Wesco International Inc: Form 10-Q for the period ended Mar 31, 2025

The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included in Item 1 of this Quarterly Report on Form 10-Q and WESCO International, Inc.’s audited Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2024. The matters discussed herein may contain forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from expectations. Certain of these risks are set forth in Item 1A of WESCO International, Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, as well as WESCO International, Inc.’s other reports filed with the Securities and Exchange Commission (the “SEC”). In this Item 2, “Wesco” refers to WESCO International, Inc., and its subsidiaries and its predecessors unless the context otherwise requires. References to “we,” “us,” “our” and the “Company” refer to Wesco and its subsidiaries.

In addition to the results provided in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), our discussion and analysis of financial condition and results of operations includes certain non-GAAP financial measures, which are defined further below. These financial measures include organic sales growth, earnings before interest, taxes, depreciation and amortization (“EBITDA”), adjusted EBITDA, adjusted EBITDA margin, financial leverage, adjusted selling, general and administrative expenses, adjusted income from operations, adjusted other non-operating expense (income), adjusted provision for income taxes, adjusted income before income taxes, adjusted net income, adjusted net income attributable to WESCO International, Inc., adjusted net income attributable to common stockholders, and adjusted earnings per diluted share. We believe that these non-GAAP measures are helpful to users of our financial statements as they provide a better understanding of our financial condition and results of operations on a comparable basis. Additionally, certain non-GAAP measures either focus on or exclude items impacting comparability of results, allowing users to more easily compare our financial performance from period to period. Management uses certain non-GAAP financial measures in its evaluation of the performance of the Company’s operating segments and in the determination of incentive compensation. Management does not use these non-GAAP financial measures for any purpose other than the reasons stated above.

Company Overview

Wesco, headquartered in Pittsburgh, Pennsylvania, is a leading provider of business-to-business distribution, logistics services and supply chain solutions.

We employ approximately 20,000 people, maintain relationships with more than 35,000 suppliers, and serve nearly 140,000 customers worldwide. With millions of products, end-to-end supply chain services, and leading digital capabilities, Wesco provides innovative solutions to meet customer needs across commercial and industrial businesses, contractors, educational institutions, government agencies, technology companies, telecommunications providers, and utilities. Our innovative solutions include supply chain management, logistics and transportation, procurement, warehousing and inventory management, as well as kitting and labeling, limited assembly of products and installation enhancement. We operate more than 700 sites, including distribution centers, fulfillment centers, and sales offices, in approximately 50 countries, providing a local presence for customers and a global network to serve multi-location businesses and global corporations.

We have operating segments comprising three strategic business units: Electrical & Electronic Solutions (“EES”), Communications & Security Solutions (“CSS”) and Utility & Broadband Solutions (“UBS”). These operating segments are equivalent to our reportable segments. The following is a description of each of our reportable segments and their business activities.

Electrical & Electronic Solutions

The EES segment, with approximately 6,700 employees serving customers in over 50 countries, is a North American leader, and supplies a broad range of products and solutions primarily to construction, industrial and original equipment manufacturer (“OEM”) customers. The EES product portfolio includes a broad range of electrical equipment and supplies, automation and connected devices (the “Internet of Things” or “IoT”), security, lighting, wire and cable, safety, and maintenance, repair and operating (“MRO”) products from industry-leading manufacturing partners. The EES service portfolio includes solutions to improve project execution, direct and indirect manufacturing supply chain optimization programs, lighting and renewables advisory services, and digital and automation solutions to improve safety and productivity.

Communications & Security Solutions

The CSS segment, with approximately 4,800 employees serving customers in over 50 countries, is a global leader in data center, network infrastructure and security solutions. CSS sells directly to end-users or through an extensive network of channel partners, including data communications contractors, security and network integrators, professional audio/visual integrators, and systems integrators. CSS also provides a wide range of professional A/V, safety, facilities, and energy management solutions. The full CSS product portfolio is frequently coupled with services designed to enhance efficiency and productivity across all customer segments globally. These services include data center services, advisory, installation enhancement, project deployment, supply chain solutions, and management platforms.

