kind of your standard distribution business? Is there a different set of folks? What does the pipeline look like for additional orders?

Speaker #6: Is there a different set of folks? And what is the pipeline look like for additional orders?

Speaker #4: So right now, I would ask you to think about this as some significant unmet customer needs. That given a breadth of capabilities, we have across WESCO and particularly what we build up in grid services, we're able to solve their address their needs, solve their problems.

John J. Engel: Right now, I would ask you to think about this as some significant unmet customer needs that, given a breadth of capabilities we have across WESCO, and particularly what we build up in Grid Services, we're able to address their needs, solve their problems. There's no one we're competing with direct one for one for what we're doing in Grid Services. There are different companies that do different pieces of what we do, and these are none of our traditional competitors. That's the first part of the answer. The second part of the answer is, because it's a long cycle of business opportunity, we have a very robust pipeline. I'm not going to get into the size and scale of that, but suffice to say, it's very large pipeline of opportunities that we are working.

Speaker #4: So, in terms of grid services, there's no one we're competing with directly on a one-for-one basis for what we're doing. There are different companies that do different pieces of what we do.

John J. Engel: There are different companies that do different pieces of what we do, and these are none of our traditional competitors. That's the first part of the answer. The second part of the answer is, because it's a long cycle of business opportunity, we have a very robust pipeline. I'm not going to get into the size and scale of that, but suffice to say, it's very large pipeline of opportunities that we are working.

Speaker #4: And these are not our these are none of our traditional competitors. So that's the first part of the answer. The second part of the answer is because it's a long cycle business opportunity, we have a very robust pipeline.

Speaker #4: I'm not going to get into the size and scale of that, but suffice to say, it's a very large pipeline of opportunities that we are working. And again, this win is just an example of one.

John J. Engel: Again, this wind is just an example of one we had been working for some time. The future is very bright for us for Grid Services. Again, this is why we outlined it at Investor Day a few years ago. It's also why we spotlighted it when we did our Q4 release. Anyway. I just kind of end on that note. It's a positive momentum vector. It's long cycle. When we get these wins, they won't show up in weeks to one or two quarters, but they'll be over a duration of many, many quarters to a few years, and that's the kind of the characteristics of this win. It's very notable. We're kind of off to the races there.

Speaker #4: We had been working for some time. And so the future is very bright for us for grid services. Again, this is why we outlined it at investor day a few years ago.

Speaker #4: It's also why we spotlighted it when we did our Q4 release. So anyway, I just kind of end on that note. It's a positive momentum vector.

Speaker #4: It's long cycle. So when we get the winds, they won't show up in the weeks to one or two quarters, but they'll be over a duration of many, many quarters to a few years.

Speaker #4: And that's the kind of the characteristics of this wind. And it's very notable. So we're kind of off to the races there.

Speaker #6: Okay. I appreciate it.

Stephen Volkmann: Okay. I appreciate it.

Speaker #1: The next question will come from Nigel Coe with Wolfe Research. Please go ahead.

Operator: The next question will come from Nigel Coe with Wolfe Research. Please go ahead.

Speaker #5: Thanks. Good morning, everyone. And yeah, it's really good to see the broad-based momentum here. I did want to just touch back on gross margins because they were up materially.

Nigel Coe: Thanks. Good morning, everyone. Yeah, it's really good to see the broad-based momentum here. I did want to just touch back on growth margins because they were up materially. We haven't talked about price. I'm just wondering, was there any price inflation benefits coming through on growth? Just double-clicking on the data center business, John, I think we've been trained to believe that that's corresponds to. Doesn't look like that's the case anymore for the CSS segment. Maybe just touch on that as well.

Speaker #5: We haven't talked about price. I'm just wondering, was there any price inflation benefit coming through on gross? And then, just double-clicking on the data center business, John, I think we've been trained to believe that that's gross margin accretive.

Speaker #5: Doesn't look like that's the case anymore for the CSS segment, just maybe just touch on that as well.

Speaker #4: Just starting on your question on price, I think overall it was about a 3% benefit. CSS was 1%, EES was 5%, and about a point of that was commodity-driven. UBS was plus 3%.

John J. Engel: Starting on your question on price, I think overall it was about a 3% benefit. CSS 1%, EES 5%, about a point of that was commodity-driven, UBS's +3%. If we step back and really stare at the underlying activity, we would characterize that as back to business as usual. We're not seeing anything out of the ordinary. Nothing really out of the ordinary to highlight, Nigel, on the pricing side. I think our supplier partners are being very measured about it, they're testing the markets, I think it would be classified as back to normal. On the back to data centers, it's two drivers, plain and simple. New leader effect. Our new leader there, this is his fifth quarter's under his belt, and he's very much driving our margin initiatives.

Speaker #4: If we step back and really stare at the underlying activity, we would characterize that as back to business as usual. We're not seeing anything out of the ordinary.

Speaker #4: And so nothing really out of the ordinary to highlight, Nigel, on the pricing side. I think our supplier partners are being very measured about it.

Speaker #4: And they're testing the markets. So I think it would be classified as back to normal—back to data centers. It's two drivers, plain and simple.

John J. Engel: On the back to data centers, it's two drivers, plain and simple. New leader effect. Our new leader there, this is his fifth quarter's under his belt, and he's very much driving our margin initiatives. Secondly, to what I answered earlier, in that we're adding additional products and services to these end user relationships. Increasingly, we're becoming a one-stop shop.

Speaker #4: New leader effect. Our new leader there is fifth quarters under his belt. And he's very much driving all our margin initiatives. And secondly, it's what I answered earlier.

John J. Engel: Secondly, to what I answered earlier, in that we're adding additional products and services to these end user relationships. Increasingly, we're becoming a one-stop shop. As we get the initial awards that were more traditional, I'm actually going back six, seven quarters ago to when I started making these comments. You get a piece of that construction project, not everything's specced at that point. Once you're there, you're doing a good job direct with the end user, you pick up other products, we now have capabilities across the entire data life cycle, even post-construction phase. That's where our services increasingly come in. We're able to drive a richer margin mix post the initial award on these projects.

Speaker #4: In that we're adding additional products and services to these end-user relationships, increasingly we're becoming a one-stop shop. So as we get the initial awards that we're more traditional, I'm actually going back six, seven quarters ago, is when I started making these comments, you get a piece of that construction project, but not everything's specced at that point.

John J. Engel: As we get the initial awards that were more traditional, I'm actually going back six, seven quarters ago to when I started making these comments. You get a piece of that construction project, not everything's specced at that point. Once you're there, you're doing a good job direct with the end user, you pick up other products, we now have capabilities across the entire data life cycle, even post-construction phase. That's where our services increasingly come in. We're able to drive a richer margin mix post the initial award on these projects.

Speaker #4: And so once you're there, you're doing a good job directly with the end user, you pick up other products, and then we now have capabilities across the entire data lifecycle, even post-construction phase.

Speaker #4: And so that's where our services increasingly come in. We're able to drive a richer margin mix post the initial award on these projects.

Speaker #5: Great. And just quickly, I'll be curious about hiring because when you grow in high-scale digits, it's a fairly labor-intensive business. So tight labor market, any constraints on hiring?

Nigel Coe: Great. Just quickly, I'd be curious about hiring, because when you're growing high single digits, it's a fairly labor-intensive business. Tight labor market, any constraints on hiring?

Speaker #4: No, I think, look, this kind of goes back to— and I've been with WESCO more than a year or two. It's actually been two decades plus.

John J. Engel: No. Look, this kind of goes back to, I've been with WESCO more than a year or 2. It's actually been 2 decades plus. We were originally a leveraged spin-out out of Westinghouse, a 1994 leverage recap, and 1998 public, and 1999. I joined in 2004. Why do I start with that? We still are very, very focused on our operating cost structure and ensuring operating cost leverage. That's in our D&A. It's always been in our D&A. It's in our D&A of all the new team members we have. We are selectively adding where we see very strong opportunities if we end up being constrained. A lot of our additions, though, quite frankly, are technical resources because we're doing some engineering and helping to spec these solutions for our customers given the requirements that they have. So we've been injecting technical talent.

Speaker #4: I would we were originally a leveraged spin-out at a Westinghouse, a leveraged 94 leveraged recap at 98 public and 99. I joined in 2004.

Speaker #4: Why do I start with that? We are still very, very focused on our operating cost structure and ensuring operating cost leverage. I mean, that's in our DNA.

Speaker #4: It's always been in our DNA. It's in the DNA of all the new team members we have. And so, we are selectively adding where we see very strong opportunities.

Speaker #4: If we end up being constrained a lot of our additions, though, quite frankly, are technical resources because we are technically we're doing some engineering and helping to spec these solutions for our customers.

John J. Engel: A lot of our additions, though, quite frankly, are technical resources because we're doing some engineering and helping to spec these solutions for our customers given the requirements that they have. So we've been injecting technical talent.

Speaker #4: Given the requirements that they have—so we've been injecting technical talent. Again, we're doing it at a fraction of our sales growth rate, though.

John J. Engel: Again, we're doing it at a fraction of our sales growth rate, though. That's the recipe we're running, we're going to continue to run. Honestly, we're not having too much of a trouble for that group of folks because I think they're seeing the success we're having, the really interesting work we're doing. We're directly with end users, so the speed and agility that's required as you work with these customers, we're at the front end. It's really exciting stuff. We've been able to really attract some very interesting talent. I like the question a lot because I don't talk about it much, but we have meaningfully strengthened our technical resources that are part of the broader WESCO team.

Speaker #4: And so that's the recipe we're running, and we're going to continue to run. Honestly, we're not having too much trouble for that group of folks, because I think they're seeing the success we're having.

Speaker #4: There's really interesting work we're doing. We're working directly with end users, so the speed and agility that's required as you work with these customers—we're kind of at the front end.

Speaker #4: It's really exciting stuff. So we've been able to attract some very interesting talent. I like the question a lot because I don't talk about it much, but we have meaningfully strengthened our technical resources that are part of the broader WESCO team.

John J. Engel: It's really exciting stuff. We've been able to really attract some very interesting talent. I like the question a lot because I don't talk about it much, but we have meaningfully strengthened our technical resources that are part of the broader WESCO team.

Speaker #5: Great. Thanks, John.

Nigel Coe: Great. Thanks, John.

Speaker #1: This concludes our question and answer session. I would like to turn the conference back over to John Engel for any closing remarks.

Operator: This concludes our question and answer session. I would like to turn the conference back over to John Engel for any closing remarks.

Speaker #4: Thank you. I think we've addressed most of your questions. I'll bring the call to a close. I know we have many follow-ups scheduled for today, tomorrow, even early next week.

