Hello and welcome to the West Coast 2026 Third Quarter Earnings Call. I would like to remind you that all lines are in a listen-only mode throughout the presentation. If you would like to ask a question, please press star followed by one on your telephone keypad. Please note that 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 uncertainty. Actual results may differ. 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 or 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 are posted on our website at Wesco.com. On the call this morning, we have John Engel, Wesco's Chairman, President, and Chief Executive Officer, and Neal Dev, Executive Vice President and Chief Financial Officer. And with that, I'll turn the call over to John.

Thank you very much, Scott. Well, good morning, everyone, and thank you for joining our call today. We're very pleased with our record third quarter results, and we carry positive business momentum into the fourth quarter. Once again, sales, backlog, operating profit, and earnings per share all increased double digits versus the prior year. And importantly, they achieved records that exceeded our expectations. We are particularly pleased with our free cash flow generation during the quarter, which was strong given the sales growth that we delivered. The past five consecutive quarters of double-digit sales growth demonstrate Wesco's higher growth profile, which extends well beyond our important data center positioning. Customer demand is strong across the rest of our diversified portfolio and markets, with sales up high single digits, excluding data centers. Our customers continue to invest in major capital and infrastructure projects, and they're increasingly relying on Wesco to manage their needs. and this is all happening while we add more services to our portfolio and demonstrate the continued effectiveness of our OneWesco cross-selling strategy. Especially noteworthy, our backlog was up over 80% to a new record level for each of our three business units. The power of our customer value proposition, our global capabilities and our leading portfolio of products, services and solutions is clear as we continue to outperform the market. Our backlog growth is being fueled by multi-year customer commitments as our large customers recognize our unique capabilities across the communications, security, electrical, utility, and power markets. As a result, we are again significantly raising our full-year 2026 outlook, reflecting our continued confidence in our continued strong execution. Given the positive market momentum that we are seeing, I'm bullish that Wesco will continue to outperform our markets and deliver superior value to our customers, suppliers, and shareholders to close out 2026 and in 2027. With regards to 2027, we will provide our full year outlook when we report our fourth quarter earnings in February of next year. With that said, we expect to continue to outperform our markets again next year with sales up mid to high single digits along with continued margin expansion. Before turning it over to Neil, I would like to highlight that we'll be hosting a virtual investor event on Tuesday, November 10th, from 10 a.m. to 11.30 a.m. Eastern Time, where we'll discuss our leadership position in the data center space and our differentiated solutions across the data center lifecycle. Let's Go is uniquely positioned with our comprehensive product services and solutions offerings for data center white space, gray space, and power infrastructure applications. Our three business leaders will discuss our One West Coast strategy, our leading value proposition, and our end-to-end capabilities for our data center customers during this upcoming virtual investor event. With that, I will now turn it over to Neil to take you through our third quarter results and our RAISE full year outlook in more detail.