Utility & Broadband Solutions

The UBS segment is a leader in North America, with approximately 2,500 employees serving customers primarily in the U.S. and Canada, and provides products and services to investor-owned utilities, public power companies, including municipalities, as well as global service providers, wireless providers, broadband operators and the contractors that service these customers. The products sold include wire and cable, transformers, transmission and distribution hardware, switches, protective devices, connectors, lighting, conduit, fiber and copper cable, connectivity products, pole line hardware, racks, cabinets, safety and MRO products, and point-to-point wireless devices. UBS also offers a complete set of service solutions to improve customer supply chain efficiencies.

Business Highlights

Against a backdrop of increased uncertainty and volatility, our financial results for the first three months of 2025 compared to the first three months of 2024 reflect relatively flat reported sales results, with organic sales up 5.6%. We had very strong growth in the CSS data center solutions business driven by large project activity with customers, but saw continued weakness in the utility business, as expected, due to ongoing customer destocking. Financial results were impacted by higher facilities and transportation costs, partially offset by lower payroll and payroll-related expenses, all of which are inclusive of the impact of the April 1, 2024 divestiture of our Wesco Integrated Supply (“WIS”) business.

On January 2, 2025, we acquired Industrial Software Solutions (ISS), an AVEVA Select distributor that specializes in industrial automation software and solutions primarily in Western Canada, Alaska and the Pacific Northwest. This acquisition allows us to pursue strategic cross-selling opportunities, expand market presence and capabilities, and aligns with our goal of increasing service offerings to our customers.

We issued $800 million aggregate principal amount of 6.375% senior notes due 2033 on March 6, 2025 to support the planned redemption of our outstanding 10.625% Series A Fixed-Rate Reset Cumulative Perpetual Preferred Stock (the “Series A Preferred Stock”) in June 2025. Following the redemption of our Series A Preferred Stock, we will have no significant debt maturities until 2028 and will have strong liquidity to execute our capital allocation priorities. Therefore, we expect this redemption to create substantial net income, earnings per share, and cash flow benefit.

Our increased inventories in the first quarter of 2025 and experience with successfully navigating global supply chain challenges will help address supplier price increases and the potential supply chain impact of global tariffs on our customers. We have taken several actions in response to tariffs, including but not limited to, pass through price increases, leveraging scale to provide locally sourced products, reducing imports from high tariff countries, optimizing supply chain logistics, and re-engineering our global supply chain.

Alongside our strong liquidity, we believe these strategic actions will help us navigate supply chain risks and economic volatility.

Results of Operations

First Quarter of 2025 versus First Quarter of 2024

Net Sales

The following table sets forth net sales and organic sales growth for the periods presented:

(In millions)

Note: Organic sales growth is a non-GAAP financial measure of sales performance. Organic sales growth is calculated by deducting the percentage impact from acquisitions and divestitures for one year following the respective transaction, fluctuations in foreign exchange rates and number of workdays from the reported percentage change in consolidated net sales. Workday impact represents the change in the number of operating days period-over-period after adjusting for weekends and public holidays in the United States; the first quarter of 2025 had one less workday compared to the first quarter of 2024.

Net sales were $5,343.7 million for the first quarter of 2025 compared to $5,350.0 million for the first quarter of 2024, a decrease of 0.1%. Adjusting in part for the 2.8% net decrease from the divestiture of the WIS business and acquisition of Ascent, organic sales for the first quarter of 2025 grew by 5.6%. This growth is reflective of an approximately 4% increase in volume, driven by volume increases in the CSS and EES segments, partially offset by a decline in the UBS segment, and by the impact of changes in price, which favorably impacted consolidated organic sales by approximately 1%.

Cost of Goods Sold

Cost of goods sold for the first quarter of 2025 was $4,218.1 million compared to $4,212.1 million for the first quarter of 2024, an increase of 0.1%. Cost of goods sold as a percentage of net sales was 78.9% and 78.7% for the first quarter of 2025 and 2024, respectively. The unfavorable increase of 20 basis points primarily reflects a decrease in CSS and EES gross margin partially offset by the impact of the divestiture of the WIS business, and also reflects lower supplier volume rebates and higher inventory adjustments.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses for the first quarter of 2025 totaled $836.3 million versus $829.4 million for the first quarter of 2024, an increase of $6.9 million, or 0.8%.

The following table reconciles SG&A expenses to adjusted SG&A expenses, which is a non-GAAP financial measure, for the periods presented:

(In millions)

(1) Digital transformation costs include costs associated with certain digital transformation initiatives.

