WESCO International, Inc. (WCC) Earnings Call Transcript & Summary

Hello, and welcome to WESCO's 2026 Second Quarter Earnings Call. [Operator Instructions] Please note, this event is being recorded. I will now hand the call over to Scott Gaffner, SVP, Investor Relations, to begin.

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. 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 Engle, WESCO's Chairman, President and CEO; and Neel Dev, Executive Vice President and CFO. Now I'll turn over the call to John.

Thank you, Scott, and 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 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 second quarter included: the first highlight was sales. Record sales were up 13%. We have now posted 4 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 and end markets as customers continue to invest in major infrastructure projects. Sales growth was broad-based across all 3 of our business units. Very importantly, ex 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. 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 3 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. ESS expanded operating margins 110 basis points to 9.2% EBITDA. It's great to get EES back above 9% EBITDA. 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 2 quarters. Our third major highlight again for this exceptional quarter was backlog. Record backlog we posted now for 3 quarters in a row, and backlog was up a whopping 60% in the second quarter. This was driven by strong double-digit growth across all 3 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 3 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. 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 July 1. 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 services 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, 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'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. So with that, I'll turn it over to Neel to take you through our second quarter results and our raised full year outlook in more detail. Neel?

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 3 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 first half 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 second quarter results, starting on Slide 4. Both the top line and profitability stepped up meaningfully in the second quarter. 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. Turning to Slide 5. 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 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. Security and enterprise network infrastructure grew low single digit then 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. 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 7. A key strategic highlight in the quarter was our acquisition of Newark Engineering Group, which further strengthens our position in a 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 [indiscernible] life cycle, from design and installation through ongoing operations, maintenance and optimization. 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 one point coming from commodity inflation. 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 digits, supported by ongoing infrastructure investment industrial project activity and strengthen 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%. 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 9. Sales increased 7%, reflecting strengthening demand trends across the business. Utility delivered mid-single-digit growth, supported by strong IRU 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 the U.S. 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 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. Backlog ended the quarter at a record level, up approximately 80% year-over-year, driven by a significant multiyear 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, powered 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. 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 the second quarter, 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 3 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 the second quarter, 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 first half 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 3 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 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. 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. 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. 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. 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 the second half of the year compared to the first half of the year, which will require incremental working capital investments. As a reminder, we run our 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 implied around improving day sales outstanding and days inventory outstanding. As reflected on the slide, we've made some adjustments to [indiscernible] stock-based compensation, interest expense and effective tax rate. 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 [indiscernible] 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 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. 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. Based on current customer forecasts, and the backdrop of record sales for [ workday ] in September 2025, we expect third quarter 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. So let me briefly recap the key points before we open up -- open the call to your questions. In summary, we delivered double-digit top line growth for 4 consecutive quarters. We delivered record results across the company, including record sales, adjusted EBITDA and adjusted earnings per share 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. A major multiyear 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 2 of our 3 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 a 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.

[Operator Instructions] The first question will come from Deane Dray with RBC Capital Markets.

Obviously, lots of excitement about the data center growth and how that continues, but your growth this quarter is so much more broad-based. So it really begs the question, John, what do you see as the drivers here? What does it say about the macro? And any sense about the sustainability, visibility that you have on this growth rate?

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'll use the term, hyper sales growth for these AI-driven data centers. No doubt about it, and 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, 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. 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 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, all things power -- around the power chain supporting increased demand for electricity, the reshoring, which we see kicking in the 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 super cycle, I think we're in the early innings. So in terms of our outlook and our visibility, Deane, I think that's why I spiked out backlog growth, all 3 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 I think our confidence is reflected in our raise for the year. And I think it sets the table for a very strong 2027 as well.

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. 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. But just can you talk about where this -- what does this mean for your international aspirations? I know your name is WESCO International. So 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 this -- the data center growth spike that you've been part of. So a lot to unpack there, but love to hear [indiscernible].