John J. Engel: Thank you. I think we've addressed most of your questions. I will bring the call to a close. I know we have many follow-ups scheduled for today, tomorrow, even into early next week, so we look forward to engaging with you. We expect to announce our Q3 earnings on Thursday, 29 October. Again, thank you for your support. Have a great day.

Speaker #4: So we look forward to engaging with you, and we expect to announce our third quarter earnings on Thursday, October 29th. Again, thank you for your support.

Speaker #4: Have a great day.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. Hello, welcome to WESCO's 2026 Q2 earnings call. I would like to remind you that all lines are in a listen-only mode throughout the presentation. If you would like to ask a question, please press star followed by one on your telephone keypad. Please note this event is being recorded. I will now hand the call over to Scott Gaffner, Senior Vice President, Investor Relations, to begin.

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

Speaker #1: disconnect.

Speaker #2: Hello, and welcome to WESCO's 2026 second quarter earnings call. I would like to remind you that all lines are in listen-only mode throughout the presentation.

Speaker #2: If you would like to ask a question, please press star, followed by 1 on your telephone keypad. Please note this event is being recorded.

Speaker #2: I will now hand the call over to Scott Gaffner, SVP of Investor Relations, to begin.

Speaker #3: 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, 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, the company undertakes no obligation to update the information to reflect changed circumstances. Additionally, today, we will 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 you can find on our website at wesco.com. On this call this morning, we have John Engel, Chairman, President, and Chief Executive Officer, and Neil Dev, Executive Vice President and Chief Financial Officer. I will turn over the call to John.

Speaker #3: 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 #3: Any forward-looking information speaks only as of this date, and the company undertakes no obligation to update the circumstances. Additionally, today, we will 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 you can find on our website at wesco.com.

Speaker #3: On this call, this morning, we have John Engel, WESCO's Chairman, President, and CEO, and Neil Dev, Executive Vice President and CFO, and I'll turn over the call to John.

Speaker #4: Thank you, Scott. Good morning, everyone. Thank you for joining our call today. We delivered exceptional results in the second quarter, and it reflects continuing strong execution market-out out performance and accelerating momentum across our entire business.

John J. Engel: Thank you, Scott. Good morning, everyone. Thank you for joining our call today. We delivered exceptional results in the Q2, it reflects continuing strong execution, market outperformance, and accelerating momentum across our entire business. We achieved record sales, record backlog, record adjusted EBITDA, and record adjusted earnings per share, all of which exceeded our plan. Free cash flow generation was also positive and exceeded our expectations. Key milestones and highlights for the Q2 included the first highlight was sales. Record sales were up 13%. We have now posted four consecutive quarters of double-digit sales growth for our WESCO enterprise, fueled by data centers. Beyond our outsized growth in data centers, demand remains strong across the rest of our diversified portfolio end-end markets as customers continue to invest in major infrastructure projects. Sales growth was broad-based across all 3 of our business units.

Speaker #4: We achieved record sales, record backlog, record adjusted EBITDA, and record adjusted earnings per share, all of which exceeded our plan. Free cash flow generation was also positive and exceeded our expectations.

Speaker #4: Key milestones and highlights for the second quarter included the first highlight was sales. Record sales were up 13%. We have now posted four consecutive quarters of double-digit sales growth for our WESCO Enterprise, fueled by data centers.

Speaker #4: Beyond our outsized growth in data centers, demand remains strong across the rest of our diversified portfolio and in our markets. As customers continue to invest in major infrastructure projects, sales growth was broad-based across all three of our business units.

Speaker #4: Very importantly, X data centers, we delivered mid-single-digit sales growth across WESCO in the second quarter. This highlights the strength of our diversified portfolio and it provides another proof point that we're benefiting from the multiple secular trends in CSS, EES, and UBS.

John J. Engel: Very importantly, ex data centers, we delivered mid-single-digit sales growth across WESCO in Q2. This highlights the strength of our diversified portfolio, and it provides another proof point that we're benefiting from the multiple secular trends in CSS, EES, and UBS. Our second highlight of this exceptional quarter was profitability. Record adjusted EBITDA was up 24%. Record adjusted EPS was up 35%, and adjusted EBITDA margin expanded 60 basis points to 7.3% for WESCO overall. Even more importantly, we significantly improved the profitability of each of our three business units. CSS achieved a record 10.2% EBITDA margin, establishing itself as a double-digit EBITDA margin business. It's great to get CSS above the 10% mark. EES expanded operating margins 110 basis points to 9.2% EBITDA. It's great to get EES back above 9% EBITDA. UBS returned to a 10% EBITDA margin business.

Speaker #4: Our second highlight of this exceptional quarter was profitability. Record adjusted EBITDA was up 24%. Record adjusted EPS was up 35%. And adjusted EBITDA margin expanded 60 basis points to 7.3% for WESCO overall.

Speaker #4: Even more importantly, we significantly improved the profitability of each of our three business units. CSS achieved a record 10.2% EBITDA margin, establishing itself as a double-digit EBITDA margin business.

Speaker #4: It's great to get CSS above the 10% mark. ESS expanded operating margins 110 basis points to 9.2% EBITDA. It's great to get EES back above 9% EBITDA.

Speaker #4: And UBS returned to a 10% EBITDA margin business. It's great to have UBS return above 10%, too, because I think, as you know, we fell below 10% over the last two quarters.

John J. Engel: It's great to have UBS return above 10% too, because I think, as you know, we fell below 10% over the last two quarters. Our third major highlight, again, for this exceptional quarter was backlog. Record backlog we've posted now for three quarters in a row, and backlog was up a whopping 60% in Q2. This was driven by strong double-digit growth across all three business units and reflects the continued effectiveness of our One WESCO cross-selling strategy. CSS backlog was up 95%, essentially doubling. EES backlog was up 30%, and UBS backlog was up 80%. All three SBUs posted record backlogs. This impressive backlog growth was fueled by multiyear customer commitments, demonstrating our transformation into a leading infrastructure solutions provider, serving the communications, the security, the electrical, the utility, and the power markets.

Speaker #4: Our third major highlight, again, for this exceptional quarter was backlog. Record backlog, we posted now for three quarters in a row, and backlog was up a whopping 60% in the second quarter.

Speaker #4: This was driven by strong double-digit growth across all three business units and reflects the continued effectiveness of our One WESCO cross-selling strategy. CSS backlog was up 95%, essentially doubling.

Speaker #4: EES backlog was up 30%, and UBS backlog was up 80%, all three SBUs posted record backlogs. This impressive backlog growth was fueled by multi-year customer commitments demonstrating our transformation into a leading infrastructure solutions provider, serving the communications, the security, the electrical, the utility, and the power markets.

Speaker #4: Another major milestone I wanted to call out this quarter was a significant multi-year grid services award in our UBS business. This award was from a hyperscale data center customer.

John J. Engel: Another major milestone I wanted to call out this quarter was a significant multiyear Grid Services award in our UBS business, and this award was from a hyperscale data center customer. This win represents a very important step in diversifying our UBS customer base and expanding our comprehensive data center offerings to include power solutions, end-to-end power solutions, and that's in addition to our extensive white space and gray space product and service offerings. Finally, as recently announced, we strengthened our end-to-end capabilities and cooling solutions for data center customers through the acquisition of Singapore-based Newark Engineering, and that acquisition closed on 1 July. We're very pleased with our exceptional Q2 results and our accelerating business momentum.

Speaker #4: This win represents a very important step in diversifying our UBS customer base, and expanding our comprehensive data center offerings to include power solutions. And to end power solutions, and that's in addition to our extensive white space and gray space product and service offerings.

Speaker #4: Finally, as recently announced, we strengthened our end-to-end capabilities and cooling solutions for data center customers through the acquisition of Singapore-based Newark Engineering and that acquisition closed on July 1st.

Speaker #4: We're very pleased with our exceptional second quarter results and our accelerating business momentum. The power of our customer value proposition, our global capabilities, and our leading portfolio of product service and solutions is very clear.

John J. Engel: The power of our customer value proposition, our global capabilities, and our leading portfolio of product, service, and solutions is very clear, and it's very clear as we continue to outperform the market. As a result, we're significantly raising our full-year outlook for sales, EBITDA, and EPS. This reflects the favorable secular growth trends and our confidence in continued strong execution. As a market leader, and with positive momentum building across our business, I'm bullish that WESCO will continue to outperform our markets and deliver superior value to our customers, our suppliers, and our shareholders in H2 2026 and beyond. With that, I'll turn it over to Neil to take you through our Q2 results and our raised full-year outlook in more detail. Neil.

Speaker #4: And it's very clear as we continue to outperform the market. As a result, we're significantly raising our full-year outlook for sales EBITDA and EPS.

Speaker #4: And this reflects the favorable secular growth trends and our confidence in continued strong execution. As the market leader, and with positive momentum building across our business, I'm bullish that WESCO will continue to outperform our markets and deliver superior value to our customers, our suppliers, and our shareholders in the second half of 2026 and beyond.

Speaker #4: So with that, I'll turn it over to Neil to take you through our second quarter results and our raised full-year outlook in more detail.

Speaker #4: Neil.

Speaker #5: Thank you, John. And good morning, everyone. As John highlighted, we delivered a record quarter, reflecting strong demand across our end markets with excellent execution and strong momentum across the portfolio.

Indraneel Dev: Thank you, John. Good morning, everyone. As John highlighted, we delivered a record quarter, reflecting strong demand across our end markets with excellent execution and strong momentum across the portfolio. Before turning to the quarter in more detail, let me start with a few highlights. We delivered record sales, adjusted EBITDA, and adjusted earnings per share. Growth was broad-based across the portfolio, with contributions from all three business units and strength across multiple end markets, highlighting the diversified nature of our growth profile. Margin expansion continued, driven by gross margin improvement and strong operating leverage on higher sales growth. As a result of our exceptional H1 results and accelerating business momentum, we are raising our full-year outlook for sales, adjusted EBITDA, and adjusted EPS. With that, let me turn to our Q2 results, starting on slide four.

Speaker #5: Before turning to the quarter in more detail, let me start with a few highlights. We delivered record sales, adjusted EBITDA, and adjusted earnings per share.

Speaker #5: Growth was broad-based across the portfolio, with contributions from all three business units and strength across multiple end markets, highlighting the diversified nature of our growth profile.

Speaker #5: Margin expansion continued, driven by gross margin improvement and strong operating leverage on higher sales growth. As a result of our exceptional first half results and accelerating business momentum, we are raising our full-year outlook for sales, adjusted EBITDA, and adjusted EPS.