Neil. Thank you, John, and good morning, everyone. As John highlighted, we delivered another exceptional quarter driven by strong execution, accelerating growth, and increasing contribution 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 earnings per share. Organic sales increased 17%, reflecting strong execution across the business. Growth was broad-based with data center sales of 55% year-over-year and non-data center sales growth of 7% year-over-year. Adjusted EBITDA increased 33% with EBITDA margin expanded 100 basis points to 7.8%. We generated solid free cash flow after investing in working capital to support strong sequential sales growth. Based on our strong year-to-date performance and continued momentum entering the fourth quarter, we are significantly raising our full-year outlook for sales, adjusted EBITDA, and adjusted EPS. With that, let me turn to our third quarter results, starting on slide five. For the third quarter, We delivered excellent sales growth and record profitability across the business. Organic sales increased 17% and $7.2 billion, driven by strong volume growth in all three business units. Pricing contributed approximately 3% and volume approximately 14%. adjusted EBITDA increased 33% to a record $562 million, while EBITDA margin expanded approximately 100 basis points to 7.8%. Gross margin increased to 21.7%, and SG&A improved approximately 50 basis points as strong sales growth, productivity, and disciplined cost management drove operating leverage. It's important to note that our SG&A incorporates ongoing investments in expanding our footprint and capabilities to support our profitable growth. Turning to slide six, adjusted EPS increased 47% year-over-year to a record $5.77 per share. The improvement was driven primarily by strong operating performance, including higher sales and margin expansion. Turning to CSS on slide 7, CSS delivered record sales and profitability in the third quarter as strong data center demand continued to drive growth. Sales increased 22% to a record $2.9 billion, with organic growth of 21%. driven almost entirely by volume. Wesco data center solutions grew approximately 40%, primarily driven by growth in hyperscale and multi-tenant data center customers. ENI and security also delivered strong growth during the quarter, reflecting continued investment and customer demand in network infrastructure. Backlog ended the quarter at another record level, up approximately 140% year-over-year, underscoring the strength of data center demand and providing increased visibility into future revenue. Adjusted EBITDA increased 42% to a record $313 million, and adjusted EBITDA margin expanded 160 basis points to a record 10.7%. Data Center Business remains margin accretive to CSS and continues to be a meaningful contributor to our overall Wesco margin expansion objective. Turning to EES on slide eight. EES delivered record sales and profitability, highlighted by excellent growth in OEM and continued positive momentum in construction and Industrial. We are pleased with the accelerating momentum and improving results over the first three quarters of this year. Sales increased 18% to a record $2.8 billion. OEM grew approximately 30%, reflecting broad-based strength across semiconductor and data center markets. Construction grew mid-teens on continued infrastructure and Data Center Project Activity. Industrial increased mid-single digit on healthy MRO demand. Data Center sales increased more than 100% year over year, reflecting our expanding participation in Data Center infrastructure. Excluding Data Center, EES grew high single digit, demonstrating healthy demand across our core and markets. Backlog increased approximately 40% year-over-year to a record level. Adjusted EBITDA increased 31% to a record $259 million. And EBITDA margin expanded 90 basis points to 9.3%. Margin expansion was driven by gross margin improvement and operating leverage resulting from the strong sales growth and effective cost management. Turning to UBS on slide nine, UBS delivered solid growth and maintained strong profitability in the third quarter, while continuing to build on the improving trends we've seen throughout 2026. Sales increased 6% to 1.5 billion, with organic sales up 7%. Utility grew high single digit, driven by strong IOU performance Improving public power trends and continued infrastructure investments. Broadband was flat year over year on the back of a challenging prior year comparison as sales in the third quarter of 2025 were up over 20%. Continued share gains supported by our performance in the current quarter. Backlog increased approximately 90% year over year to a record level, driven by grid services, and strong order activity across utility and broadband. Adjusted EBITDA increased 6% to 158 million. EBITDA margin remains strong at 10.4%, improving 40 basis points sequentially. We are pleased with the EBITDA margin expansion over the past three quarters. and maintained our double-digit EBITDA margin in the third quarter. This was achieved with a backdrop of a competitive public power landscape as we focused on pricing for our value proposition, driven strong operating cost leverage and continue to diversify our customer