(2) Restructuring costs include severance costs incurred pursuant to an ongoing restructuring plan.

(3) Excise taxes on excess pension plan assets represent the excise taxes applicable to the excess pension plan assets following the final settlement of the Company's U.S. pension plan.

SG&A payroll and payroll-related expenses for the first quarter of 2025 of $519.4 million decreased by $4.7 million compared to the same period in 2024 primarily as a result of a decrease of $3.1 million in commissions and incentives, which include the impact of the WIS divestiture.

SG&A expenses not related to payroll and payroll-related costs for the first quarter of 2025 were $316.9 million, an increase of $11.6 million compared to the same period in 2024, which primarily reflects higher costs to operate our facilities of $6.9 million and higher transportation costs of $6.9 million.

Income from Operations

Income from operations was $240.9 million for the first quarter of 2025 compared to $263.0 million for the first quarter of 2024. The decrease of $22.1 million, or 8.4%, reflects a slight decline in sales, higher cost of goods sold as a percentage of net sales due to a decrease in CSS and EES gross margin partially offset by the impact of the divestiture of the WIS business, and an increase in SG&A expenses, as described above.

Interest Expense, net

Net interest expense totaled $86.3 million for the first quarter of 2025 compared to $94.4 million for the first quarter of 2024. The decrease of $8.1 million, or 8.6%, primarily reflects lower borrowings and lower interest rates.

Other (Income) Expense, net

Other non-operating expense totaled $0.2 million for the first quarter of 2025 compared to $21.6 million for the first quarter of 2024. Due to fluctuations in the U.S. dollar against certain foreign currencies, we recognized a net foreign currency exchange loss of $1.1 million for the first quarter of 2025 compared to a net loss of $17.4 million for the first quarter of 2024. We recognized net benefits of $0.8 million and net costs of $5.9 million associated with the non-service cost components of net periodic pension (benefit) cost for the three months ended March 31, 2025 and 2024, respectively.

The following table reconciles other non-operating (income) expense to adjusted other non-operating (income) expense, which is a non-GAAP financial measure, for the periods presented:

(In millions)

(1) Loss on termination of business arrangement represents the loss recognized as a result of management's decision to terminate a business arrangement with a third party.

(2) Pension settlement cost represents expense related to the final settlement of the Company's U.S. pension plan.

Income Taxes

The provision for income taxes was $36.1 million for the first quarter of 2025 compared to $30.9 million for the corresponding quarter of the prior year, resulting in effective tax rates of 23.4% and 21.0%, respectively. The higher effective tax rate for the first quarter of 2025 is due to lower discrete income tax benefits resulting from the exercise and vesting of stock-based awards as compared to the prior year.

Net Income and Earnings per Share

Net income and earnings per diluted share attributable to common stockholders were $104.0 million and $2.10, respectively, for the first quarter of 2025 compared to $101.4 million and $1.95, respectively, for the first quarter of 2024. Adjusted for the non-GAAP adjustments above and the related income tax effects, net income and earnings per diluted share attributable to common stockholders were $109.6 million and $2.21, respectively, for the three months ended March 31, 2025 and $119.2 million and $2.30, respectively, for the three months ended March 31, 2024.

The decrease in adjusted earnings per diluted share primarily reflects the increase in cost of goods sold as a percentage of net sales and increase in SG&A expenses, partially offset by decreases in interest expense and adjusted other expense, all of which are discussed above. Additionally, there was a positive impact from the reduction in outstanding shares during the first quarter of 2025 as compared to the first quarter of 2024.

Adjusted EBITDA

Adjusted EBITDA, a non-GAAP financial measure, was $310.7 million for the first quarter of 2025, compared to $340.4 million for the first quarter of 2024, a decrease of $29.7 million, or 8.7% year-over-year. The decrease primarily reflects a $6.3 million decrease in net sales, a $6.0 million increase in cost of goods sold related to increased large project sales, and a $6.9 million increase in SG&A expenses, all of which include the impact of the WIS divestiture. Included in the increase in SG&A expenses is a $6.9 million decrease in restructuring costs, which is an adjustment to calculate adjusted EBITDA.