Speaker #5: With that, let me turn to our second quarter results, starting on slide four. Both the top line and profitability stepped up meaningfully in the second quarter.

Indraneel Dev: Both the top line and profitability stepped up meaningfully in the Q2. Sales reached a record $6.7 billion, with both reported and organic growth of 13%, driven by an estimated 3% price benefit and solid volume growth across all three SBUs. While data center remains a key growth driver for the company, growth this quarter was broad-based and diversified, with mid-single-digit year-over-year sales growth excluding data center. Adjusted EBITDA grew 24% to a record $487 million, and margin expanded 60 basis points to 7.3% of sales. Gross margins expanded by 70 basis points as a result of favorable sales mix during the quarter and continued execution of our margin improvement initiatives. SG&A for the quarter was 14.5% of sales, compared to 14.4% for the year-ago quarter, primarily driven by higher incentive compensation, partially offset by operating leverage in the core business.

Speaker #5: Sales reached a record 6.7 billion, with both reported and organic growth of 13%. Driven by an estimated 3% price benefit and solid volume three SBUs.

Speaker #5: While data center remains a key growth driver for the company, growth this quarter was broad-based and diversified, with mid single-digit year-over-year sales growth excluding data center.

Speaker #5: Adjusted EBITDA grew 24% to a record $487 million, and margin expanded 60 basis points to 7.3% of sales. Gross margins expanded by 70 basis points.

Speaker #5: As a result of favorable sales mix during the quarter, and continued execution, of our margin improvement initiatives. SG&A for the quarter was 14.5% of sales compared to 14.4% for the year ago quarter.

Speaker #5: Primarily driven by higher incentive compensation partially offset by operating leverage in the core business. Turning to slide five, adjusted earnings per share increased 35% to a record $4.57.

Indraneel Dev: Turning to slide five, adjusted earnings per share increased 35% to a record $4.57. The improvement was driven primarily by strong operating performance, including higher sales and margin expansion. EPS growth also benefited from a lower tax rate, the absence of preferred dividends, and a lower share count, partially offset by higher interest expense. Turning to CSS on slide six. CSS delivered an outstanding quarter, with reported and organic sales growth of 18%, driven by continued data center momentum. Sales for WESCO Data Center Solutions increased approximately 45%, driven by broad-based growth across our data center customer base. Security and Enterprise Network Infrastructure grew low single digit, and both grew high single digit, including data center projects. Backlog ended the quarter at a record level, up approximately 95% versus the prior year, underscoring the durability of demand in data center projects and providing meaningful revenue visibility.

Speaker #5: The improvement was driven primarily by strong operating performance including higher sales, and margin expansion. EPS growth also benefited from a lower tax rate, the absence of preferred dividends, and a lower share count, partially offset by higher interest expense.

Speaker #5: Turning to CSS on slide six, CSS delivered an outstanding quarter, with reported and organic sales growth of 18%, driven by continued data center momentum. Sales for WESCO Data Center Solutions increased approximately 45%, driven by broad-based growth across our data center customer base.

Speaker #5: Security and enterprise network infrastructure grew low single-digit and both grew high single-digit including data center projects. Backlog end of the quarter at a record level, up approximately 95% versus the prior year.

Speaker #5: Underscoring the durability projects and providing meaningful revenue visibility. Adjusted EBITDA increased 37% and adjusted EBITDA margin expanded 140 basis points to a record 10.2%.

Indraneel Dev: Adjusted EBITDA increased 37%, and adjusted EBITDA margin expanded 140 basis points to a record 10.2%. Both our first double-digit EBITDA margin quarter in CSS history. Moving to slide seven. A key strategic highlight in the quarter was our acquisition of Newark Engineering Group, which further strengthens our position in the mission-critical data center infrastructure. Newark expands our capabilities in engineered cooling solutions and lifecycle services while strengthening our presence in the fast-growing Southeast Asia region. The addition of Newark enhances our ability to serve customers across the full data center lifecycle, from design and installation through ongoing operations, maintenance, and optimization. Turning to EES on slide eight. EES delivered an excellent quarter, with sales growth of 11%. Volume was up approximately 6%, and price contributed approximately 5%, with about 1 point coming from commodity inflation. Construction grew high single digit on robust data center infrastructure investments and project activity.

Speaker #5: Both our first double-digit EBITDA margin quarter in CSS history. Moving to slide seven, a key strategic highlight in the quarter was our acquisition of Newark Engineering Group, which further strengthens our position in the mission-critical data center infrastructure.

Speaker #5: Newark expands our capabilities in engineered cooling solutions and life cycle services while strengthening our presence in the fast-growing Southeast Asia region. The addition of Newark enhances our ability to serve customers across the full data center life cycle, from design and installation through ongoing operations, maintenance, and optimization.

Speaker #5: Turning to EES on slide eight, EES delivered an excellent quarter, with sales growth of 11%. Volume was up approximately 6% and price contributed approximately 5%, with about one point coming from commodity inflation.

Speaker #5: Construction grew high single-digit on robust data center infrastructure investments, and project activity. Industrial grew low single-digit on solid MRO demand, and increased project activity.

Indraneel Dev: Industrial grew low single-digit on solid MRO demand and increased project activity. OEM was up strong double-digits, supported by strength across semiconductor, electrification, and data center customers. Data center sales increased more than 70% year over year and remained a strong growth driver, now representing about 8% of EES sales. Excluding data center, EES grew high single-digit, supported by ongoing infrastructure investment, industrial project activity, and strength in OEM. This performance further highlights the diversified growth profile of our business. Backlog ended the quarter at a record level, up approximately 30% versus the prior year, with double-digit backlog growth across industrial, OEM, and construction. Adjusted EBITDA increased 27%, and adjusted EBITDA margin expanded 110 basis points to 9.2%.

Speaker #5: OEM was up strong double digits, supported by strength across semiconductor, electrification, and data center customers. Data center sales increased more than 70% year over year and remained a strong growth driver, now representing about 8% of EES sales.

Speaker #5: Excluding data center, EES grew high single-digit supported by ongoing infrastructure investment, industrial project activity, and strength in OEM. This performance further highlights the diversified growth profile of our business.

Speaker #5: Backlog end of the quarter at a record level, up approximately 30% versus the prior year. With double-digit backlog growth across industrial OEM and construction, adjusted EBITDA increased 27% and adjusted EBITDA margin expanded 110 basis points to 9.2%.

Speaker #5: The margin improvement was driven by strong gross margin expansion, to a record 24.4%, partially offset by slightly higher SG&A expense associated with variable compensation on increased sales and profit growth.

Speaker #5: Turning to UBS on slide nine, sales increased 7%, reflecting strengthening demand trends across the business. Utility delivered mid single-digit growth, supported by strong IOU performance, improving public power trends, and increased traction for power solutions from our grid services portfolio.

Speaker #5: Broadband posted strong mid-teens growth, driven by increased project activity and customer share gains, with strength across both U.S. and Canadian operations. Adjusted EBITDA increased 2%, and the business returned to a 10% EBITDA margin this quarter.

Speaker #5: As expected, and as discussed on prior calls, public power competitive dynamics remained a margin headwind in the near term. However, the combination of strengthening demand trends, record backlog, and accelerating momentum in grid services positions us well.

Speaker #5: Backlog at the end of the quarter is at a record level, up approximately 80% year-over-year, driven by a significant multi-year grid services award with a hyperscale data center customer.

Indraneel Dev: Backlog ended the quarter at a record level, up approximately 80% year over year, driven by a significant multi-year Grid Services award with a hyperscale data center customer. As John mentioned, this win represents an important milestone for UBS, expanding our customer base beyond traditional utility and broadband end markets into data center power infrastructure. Moving to slide 10. We believe that our Grid Services offerings position us well to benefit from the significant power infrastructure investments that will be needed over the coming years. Today, our capabilities span a broad set of power solutions that support utilities, data centers, high-voltage industrial applications, renewables, and other power-intensive end markets. As demand for power-intensive AI data center infrastructure continues to increase, customers are engaging WESCO earlier in the life cycle to help solve complex power and infrastructure challenges.

Speaker #5: As John mentioned, this win represents an important milestone for UBS. Expanding our customer base beyond traditional utility and broadband end markets into data center, power infrastructure.

Speaker #5: Moving to slide 10, we believe that our grid services offerings position us well to benefit from the significant power infrastructure investments that will be needed over the coming years.

Speaker #5: Today, our capabilities span a broad set of power solutions, that support utilities, data centers, high-voltage industrial applications, renewables, and other power-intensive end markets. As demand for power-intensive AI data center infrastructure continues to increase, customers are engaging WESCO earlier in the life cycle to help solve complex power and infrastructure challenges.

Speaker #5: This is creating new opportunities to cross-sell into existing customer relationships and expand our participation across large-scale projects. Moving to slides 11 and 12, in the second quarter, data center sales reached approximately $1.5 billion, up approximately 45% year over year.

Indraneel Dev: This is creating new opportunities to cross-sell into existing customer relationships and expand our participation across large-scale projects. Moving to slide 11 and 12. In Q2, data center sales reached approximately $1.5 billion, up approximately 45% year over year. As we discussed last quarter, WESCO's differentiated power to compute model positions us across the full data center life cycle, from the grid to the building to the rack and equipment. This integrated approach continues to create growth opportunities across all three business units while expanding the scope of products, services, and solutions we provide to our customers. We will continue to enhance our value proposition with organic investments and targeted bolt-on acquisitions. Turning to slide 13. During Q2, free cash flow was $32 million. Despite double-digit top-line growth over the past four quarters, our working capital intensity remains at approximately 20% of sales.

Speaker #5: As we discussed last quarter, WESCO's differentiated power-to-compute model positions us across the full data center life cycle, from the grid to the building to the rack, and equipment.

Speaker #5: This integrated approach continues to create growth opportunities across all three business units, while expanding the scope of products, services, and solutions we provide to our customers.

Speaker #5: We will continue to enhance our value proposition with organic investments and targeted bolt-on acquisitions. Turning to slide 13, during the second quarter, free cash flow was 32 million.

Speaker #5: Despite double-digit top-line growth over the past four quarters, our working capital intensity remains at approximately 20% of sales. For the first half of the year, we generated 246 million in free cash flow.

Indraneel Dev: For H1, we generated $246 million in free cash flow. Moving to slide 14, we are raising our full-year sales growth outlook across all three business units, reflecting accelerating momentum throughout the portfolio. Within CSS, we now expect reported sales growth of mid to high teens year over year on a percentage basis, which is primarily driven by our higher expectations for our data center business. We are raising our CSS data center sales outlook to 30-plus% year over year, reflecting continued strength in hyperscale and data center-related demand. We are also raising our outlook for EES to high single-digit sales growth year over year, reflecting diversified strength across construction, industrial, and OEM. Finally, we are raising our outlook for UBS to mid single-digit sales growth year over year, reflecting improving trends across all of our utility businesses and for our broadband business.