base. Moving to slide 10. Data Center sales are now approximately $6 billion on a trailing 12-month basis and represent approximately 23% of company sales. Importantly, this business continues to be margin accretive to Wesco and remains a meaningful contributor to our profitability and margin expansion. Third quarter data center sales increased approximately 55% year over year to a record $1.8 billion, marking another quarter of strong growth despite increasingly challenging year over year comparisons. Turning to slide 11, free cash flow generation was $184 million during the third quarter. We continue to focus on our working capital efficiency and we are pleased with our cash flow generation this quarter. As a reminder, we are an asset-light business with working capital being our primary investment supporting profitable growth. We are successfully managing pressures on our working capital intensity as we execute large, long-cycle projects with longer-term commitments from our customers. Networking capital as a percentage of trailing 12-month sales was approximately 20%, remaining generally consistent with prior quarters despite higher sales, expanding margins, and accelerating momentum in our business. Moving to slide 12. Net leverage improved to 2.8 times net debt to adjusted EBITDA compared to 3.4 times at year end, notably ending the quarter below three times. This continues our trend of steady deleveraging with leverage improving every quarter over the past year. Approximately $2 billion of our debt consists of are evolving credit and accounts receivable facility. These credit facilities are in place to support fluctuations in our working capital, and the balances are typically countercyclical in nature. We exited the quarter with available liquidity of over $2 billion. We also maintain a well-structured debt maturity profile with no significant near-term maturities. and sufficient flexibility to support our capital allocation priorities and future growth. Moving to slide 13, turning to our 2026 outlook by business unit. We have raised our growth expectations for CSS and EES. We now expect CSS sales to grow about 20% and EES to grow low double digit for the year. Within CSS, we have also increased our outlook for Westco Data Center solutions and now expect growth of more than 40%. We continue to expect UBS to grow at a mid-single-digit rate in 2026. Moving to slide 14 and our outlook for the remainder of the year. Based on our strong year-to-date performance and continued positive momentum across the business, we are again raising our full-year outlook. We now expect organic sales growth of 13% to 14% and reported sales growth of 14% to 15%, resulting in expected full-year sales of approximately $26.8 billion to $27 billion. We are significantly increasing our adjusted EBITDA margin outlook to approximately 7.2% and significantly raising our adjusted EPS outlook to $18 to $18.50 per share. As reflected on the slide, we've made some minor adjustments to DNA, stock-based compensation, and interest expense. Despite significantly higher sales growth and implications for working capital, we are maintaining our free cash flow guidance, reflecting the progress we are making with our working capital improvement initiatives. Overall, our updated outlook reflects continued strength across the portfolio, strong execution, and confidence in our ability to deliver. Turning to slide 15. Preliminary October sales per workday are up in the high teens year over year, providing an excellent start to the fourth quarter. We currently expect low to mid-teens reported sales growth and adjusted EBITDA margin expansion of approximately 50 basis points in the fourth quarter versus the prior year. These expectations are consistent with our increased full-year outlook and reflect the continued positive momentum we are seeing across the business. We've covered a lot of material this morning, so let me briefly recap the key points before we open the call to your questions. In summary, we delivered our fifth consecutive quarter of double-digit sales growth. with record sales, backlog, adjusted EBITDA, and adjusted earnings per share. Momentum continued to build across the portfolio with positive organic sales growth across all three business units. Data Center remains a significant growth driver and continues to evolve into a company-wide growth engine. CSS delivered another quarter of exceptional growth and profitability further demonstrating that data center remains a margin-accretive growth driver. EES delivered another quarter of exceptional growth and profitability, reinforcing its role as an increasingly important contributor to Wesco's overall performance. UBS delivered solid growth and a third consecutive quarter of sequential margin improvement, while GRIP Services continues to diversify our customer base. Strong sales growth translated into record profitability, driving meaningful operating leverage and further improving our leverage profile. Lastly, based on our strong year-to-day performance and continued momentum, we are significantly raising are full year outlook for sales, adjusted EBITDA, and adjusted EPS. With that, operator, we can now open the call to questions.