And 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 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. But as you look -- you look at what we've done on the acquisition front post Anixter, it started with Rahi that 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. It was end-user driven like core Anixter was. We added interest in them following Rahi, Facility Services, we added [indiscernible]. And then we now add Newark Engineering, 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. It's really an important point. And we are 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. And so we are uniquely positioned with our global footprint, the breadth of our portfolio to really serve them around the world, 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. 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. 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, okay? And then bringing the strengths of WESCO into Newark. And so what we're specifically adding now, 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. And 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 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. So a little longer answer, Deane, but I think I wanted to clearly address the question by saying, this is -- think of this as a continuum. We've got a leading position to serve global data center customers. And if you look at the acquisitions we've done post Anixter. They are tuck-ins, but they're more than tuck-ins because they actually have been expanding the portfolio, and we're leveraging our One WESCO selling model across the globe.

Great color. And congrats to the team.

The next question will come from Sam Darkatsh with Raymond James.

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

Thanks for that, Sam. The -- I'll take you back 6 quarters and -- 6 to 7 quarters, and that's when the CSS sales started to meaningfully inflect up, and we had a bit of gross margin pressure in CSS. And if you go back to 7 quarters ago, we were very clear that we had very high confidence we will be able to improve margins as we start executing those projects with customers. That these are front-end margins only, but as we start executing the projects, there'll be other products that are pulled through, and we will be increasing our services content over time 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 heart of your question, first part of your question, look at that, I think we're building a very nice trend and so we're -- we're seeing now -- seeing the result of what I outlined 6 to 7 quarters ago. 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 and 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. 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 Anixter side of the equation. And we have a new leader in EES. This is his fourth quarter under his belt, and we went outside to bring him on to the team. And I think you're seeing a special cause driver is a new leader effect in both sales growth and profitability for those 2 businesses. 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, 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%. 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. 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 2 quarters in a row of double-digit growth for grid services. 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. 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, and we talked about the big new win that will ship over multiple years, and that's margin accretive. That rounds it up, Sam.

Yes, terrific comprehensive answer. My second question, and I recognize that this is going to sound like looking a [ gift horse ] in the mouth, so apologies. 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, $400 million of extra sales incrementally. 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?

So Sam, I think it's -- the short answer is it's largely mix. So if you look at second quarter, we had a significant margin improvement, right? And one of the driver 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. And so that's the dynamic that we see going into third quarter. So it's largely mix.

And then on your operating leverage comments, Sam, look, we also had some true-up of incentive compensation in this quarter. So we're clearly -- we're exceeding our internal plan commitment. 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. [ To stream ] 4 quarters in a row at double digits as strong operating model is, we do absolutely expect to get very strong operating cost leverage as you look out '27, '28, '29, that's a key part of our recipe.

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 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.

The next question will come from David Manthey with Baird.

First on grid services, John, who's the buyer here? Do you sell this direct to customers? 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?

Yes. Thanks, Dave. It's not through an integrator. It's a direct through a very large -- very, very large hyperscaler end user customers. So that's the first point. 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. And by the way, this business, grid services is working with a series of end users. How does this develop? I would tell you, if you take a multi-decade look at the products and services and this full solution that comprise 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. And we organically build up this grid services business over the last 5 to 6 years 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 that organic build. Jim 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 5 to 6 years. We've now struck 3 quarters of double-digit growth in a row, 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. It's our global supply base. It's our global supply chain management capabilities. It's our global project execution capabilities and stitch -- 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. What's really important here is that grid services, again, we're 5 to 6 years in the making here of this organic build, has really been serving utilities principally till now. 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. This is a long-cycle business. This drove the 80% growth rate in backlog for UBS. But even if you strip this out, UBS growth was still well above 20% to 30% backlog growth. 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. 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, it applies the utilities in 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. So think of this grid services play, even though it's tucked under UBS, it is absolutely a One WESCO play. As for 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. 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.