Speaker #5: Moving to slide 14, we are raising our full-year sales growth outlook across all three business units, reflecting accelerating momentum throughout the portfolio. With NCSS, we now expect reported sales growth of mid-to-high teens year over year on a percentage basis, which is primarily driven by our higher expectations for our data center business.

Speaker #5: We are raising our CSS data center sales outlook to 30-plus percent year over year, reflecting continued strength in hyperscale and data center-related demand. We are also raising our outlook for EES to high single-digit sales growth year over year, reflecting diversified strength across construction, industrial, and OEM.

Speaker #5: Finally, we are raising our outlook for UBS to mid single-digit sales growth year over year, reflecting improving trends across all of our utility businesses and for our broadband business.

Speaker #5: Moving to slide 15, and our outlook for the remainder of the year. For full year 2026, we are raising our outlook for sales growth, profitability, and earnings per share reflecting our exceptional first half performance and continued momentum across the business.

Indraneel Dev: Moving to slide 15 and our outlook for the remainder of the year. For full year 2026, we are raising our outlook for sales growth, profitability, and earnings per share, reflecting our exceptional H1 performance and continued momentum across the business. We now expect organic sales growth in the range of 9% to 11%, up from 5% to 8% previously. Reported sales growth is now expected to be 10% to 12%, with total reported sales of approximately $26 billion at the midpoint of the range. Consistent with our stronger growth outlook, we are raising our adjusted EBITDA margin outlook to 6.9% to 7.1%, representing an EBITDA raise in dollar terms at the midpoint of over $100 million compared to the previous outlook. We are also increasing our adjusted diluted EPS range to $16 to $17.50, representing a $0.75 raise at the midpoint.

Speaker #5: We now expect organic sales growth in the range of 9% to 11%, up from 5% to 8% previously. Reported sales growth is now expected to be 10% to 12%, with total reported sales of approximately $26 billion at the midpoint of the range.

Speaker #5: Consistent with our stronger growth outlook, we are raising our adjusted EBITDA margin outlook to 6.9% to 7.1%, representing an EBITDA raise in dollar terms at the midpoint of over 100 million dollars compared to the previous outlook.

Speaker #5: We are also increasing our adjusted diluted EPS range to 16 dollars to 17 dollars and 50 cents, representing a 75-cent raise at the midpoint.

Speaker #5: Given the continued growth in the business and the associated working capital requirements, we now expect free cash flow of 300 million to 600 million for the year.

Indraneel Dev: Given the continued growth in the business and the associated working capital requirements, we now expect free cash flow of $300 million to $600 million for the year. The midpoint of our guidance implies mid single-digit sales growth sequentially in H2 compared to H1, which will require incremental working capital investments. As a reminder, we run a CapEx-light business model with attractive returns on working capital deployed. Over the past few months, we've made several operational and organizational changes to drive more accountability around initiatives to improve working capital intensity and cash flow conversion. There are now a number of initiatives in flight around improving day sales outstanding and days inventory outstanding. As reflected on the slide, we've made some adjustments to D&A, stock-based compensation, interest expense, and effective tax rate.

Speaker #5: The midpoint of our guidance implies mid single-digit sales growth sequentially in the second half of the year, compared to the first half of the year.

Speaker #5: Which will require incremental working capital investments. As a reminder, we run a CapEx-like business model with attractive returns on working capital deployed. Over the past few months, we've made several operational and organizational changes to drive more accountability around initiatives to improve working capital intensity and cash flow conversion.

Speaker #5: There are now a number of initiatives in flight around improving day sales outstanding and days inventory outstanding. As reflected on the slide, we've made some adjustments to DNA, stock-based compensation, interest expense, and effective tax rate.

Speaker #5: As detailed last quarter, we completed the redemption of our 2028 notes and significantly improved and extended our debt maturity profile. We also repurchased approximately $50 million of WESCO shares in the first half of the year, including approximately $25 million in the second quarter, largely to offset dilution from equity compensation.

Indraneel Dev: As detailed last quarter, we completed the redemption of our 2028 notes and significantly improved and extended our debt maturity profile. We also repurchased approximately $50 million of Wesco shares in H1, including approximately $25 million in Q2, largely to offset dilution from equity compensation. Additionally, the strength of our operating performance drove another quarter of leverage improvement, ending the quarter at approximately 3x net debt to adjusted EBITDA, compared to 3.4x at year-end. Turning to slide 16, as we reflect on our Q2 overperformance compared to our outlook, the drivers were increased bidding activity and win rates, cross-selling enabled by our One Wesco value proposition resonating with existing customers, favorable project and customer mix, and strong execution across the business.

Speaker #5: Additionally, the strength of our operating performance drove another quarter of leverage improvement, ending the quarter at approximately three times net debt to adjusted EBITDA, compared to 3.4 times a year-end.

Speaker #5: Turning to slide 16, as we reflect on our second quarter overperformance compared to our outlook, the drivers were increased bidding activity and win rates, cross-selling enabled by our one WESCO value proposition resonating with existing customers, favorable project and customer mix, and strong execution across the business.

Speaker #5: We continue to see favorable demand trends across the business to start the third quarter, with preliminary July month-to-date sales per workday up approximately mid-teens on a percentage basis.

Indraneel Dev: We continue to see favorable demand trends across the business to start Q3 with preliminary July month-to-date sales per workday up approximately mid-teens%. Based on current customer forecasts and the backdrop of record sales per workday in September 2025, we expect Q3 sales to grow low double digits year-over-year. Adjusted EBITDA margin is expected to be slightly lower sequentially, reflecting the anticipated mix of business expected in the quarter. We've covered a lot of material this morning, let me briefly recap the key points before we open the call to your questions. In summary, we delivered double-digit top-line growth for four consecutive quarters. We delivered record results across the company, including record sales, adjusted EBITDA, and adjusted EPS, while continuing to expand margins. Data center remained a key growth driver for the company.

Speaker #5: Based on current customer forecasts, and the backdrop of record sales per workday in September 2025, we expect third-quarter sales to grow in the low double digits year over year.

Speaker #5: Adjusted EBITDA margin is expected to be slightly lower sequentially, reflecting the anticipated mix of business expected in the quarter. 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.

Speaker #5: In summary, we delivered double-digit top-line growth for four consecutive quarters. We delivered record results across the company including record sales, adjusted EBITDA, and adjusted earnings per share.

Speaker #5: While continuing to expand margins. Data center remained a key growth driver for the company. Growth was broad-based across the portfolio, with strong sales growth excluding data center.

Indraneel Dev: Growth was broad-based across the portfolio, with strong sales growth excluding data center. A major multi-year Grid Services win represents a major milestone for UBS in terms of customer diversification and meaningfully expands our data center product portfolio to now include power solutions. We've made meaningful progress towards our long-term margin goals with two of our three business units at double-digit EBITDA margin this quarter. We further strengthened our balance sheet during the quarter with lower leverage and an improved debt maturity profile. We are raising our full-year outlook for sales, adjusted EBITDA, and adjusted EPS. Despite higher working capital to support double-digit sales growth, we expect to continue to deliver solid free cash flow. As we lean in to support 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 #5: A major multi-year grid services win represents a major milestone for UBS in terms of customer diversification, and meaningfully expands our data center product portfolio to now include power solutions.

Speaker #5: We've made meaningful progress toward our long-term margin goals, with two of our three business units achieving double-digit EBITDA margins this quarter. We also further strengthened our balance sheet during the quarter, with lower leverage and an improved debt maturity profile.

Speaker #5: We are raising our full-year outlook for sales, adjusted EBITDA, and adjusted earnings per share. Despite higher working capital to support double-digit sales growth, we expect to continue to deliver solid free cash flow.

Speaker #5: As we lean into supporting 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 #1: 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 yourself to one question and one follow-up. The first question will come from Deane Dray with RBC Capital Markets. Please go ahead.

Speaker #1: Please limit yourself to one question and one follow-up. The first question will come from Dean Dre with RBC Capital Markets. Please go ahead.

Speaker #2: Thank you. Good morning, everyone.

Deane Dray: Thank you. Good morning, everyone.

Speaker #3: Morning, Dean.

Indraneel Dev: Morning, Deane.

Speaker #2: Hey. Is obviously lots of excitement about the data center growth and how that continues, but your growth this quarter is so much more broad-based.

John J. Engel: Good morning.

John J. Engel: Hey. There's obviously lots of excitement about the data center growth and how that continues, Your growth this quarter is so much more broad-based. It really begs the question, John, what do you see as the drivers here? What does this say about the macro? Any sense about the sustainability visibility that you have on this growth rate?

Speaker #3: Thanks, Dean. And thanks for that question. I addressed some of that in my opening comments, but let me come back and hit it more broadly.

Indraneel Dev: Thanks, Deane, Thanks for that question. I addressed some of that in my opening comments, Let me come back and hit it more broadly. First, I have to say we feel terrific about our positioning to capture the, I'll use the term hyper sales growth for these AI-driven data centers. No doubt about it, We're getting great momentum across our entire business. It's not just a CSS-driven opportunity, it's a One WESCO play. With that said, we're not a one-trick pony. We're benefiting from multiple secular growth trends, You're seeing that starting to contribute meaningfully to our results. In the Q2, our non-data center sales were up mid-single digits. I'll remind everyone that data centers as a mix of our total sales are a little over 20% on a trailing 12-month basis.

Speaker #3: First, I have to say we feel terrific about our positioning. To capture the—I’ll use the term—hyper-sales growth for these AI-driven data centers.

Speaker #3: No doubt about it. And we're getting great momentum across our entire business. It's not just the CSS-driven opportunity—it's a one WESCO play. With that said, we're not a one-trick pony.

Speaker #3: And I'll remind everyone that data centers, as a mix of our total sales, are a little over 20% on a trailing 12-month basis. So, that says we've got a remainder portion of the portfolio—75% to 80% of the business—and that's diversified and very well positioned.

John J. Engel: That says that we got a remainder portion of the portfolio, 75% to 80% of the business, and that's diversified and it's very well-positioned to benefit from multiple secular trends, the infrastructure build-out

Speaker #3: The benefit from multiple secular trends, the infrastructure build-out, all things power around the power chain, supporting increased demand for electricity, the reshoring, which we see kicking into gear as well, back to US and North American markets.

