Thank you, and good morning. Before we start, 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 inherent uncertainties. Actual results may differ materially. Please see our webcast slides as well as the company's SEC filings for additional risk factors and disclosures. Any forward-looking information relayed on this call speaks only as of this date, and the company undertakes no obligation to update the information to reflect the changed circumstances. Additionally, today, we will use certain non-GAAP financial measures. Required information about these non-GAAP 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 Dave Schulz, Executive Vice President and Chief Financial Officer. Now I'll turn the call over to John.

Thank you, Scott. Good morning, everyone, and thank you for joining us today for our call on the third quarter earnings release. As you've seen from our earnings press release and webcast materials, we delivered a strong set of operating results in the third quarter. Highlights for the quarter included great cash generation, stable gross margins, SG&A cost actions now taking effect. They're the actions we took over the last two quarters. Sequential EBITDA growth and sequential EBITDA margin expansion, better inventory management, strong cross-sell execution, and continued market share gains. The power of our portfolio and industry-leading value proposition is clear, and we're in a great position to create value across all phases of the economic cycle. That is without regard to the exact economic environment that will prevail over the near term. So starting with cash. We generated very strong free cash flow of $357 million or more than 140% of adjusted net income, and this highlights the strength of our B2B distribution business model. Over the past two years, global supply chain constraints due to the pandemic required us to invest in our inventories to service our customers. With supply chain healing, we are focused on reducing our inventory and returning to our historical levels of strong and consistent free cash flow generation. We saw this in the third quarter in fact, and deployed capital in a balanced manner to reduce our debt and returned cash to shareholders through a share buyback. Importantly, our financial leverage now stands at 2.7 times, below the midpoint of our target range and is at the lowest level since the Anixter acquisition in June 2020. We expect our strong free cash flow generation to continue, and we expect to use that cash to invest in above-market growth, continue to pay down our debt, and increase the return of capital to shareholders. Now turning to our third quarter financial results. Overall results were in line with our expectations with improved performance in our EES business, and that was coupled with continued share capture and higher operating margins in both our CSS and UBS businesses. The multispeed economy has increased the importance of our array of internal initiatives and our continued operational excellence as we drive outperformance versus our end markets. We again exceeded our expectations for cross-sell, I'm happy to say, and are raising our sales synergy target from $2 billion to $2.2 billion. Our long-term secular growth drivers remain intact, and our portfolio mix shift in the higher-growth end markets has driven and is expected to continue to drive more consistent financial performance. We remain focused on what we can control as we continue to invest in our digital transformation plan and deliver game-changing digital capabilities that will benefit our customers and supplier partners. We've revised our full-year outlook to reflect a moderating economic environment and are confident in delivering record sales, record adjusted EBITDA, and record free cash flow in 2023. Finally, as we look to 2024 and beyond, we remain confident in and committed to delivering the financial value creation objectives presented at our Investor Day last year, and as you know, these include our long-term margin expansion, profit growth, and cash generation targets. So now let's move to Page 4. The strength of our business model and the success of our integration efforts since closing the Anixter acquisition in mid-2020 have established a track record of success and exceptional results for our company. Over the past three years, we have outperformed the market and delivered impressive sales growth and margin expansion, and we did this all while rapidly deleveraging our balance sheet. With a three-year integration program coming to a close at the end of this year, we are exceptionally well positioned to capture the benefits of the enduring secular growth trends as well as the anticipated increased infrastructure investments in North America. And we will do this by using our global scale, industry-leading positions, and now expanded portfolio of products, services, and solutions. So with that, I will now turn the call over to Dave.