Segment Results

The following is a discussion of the financial results of our operating segments comprising three strategic business units consisting of EES, CSS and UBS for the three months ended March 31, 2025. As further described below and in Note 14, “Business Segments” of our Notes to the unaudited Condensed Consolidated Financial Statements, the Chief Operating Decision Maker (the “CODM”) allocates resources and evaluates the performance of the Company’s reportable segments based on adjusted EBITDA, which is the Company’s measure of segment profit or loss. Adjusted EBITDA and adjusted EBITDA margin percentage are non-GAAP financial measures. As previously described in Note 2, “Accounting Policies,” the reportable segment information for the three months ended March 31, 2024 for the EES and CSS reportable segments has been recast to conform to the current year presentation.

Electrical & Electronic Solutions

(In millions)

EES reported net sales of $2,065.3 million for the first quarter of 2025 compared to $2,064.3 million for the first quarter of 2024, an increase of $1.0 million. EES organic sales for the first quarter of 2025 grew by 3.4%, driven by the impact of changes in price. Volume did not have a material impact on the year over year growth in EES organic sales.

EES adjusted EBITDA decreased $19.2 million, or 11.9% year-over-year. The decrease primarily reflects an increase in cost of goods sold of $13.2 million, which is inclusive of higher inventory adjustments of approximately $4.0 million. Additionally, SG&A expenses increased $7.0 million as compared to the prior year, which was primarily attributed to an increase in transportation costs of $2.5 million and an increase in operations expenses of $2.5 million.

Communications & Security Solutions

(In millions)

CSS reported net sales of $2,000.3 million for the first quarter of 2025 compared to $1,704.8 million for the first quarter of 2024, an increase of $295.5 million, or 17.3%, which is inclusive of a favorable impact from the acquisition of Ascent of 2.3%. CSS organic sales for the first quarter of 2025 grew by 18.1%, primarily reflecting volume growth in the data center solutions business. Changes in price did not have a material impact on the year-over-year growth in CSS organic sales.

CSS adjusted EBITDA increased $27.3 million, or 20.8% year-over-year. The increase primarily reflects a $295.5 million increase in net sales, as described above, partially offset by a corresponding increase in cost of goods sold of $247.2 million, and an increase in SG&A expenses of $20.7 million. The increase in SG&A expenses is primarily attributed to a $6.9 million increase in transportation costs consistent with higher sales, increased salaries of $4.0 million and increased commissions and incentives of $3.5 million.

Utility & Broadband Solutions

(In millions)

UBS reported net sales of $1,278.1 million for the first quarter of 2025 compared to $1,580.9 million for the first quarter of 2024, a decrease of $302.8 million, or 19.2%, which is inclusive of an unfavorable impact from the divestiture of the WIS business of 12.2%. UBS organic sales for the first quarter of 2025 declined by 4.9%, reflecting volume declines, primarily as a result of ongoing customer destocking. Changes in price did not have a material impact on the year-over-year decline in UBS organic sales.

UBS adjusted EBITDA decreased $31.1 million, or 18.4% year-over-year. The decrease primarily reflects the $302.8 million decline in net sales, as described above, partially offset by a corresponding decrease in cost of goods sold of $254.4 million, which is inclusive of lower supplier volume rebates of $3.8 million. SG&A expenses decreased $17.8 million as compared to the prior year, primarily due to lower salaries of $5.2 million, lower commissions and incentives of $4.0 million, and lower benefits of $2.6 million, all of which are primarily attributable to the divestiture of the WIS business.

The following tables reconcile net income attributable to common stockholders to adjusted EBITDA and adjusted EBITDA margin % by segment, which are non-GAAP financial measures, for the periods presented:

(In millions)

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WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

(In millions)

Note: Adjusted EBITDA and Adjusted EBITDA margin % are non-GAAP financial measures that provide indicators of the Company's performance and its ability to meet debt service requirements. Adjusted EBITDA margin % is calculated by dividing Adjusted EBITDA by net sales.

The following tables reconcile selling, general and administrative expenses, income from operations, other non-operating (income) expense, provision for income taxes and earnings per diluted share to adjusted selling, general and administrative expenses, adjusted income from operations, adjusted other non-operating (income) expense, adjusted provision for income taxes and adjusted earnings per diluted share, which are non-GAAP financial measures, for the periods presented:

(In millions)

(1) Digital transformation costs include costs associated with certain digital transformation initiatives.