John J. Engel: All things power around the power chain supporting the increased demand for electricity. The reshoring, which we see kicking into gear as well, back to US and North American markets. What we think is, and I've spoken about this at length, an impending industrial super cycle. I think we're in the early innings. In terms of our outlook and our visibility, Deane, I think, that's why I called out backlog growth, all three SBUs at record levels. These are eye-popping growth numbers for us. You've covered the company a long time. This is just, it's very telling and, our confidence is reflected in our raise for the year, and it sets the table for a very strong 2027 as well.

Speaker #3: And then what we think is, and I've spoken about this at length, an impending industrial supercycle. I think we're in the early innings. So in terms of our outlook and our visibility, Dean, I think that's why I spiked out backlog growth.

Speaker #3: All three SBUs are at record levels. These are eye-popping growth numbers for us. You've covered the company a long time—this is just, it's very telling.

Speaker #3: And I think our confidence is reflected in our raise for the year. I think it sets the table for a very strong 2027 as well.

Speaker #2: That's really good color. And my follow-up question—I'm tempted to talk about the margin improvements, because that's fabulous, and congrats to the team there.

Deane Dray: That's really good color. My follow-up question, I'm tempted to talk about the margin improvements because that's fabulous and congrats to the team there. I actually want to put the spotlight on this acquisition of Newark Engineering. The strategic rationale that you list there, really should enhance your capabilities in data center globally. Just can you talk about what does this mean for your international aspirations? I know your name is WESCO International. Just what does that say about the data center opportunities globally, and how does this have parallels with Rahi? Rahi was such a good acquisition right at the doorstep of all this, the data center growth spike that you've been part of. A lot to unpack there.

Speaker #2: But I actually want to put the spotlight on this acquisition of Newark Engineering, because the strategic rationale that you list there really should enhance your capabilities in data centers globally.

Speaker #2: But just can you talk about what this means for your international aspirations? I know your name is WESCO International, so what does that say about the data center opportunities globally?

Speaker #2: And how does this have parallels with Rahi? Because Rahi was such a good acquisition right at the doorstep of all this—the data center growth spike that you've been part of.

Speaker #2: So, a lot to unpack there, but love to hear it. Thank you.

John J. Engel: Yeah

Deane Dray: Love to hear it. Thanks.

John J. Engel: Well, thanks for tying it back to Rahi, because I think that really is the first where I wanted to start, Deane. By putting Anixter and Wesco together, which actually preceded Rahi, in the beginning of the pandemic, we did create a new company. I think we're seeing the benefits of this strong and diverse portfolio, as I kind of outlined earlier. As you look at what we've done on the acquisition front, post Anixter, it started with Rahi. It was back in 2022, and that gave us increased end user customer access. Rahi was also global, which I'll remind everyone. It did allow us to add some additional capabilities to our portfolio. It was end user driven like core Anixter was. We added entroCIM then, following Rahi. Facility services, we added Ascent. Then we now add Newark Engineering, which is cooling solutions.

Speaker #3: Yeah. Well, and thanks for tying it back to Rahi because I think that really is the first where I wanted to start, Dean. By putting an extra WESCO together, which I actually preceded Rahi in the beginning of the pandemic, we did create a new company.

Speaker #3: I think we're seeing the benefits of this strong and diverse portfolio. As I kind of outlined earlier, but as you looked about as you look at what we've done on the acquisition front post-Annexter, it started with Rahi.

Speaker #3: It was back in 2022, and that gave us increased end-user customer access. Rahi was also global, which I'll remind everyone. But it did allow us to add some additional capabilities to our portfolio.

Speaker #3: It was end-user driven, like core Annexter was. We added Entrism then, following Rahi, facility services. We added Ascent. And then we now add Newark Engineering.

Speaker #3: Which is cooling solutions. And so what we've been doing systematically is expanding our end-to-end solutions capabilities to support the data center customers across the entire life cycle.

John J. Engel: What we've been doing systematically is expanding our end-to-end solutions capabilities to support data center customers across the entire life cycle. It's really an important point. We're in 55 countries around the world. If you look at our end user relationships with hyperscale data center customers, the MTDCs, the multi-tenant data center customers, and our enterprise class customers, where they have captive data centers. All of those companies are very large, are global, and they're running a global expansion play and global deployment play. We are uniquely positioned with our global footprint, the breadth of our portfolio to really serve them around the world. We're focused on that expansion, expanding the portfolio. We've got the global execution capabilities and Newark adds to that. Newark, again, expands the portfolio meaningfully. Yes, it's in the Southeast Asia today.

Speaker #3: That's really an important point. We're in 55 countries around the world. If you look at our end-user relationships—with hyperscale data center customers, the MTDCs (multi-tenant data center customers), and our enterprise-class customers, where they have captive data centers—all of those companies are very large, they're global, and they're running a global expansion play.

Speaker #3: And global deployment play. And so we are uniquely positioned with our global footprint and the breadth of our portfolio to really serve them around the world.

Speaker #3: And this is really, so we're focused on that expansion—expanding the portfolio. We've got the global execution capabilities, and Newark adds to that. So Newark, again, expands the portfolio meaningfully.

Speaker #3: Yes, it's in the Southeast portion of Asia today. Very strong end-user customer relationships—our same customers that we have. So we essentially expanded the portfolio.

John J. Engel: Very strong end user customer relationships, our same customers that we have. We essentially expanded the portfolio. We've dramatically strengthened across Southeast Asia, those markets. By the way, that data center growth market is incredibly exciting, growing at a rapid rate. We have the opportunity now to expand and do the One WESCO play for Newark across broader geographies. Okay. Then bringing the strength of Wesco into Newark. What we're specifically adding, though, and I'll just end on this point, it's mission-critical cooling and thermal management expertise. We did not have that in our portfolio. It allows us to engage the customer a little bit earlier in the data center life cycle, which will be very helpful. Again, I talked about very nice cross-selling opportunities.

Speaker #3: We've dramatically strengthened across Southeast Asia—those markets. By the way, that data center growth market is incredibly exciting, growing at a rapid rate. But we have the opportunity now to expand and do the One WESCO play for Newark across broader geographies.

Speaker #3: Okay? And then bringing the strengths of WESCO into Newark. And so, what we're specifically adding, though—and I'll just end on this point—is mission-critical cooling and thermal management expertise.

Speaker #3: We did not have that in our portfolio, and it allows us to engage the customer a little bit earlier in the data center life cycle.

Speaker #3: Which will be very helpful. Again, I talked about very nice cross-selling opportunities and the capabilities they have: design engineering capabilities around mission-critical HVAC systems, in-house fabrication and assembly capability, installation, after-sales servicing, and support.

John J. Engel: The capabilities, they have design engineering capabilities around mission-critical HVAC systems, in-house fabrication and assembly capability, installation, after-sale servicing and support. A little longer answer, Deane, but I think I wanted to clearly address the question by saying, think of this as a continuum. We've got a leading position to serve global data center customers. If you look at the acquisitions we've done post Anixter, they're tuck-ins, but they're more than tuck-ins because they actually have been expanding the portfolio and we're leveraging them, our One WESCO selling model across the globe.

Speaker #3: So a little longer answer, Dean, but I think I wanted to clearly address the question by saying, think of this as a continuum.

Speaker #3: We've got a leading position to serve global data center customers. And if you look at the acquisitions we've done post-Annexter, they're tuck-ins, but they're more than tuck-ins ins because they actually have been expanding the portfolio and we're leveraging them.

Speaker #3: Our one WESCO selling model across the globe.

Speaker #2: Great. That was great color, thank you, and congrats to the team.

Deane Dray: Great. It was great color. Thank you and congrats to the team.

Speaker #3: Thank you.

John J. Engel: Thank you.

Speaker #1: The next question will come from Sam Darkesh with Raymond James. Please go ahead.

Operator: The next question will come 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 #4: Good morning, Sam.

John J. Engel: Morning, Sam.

Indraneel Dev: Good morning.

Speaker #3: So, a couple of questions. The first topic would be gross margins, specifically around data center. I mean, I'm noticing CSS and EES gross margins were up pretty materially year on year.

Sam Darkatsh: A couple questions. The first topic would be gross margins, specifically around data center. I'm noticing CSS and EES gross margins were up pretty materially year-on-year. I'm wondering, has the data center gross margin dynamic switched? Is it now more stock and flow? Is the price cost turning positive, which may overwhelm the lower project mix? I guess related to that, if you could address the gross margin for the Grid Services award versus your overall UBS gross margins.

Speaker #3: And I'm wondering, has the data center gross margin dynamic switched? I mean, is it now more stock and flow? Is the price-cost turning positive, which may overwhelm the lower project mix?

Speaker #3: And I guess related to that, if you could address the gross margin for the grid services award versus your overall UBS gross margins.

Speaker #4: Yeah, thanks for that, Sam. Again, good morning. I'll take you back six quarters—six to seven quarters—and that's when the CSS sales started to meaningfully inflect up.

John J. Engel: Yeah. Thanks for that, Sam. Again, good morning. I'll take you back six quarters, six to seven quarters, that's when the CSS sales started to meaningfully inflect up, we had a bit of gross margin pressure in CSS. If you go back to seven quarters ago, we were very clear that we had very high confidence we would be able to improve margins as we start executing those projects with customers. That these were front-end margins only, as we start executing the projects, there'd be other products that are pulled through, we will be increasing our services content over time through the project execution, then post-project deployment. That's what you're seeing. We've been working hard at that. If you look at CSS gross margins, the heart of your question, first part of your question, look at that.

Speaker #4: And we had a bit of gross margin pressure in CSS. If you go back to seven quarters ago, we were very clear that we had very high confidence we would be able to improve margins.

Speaker #4: As we start executing those projects with customers, these were front-end margins only, but as we start executing the projects, there will be other products that are pulled, increasing our services content over time.

Speaker #4: As through the project execution and then post-project deployment, that's what you're seeing. So we've been working hard at that. If you look at CSS gross margins, the harder your question.

Speaker #4: First part of your question. Look at that. I think we're building a very nice trend. And so we're seeing now that seeing the result of what I outlined six to seven quarters ago.

John J. Engel: I think we're building a very nice trend. We're seeing the result of what I outlined six to seven quarters ago. It speaks to our value proposition with those end user customers and the fact that we're able to be more of a one-stop shop solving their critical needs through project design, project implementation, construction, and deployment. Those phases are critical for data center build. For EES, I couldn't be more pleased with kind of the broad-based gross margin momentum we're getting. I will tell you, both CSS and EES is, I have to highlight it, we have a new leader effect. We got a new leader in CSS. This is his fifth quarter under his belt. We have a new leader, and he was promoted from within, so he came out of the Anixter side of the equation. We have a new leader in EES.