Thanks, John, and good morning, everyone. I'll start on Slide 5 with a summary of our third quarter results. As John mentioned, the company delivered record third quarter sales, up 4% on a reported basis. Year-over-year increases in our CSS and UBS businesses were partially offset by a decline in sales in certain EES segments. On an organic basis, which includes the adjustment for one less workday in the quarter, sales were up 3% over the prior year, driven mostly by a low single-digit contribution from price, as volume was approximately flat. The flat volumes in the quarter represent a modest year-over-year decline in market volume that was fully offset by the combination of share gain in our cross-sell program. During the quarter, we experienced some negative impacts from the normalization of supplier lead times, which led to customer destocking in certain parts of our business. Project backlog continues to be at a historically high level, supporting our outlook for the rest of the year and into 2024, but is normalizing. In total, backlog was down 6% year-over-year and down approximately 7% sequentially from the end of June. We expect our backlog will continue to moderate as supply chain lead times have improved for most product categories. Gross margin of 21.6% was flat sequentially with the second quarter and flat year-to-date with the comparable period in 2022. Gross margin in the quarter was down compared with the prior year due primarily to lower supplier volume rebates as a percentage of sales as well as mix. We continue to prioritize profitable top-line growth and as an industry leader, we intend to protect the progress we've made on gross margin with continued execution of our enterprise-wide margin improvement program. Adjusted EBITDA was down slightly versus the prior year as the benefit of higher gross profit was offset by increased compensation and volume-related costs and higher costs associated with our digital and IT transformation. Adjusted SG&A was 13.7% of sales, flat with the prior year and down 40 basis points sequentially, driven by the cost reduction initiatives executed in the second and third quarters. As we mentioned last quarter, we took steps in June to address higher costs, and we took additional cost reduction actions in Q3. Collectively, these actions are expected to reduce costs by approximately $45 million on an annualized basis. Adjusted diluted EPS for the quarter was $4.49, flat with the prior year as the increases from Rahi, a lower effective tax rate, and lower share count were offset by foreign exchange rates and higher interest expense. As we start the fourth quarter, end market demand trends have moderated versus our prior expectations. We experienced a step-down in demand in October, with preliminary reported sales per workday down 2%. CSS was up low single digits including the benefit from Rahi. EES was down low-single digits with growth in industrial offset by declines in construction and OEM. UBS was also down low-single digits as we continue to see broadband down double digits, offsetting modest growth in utility and integrated supply. Notably, book-to-bill remains above 1.0 for all three of our business units. Turning to Page 6, this slide bridges the year-over-year changes in sales and adjusted EBITDA. As I mentioned a moment ago, organic sales increased 3% versus the prior year, including an approximate 3% benefit from price while volumes were roughly flat. Market volumes declined and were offset by share gains. As expected, the contribution from price moderated again in the quarter relative to 2022 as there have been fewer supplier price increases and the magnitude of these increases has been smaller. You can also see the drivers of the decline in Q3 adjusted EBITDA. Of note, adjusted EBITDA margins in the quarter improved by 40 basis points sequentially, driven by our cost reduction actions. Turning to Slide 7, organic sales in our EES business were flat year-over-year. On a like-for-like basis, sales were up 2% over the prior year, adjusting for the impact of intersegment transfers at the beginning of 2023. Construction sales were flat with large project growth, offset by continued declines in wire and cable. Industrial sales were strong, up high-single digits over the prior year, driven by strength in automation. OEM was down high-single digits in the quarter. Backlog was down 5% sequentially and up 3% from the prior year, driven by strong bookings for large projects as we are now beginning to win large projects associated with the unprecedented levels of infrastructure investments in North America. In the third quarter, adjusted EBITDA was down approximately 15% from the prior year. Adjusted EBITDA margin was 8.7%, 140 basis points lower year-over-year. The reduced profitability in EES was driven by lower supplier volume rebates, business mix, and higher SG&A as a percentage of sales. EES margins improved slightly compared to the second quarter, and we expect sequential improvement in the fourth quarter, driven by the benefit of the SG&A reduction actions previously taken. On this slide, we've also highlighted that we were awarded a five-year $250 million contract to provide electrical and electronic products to support MRO and capital project activity of a major metal producer in the United States. This is an indication of the larger project activity in the electrical industry. Turning to Slide 8, third quarter sales in our CSS business were a record, and up 11% versus the prior year on a reported basis, and