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

Thank you. Good morning, everyone. Good morning, Dave. Everything looked really good. I'm sure you'll get a lot of questions on data center, so I'll go on a tangent here to start off. Could you give us an update on the digital transformation? And I believe you have 100 basis points of EBITDA margin benefit targeted. Is that expected to start to materialize in 2027? Is that a part of your mid-single-digit, high-single-digit, top-line, and margin expansion outlook in broad strokes you gave us, John, here on 2027? Yeah.

Dave, thanks for that. Look, we're making very good progress on our digital transformation, and we remain committed to the long-term vision we outlined in our last full investor day back in 2024. all three SBUs are running an initial build on the new digital platform in multiple locations. So that gives us a strong foundation as we continue to expand the capabilities. And over the past year, we've continued to build out the functionality while deploying the platform across additional locations. In the first half of this year, we successfully deployed the platform in a much more complex operation, really an end-to-end business. and it's been successfully converted to the new platform which gives us even, you know, gives us the confidence that we're on track and we'll realize material benefits of our digital transformation. So we're on great progress. I will tell you we haven't, we're not going to give you that kind of composition of the 27 outlook or guide yet. We'll do that as part of the fourth, you know, when we deliver the fourth quarter earnings release. I will say this, though, the 100 basis points that we targeted as a result of digital transformation, that it will be in at least 100. I think as we've made progress on the deployment, we see material opportunities and upside. So I'll just say that without updating the number. Let's say it's in at least 100 basis points of EBITDA margin expansion. And Dave, we'll give that a little more color when we provide the full year outlook for 27 in the Q4 earnings release.

That sounds good. And then as a follow-up, I think when people think data centers, they sort of think AI data centers, and I know you have a broader business than that. Can you talk about beyond that specific vertical, your exposure to General Cloud Providers, On-Prem, etc., in terms of your capabilities?

David, that's an outstanding question. And look, this is a really important question. And I think that everyone's getting painted with the AI hyperscaler data center brush. This is why we chose to do a deep dive on data centers in our Virtual Investor Day week after next. So just to address your question directly, we have been in the data center business for decades. So our business is broad-based. Yes, we obviously serve the hyperscalers, and we have, again, a terrific, we think a leading value proposition, global execution capability, and we serve end-user customers directly, not through intermediaries. That includes the hyperscalers, it includes MTDCs, it includes the emerging AI players, but very importantly, includes all the enterprise class customers of which that's where our deep roots are in data centers. We've been serving them for decades, not just in US and North America, but around the world. Our data center demand remains strong and very broad-based. And what I see happening for data centers, and we'll We'll double click this and go in much more detail in our deep dive. Enterprise AI investment is expanding well beyond the hyperscalers with the large enterprise customers building out hybrid and private AI infrastructure and deploying AI closer to the edge. So that sets up exceptionally well for Wesco given our history, are leading capabilities in terms of the value prop across white space, gray space, and power, and infrastructure, and our global execution model. And for us specifically, our bookings and sales accelerated in the third quarter, and the backlog growth is exceptional, far stripping, far surpassing the sales growth. And it's important to note that as we had expected, and we said this would happen as we move through the cycle, The data center business is now as margin accretive. So it's a great question. We'll bring this to life in much more detail again week after next. Thanks, Dave.

We'll look forward to it. Thanks, John.

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

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

Morning, Sam.

Yeah. We'll repeat what Dave said. It was a hell of a quarter, obviously. My first question, as it relates to the implied fourth quarter guide, it seems as though the margins, there's probably some conservatism, I think, in your margins. I'm just trying to understand the decremental margins sequentially are are like 20 to 30% or so, if my math holds, and the incremental margins year on year are only around 10% or so. Is there something structural keeping the margins lighter than a normal flow through, or is that just normal conservatism?

So, Sam, I think just to put the outlook in context, right, we're Guiding to solid fourth quarter growth year over year. But if you think about fourth quarter, you have the December dynamic, potentially weather, there's holidays, etc. And so we're factoring that in. But having said that, very solid growth. So if you think about it sequentially, you got one less business day. And so there is a slight step down in revenue. And so operating leverage goes slightly different direction. And then we're also continually investing in the business as we look forward to next year. We've got longer term customer commitments, long cycle project bills. So all in all, we factored all of that in. and so it really is the leverage in the business that's driving that. Got it. Nothing structural, Sam, or anything to highlight.

Gotcha. And then my follow-up, sort of kind of similar. With this kind of growth that's likely to be sustained at least for a fairly extended period of time, John, how do you view your labor and your physical footprint capacity right now, especially knowing that the digital transformation is still in its early stages?