(2) Restructuring costs include severance costs incurred pursuant to an ongoing restructuring plan.

(3) Excise taxes on excess pension plan assets represent the excise taxes applicable to the excess pension plan assets following the final settlement of the Company's U.S. pension plan.

(4) Loss on termination of business arrangement represents the loss recognized as a result of management's decision to terminate a business arrangement with a third party.

(5) Pension settlement cost represents expense related to the final settlement of the Company's U.S. pension plan.

(6) The adjustments to income from operations and other (income) expense, net have been tax effected at rates of 26.4% and 27.0% for the three months ended March 31, 2025 and 2024, respectively.

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES

(In millions, except per share data)

Note: For the three months ended March 31, 2025, SG&A expenses, income from operations, other non-operating (income) expense, the provision for income taxes and earnings per diluted share have been adjusted to exclude digital transformation costs, restructuring costs, the loss on termination of business arrangement, and the related income tax effects. For the three months ended March 31, 2024, SG&A expenses, income from operations, other non-operating expense, the provision for income taxes and earnings per diluted share have been adjusted to exclude digital transformation costs, restructuring costs, pension settlement cost and excise taxes on excess pension plan assets related to the final settlement of the Anixter Inc. Pension Plan, and the related income tax effects. These non-GAAP financial measures provide a better understanding of our financial results on a comparable basis.

Liquidity and Capital Resources

Our liquidity needs generally arise from fluctuations in our working capital requirements, information technology investments, capital expenditures, acquisitions, the payment of dividends, and debt service obligations. As of March 31, 2025, we had approximately $1.7 billion in available borrowing capacity under our Revolving Credit Facility, after giving effect to outstanding letters of credit and certain borrowings under our international lines of credit, and $275.0 million of available borrowing capacity under our Receivables Facility, which combined with available cash of $404.8 million, provided liquidity of approximately $2.4 billion. Cash included in our determination of liquidity represents cash in certain deposit and interest-bearing investment accounts held in the United States and Canada. We monitor the depository institutions that hold our cash and cash equivalents on a regular basis, and we believe that we have placed our deposits with creditworthy financial institutions.

As described in Note 9, “Debt” of our Notes to the unaudited Condensed Consolidated Financial Statements, on March 6, 2025, Wesco Distribution issued $800 million aggregate principal amount of 6.375% senior notes due 2033 (the “2033 Notes”). We intend to use the net proceeds from the issuance of the 2033 Notes to redeem all of the Company’s outstanding Series A Preferred Stock and all of the related depositary shares representing fractional interests in the Series A Preferred Stock in June 2025, and repay a portion of the amounts outstanding under the Revolving Credit Facility. Prior to redeeming the Series A Preferred Stock, we used the net proceeds to temporarily repay all of the outstanding borrowings under our Revolving Credit Facility and to repay a portion of the amounts outstanding under our Receivables Facility. We intend to subsequently redraw under the Receivables Facility and/or the Revolving Credit Facility in an aggregate amount sufficient to redeem the Series A Preferred Stock.

We regularly review our mix of fixed versus variable rate debt, and we may, from time to time, issue or retire borrowings and/or refinance existing debt in an effort to mitigate the impact of interest rate and foreign exchange rate fluctuations, and to maintain a cost-effective capital structure consistent with our anticipated capital requirements. Interest rates remained stable in the first three months of 2025 after the Federal Reserve reduced its benchmark interest rate by a total of 100 basis points in the second half of 2024. Future interest rate changes would raise or lower the rates we pay on our variable rate debt and would contribute to fluctuations in interest expense versus prior periods.

As of March 31, 2025, approximately 74% of our debt portfolio consisted of fixed rate debt. As noted above, we used the net proceeds from our issuance of the 2033 Notes to temporarily repay all of the outstanding borrowings under our Revolving Credit Facility and a portion of the amounts outstanding under our Receivables Facility, which are both variable rate facilities. We intend to subsequently withdraw under our Receivables Facility and/or our Revolving Credit Facility in an aggregate amount sufficient to redeem the Series A Preferred Stock. We believe our capital structure has an appropriate mix of fixed versus variable rate debt and secured versus unsecured instruments.