up 4% organically. We saw solid growth in network infrastructure with reported sales up low double digits, driven by data center and cloud applications. These gains were partially offset by destocking at service providers, along with overall softness in the structured cabling business, while security sales were up low single digits, and professional audiovisual installations were up double digits, driven by strong international sales. As we noted earlier in the year, backlog continues to moderate to normal levels in CSS as supplier lead times have returned to pre-pandemic levels. Backlog was down 19% year-on-year and down 10% sequentially. Profitability was also strong with record adjusted EBITDA margin of 9.9%, 10 basis points higher than the prior year, driven by operating leverage, integration cost synergies, and the continued successful execution of our margin improvement initiatives. In the quarter, the combined WESCO and Anixter data center and power portfolio enabled WESCO to win a three-year $135 million contract to supply data center infrastructure, wire and cable, power, and switchgear products to support the construction of a hyperscale data center in Latin America. Global hyperscale demand remains strong, and we are exceptionally well positioned to capture the secular growth. Turning to Slide 9, third quarter sales in UBS were up 6% versus the prior year on an organic basis. Sales in our utility business were up high single digits as electrification, green energy, and grid modernization investments continued. Integrated supply was up low double digits versus the prior year. Broadband sales were down double digits as certain customers continue to work through inventory and delayed purchases as projects are pushed out. We now expect broadband sales to remain pressured until the second half of 2024 as customers in the supply chain continue to work through inventory destocking, along with the expected timing of government stimulus funding in 2024. Backlog continues to normalize and was down 7% from the prior year and down approximately 8% on a sequential basis but remains at historically high levels. Profitability was exceptionally strong as Q3 adjusted EBITDA was an all-time record of $196 million and EBITDA margin was 11.7% of sales, driven by operating leverage on higher sales, margin improvement initiatives, and integration synergies. In the quarter, we were awarded a five-year $100 million contract to supply high-voltage equipment to support the construction of utility-scale renewable energy projects, again a testament to our industry-leading value proposition. Now moving to Page 10, the size of the cross-sell opportunity continues to exceed our expectations. This quarter, we recognized more than $270 million of cross-sell revenue, bringing the cumulative total to more than $2 billion since the beginning of the program three years ago. Our pipeline of sales opportunities remains healthy. We are continuing to capitalize on the complementary portfolio of products and services as well as the minimal overlap between legacy WESCO and legacy Anixter customers. As we look at the last three months of the program in 2023, we are increasing our expected cumulative total to $2.2 billion, reflecting the strength of our value proposition and cross-sell execution against the backdrop of accelerating secular trends. Turning to Slide 11, we realized cumulative run rate cost synergies of $188 million in 2021 and $270 million through 2022. We remain on track to meet or exceed our expected target of $315 million of cumulative cost synergies by the end of 2023. Our focus through the balance of the year is on our supply chain network optimization and field operations to drive the remaining cost synergies. Turning to Slide 12, recall that after a cash draw in the first quarter, we were approximately neutral to the first half of the year. In the third quarter, we generated free cash flow of $357 million or more than 140% of adjusted net income, highlighting the strength of our B2B distribution model. Working capital management, specifically lower accounts receivable and inventory, contributed to the strong cash generation in the quarter. Over the past two years, global supply chain constraints due to the pandemic required us to invest in inventory to service our customers. With supply chains healing, we are focused on reducing our inventory and returning to our historical levels of strong and consistent free cash flow generation. We saw this in the third quarter and used our available cash in a balanced manner to reduce our debt and return cash to shareholders through a share buyback. Moving to Slide 13, reducing our leverage has been a top priority since we announced the acquisition of Anixter, and we are pleased that leverage is now at its lowest level since closing the transaction in June of 2020. Notable this quarter was that our strong cash flow enabled us to reduce net debt by approximately $250 million, which was the primary driver of the lower leverage. Leverage is now approximately 2.7x trailing 12-month adjusted EBITDA, a reduction of 3 turns since June of 2020. We are now below the midpoint of our targeted range of 2 to 3.5x trailing 12-month EBITDA, and delivering on this commitment enables us to pursue additional capital allocation options to increase shareholder returns. During the third quarter, we purchased $50 million of our shares. Based on our outlook for continued cash flow generation through the balance of the year, we expect to fund additional