Yeah, great question, Sam. We haven't talked much about that, but we've been continuously managing that, you know, since Annexter and Wesco came together back, you know, now six years ago in the beginning of the pandemic. So we've been going through a continuous process of where we've been optimizing that. Again, we haven't really put a spotlight on that externally for all the investors, but we've been continuously combining facilities where it makes sense. Our new facilities that we added to our footprint are materially larger, and they also have a kind of a different scope and expanded mix that supports more of our value-added services. We had a press release recently on a very large facility down in Texas that's new that we stood up and expanded. And that includes level 10, level 11, and level 12 data center testing capability for the full-up server racks. We'll double-click on that in much more detail in our Investor Day week after next. So we've been investing, Sam, since we put Angster and Wesco together while pruning and optimizing the footprint. And so I feel very good about what we have right now. Look, we've kicked into a much higher gear in terms of growth. I've said for a number of years now that this portfolio mix shifted to a higher growth profile. We're really seeing it kick in now. As strong as data centers are, and look, they're terrific. We're exceptionally well positioned with a leading set of capabilities, and we're taking advantage of that. It's terrific. I'm especially pleased with the growth across the balance of the portfolio being high single digits. It stepped up from Q2 to Q3, and that just shows the breadth and depth of the portfolio. And Sam, we're leveraging really the optimization moves we've made on our footprint over the last several years. So I think we're exceptionally well positioned to continue to see the operating cost levers, that gearing, I'll say, as we drive to these higher sales growth numbers.

Thank you much.

The next question comes from Tommy Maul with Stevens. Please go ahead.

Morning, and thank you for taking my questions.

Morning, Tommy.

John, I want to push a little bit on the comment you made regarding 2027 sales. If we just look at the acceleration in the non-data center business, which you've highlighted a couple times, was a seven in the most recent quarter. Presumably, you're dialing in something similar in Q4, so you're exiting very strong into next year. And then, I don't know what you assume for data center, but something accretive to that. I mean, almost any way you cut it, you're going to get to a solid high singles kind of outlook. So is there some kind of conservatism in your comment or something I've overlooked here?

Tommy, I'll stand with my comments because we're not providing the outlook yet, but I think it's been our history that with the Q3 results, we at least try to give you a sense of how we're beginning to think about it. And just, you know, we do have very strong positive momentum. We carried it into the fourth quarter. We expect that'll continue through the quarter and we'll exit with with that very strong momentum entering next year. And then we'll give our full outlook when we do our Q4 results.

Fair enough. And I also wanted to ask on the digital investment, today versus when you kicked off that initiative, there's a lot more opportunity to deploy AI now across the enterprise. So I'm just curious, have you needed to update your planning on how you execute this big investment cycle, or what can you tell us there?

So, you know, one of my quotes is, timing is everything in life and business. And so when you think about when we started down our digital transformation journey, that strategy was clearly articulated back in an investor day in 2019. Some of you will recall that, and that's captured in the history books. And so we said very strongly that we wanted to invest and be the leader in digitally transforming businesses. The B2B distribution value chain and do it by leading that transformation of our company. And we said we would have to acquire a big or bigs and then get the synergies to pay for that, but then take a piece of those synergies and reinvest it in the business. And that's the playbook we've been running over the last five to six years. We absolutely picked the right architecture. It's a new tech stack. wrapped around one world-class data lake that we've been hydrating all our data in. And we've made substantial progress on leveraging AI. We focused inside our four walls, quite frankly, as we're learning and developing and expanding our AI applications. It started as standard AI applications several years ago. We moved to generative AI. Now we have a combination of generative and true agentic AI applications running. inside our environment with our new tech stack and against our big data set that's in our data lake. The data lake really is the core. I've said many times, the greatest asset we have that's not on the balance sheet is our big data. That's our data on all our transactions. And remember, we're the market leader. So it's that plus uniquely customer data, supplier data. And then we use other external data sources as well. So We'll talk much more about this as we move into next year, but I'm really pleased with the value we're already getting out of AI in terms of enhanced analytics, driving some productivity. It's starting to support the operating cost leverage. We didn't spike out the contribution, but it's clearly a contributor, which tags on to Sam's comment. And look, this is why we did this, but we're in the early days of starting to realize these benefits. And by the way, bottom line too, we don't have to wait for the digital new tech stack to be quote unquote deployed to every location around the globe. We're getting these benefits of AI implementation, both generative and agentic AI along the way. I'm more bullish than ever in terms of the operating leverage, the productivity. It will actually help accelerate our sales growth as well with some unique insights we're gaining across our big data set. And so with 2010 hindsight, we absolutely had the right strategy, and I'm really happy that we launched this years ago as opposed to just trying to get started now. And again, maybe my final point is, The quality and fidelity of the AI implementation and the ability to get the benefits is directly proportional to the quality and fidelity of your big data. And again, it's the greatest asset we have that's not on the balance sheet. So thanks for that question.