Over the next several quarters, we expect that our excess liquidity will be directed primarily at share repurchases, the payment of dividends, debt reduction, digital transformation initiatives, potential acquisitions and related integration activities, and the redemption of Series A Preferred Stock. We expect to maintain sufficient liquidity through our credit facilities and cash balances. We continue to monitor the sufficiency of our liquidity given the potential impact of current economic conditions and uncertainty, including tariffs, interest rates, and inflation. While we did not face significant challenges with our sources or uses of cash in the first quarter of 2025, future market disruptions could occur which could potentially affect our liquidity. We believe cash provided by operations and financing activities will be adequate to cover our operational and business needs for at least the next twelve months.

We communicate on a regular basis with our lenders regarding our financial and working capital performance, and liquidity position. We were in compliance with all financial covenants and restrictions contained in our debt agreements as of March 31, 2025.

We also measure our ability to meet our debt obligations based on our financial leverage ratio, which was 3.1x as of March 31, 2025 and 2.9x as of December 31, 2024.

The following table sets forth our financial leverage ratio, which is a non-GAAP financial measure, for the periods presented:

(In millions, except ratios)

(1) Digital transformation costs include costs associated with certain digital transformation initiatives.

(2) Restructuring costs include severance costs incurred pursuant to an ongoing restructuring plan.

(3) Cloud computing arrangement amortization consists of expense recognized in selling, general and administrative expenses for capitalized implementation costs for cloud computing arrangements to support our digital transformation initiatives.

(4) Loss on abandonment of assets represents the write-off of certain capitalized cloud computing arrangement implementation costs relating to a third-party developed operations management software product in favor of an application with functionality that better suits the Company’s operations.

(5) Excise taxes on excess pension plan assets represent the excise taxes applicable to the excess pension plan assets following the final settlement of the Company's U.S. pension plan.

(6) Debt is presented in the condensed consolidated balance sheets net of debt issuance and debt discount costs, and includes adjustments to record the long-term debt assumed in the merger with Anixter at its acquisition date fair value.

Note: Financial leverage ratio is a non-GAAP measure of the use of debt. Financial leverage ratio is calculated by dividing total debt, excluding debt issuance costs, debt discount and fair value adjustments, net of cash, by adjusted EBITDA. EBITDA is defined as the trailing twelve months earnings before interest, taxes, depreciation and amortization.

Most of the undistributed earnings of our foreign subsidiaries have been taxed in the U.S. under either the one-time tax imposed on the deemed repatriation of undistributed foreign earnings (the “transition tax”), or the global intangible low-taxed income tax regime imposed by the Tax Cuts and Jobs Act of 2017. However, the distribution of earnings by our foreign subsidiaries in the form of dividends, or otherwise, may be subject to additional taxation. We believe that we are able to maintain sufficient liquidity for our domestic operations and commitments without repatriating cash from our foreign subsidiaries. Therefore, we continue to assert that the remaining undistributed earnings of our foreign subsidiaries are indefinitely reinvested.

We finance our operating and investing needs primarily with borrowings under our Revolving Credit Facility and Receivables Facility, as well as uncommitted lines of credit entered into by certain of our foreign subsidiaries to support local operations, some of which are overdraft facilities. The Revolving Credit Facility has a borrowing limit of $1,725 million and the purchase limit under the Receivables Facility is $1,550 million. As of March 31, 2025, we had no balance outstanding on the Revolving Credit Facility and $1,275.0 million outstanding under the Receivables Facility. The maximum borrowing limits of our international lines of credit vary by facility and range between $0.6 million and $9.5 million. Our international lines of credit generally are renewable on an annual basis and certain facilities are fully and unconditionally guaranteed by Wesco Distribution. Accordingly, certain borrowings under these lines directly reduce availability under our Revolving Credit Facility. As of March 31, 2025, we had $0.4 million outstanding under our international lines of credit.

For information regarding amendments to the Receivables Facility and Revolving Credit Facility as well as disclosure of our debt instruments, including our outstanding indebtedness as of March 31, 2025, see Note 9, “Debt” of our Notes to the unaudited Condensed Consolidated Financial Statements.

