Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - Wesco Aircraft Holdings, Inc | wair-3312017xex991.htm |
| 8-K - 8-K - Wesco Aircraft Holdings, Inc | wair-3312017x8k.htm |
Q2 2017 EARNINGS CALL PRESENTATION
May 9, 2017
Todd Renehan
Chief Executive Officer
Rick Weller
Executive Vice President and Chief Financial Officer
Information in this presentation should be read in conjunction
with Wesco Aircraft’s earnings press release and tables for the
fiscal 2017 second quarter.
Wesco Aircraft Proprietary
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Disclaimer
2
Wesco Aircraft – Investor Relations
This presentation contains forward-looking statements (including within the meaning of the Private Securities Litigation Reform Act of 1995) concerning Wesco Aircraft Holdings, Inc. (“Wesco Aircraft “ or the “Company”). These
statements may discuss goals, intentions and expectations as to future plans, trends, events, results of operations or financial condition, or otherwise, based on current beliefs of management, as well as assumptions made by,
and information currently available to, management. In some cases, you can identify forward-looking statements by the use of forward-looking terms such as “achieve,” “address”, “believe,” “can” “continue,” “deliver,” “drive,”
“establish,” “expect,” “grow,” “improve,” “increase,” “intend,” “may,” “plan,” “should,” “will” or similar words, phrases or expressions. These forward-looking statements are subject to various risks and uncertainties, many of
which are outside the Company’s control. Therefore, you should not place undue reliance on such statements.
Factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, the following: general economic and industry conditions; conditions in the credit markets;
changes in military spending; risks unique to suppliers of equipment and services to the U.S. government; risks associated with the Company’s long-term, fixed-price agreements that have no guarantee of future sales volumes;
risks associated with the loss of significant customers, a material reduction in purchase orders by significant customers, or the delay, scaling back or elimination of significant programs on which the Company relies; the
Company’s ability to effectively compete in its industry; the Company’s ability to effectively manage its inventory; the Company’s suppliers’ ability to provide it with the products the Company sells in a timely manner, in
adequate quantities and/or at a reasonable cost; the Company’s ability to maintain effective information technology systems; the Company’s ability to retain key personnel; risks associated with the Company’s international
operations, including exposure to foreign currency movements; risks associated with assumptions the Company makes in connection with its critical accounting estimates (including goodwill) and legal proceedings; the
Company’s dependence on third-party package delivery companies; fuel price risks; fluctuations in the Company’s financial results from period-to-period; environmental risks; risks related to the handling, transportation and
storage of chemical products; risks related to the aerospace industry and the regulation thereof; risks related to the Company’s indebtedness; and other risks and uncertainties.
The foregoing list of factors is not exhaustive. You should carefully consider the foregoing factors and the other risks and uncertainties that affect the Company’s business, including those described in the Company’s Annual
Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other documents filed from time to time with the Securities and Exchange Commission. All forward-looking statements included in this
presentation (including information included or incorporated by reference herein) are based upon information available to the Company as of the date hereof, and the Company undertakes no obligation to update or revise
publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
The Company utilizes and discusses Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA), Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Basic Earnings Per Share (EPS), Adjusted Diluted
EPS, Constant-Currency Sales, Constant-Currency Sales Excluding Large Commercial Contract and Free Cash Flow, which are non-GAAP measures its management uses to evaluate its business, because the Company believes
they assist investors and analysts in comparing its performance across reporting periods on a consistent basis by excluding items that the Company does not believe are indicative of its core operating performance. The
Company believes these metrics are used in the financial community, and the Company presents these metrics to enhance understanding of its operating performance. You should not consider Adjusted EBITDA and Adjusted
Net Income as alternatives to Net Income, determined in accordance with GAAP, as an indicator of operating performance. Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Basic EPS, Adjusted Diluted
EPS, Constant-Currency Sales, Constant-Currency Sales Excluding Large Commercial Contract and Free Cash Flow are not measurements of financial performance under GAAP, and these metrics may not be comparable to
similarly titled measures of other companies. See the Appendix for a reconciliation of Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Basic EPS, Adjusted Diluted EPS, Constant-Currency Sales and
Constant-Currency Sales Excluding Large Commercial Contract to the most directly comparable financial measures calculated and presented in accordance with GAAP.