Thank you, John. I'll turn it back.

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

Thanks. Good morning, John, and congrats on the So interesting the comment that data center sales now created enterprise margins. It's great to hear we've been seeing them deliver great incrementals for a while now. But particularly interesting to hear that comment in a context where CSS is reporting 1% growth and ESS is reporting 5%. So just curious about the The pricing differential there, what you could say about that, and if that's a pricing opportunity to come.

Yeah. So great question, Chris. Here's what I'd focus you on. If you go back several years ago, when we started seeing the acceleration in data centers, you'll recall that we had a few quarters in CSS where the margins weren't moving. They were kind of flattish, maybe a little bit of pressure. I was very clear that Given where we fit in the construction cycle, the data center life cycle, and where we sit in terms of the value chain, that this was the front end of that business. And as we secure these bigger construction projects, that as we progress through and manage them, there'd be additional products that we would pull through, and we would increasingly add services. So that's what you're seeing. Like for like the products, there's not tremendous inflation for what we do. Again, we're not doing NVIDIA chips and the core compute solution. That does not go through distribution to the end customer. We're doing everything else wrapped around it. We'll deep dive this the week after next. But the way you should look at it is it's not that price is going to be a huge lever to gross margin expansion. It's our conscious strategy of adding additional products once we're in at the beginning through the lifecycle of the build and increasing the services content while the project's being built and post-deployment of the project, which again, we've done a series of acquisitions that give us additional capabilities that manage day two through day N of the data center, not just up to day one. So this is really an important point. I would really focus you on the gross margin improvement is because of our services content increasing over time, and we're continuing to drive and accelerate that. And the operating cost leverage is inherent because we're getting this exceptional growth, and we're getting great leverage off our operational footprint, which tags back to what I mentioned in response to Sam's question. The one-two punch we're seeing in CSS is really remarkable. And to get CSS above the 10% EBITDA margin two quarters in a row, this quarter in particular represents really terrific momentum.

Sounds good. And I've also got a question on the UBS margins. Just given the peculiar dynamics of the trough that that's moving off of and the PPU recovery, you've had two or three quarters sequential margin expansion. Is there kind of just a natural course of the next few quarters where that trend of sequential expansion prevails as a function of the PPU headwinds dissipating?

Yeah, so I'll address that question, but expand it a little bit in terms of the different dynamics occurring there. But remember, UBS had gotten to 11% EBITDA business. So we think we have a terrific set of capabilities, unique, leading market position, value proposition. And so we are in a very interesting period because we're seeing very good accelerating momentum. First of all, the backlog being up over 90%. I'll come back to that. It's just a terrific indicator. But fundamentally, we've got improving sequential momentum. IOUs grew double digits in the third quarter. That's the fourth quarter in a row of double-digit growth for IOUs. And public power grew in the third quarter. And that is the second quarter in a row that public power grew. Core margins have stabilized. Grid services is up double digits the last four quarters in a row. We told you that would grow double digits this year. and so and fundamentally this recipe it has an improved EBITDA margins profile as we move forward and we've improved EBITDA margins successively over the last three to four quarters on a sequential basis and grid services will increasingly contribute as we move as we move through time so we you know I remain very bullish on utility and the required power chain investments that are going to have to be made to support not just AI-driven data centers, but all the other megaprojects and the infrastructure build-out. And look, I've mentioned before, and I have a very strong belief that utilities become a secular growth industry. And when I say utilities are a secular growth industry, I will include the IPPs, the independent power producers, where, I mean, basically the way I look at this is all things power, is what we're focused on to the increasing energy demand, and that bodes exceptionally well for us.