An analysis of cash flow for the first three months of 2025 and 2024 follows:

Operating Activities

Net cash provided by operating activities for the first three months of 2025 totaled $28.0 million, compared to $746.3 million for the first three months of 2024. Net cash provided by operating activities for the first three months of 2025 included net income of $118.3 million and non-cash adjustments to net income totaling $66.5 million, which primarily comprised depreciation and amortization, stock-based compensation expense, and amortization of debt issuance costs and debt discount.

Other sources of cash in the first three months of 2025 included an increase in accounts payable of $343.8 million primarily due to the increase in inventory as well as the timing of purchases and payment to suppliers, and a decrease in other accounts receivable of $65.1 million, primarily due to the collection of supplier volume rebates earned in 2024 in excess of current year accruals. Primary uses of cash in the first three months of 2025 included an increase in inventories of $227.4 million, primarily due to an increase in volume related to ongoing projects, an increase in trade accounts receivable of $188.7 million due to significant growth in sales in the CSS segment, as well as the timing of receipts from customers. Uses of cash in the first three months of 2025 also included a decrease in accrued payroll and benefit costs of $77.1 million primarily due to the payment of management incentive compensation earned in 2024 and an increase in accrued sales incentives, an increase in other current and noncurrent assets of $35.6 million primarily due to increases in capitalized costs associated with developing cloud computing arrangements, and a decrease in other current and noncurrent liabilities of $36.9 million, primarily due to decreases in accrued income taxes payable, related to the purchase of transferable tax credits.

Net cash provided by operating activities for the first three months of 2024 included net income of $116.1 million and non-cash adjustments to net income totaling $70.1 million, which primarily comprised depreciation and amortization, stock-based compensation expense, pension settlement costs, other operating activities, and amortization of debt issuance costs and debt discount.

Other sources of cash in the first three months of 2024 included an increase in accounts payable of $620.9 million primarily due to the impact of a system conversion, the timing of inventory purchases, and a bank holiday at the end of the quarter that delayed payments, a decrease in other accounts receivable of $78.9 million primarily due to the collection of supplier volume rebates earned in 2023 in excess of income accrued during the current period, and an increase in other current and noncurrent liabilities of $75.0 million, due to increases in accrued interest payable and deferred revenue, partially offset by a decrease in federal taxes payable. Primary uses of cash in the first three months of 2024 included an increase in trade accounts receivable of $116.1 million due to the timing of receipts from customers, an increase in other current and noncurrent assets of $60.1 million primarily due to excess pension plan assets, an increase in supplier prepayments, capitalized costs associated with developing cloud computing arrangements, and a decrease in accrued payroll and benefit costs of $44.0 million resulting primarily from the payment of management incentive compensation earned in 2023.

Investing Activities

Net cash used in investing activities for the first three months of 2025 was $54.4 million compared to $16.5 million used in the first three months of 2024. Included in the first three months of 2025 was $35.2 million paid to acquire Industrial Software Solutions, net of cash acquired. Capital expenditures were $20.4 million for the first three months of 2025 and 2024, which primarily comprised leasehold improvements to support our global network of locations, internal-use computer software and information technology hardware to support our digital transformation initiatives, as well as machinery and equipment.

Financing Activities

Net cash provided by financing activities for the first three months of 2025 was $2.3 million, compared to net cash used in financing activities of $254.5 million during the first three months of 2024. During the first three months of 2025, financing activities primarily comprised the proceeds of $800.0 million related to the issuance of the 2033 Notes, net repayments of $525.0 million related to our Revolving Credit Facility, net repayments of $175.0 million related to our Receivables Facility, and payment of total debt issuance costs of $14.0 million related to the issuance of the 2033 Notes and amendments to the Revolving Credit Facility and Receivables Facility. The first three months of 2025 also included $25.0 million of common stock repurchases, $22.1 million and $14.4 million of dividends paid to holders of our common stock and Series A Preferred Stock, respectively, and $18.0 million of payments for taxes related to the exercise and vesting of stock-based awards.

During the first three months of 2024, financing activities primarily comprised proceeds of $900.0 million and $850.0 million related to the issuance of the 2029 Notes and 2032 Notes, respectively, net repayments of $953.0 million related to our Revolving Credit Facility, net repayments of $912.0 million related to our Receivables Facility, and payment of total debt issuance costs of $26.6 million related to the issuance of the 2029 and 2032 Notes and amendments to the Revolving Credit Facility and Receivables Facility. The first three months of 2024 also included $50.0 million of common stock repurchases, $25.2 million of payments for taxes related to the exercise and vesting of stock-based awards, and $20.9 million and $14.4 million of dividends paid to holders of our common stock and Series A Preferred Stock, respectively.