Wesco Aircraft Proprietary
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2Q17 Summary
3
Wesco Aircraft – Investor Relations
$376.7
$364.6
Q2 2016 Q2 2017
Net Sales
($M) Net sales decrease of 3.2% overall
Negative currency impact of 2.5%, primarily British pound
Constant-currency sales down 0.7%*
Constant-currency sales 1.9% higher, excluding one-time sale in Q2
last year to large commercial customer*
New contract business of ~$16M primarily drove increase, partially
offset by decline in ad-hoc sales
* See appendix for reconciliation and information regarding non-GAAP measures.
Wesco Aircraft Proprietary
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2Q17 Financial Results
4
Diluted Earnings Per Share
* See appendix for reconciliation and information regarding non-GAAP measures.
** As a percentage of net sales
Income from Operations
$41.4
$32.2
Q2 2016 Q2 2017
11.0%**
8.8%**
Wesco Aircraft – Investor Relations
($M) Gross margin down 120 bps – greater chemical sales and lower ad-
hoc sales and margins
SG&A as % of sales up 100 bps – lower sales and investment to
support growth
SG&A expenses – higher people and systems costs, including
~$2.0M to support growth, partially offset by lower professional
fees and bad debt
Operating margin decline of 220 bps
Lower income tax expense due to discrete items
Adjusted EBITDA margin down 280 bps*
$0.24
$0.29
$0.18
$0.21
Diluted EPS Adjusted Diluted EPS*
Q2 2016 Q2 2017
Wesco Aircraft Proprietary
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2Q17 Segments – North America
5
Net Sales
Net sales decrease of 2.3%, due to one-time sale to large
commercial customer in Q2 last year; net sales excluding
large customer rose 1.0%
Contract sales higher due to new business, partially offset
by lower ad-hoc sales
SG&A as % of sales up 110 bps – lower sales volumes,
investment in new business
Gross margin decline of 40 bps – reduced ad-hoc and
greater chemical sales, partially offset by lower inventory
adjustments
Operating margin down 150 bps
Income from Operations
$302.0 $295.1
Q2 2016 Q2 2017
$28.2
$23.0
Q2 2016 Q2 2017
9.3%* 7.8%*
Wesco Aircraft – Investor Relations
($M)
($M)
* As a percentage of net sales
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2Q17 Segments – Rest of World
6
Net Sales
Income from Operations
$74.7
$69.5
Q2 2016 Q2 2017
$13.2
$9.2
Q2 2016 Q2 2017
17.7%**
13.2%**
Net sales decrease of 7.0%
Negative currency impact of $9.4M
Constant-currency sales up 5.5%*
Growth in contract sales
Gross margin decrease of 430 bps – higher chemical sales
and inventory adjustment change
SG&A as % of net sales up 20 bps
Operating margin 450 bps lower
New U.K. legal entity established April 1
Wesco Aircraft – Investor Relations
($M)
($M)
* See appendix for reconciliation and information regarding non-GAAP measures.
** As a percentage of net sales
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Financial Summary
7
(Dollars in Millions)
March 31,
2017
Dec. 31,
2016
Sept. 30,
2016
At period end:
Cash and cash equivalents $54.0 $51.2 $77.1
Accounts receivable 266.7 247.3 249.2
Inventories 774.4 751.7 713.5
Accounts payable 181.2 173.1 181.7
Total debt* 855.3 843.2 834.3
Stockholders’ equity 916.0 889.7 882.9
Wesco Aircraft – Investor Relations
* Includes current portion of $58.0M and $40.0M at March 31, 2017 and Dec 31, 2016, respectively.