Good to call her.

The next question comes from Ken Newman with KeyBank Capital Markets. Please go ahead.

Hey, good morning, guys. Thanks for taking the question. Congrats on the solid quarter. Maybe first, John, morning. Good morning. John, I appreciate the color on the support for mid-to-high single-digit sales growth for next year. I'm assuming that comment is primarily just being driven by what's currently in the backlog today. So I guess, first, is that a fair assessment? And then secondly, is there a way to help us think about the stock and flow side of the business and how that performed this quarter relative to the backlog side?

Again, I think what we've done with that commentary, Ken, is just consistent with the last couple years. And so I think you should put it into that context. And in terms of, you know, what really is the drivers and the composition, we'll give that in great detail when we release our fourth quarter earnings results, as we always do. You know, we're in the middle of the fourth quarter now. We do have positive momentum. And that commentary was meant to reflect that we – We entered the quarter with great momentum. We expect to exit the quarter with strong positive momentum. And it's more of a momentum comment as we move into next year. So that's how you should take it. But in terms of the detailed guide, we'll provide that again once 2026 is in the record books.

Okay. And then anything to comment on stock and flow versus project oriented?

We've been getting a pickup actually mix-wise in stock and flow, and it's most notable in our EES business, which I made that comment last two quarters. That is continued, and it's part of the broader commentary around EES just posted a record quarter, another record quarter. There's accelerating business momentum. Construction's accelerating. Industrial's improving. OEM has further acceleration as represented by our Q3 results. And, you know, I think we're at the beginning of an industrial super cycle. I've made those comments before, so the best is yet to come on industrial. I'll just tell you, it's great to see EES kicking in the gear. And one of the attributes of that is we're getting, you know, this very strong growth in stock and flow.

That's helpful. And then for the follow-up, you know, I guess You know, obviously, it seems like you aren't seeing or expecting any impact from the moratorium headlines from earlier this quarter. And that seems like it jives with what most of your suppliers and competitors have said or been seeing in project activity year to date. I guess when you think about where you play primarily in the timing of new data center construction, is there a higher level way to think about the inherent lag of The new orders that you're winning today for new greenfields and when they ultimately flow through the P&L, you know, just maybe ask another way, how much of the increase in the CSS backlog is for new data center projects that likely won't see, you know, you won't play for until like 28 versus 27?

No, it's a good point, and, you know, we've given that view before over the last few years, and this is something we'll highlight in more detail week after next in our data center deep dive, but When you see the headline numbers from a hyperscaler or an MTDC in terms of their increased CapEx, where we play in the value chain, there is a meaningful time delay or time lag. It's the nature of the beast. So you'll see these reported headlines on CapEx increases. The first thing that has to be done is the overall power solution. and then as the construction build cycle progresses, it's gray space moving to white space. So what we're benefiting from now is projects that are spending it was announced quite some time ago on behalf of our end user customers. It's a really important point that you've called out and that we've cited before. And so again, but when you look at our momentum vector, Look at the backlog growth in CSS, 140%. And look at the sales growth. Look at the backlog growth in EES, right, at the 40% level. And then look at the sales growth. And look at the backlog growth in UBS at 90%. And look at the sales growth. So I think that answers your question. At the high level, in terms of the dynamics, of brand new projects being loaded and backlogged and the time phasing. We'll give a little more insight on that week after next, because again, I think as we peel the onion on our data center business, I think you'll all appreciate to a much better degree, which is why we chose to do it, the depth and breadth of our data center positioning, our leading value prop, our global execution model, and that we are across all types of data center applications and now have capabilities across the whole lifecycle. That's the really important point. It's not just the build, but it includes day two through day N of running the data center.