Contractual Cash Obligations and Other Commercial Commitments

There were no material changes in our contractual obligations and other commercial commitments that would require an update to the disclosure provided in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

Seasonality

Our operating results are not significantly affected by seasonal factors. Sales during the first and fourth quarters have historically been affected by a reduced level of activity due to the impact of weather on projects. Sales typically increase beginning in March, with slight fluctuations per month through October. During periods of economic expansion or contraction, our sales by quarter have varied significantly from this pattern.

Critical Accounting Estimates

There have been no significant changes to the critical accounting estimates disclosed in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2024.

Recent Accounting Standards

See Note 2, “Accounting Policies” of our Notes to the unaudited Condensed Consolidated Financial Statements for a description of recently adopted and recently issued accounting standards.

Forward-Looking Statements

All statements made herein that are not historical facts should be considered as “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. These statements include, but are not limited to, statements regarding business strategy, growth strategy, competitive strengths, productivity and profitability enhancement, competition, new product and service introductions, and liquidity and capital resources. Such statements can generally be identified by the use of words such as “anticipate,” “plan,” “believe,” “estimate,” “intend,” “expect,” “project,” and similar words, phrases or expressions or future or conditional verbs such as “could,” “may,” “should,” “will,” and “would,” although not all forward-looking statements contain such words. These forward-looking statements are based on current expectations and beliefs of Wesco's management, as well as assumptions made by, and information currently available to, Wesco's management, current market trends and market conditions and involve risks and uncertainties, many of which are outside of Wesco's and Wesco's management's control, and which may cause actual results to differ materially from those contained in forward-looking statements. Accordingly, you should not place undue reliance on such statements.

Important factors that could cause actual results or events to differ materially from those presented or implied in the forward-looking statements include, among others, the failure to achieve the anticipated benefits of, and other risks associated with, acquisitions, joint ventures, divestitures and other corporate transactions; the inability to successfully integrate acquired businesses; the impact of increased interest rates or borrowing costs; fluctuations in currency exchange rates; evolving impacts from tariffs or other trade tensions between the U.S. and other countries (including implementation of new tariffs and retaliatory measures); failure to adequately protect Wesco's intellectual property or successfully defend against infringement claims; the inability to successfully deploy new technologies, digital products and information systems or to otherwise adapt to emerging technologies in the marketplace, such as those incorporating artificial intelligence; failure to execute on our efforts and programs related to environmental, social and governance (ESG) matters; unanticipated expenditures or other adverse developments related to compliance with new or stricter government policies, laws or regulations, including those relating to data privacy, sustainability and environmental protection; the inability to successfully develop, manage or implement new technology initiatives or business strategies, including with respect to the expansion of e-commerce capabilities and other digital solutions and digitalization initiatives; disruption of information technology systems or operations; natural disasters (including as a result of climate change), health epidemics, pandemics and other outbreaks; supply chain disruptions; geopolitical issues, including the impact of the evolving conflicts in the Middle East and Russia/Ukraine; the impact of sanctions imposed on, or other actions taken by the U.S. or other countries against, Russia or China; the failure to manage the increased risks and impacts of cyber incidents or data breaches; and exacerbation of key materials shortages, inflationary cost pressures, material cost increases, demand volatility, and logistics and capacity constraints, any of which may have a material adverse effect on the Company's business, results of operations and financial condition. All such factors are difficult to predict and are beyond the Company's control. Additional factors that could cause results to differ materially from those described above can be found in Wesco's most recent Annual Report on Form 10-K and other periodic reports filed with the U.S. Securities and Exchange Commission.

For a discussion of changes to the market risks that were previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, refer to Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and to Part II, Item 1A, “Risk Factors”.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)). Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures and internal control over financial reporting were effective as of the end of the period covered by this report.

There were no changes in the Company’s internal control over financial reporting that occurred during the quarterly period ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There have been no material changes to the risk factors previously disclosed in Item 1A. to Part I of WESCO International, Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024.