Wesco Aircraft Proprietary
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Cash Flow Summary
8
(Dollars in Millions)
March 31,
2017
Dec. 31,
2016
March 31,
2016
Quarter ended:
Net income $17.4 $13.1 $23.5
Adjustments to reconcile to operating cash flow 10.7 12.4 8.9
Working capital change (33.8) (53.6) (28.2)
Net cash (used in) provided by operating activities (5.7) (28.1) 4.2
Purchase of property and equipment (2.9) (1.3) (6.1)
Free cash flow $(8.6)
$(29.4)
$(1.9)
Wesco Aircraft – Investor Relations
APPENDIX
9
Wesco Aircraft Proprietary
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Non-GAAP Financial Information
10
Wesco Aircraft – Investor Relations
‘‘Adjusted EBITDA’’ represents Net Income (Loss) before: (i) income tax provision (benefit), (ii) net interest expense, (iii) depreciation and amortization and (iv) unusual or non-recurring items; “Adjusted
EBITDA Margin” represents Adjusted EBITDA divided by Net Sales.
‘‘Adjusted Net Income’’ represents Net Income (Loss) before: (i) amortization of intangible assets, (ii) amortization or write-off of deferred financing costs, (iii) unusual or non-recurring items and (iv)
the tax effect of items (i) through (iii) above calculated using an estimated effective tax rate.
“Adjusted Basic EPS” represents Basic EPS calculated using Adjusted Net Income as opposed to Net Income.
“Adjusted Diluted EPS” represents Diluted EPS calculated using Adjusted Net Income as opposed to Net Income.
“Constant-Currency Sales” represent net sales for the fiscal 2017 second quarter and year-to-date period translated at the corresponding fiscal 2016 periodical average exchange rates; “Constant-
Currency Sales Excluding Large Commercial Contract” represent net sales for the fiscal 2017 second quarter and year-to-date period translated at the corresponding fiscal 2016 periodical average
exchange rates, further adjusted to remove sales in the fiscal 2016 second quarter and year-to-date period related to a commercial hardware contract that ended on March 31, 2015.
“Free Cash Flow” represents net cash (used in) provided by operating activities less purchases of property and equipment.
Wesco Aircraft utilizes and discusses Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Basic EPS, Adjusted Diluted EPS, Constant-Currency Sales, Constant-Currency Sales
Excluding Large Commercial Contract and Free Cash Flow, which are non-GAAP measures our management uses to evaluate our business, because we believe they assist investors and analysts in
comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. We believe these metrics are
used in the financial community, and we present these metrics to enhance understanding of our operating performance. You should not consider Adjusted EBITDA and Adjusted Net Income as
alternatives to Net Income, determined in accordance with GAAP, as an indicator of operating performance. Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Basic EPS,
Adjusted Diluted EPS, Constant-Currency Sales, Constant-Currency Sales Excluding Large Commercial Contract and Free Cash Flow are not measurements of financial performance under GAAP, and
these metrics may not be comparable to similarly titled measures of other companies. See the following slides for a reconciliation of Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income,
Adjusted Basic EPS, Adjusted Diluted EPS, Constant-Currency Sales and Constant-Currency Sales Excluding Large Commercial Contract to the most directly comparable financial measures calculated and
presented in accordance with GAAP.