Appreciate the color. Thanks.

Yep.

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

Actually, Ken asked most of what I was going to ask, but Maybe I'll ask the question a different way. John, is it possible to kind of parse the backlog as to how much is delivered next year, how much is delivered in 2028 and beyond?

Yeah, Guy, we haven't done that historically, so I won't do that in Q&A. But we'll take that input and see if we can provide some further insight as we move forward. I will just tell you that In general, what's in backlog, it includes a broad mix of demand that can be tomorrow, next week, next month, next quarter. And typically, it's not five years out or four years out, but it can be a year to two years out for some very specific long cycle products that are part of projects. So that's kind of the nature of the beast of our backlog for wholesale distribution.

Just as my follow-up, what percentage of UBS now is grid solutions given it's grown? I think you said at one point it was 10%. I assume it's higher than that now.

So we were a $300-plus million business last year, and when we gave our outlook and guidance, our original one for 2026, we said it would grow double digits this year. It's grown double digits all three quarters. We expected to grow double digits in the fourth quarter as well. We'll update those mixes when we complete the, you know, when we close out 2026. So we'll give you a sense of that then, because it's growing at a higher rate than UBS overall, clearly. So it's a is mixed shifting up.

Thank you. I'll pass it on.

The next question comes from Chris Stankert with DA Davidson. Please go ahead.

Hey, morning. Thanks for taking the question. I guess I did kind of want to hold on grid services for just a minute. John, I want to make sure I'm understanding your earlier comments. When it comes to the profitability there, is that accretive to UBS today? Is there opportunity to expand that to be even higher than the segment average, kind of similar to what we've seen in data center? Just some comments on the profitability of grid services would be great.

It's accretive to Wesco, for sure, and will obviously help UBS. So it's You know, we've given, you know, kind of given a profile of that business as we move through the year. I'll just remind everyone that we first called it out at our last full investor day in 2024. Jim Cameron, who leads UBS, called it out during that investor day as part of Q&A. And, you know, when we announced our fourth quarter results for 2025, we did profile that business. because it was an important part of our plan for 2026 because we had planned double-digit growth this year. Now, here we are three-quarters in the record books. It's driving double-digit growth. And then last quarter, we called out a very large win that's multi-year in nature. that kicks in starting, ostensibly kicks in 2027, starts to contribute meaningfully in the first half of 27. And so, and the margin characteristics because of the value proposition we're delivering and we're managing a global supply chain with some very challenging requirements, they're attractive margins and it is margin accretive. I thought I'd just give a little more color on what the drivers are there.

Thank you very much for the reminder in that color there. And I guess to zoom out a little bit, can you remind us, and forgive me if I missed it somewhere in the deck, but as far as the price-cost impact, are we kind of hovering at neutral right now, the same kind of price-cost neutrality expected fourth quarter in the guide there, which kind of gives an update on price-cost?

Yeah, Chris, you're right. You know, that's usually our objective. So we're generally neutral. And if you look at pricing, it's not a factor in our CSS business like John touched on before. It's really primarily in our EES business, and we manage that very closely and try to maintain margins.

Thanks so much. I'll pass it back.

This concludes our question and answer session. I'll now turn the conference back over to John Engel for any closing remarks.

So I think we addressed all your questions today. It's great that we were able to get through all of them. Thanks for joining us. I'll bring the call to a close. Thank you all for your support. It's very much appreciated. I'm going to remind you again that we'll be hosting a virtual investor event on Tuesday, November 10th from 10 a.m. to 11.30 a.m. Eastern Time, and I hope you'll be able to make it. I know we've got a number of follow-up calls lined up with Scott and team, so we look forward to engaging with you in the coming days. And finally, we expect to announce our fourth quarter earnings on Tuesday, February 9th, 2027. Thanks again for your support. Have a great day.

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