Speaker #4: And it speaks to our value proposition with those end-user customers, and the fact that we're able to be more of a one-stop shop, solving their critical needs through project design, project implementation, construction, and deployment.

Speaker #4: Those phases are critical for data center builds. For EES, I couldn't be more pleased with the broad-based gross margin momentum we're getting.

Speaker #4: I will tell you, both CSS and EES—I have to highlight it. We have a new leader effect; we got a new leader in CSS.

Speaker #4: He's got this is his fifth quarter under his belt. We have a new leader and he was promoted from within. So he came out of the side of the equation.

Speaker #4: And we have a new leader in EES. This is his fourth quarter under his belt, and we went outside to bring him onto the team.

John J. Engel: This is his fourth quarter under his belt. We went outside to bring him onto the team. I think you're seeing a special cause driver, quote unquote, is a new leader effect in both sales growth and profitability for those two businesses. Finally on UBS, which is the final part of your question, I remain incredibly bullish on the outlook for UBS overall, and especially utility. Both utility and broadband. In terms of utility, we're seeing margins stabilize on a sequential basis. It's nice to get EBITDA margins back up above 10. I think what you're going to see very clearly, and we wanted to signal this, the margins for Grid Services are accretive at the operating margin line to UBS. As Grid Services kicks into gear, it will kick into gear very strongly, it's going to be margin accretive.

Speaker #4: And I think you're seeing a special cause driver—quote, unquote—is a new leader effect in both sales growth and profitability for those two businesses.

Speaker #4: And then finally, on UBS, which is the final part of your question, I remain incredibly bullish on the outlook for UBS overall, and especially utility.

Speaker #4: Both utility and broadband. But in terms of utility, we're seeing margins stabilize. On a sequential basis, it's nice to get EBITDA margins back up above 10.

Speaker #4: But I think what you're going to see very clearly, and we wanted to signal this, the margins for grid services are accretive. At the operating margin line, to UBS.

John J. Engel: We've now strung two quarters in a row of double-digit growth for Grid Services. As we outlined in our original outlook for 2026, we expect double-digit growth for Grid Services across the entire year. Message is: Public Power is stabilized and improving. We actually returned to growth in Public Power this quarter. IOUs are chugging along nicely, double-digit growth in the quarter. Still got the margin pressures in Public Power, Grid Services is really accelerating. We talked about the big new win that will ship over multiple years, that's margin accretive. That rounds it out, Sam.

Speaker #4: And as we outlined in our original outlook for 2026, we expect double-digit growth for grid services across the entire year. So the message is, public power is stabilized and improving.

Speaker #4: We actually returned to growth in public power this quarter. IOUs are chugging along nicely, double-digit growth in the quarter. Still got the margin pressures in public power, but grid services is really accelerating.

Speaker #4: And we talked about the big new win that will ship over multiple years, and that's margin accretive.

Speaker #3: That rounds it out. Yeah, terrific comprehensive answer. Thank you. My second question, and I recognize that this is going to sound like looking at gift horse in the mouth, so apologies.

Sam Darkatsh: Yeah. Terrific comprehensive answer. Thank you. My second question, I recognize that this is going to sound like looking a gift horse in the mouth, apologies, I was a little surprised at the Q3 EBITDA margin guide being a bit lower than the Q2. I recognize you're calling mix out, you're also going to have, I don't know what, $300 million, $400 million of extra sales incrementally. What's happening there that margins are coming in a little bit? Related to that, at what point are you expecting OpEx leverage on a year-on-year basis? Thanks.

Speaker #3: But I was a little surprised at the third quarter EBITDA margin guide being a bit lower than the second quarter. I recognize you're calling mix out, but you're also going to have, I don't know, what, $300 million to $400 million of extra sales incrementally.

Speaker #3: So, what's happening there is that margins are coming in a little bit. And then, related to that, at what point are you expecting OpEx leverage on a year-over-year basis?

Speaker #3: Thanks.

Speaker #4: So, Sam, I think the short answer is it's largely mixed. If you look at the second quarter, we had significant margin improvement, right?

Speaker #4: And one of the drivers was mix. So, obviously, as we grew the revenue base across the different business units, mix plays a big part, with some of the bigger, chunkier projects that we now deliver on.

Speaker #4: And that's the dynamic that we see going into the third quarter, so it's largely mix.

Speaker #3: And on the operating leverage comment, Sam — look, we also had some true-up of incentive compensation in this quarter. So clearly, we're exceeding our internal plan commitments.

John J. Engel: Yeah, on the operating leverage comment, Sam, look, we also had some true-up of incentive compensation in this quarter. We're clearly exceeding our internal plan commitments. That's a nice problem to have. Just in terms of operating model, look, we've geared up, and you can see us now operating at a much higher organic sales growth rate on the top line. To string 4 quarters in a row at double digits is strong. Operating model-wise, we do absolutely expect to get very strong operating cost leverage as you look out 2027, 2028, 2029. That's a key part of our recipe.

Speaker #3: So it's a nice problem to have. But just in terms of operating model, look, we've geared up, and you can see us now operating at a much higher organic sales growth rate on the top line.

Speaker #3: The string—four quarters in a row at double digits—is strong. Operating model–wise, we do absolutely expect to get very strong operating cost leverage.

Speaker #3: As you look out, 2027, 2028, 2029—that's a key part of our recipe.

Indraneel Dev: Just one other thing I would add, Sam, is just John highlighted in his comments about data center, the operating leverage really is important to look at the EBITDA line for us now because of some of the services that we're wrapping in. It's a combination of SG&A, and really focusing on the EBITDA line, which you're seeing clearly come through.

Speaker #4: Because of some of the services that we're wrapping in, it's a combination of SG&A and really focusing on the EBITDA line, which you're seeing clearly come through.

Speaker #1: The next question will come from David Manthe with Barrett. Please go ahead.

Operator: The next question will come from David Manthey with Baird. Please go ahead.

Speaker #5: Thank you. Good morning, everyone.

David Manthey: Thank you. Good morning, everyone.

Speaker #3: Good morning, Dave.

Indraneel Dev: Morning, Dave.

Speaker #5: First, on grid services, John, who's the buyer here? You saw this direct to customer. Is there an integrator involved? And then second, how did this type of grid-to-data center connection application get purchased in the past before you stood up this operation?

David Manthey: First on Grid Services, John. Who's the buyer here? Do you sell this direct to customer? Is there an integrator involved? Second, how does this type of grid to data center connection application get purchased in the past before you stood up this operation?

Speaker #4: Yeah, thanks, Dave. It's not through an integrator. It's a direct to a very large very, very large hyperscaler end user customer. So that's the first point.

John J. Engel: Yeah. Thanks, Dave. It's not through an integrator. It's direct to a very, very large hyperscaler end user, customer. That's the first point. We can't disclose who the customer is. We're not at liberty to do that. We're thrilled, though, again, that it's direct with the end user. By the way, this business Grid Services is working with a series of end users. How did this develop? I would tell you, if you take a multi-decade look at these products and services and this full solution that comprise of what we call our Grid Services business, it was served direct, Dave, to the heart of your question. It was manufacturers direct to the end user. We organically built up this Grid Services business over the last five to six years.

Speaker #4: And we can't disclose who the customer is—we're not at liberty to do that. But we're thrilled, though, again, that it's direct with the end user.

Speaker #4: And by the way, this business—Grid Services—is working with a series of end users. How did this develop? I would tell you, if you take a multi-decade look at the products and services in this full solution that comprise what we call our Grid Services business, it was served direct.

Speaker #4: Dave, to the heart of your question, it was manufacturers direct to the end user. And we organically build up this grid services business over the last five to six years.

Speaker #4: If you go back to our last investor day a couple of years ago, we did reference it. I pointed to it as kind of inside the house.

John J. Engel: If you go back to our last Investor Day a couple of years ago, we did reference it. I pointed to it as a kind of inside the house. No acquisition served it, organic build. James Cameron touched upon it at our Investor Day as well. Again, that was a few years ago at our Investor Day. It was a $300-plus million business last year, so we grew it over the last five to six years. We have now struck three quarters of double-digit growth in a row, Q4, Q1, Q2. We expect that to continue, as I said. It is just a terrific set of service capabilities. Why? Kind of right to win there and right to continue to win. It is our global supply base, it is our global supply chain management capabilities, it is our global project execution capabilities, and our logistical capabilities as well.

Speaker #4: No acquisition served it; it was an organic build. Jim Cameron touched upon it at our Investor Day as well. Again, that was a few years ago at our Investor Day.

Speaker #4: It was a $300-plus million business last year. So, we grew it over the last five to six years. We've now struck three quarters of double-digit growth in a row.

Speaker #4: Q4, Q1, Q2—we expect that to continue, as I said. And so, it's just a terrific set of service capabilities. Why? Kind of right to win there, and right to continue to win.

Speaker #4: It's our global supply base, our global supply chain management capabilities, our global project execution capabilities, Stitch, and our logistical capabilities as well.

John J. Engel: Stitching that all together with our services abilities to support major construction builds. We have those capabilities in the power portion of the value chain. What is really important here is that Grid Services, again, we are five to six years in the making here of this organic build, has really been serving utilities principally till now. This is a landmark win, quite frankly, which is why we spiked it out. It is also why I profiled Grid Services when we gave our Q4 earnings results earlier this year when we outlined our initial guide. This is a long cycle business. This drove the 80% growth rate in backlog for UBS. Even if you strip this out, UBS growth was still well above 20% to 30% backlog growth. Still good backlog growth in utility, but this will ship over multiple years.

Speaker #4: Stitching that all together with our services' abilities to support major construction builds, we have those capabilities in the Power portion of the value chain.

Speaker #4: What's really important here is that grid services—again, we're five to six years into making here, of this organic build—has really been serving utilities principally until now.

Speaker #4: And so this is a landmark win, quite frankly, which is why we spiked it out. And it's also why I profiled Grid Services when we gave our Q4 earnings results earlier this year, when we outlined our initial guide.

Speaker #4: This is a long cycle business. This drove the 80% growth rate and backlog for UBS. But even if you strip this out, UBS growth was still well above 20 to 30% backlog growth.

Speaker #4: So, still good backlog growth in Utility, but this will ship over multiple years. We've got some other wins, but this is a notable single win with a data center end user customer.

John J. Engel: We have got some other wins, but this is a notable single win with a data center end user customer. I will end on this note. The Grid Services value proposition and what we are providing to customers, working with our supplier partners, and these are global supplier partners, it applies to utilities and the utility industry, it applies to data centers, it applies to any and all high voltage, medium to high voltage industrial applications, it applies to renewables. Think of this Grid Services play, even though it is tucked under UBS, it is absolutely a One WESCO play. Like data centers are a One WESCO play, but it is bigger than data centers. We spiked it out purposely. Obviously, it is a big driver of our backlog growth. The margins, again, are accretive to UBS.