share repurchases and pay down debt in the fourth quarter. Now moving to Page 14, this slide shows the uniquely strong position of our company to drive growth and profitability in the years ahead. The end-to-end solutions that we provide to our global customers are directly aligned with the 6 secular growth trends shown on the left side of this page. Our participation in these trends, coupled with increasing public sector investments in infrastructure, broadband, and partnerships with the private sector, position WESCO exceptionally well. As we outlined at our Investor Day last year, over the long term, we expect to grow 2% to 4% above the market due to the combined benefit of secular growth trends and increasing share. Moving to Page 15. We are updating our 2023 outlook today based on year-to-date results and current market conditions. For the year, we expect organic sales to be up approximately 4%, at the low end of our previous range of 4% to 6%. The change in our outlook reflects moderating market conditions, including a slow start to the quarter in the month of October. We now expect volumes to be down slightly year-over-year as gains in CSS and UBS are offset by a decline in EES, with price driving total market growth of approximately 3% to 4%. Our share gains and cross-sell initiatives remain a powerful driver of our performance and are expected to provide another 1 to 2 points of organic growth. After factoring in the additional revenue from Rahi, the impact of one less workday in 2023 and the impact of foreign exchange rate differences, we estimate our reported sales growth for fiscal year 2023 will be approximately 5%. For our strategic business units, we now expect EES reported sales to be down low single digits year-over-year versus our prior expectation for growth to be flat. As we noted earlier, we have experienced headwinds in EES due to customer destocking along with overall weakness in commercial construction and certain end markets in our OEM business. Our outlook for CSS remains unchanged from our prior outlook, with the top line expected to be up mid-teens. And lastly, for UBS, we now expect reported sales to be up high single digits year-over-year versus our prior expectation of high single to low double-digit growth. The lower expectation is driven by an extended period of inventory destocking within our broadband business, along with deferred purchasing at some of our utility customers who are balancing near-term customer affordability and cash generation with long-term service reliability. For the fourth quarter, we expect UBS revenue to be relatively flat due to a difficult comparison year-over-year, continued softness in our broadband business, and moderation in utility growth rates. We expect lower project activity, limited storm recovery in the current year, and customers adjusting order patterns to align with reduced lead times. This aligns with a more normal seasonal pattern for our UBS business. For adjusted EBITDA margin, our outlook is for a range of 7.8% to 8.0%, unchanged from our prior outlook and still representing approximately $1.8 billion of EBITDA. We expect stable gross margin in the fourth quarter as we overcome notable year-over-year headwinds related to supplier volume rebates. Based on current assumptions, supplier volume rebates for the full year are expected to be a headwind of approximately 20 basis points. We are increasing our outlook for adjusted earnings per share to $15.60 to $16.10, driven by a lower full-year effective tax rate and lower share count. We continue to expect free cash flow between $500 million and $700 million. This outlook still reflects record sales, record adjusted EBITDA, and record cash flow. In the appendix of this presentation, we have shown our revised underlying assumptions for certain items on the income statement. We increased the low end of our expectation for interest expense for the year from a range of $370 million to $390 million to a range of $380 million to $390 million, primarily driven by higher variable rates and the timing of debt paydown in 2023. Additionally, we now expect other expenses to be approximately $20 million for the full year versus $20 million to $30 million previously. Regarding the quarterly cadence, we expect Q4 top line results to be down low single digits sequentially. This is in line with typical seasonality and note that there is one less workday compared to Q3. Before opening the call for questions, let me provide a brief summary of what we covered this morning. Free cash flow was particularly strong in the quarter as we delivered approximately $360 million of free cash flow, bringing our year-to-date total to $384 million. Overall, sales and earnings in the third quarter were in line with our expectations, with internal initiatives and operational excellence driving outperformance versus a multispeed economy. We delivered record third quarter sales in both CSS and UBS, which offset the impact of supply chain destocking and select market weakness within EES. Profitability improved sequentially in the quarter, with adjusted EBITDA of $15 million and adjusted EBITDA margin increasing 40 basis points. We reduced our leverage this quarter to the lowest level since acquiring Anixter in 2020, and we are now below the midpoint of our target range. We expect to generate significant cash flow in the fourth quarter, enabling continued investment in our strategic objectives and increasing shareholder returns. With that, we'll open the call to your questions.