Non-GAAP Financial Information
11 Wesco Aircraft Proprietary
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Wesco Aircraft – Investor Relations
2017 2016 2017 2016
Net Sales 364,599$ 376,742$ 703,970$ 736,585$
EBITDA and Adjusted EBITDA
Net income 17,442$ 23,492 30,549$ 44,101$
Provision for income taxes 5,659 9,167 8,023 17,546
Interest expense, net 8,842 9,114 19,915 18,111
Depreciation and amortization 6,743 7,055 13,472 14,053
EBITDA 38,686 48,828 71,959 93,811
Unusual or non-recurring items (1) 294 1,938 1,309 2,567
Adjusted EBITDA 38,980$ 50,766$ 73,268$ 96,378$
Adjusted EBITDA margin 10.7% 13.5% 10.4% 13.1%
Adjusted Net Income
Net income 17,442$ 23,492$ 30,549$ 44,101$
Amortization of intangible assets 3,719 3,955 7,440 7,919
Amortization of deferred financing costs 921 925 4,123 1,753
Unusual or non-recurring items (1) 294 1,938 1,309 2,567
Adjustments for tax effect (1,316) (2,267) (3,863) (4,123)
Adjusted net income 21,060$ 28,043$ 39,558$ 52,217$
Adjusted Basic Earnings Per Share
Weighted-average number of basic share outstanding 98,709,557 97,390,636 98,512,601 97,303,808
Adjusted net income per basic share 0.21$ 0.29$ 0.40$ 0.54$
Adjusted Diluted Earnings Per Share
Weighted-average number of diluted shares outstanding 99,017,986 98,075,389 98,900,437 97,999,018
Adjusted net income per diluted shares 0.21$ 0.29$ 0.40$ 0.53$
(1) U usual and non-recurring items in the second quarter of fiscal 2017 consisted of business realignment and other expenses of $0.3 million. Unusual and
non-recurring items in the second quarter of fiscal 2016 consisted of integration and other related expenses of $0.6 million, as well as business realignment
and other expenses of $1.3 million.
Unusual and non-recurring items in the year-to-date period of fiscal 2017 consisted of business realignment and other expenses of $1.3 million. Unusual and
non-recurring items in the year-to-date period of fiscal 2016 consisted of integration and other related expenses of $1.1 million, as well as business
realignment and other expenses of $1.5 million
Wesco Aircraft Holdings, Inc.
Non-GAAP Financial Information (UNAUDITED)
(In thousands, except share data)
Three Months Ended Six Months Ended
March 31, March 31,
Non-GAAP Financial Information
12
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Wesco Aircraft – Investor Relations
March 31,
2017
March 31,
2016
Increase /
(Decrease)
Percent
Change
March 31,
2017
March 31,
2016
Increase /
(Decrease)
Percent
Change
Consolidated
Net sales 364,599$ 376,742$ (12,143)$ -3.2% 703,970$ 736,585$ (32,615)$ -4.4%
Currency translation impact 9,367 - 9,367 22,973 - 22,973
Constant-currency sales 373,966$ 376,742$ (2,776)$ -0.7% 726,943$ 736,585$ (9,642)$ -1.3%
Large commercial contract(2) - (9,782) 9,782 - (9,782) 9,782
Constant-currency sales excluding
large conmmercial contract 373,966$ 366,960$ 7,006$ 1.9% 726,943$ 726,803$ 140$ 0.0%
North America
Net sales 295,106$ 301,981$ (6,875)$ -2.3% 565,575$ 588,941$ (23,366)$ -4.0%
Large commercial contract(2) - (9,782) 9,782 - (9,782) 9,782
Net sales excluding large conmmercial
contract 295,106$ 292,199$ 2,907$ 1.0% 565,575$ 579,159$ (13,584)$ -2.3%
Rest of World
Net sales 69,493$ 74,761$ (5,268)$ -7.0% 138,395$ 147,644$ (9,249)$ -6.3%
Currency translation impact 9,367 - 9,367 22,973 - 22,973
Constant-currency sales 78,860$ 74,761$ 4,099$ 5.5% 161,368$ 147,644$ 13,724$ 9.3%
(2) In the second quarter and year-to-date periods of fiscal 2016, the company sold $9,782 of commercial hardware under a contract that ended on March 31,
2015, as previously disclosed.
Wesco Aircraft Holdings, Inc.
Non-GAAP Financial Information (UNAUDITED)
(In thousands)
Three Months Ended Six Months Ended
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