Speaker #4: And I'll end on this note. The grid services value proposition, and what we're providing to customers working with our supplier partners—and these are global supplier partners.

Speaker #4: It applies to utilities and the utility industry. It applies to data centers. It applies to any and all high-voltage, medium to high-voltage industrial applications.

Speaker #4: It applies to renewables. So think of this grid service as a play— even though it's tucked under UBS, it is absolutely a One WESCO play.

Speaker #4: And it's like data centers are a one WESCO play, but it's bigger than data centers. So we spiked it out purposely, obviously—it's a big driver of our backlog growth.

Speaker #4: And the margins, again, are accretive to UBS. So this just sets us up very well, I think, especially as we move into next year because this is a longer cycle business of getting that margin-accretive growth for UBS.

John J. Engel: This just sets us up very well, I think, especially as we move into next year, because this is a longer cycle business of getting that margin accretive growth for UBS.

Speaker #5: Sounds good. Thanks, John. And then on the core EES trends ex-data centers, one of your big competitors noted that their progression was more limited in the core electrical outside of DCs.

David Manthey: Sounds good. Thanks, John. On the core EES trends, ex data centers, one of your big competitors noted that their progression was more limited in the core electrical outside of DCs, it's encouraging to see Wesco growing high single digits outside of that specific vertical. Could you just talk a little bit more broadly about where you're seeing acceleration and if there's any markets that are yet to inflect in that sort of core OEM and medium voltage market?

Speaker #5: So it's encouraging to see Wesco growing high single digits outside of that specific vertical. Could you just talk a little bit more broadly about where you're seeing acceleration, and if there are any markets that have yet to inflect in that sort of core OEM and medium voltage market?

Speaker #4: Yeah, it's a great question, Dave. I couldn't be more pleased with EES really accelerating this quarter. Eleven percent sales growth—really nice to see.

John J. Engel: Yeah. It's a great question, Dave. I couldn't be more pleased with really EES accelerating this quarter. 11% sales growth. Really nice to see. By the way, if you strip out data centers, it's still 8 plus percent growth. EES is 8 plus percent high single-digit growth ex data centers. That speaks to the breadth and strength of the portfolio, these multiple secular growth trends. Let's double-click on EES. OEM being up over 20%, and that's always been a leading indicator for us for the industrial market. It's, again-

Speaker #4: By the way, if you strip out data centers, it's still a plus percent growth. So EES is a plus percent, high single-digit growth ex-data centers.

Speaker #4: That speaks to the breadth and strength of the portfolio, these multiple secular growth trends. So let's double-click on EES. OEM being up over 20%, and that's always been a leading indicator for us for the industrial market.

Speaker #4: Again, really healthy margins—having that 20-plus percent growth is very strong. And that's an indicator of the beginning of this, I'll call it, broader industrial super cycle because of where we play in the value chain.

John J. Engel: Really healthy margins. Having that 20-plus percent growth is very strong, and that's an indicator of the beginning of this, I'll call it, broader industrial super cycle because of where we play in the value chain. Industrial was only up low single digits. As good as EES was with the 11% growth, that's with industrial being up low single digits. The future's very bright. I'm bullish on industrial. As that improves and kicks in, and by the way, the backlog growth, we have backlog growth for industrial OEM, and for construction, all three elements of EES at a double-digit growth rate, but very strong backlog growth and book-to-bill ratio in industrial. I think the future is bright. Again, I think we're at the beginning of early innings of this super cycle. If you look at construction, it was up high single digits.

Speaker #4: Industrial was only up low single digits. So, as good as EES was with the 11% growth, that's with Industrial being up low single digits.

Speaker #4: That's the futures very bright. I'm bullish on industrial. As that improves and kicks in, and by the way, the backlog growth, we have backlog growth for industrial OEM, and for construction, all three elements of EES at a double-digit growth rate.

Speaker #4: But very strong backlog growth and book-to-bill ratio in Industrial. So I think the future is bright. Again, I think we're at the beginning, the early innings of this super-cycle.

Speaker #4: And then if you look at construction, it was up high single digits. So yes, data centers help that, but it's the broader infrastructure investments, Dave, that we've been reading about, quite frankly, for not one year, but two years—two and a half years plus.

John J. Engel: Yes, data centers helps that, but it's the broader infrastructure investments, Dave, that we've been reading about, quite frankly, for not one year, but two years, two and a half years plus. Where EES plays in that cycle, the gear goes in earlier, but there's a whole series of other electrical products and supplies that get installed as part of the major infrastructure projects, after gear, much later than gear. I think you're starting to see that kick in. I'm really pleased with the breadth and strength across EES.

Speaker #4: And where EES plays in that cycle, the gear goes in earlier, but there’s a whole series of other electrical products and supplies that get installed as part of the major infrastructure projects after gear—much later than gear.

Speaker #4: So I think you're starting to see that kick in. So I'm really pleased with the breadth and strength across the EES.

Speaker #5: Perfect. Thanks, John.

David Manthey: Perfect. Thanks, John.

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

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

Speaker #6: Hi, good morning. Congratulations on the outstanding results. Just to be, maybe, a little bit pejorative, John, has there been any sign of any of your end markets being kind of crowded out by data center AI spend?

Guy Hardwick: Hi, good morning. Congratulations on the outstanding results. Just to be maybe a little bit pejorative, John, has there been any sign of any of your end markets being kind of crowded out by data center AI spend? If you look at ENI and security, they only grew low single digits, and maybe if there's a bit of inflation there, then they're maybe they're flat. Are there any examples you think of where some of your businesses may be being impacted by resources being switched to data center and AI investment?

Speaker #6: I mean, if you look at E&I and Security, they only grew in the low single digits, and maybe if there's a bit of inflation there, then they may be about flat.

Speaker #6: Are there any examples you can think of where some of your businesses may be impacted by resources being switched to data center and AI investment?

Speaker #4: Yeah, I wouldn't call out our business guy. I guess the way I'd answer it is this—and I think it's more of an industry-wide phenomenon.

John J. Engel: Yeah, I wouldn't call out our business, Guy. I guess the way I'd answer it is this, and I think it's more of an industry-wide phenomenon. When you think about the amount of capital that's being spent in this rising demand curve for data centers, where is it driving demand? It's driving power demand, significantly increasing energy demand, and it's also driving the need for construction labor. It's not a WESCO specific item, I wouldn't call that out as driving any parts of our business ex data center. Again, that's why I spiked out EES is 8%+ growth ex data center. Overall, WESCO is mid-single digit growth, let's say, ex data center. The constraint is power and labor.

Speaker #4: So, when you think about the amount of capital that's being spent in this rising demand curve for data centers, where is it driving demand?

Speaker #4: It's driving power demand, significantly increasing energy demand. And it's also driving the need for construction labor. So it's not a WESCO-specific item, and I wouldn't really call that out as driving any parts of our business, ex-data center.

Speaker #4: Again, that's why I spiked out EES as a plus-percent growth. X Data Center overall, WESCO is six-plus, mid-single-digit growth, let's say.

Speaker #4: X data center. But the constraint is power and labor. And so, what's happening is when you look across the entire construction value chain, solving the power solution—and there's a variety of in front of the meter and behind the meter solutions that are being worked—is the ultimate, largest governor. But then the next closest governor is construction labor.

John J. Engel: What's happening is when you look across the entire construction value chain, solving the power solution, and there's a variety of in front of the meter and behind the meter solutions that are being worked is the ultimate largest governor, the next closest governor is construction labor. To the extent the data center ends up consuming that labor, demand exceeds supply, it could just shift the timing around of other construction projects. With all that said, we're not seeing that because look at our EES business, we're not residential construction. We're non-resi construction. We grew again high single digits in construction in Q2, which we feel really good about. It's a great question because I think it's important for everyone to understand that from an industry standpoint. Bottom line is this: demand's outstripping supply across the value chain.

Speaker #4: And so, to the extent that data centers end up consuming that labor, and demand exceeds supply, it could just shift the timing around of other construction projects.

Speaker #4: With all that said, we're not seeing that because, look at our EES business—we're not residential construction; we're non-resi construction. And we grew again, high single digits in construction.

Speaker #4: In the second quarter, which we feel really good about. So, it's a great question because I think it's important for everyone to understand that, from an industry standpoint...

Speaker #4: Bottom line is this: demand is outstripping supply across the value chain. It starts with power, followed by labor, and then there are some other constraints as well.

John J. Engel: Starts with power, followed by labor, there's some other constraints as well.

Speaker #6: Thank you. Just quickly, Neil, could you possibly expand on what those initiatives to improve DSOs and DIOs are? It does look like the production in the free cash regarding this entire counterflow is by the increase in the top line.

Speaker #6: So, maybe, is there a target for where you think you can get working capital to sales in, say, one year's time or two years' time?

Speaker #4: Sure. So, we have a series of initiatives. It starts with the commercial front end. And so, we're being very diligent in terms of a lot of our payment terms with customers.

Indraneel Dev: Sure. We have a series of initiatives. It starts with the commercial front end. We're being very diligent in terms of a lot of our payment terms with customers, thinking through, not only just the payment term, thinking through how long we hold inventory, having protections in the contracts to make sure we limit that, et cetera. There is a big effort on the commercial front. We've made some other organizational changes to put focus on just the pure collections engine, if you will. We're compressing timelines. We're resolving customer disputes faster. A number of tactical initiatives, Guy, that we expect to bring in some of our DSO days. Similarly, also on the inventory side.

Speaker #4: Thinking through not only the payment terms, thinking through how long we hold inventory, we have protections in the contracts to make sure we limit that.

Speaker #4: It's accurate, etc. So, there is a big effort on the commercial front. We've made some other organizational changes to put focus on just the pure collections engine, if you will.

Speaker #4: So we're compressing timelines for resolving customer disputes faster. So, a number of tactical initiatives, Guy, that we expect to bring in—some of our DSO days.

Speaker #4: And similarly, also on the inventory side, as we invest more in digital transformation and now layer in AI, we have tools that we've never had before in terms of looking at our entire data lake and analyzing what can be done in terms of compressing that cycle.

Indraneel Dev: As we invest more in digital transformation and now layering in AI, we have tools that we've never had before in terms of looking at our entire data lake and analyzing what can be done from in terms of compressing that cycle. I'll just underline that point by saying that's one of my top priorities, and I'm personally spending a lot of time in that area.