Thank you. We will now begin the question-and-answer session. Our first question today is from Deane Dray of RBC Capital. Please go ahead.

Thank you. Good morning, everyone.

Good morning, Deane.

Hey, maybe we can start with your read of the multispeed economy. Certainly, you could see it dipped a bit more in October, and take us through your read of quote activity, daily stock and flow and address the destocking because last quarter, it was unprecedented. It seems like that has leveled out a bit. It's still a headwind, but if you could just give us the context there, it looked like it impacted EES a bit more. But take us through your read, please?

Sure, Deane. Daily bid activity levels are very strong. Dave mentioned this, and I want to emphasize that we did see moderating sales growth in October, largely driven by the end market. I'll revisit that shortly. However, book-to-bill ratios were above 1.0 for each of the three SBUs, even after drawing down some backlog during the third quarter. The bid activity level remains strong, and I'm optimistic about that. The significant destocking we observed in the second quarter relative to EES has appeared to moderate somewhat. Q3 unfolded similarly to our expectations, showing a more pronounced effect than Q2. EES did experience a nice sequential improvement in the third quarter compared to the second quarter, indicating that destocking continues in that area. Meanwhile, parts of the EES and UBS portfolios with extended lead times, such as switchgears from select breaker categories and transformers, have persisted. Other areas of the portfolio have returned to pre-pandemic levels through our collaboration with suppliers. One final point is that broadband continues to face challenging year-over-year comparisons, and destocking is still ongoing in that sector. We anticipate this trend to carry on without recovery until the second half of next year. In contrast, industrial momentum remains very robust, showcasing a strong growth rate within that part of the portfolio, as well as solid growth in utilities overall. This gives a comprehensive view of our portfolio. Lastly, growth driven by data centers remains exceptionally strong, both in our base business and in combination with Rahi, with our WDCS business reporting a very solid quarter.

That's very helpful, especially noting that the book-to-bills for each of the SBUs are at one times or above. It's great to hear that. My second question is for Dave. Congratulations to you and the team for reducing leverage below the midpoint of your range, which was a target that was successfully achieved. This has also led to a decrease in inventories and good free cash flow. To clarify, are you comfortable at the current level of 2.7, or is there a lower goal you wish to share? How much inventory reduction has been accomplished? Can you provide some context regarding the pace, the dollar amount, or the number of quarters you anticipate for further reductions? This is important for understanding the implications for free cash flow. Thank you.

I'll start with the leverage, Deane. We mentioned last quarter, our goal was to get at the midpoint of our target range. Obviously, we were balanced in our approach of deploying available capital. That included continuing to take down our leverage but then also buying back shares. And we would continue to do that. So given the high interest rate environment, we're always evaluating what is the right level of leverage versus our other capital deployment opportunities. Given where we are right now in the fourth quarter, we would expect to continue to buy down our debt but then also continue to buy back our shares. So that's our approach there. On inventory, we've made some progress. We're not where we want to be. And again, as the supply chains continue to heal, when you take a look at over the next several quarters, we would expect our inventory levels to continue to come down. Just to put that into perspective, we added about 10 days of inventory over the past 18 months. And that was in response to the supplier lead times being able to service our customers at the appropriate level. We've made progress from Q2 to Q3 but we still have more ways to go. We'll provide more details about our plans for 2024 at our fourth quarter call.

Thank you. That's good execution.

Thanks, Deane.

Our next question today will come from Sam Darkatsh of Raymond James. Please go ahead.

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

Good morning, Sam.

Two topics here. You mentioned some successes in large projects, but there’s a lot more discussion in the channel about the growth of mega projects, particularly as we approach next year. What is the general guideline for the types or sizes of mega projects that go vendor direct? How can WESCO become involved in mega projects? And how significant is the risk that mega projects will overshadow smaller projects that typically utilize the usual channels due to their demands for labor or financing?