Speaker #4: And I'll just underline that point by saying that's one of my top priorities, and I'm personally spending a lot of time in that area.

Speaker #6: Thank you.

Guy Hardwick: Thank you.

Speaker #1: The next question will come from Steve Volkmann with Jefferies. Please go ahead.

Operator: The next question will come from Stephen Volkmann with Jefferies. Please go ahead.

Speaker #5: Great. Good morning, guys. Neil, I think you said that there would be a little bit of a mixed impact on margins in the third quarter.

Speaker #5: Since it's kind of hard to see into that on our side, do you have any words of wisdom relative to the different segments and how we should think about that?

Indraneel Dev: Well, Steve, sometimes it's hard for us to see that in terms of the timing of these large projects. That is our best estimate at this point, given what we anticipate in terms of project mix across all the SPUs. There is some variability to that, but that's the best guidance I can give you at this point.

Speaker #4: Well, Steve, sometimes it's hard for us to see that in terms of the timing of these large projects, but that is our best estimate at this point.

Speaker #4: Given what we anticipate in terms of project mix across all the SBOs—and there is some variability to that—but that's the best guidance I can give you at this point.

Speaker #5: Okay. Maybe a bigger picture question then. Back to grid services, John. So I'm curious how you think about the competitive dynamics there. Is it the same competitor group in grid services that you would see in your standard distribution business?

Stephen Volkmann: Okay. Maybe a bigger picture question then. Back to Grid Services, John. I'm curious how you think about the competitive dynamics there. Is it the same competitor group in Grid Services that you would see in kind of your standard distribution business? Is there a different set of folks, and what does the pipeline look like for additional orders?

Speaker #5: Is there a different set of folks? And what does the pipeline look like for additional orders?

Speaker #4: So, right now, I would ask you to think about this as some significant unmet customer needs. Given the breadth of capabilities we have across Wesco, and particularly what we've built up in Grid Services, we're able to address their needs and solve their problems.

John J. Engel: Right now, I would ask you to think about this as some significant unmet customer needs that, given a breadth of capabilities we have across WESCO, and particularly what we build up in Grid Services, we're able to address their needs, solve their problems. There's no one we're competing with direct one for one for what we're doing in Grid Services. There are different companies that do different pieces of what we do, and these are none of our traditional competitors. That's the first part of the answer. The second part of the answer is, because it's a long cycle business opportunity, we have a very robust pipeline. I'm not going to get into the size and scale of that, but suffice to say, it's very large pipeline of opportunities that we are working.

Speaker #4: So, in terms of—there's no one we're competing with directly, one-for-one, for what we're doing in grid services. There are different companies that do different pieces of what we do.

Speaker #4: And these are not our—these are none of our traditional competitors. So that's the first part of the answer. The second part of the answer is, because it's a long-cycle business opportunity, we have a very robust pipeline.

Speaker #4: I'm not going to get into the size and scale of that, but suffice it to say, it's a very large pipeline of opportunities that we are working, and again, this win is just an example of one we had been working on for some time.

John J. Engel: Again, this wind is just an example of one we had been working for some time. The future is very bright for us for Grid Services. Again, this is why we outlined it in Investor Day a few years ago. It's also why we spotlighted it when we did our Q4 release. Anyway. I just kind of end on that note. It's a positive momentum vector. It's long cycle. When we get these wins, they won't show up in weeks to one or two quarters, but they'll be over a duration of many quarters to a few years. That's the kind of the characteristics of this win, and it's very notable. We're kind of off to the races there.

Speaker #4: And so the future is very bright for us for grid services. Again, this is why we outlined it at investor day a few years ago.

Speaker #4: It's also why we spotlighted it when we did our Q4 release. So, anyway, I'll just kind of end on that note—it's a positive momentum vector.

Speaker #4: It's a long cycle. So when we get these wins, they won't show up in weeks or one to two quarters, but they'll be over a duration of many, many quarters to a few years.

Speaker #4: And that's the kind of the characteristics of this wind. And it's very notable. So we're kind of off to the races there.

Speaker #5: Okay. I appreciate it.

Stephen Volkmann: Okay. I appreciate it.

Speaker #1: The next question will come from Nigel Coe with Wolf Research. Please go ahead.

Operator: The next question will come from Nigel Coe with Wolfe Research. Please go ahead.

Speaker #3: Thanks. Good morning, everyone. And yeah, it's really good to see the broad-based momentum here. I did want to just touch back on gross margins because they were up materially.

Nigel Coe: Thanks. Good morning, everyone. Yeah, it's really good to see the broad-based momentum here. I did want to just touch back on gross margins because they're up materially. We haven't talked about price, so I'm just wondering, was there any price inflation benefits coming through on growth? Then just double-clicking on the data center business, John, I think we've been trained to believe that that corresponds to accretive. Doesn't look like that's the case anymore for the CSS segment. Maybe just touch on that as well.

Speaker #3: We haven't talked about price. I'm just wondering, was there any price inflation benefit coming through on gross? And then, just double-clicking on the data center business—John, I think we've been trained to believe that that's gross margin dilutive.

Speaker #3: It doesn't look like that's the case anymore for the CSS segment. Maybe just touch on that as well.

Speaker #4: Just starting on your question on price, I think overall it was about a 3% benefit. CSS 1%, EES 5%, about a point of that was commodity-driven and UBS plus 3%.

Indraneel Dev: Just starting on your question on price, I think overall it was about a 3% benefit. CSS 1%, EES 5%, about a point of that was commodity driven, and UBS plus 3%. If we step back and really stare at the underlying activity, we would characterize that as back to business as usual. We're not seeing anything out of the ordinary. Nothing really out of the ordinary to highlight, Nigel, on the pricing side. I think our supplier partners are being very measured about it, and they're testing the markets, so I think it would be classified as back to normal.

Speaker #4: If we step back and really stare at the underlying activity, we would characterize that as back to business as usual. We're not seeing anything out of the ordinary.

Speaker #4: And so, nothing really out of the ordinary to highlight, Nigel, on the pricing side. I think our supplier partners are being very measured about it.

Speaker #4: And they're testing the markets, so I think it would be classified as back to normal.

John J. Engel: Back to data centers, it's two drivers, plain and simple. New leader effect. Our new leader there, his fifth quarter's under his belt, he's very much driving our margin initiatives. Secondly, to what I answered earlier, in that we're adding additional products and services to these end user relationships. Increasingly, we're becoming a one-stop shop. As we get the initial awards that were more traditional, I'm actually going back six, seven quarters ago to when I started making these comments. You get a piece of that construction project, but not everything's specced at that point. Once you're there, you're doing a good job direct with the end user, you pick up other products, then we now have capabilities across the entire data life cycle, even post-construction phase. That's where our services increasingly come in.

Speaker #2: On the topic of data centers, there are two drivers.

Speaker #4: Plain and simple, new leader effect: our new leader there has five quarters under his belt, and he's very much driving our margin initiatives. And secondly, it's what I answered earlier.

Speaker #4: In that we're adding additional products and services to these end-user relationships, increasingly we're becoming a one-stop shop. So as we get the initial awards that were more traditional—I'm actually going back six, seven quarters ago is when I started making these comments—you get a piece of that construction project, but not everything is spec'd at that point.

Speaker #4: And so once you're there, you're doing a good job direct with the end user. You pick up other products and then we now have capabilities across the entire data life cycle, even post-construction phase.

Speaker #4: And so that's where our services increasingly come in, so we're able to drive a richer margin mix post the initial award on these projects.

John J. Engel: We're able to drive a richer margin mix post the initial award on these projects.

Speaker #3: Great. And just quickly, I'd be curious about hiring, because when you grow in high single digits, it's a fairly labor-intensive business. So, tight labor market—any constraints on hiring?

Nigel Coe: Great. Just quickly, I'd be curious about hiring because when you grow in high single digits, it's a fairly labor-intensive business. Tight labor market, any constraints on hiring?

Speaker #4: No, I think, look, we've just kind of goes back to and I've been with Wesco more than a year or two. It's actually been two decades plus.

John J. Engel: No. This goes back to, I've been with WESCO more than a year or two. It's actually been 2 decades plus. We were originally a leveraged spinout at Westinghouse, a leveraged 1994, leverage recap in 1998, public in 1999. I joined in 2004. Why do I start with that? We still are very focused on our operating cost structure and ensuring operating cost leverage. That's in our D&A. It's always been in our D&A. It's in our D&A of all the new team members we have. We are selectively adding where we see very strong opportunities if we end up being constrained. A lot of our additions, though, quite frankly, are technical resources because we're doing some engineering and helping to spec these solutions for our customers given the requirements that they have. We've been injecting technical talent.

Speaker #4: I would we were originally a leveraged spin out at a Westinghouse, a leveraged 94 leveraged recap at 98 public and 99. I joined in 2004.

Speaker #4: Why do I start with that? We still are very, very focused on our operating cost structure and ensuring operating costs leverage. I mean, that's in our DNA.

Speaker #4: It's always been in our DNA. It's in the DNA of all the new team members we have. And so, we are selectively adding where we see very strong opportunities.

Speaker #4: Given the requirements that they have, we've been injecting technical talent. Again, we're doing it at a fraction of our sales growth rate, though.

Speaker #4: And so that's the recipe we're running, and we're going to continue to run it. Honestly, we're not having too much trouble with that group of folks because I think they're seeing the success we're having.

Speaker #4: They're really interesting work we're doing. We're directly with end users. So the speed and agility that's required as you work with these customers, we're kind of at the front end.

Speaker #4: It's really exciting stuff. We've been able to attract some very interesting talent. I like the question a lot because I don't talk about it much, but we have meaningfully strengthened the technical resources that are part of the broader Wesco team.

Speaker #3: Great. Thanks, John.

Nigel Coe: Great. Thanks, John.

Speaker #1: This concludes our question and answer session. I would like to turn the conference back over to John Engel for any closing remarks.

Operator: This concludes our question and answer session. I would like to turn the conference back over to John Engel for any closing remarks.

Speaker #4: Thank you. I think we've addressed most of your questions. I'll bring the call to a close. I know we have many follow-ups scheduled for today, tomorrow, even early next week.

John J. Engel: Thank you. I think we've addressed most of your questions. I'll bring the call to a close. I know we have many follow-ups scheduled for today, tomorrow, even into early next week. We look forward to engaging with you. We expect to announce our Q3 earnings on Thursday, 29 October. Again, thank you for your support. Have a great day.

Speaker #4: So we look forward to engaging with you, and we expect to announce our third quarter earnings on Thursday, October 29th. Again, thank you for your support.

Speaker #4: Have a great day.

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

Q2 2026 WESCO International Inc Earnings Call

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