I’ll begin by addressing the latter part of your question, focusing on the size, scope, and scale of WESCO, as well as the strength of our balance sheet. There are no financial limitations at all. It would be interesting to compare the wins we have achieved this quarter and in previous quarters over the years. These wins are significantly larger, moving from double-digit millions to triple-digit millions. The projects we are involved in are larger and more complex. Importantly for WESCO, our cross-sell execution is enabling us to achieve these larger wins, which represent greater scope. As we succeed in cross-selling, we are providing more comprehensive solutions across EES, CSS, and UBS. This addresses the first part of your question regarding the size and scale of these projects, which are indeed larger and designed to support the infrastructure build-out. Many are referred to as 'mega projects,' and they often necessitate a more complete solution that goes beyond what one supplier can provide. This feedback is coming from our end-user customers and our large contractor and integrator partners, including global EPCs. Our successful cross-sell execution and wins serve as proof of this trend. Now, addressing the second part of your question, as we look at smaller and midsized players, I believe some of them may risk their companies if they attempt to engage in these larger projects. However, we have not yet observed this dynamic as we are still at the beginning of a multi-year investment phase that supports infrastructure development. Just last quarter, we mentioned one significant win; this quarter, we are announcing several, and we expect this momentum to continue into 2024 and even more so in 2025. You raised a valid point about larger projects potentially straining traditional small and midsized players, but for WESCO, we don't see any issues in navigating this landscape.

My second question relates to integrated supply. It's great to see the double-digit growth and new successes in this area. Could you remind us of the strategic importance of this business for WESCO? I'm asking this in light of your major competitor, Sonepar, recently selling their integrated supply business for what I believe is around 9 or 10 times EBITDA. Additionally, you still have some high-cost debt in the preferred shares that will need to be addressed eventually. Can you discuss how integrated supply fits into the portfolio, John or Dave?

I appreciate the question, Sam. To start, it's important to note that WESCO, following the integration of external WESCO, now offers a variety of complete supply chain solutions that some may refer to as 'integrated supply.' However, the definition of integrated supply varies and is not universally agreed upon, so I wanted to clarify that. This distinction is significant as we cater to our utility, broadband, global data center, and industrial global account customers, as well as some major EPCs, with whom we have multiyear agreements, all of which could be considered forms of integrated supply. Since my joining the company in 2004, the WESCO Integrated Supply captive business unit, part of UBS, has been a staple, focusing on MRO and selective OEM integrated supply models, starting from its roots in the Bruckner business acquired in 1998. The team has effectively worked to enhance margins in this area; however, it's still currently below our overall corporate margins. Over the years, we've observed this business model closely and adapted different variations for various customers, which has allowed us to significantly improve the margin profile of this segment. This year, it is experiencing double-digit growth, reflecting our exposure to the industrial end market and the strengths of that business. However, as mentioned, it remains below our overall corporate margins, and we are evaluating it from a portfolio perspective.

Very helpful. Thank you.

Our next question today will come from Nigel Coe of Wolfe Research. Please go ahead.

Thanks. Good morning, everyone.

Good morning.

Good morning. So on inventory, I think we touched on this topic, but there's definitely a little bit of a draw during the quarter, but given the metric out there in terms of the inventory headwinds that some of your suppliers are talking about, I'm curious what you're seeing across the broader industry. Are smaller distributors managing their inventories more aggressively than you are? I'm wondering if there's an ambition in sense of WESCO inventory in light of the current demand environment, how much further to go on that dollar inventory reduction.

As Dave mentioned, we significantly increased our inventories during the pandemic. In hindsight, it was definitely the right choice. It helped us maintain our service levels, support our growth, and gain additional market share. Currently, we have a strict set of controls on our inventories. We're being very calculated in managing it. While it was a source of cash this quarter, it wasn't a major one. My initial answer to your question is that there’s still substantial opportunity in inventory as we look toward 2024 and beyond to reduce it further. We're balancing our inventory levels with customer service priorities, which are crucial. We focus on availability and fill rate metrics, which guide our inventory levels. As the economy begins to stabilize, we believe we will better demonstrate the strength of the new WESCO portfolio and our working capital management. Inventory presents a clear opportunity for cash and monetization as we head into the fourth quarter and 2024. Additionally, as Dave mentioned, we'll provide clearer details on our days reduction target for 2024 alongside our overall guidance in Q1.

Great. And then looking into 2024, I must say the data center and utility would be the 2 end markets that people would look to for continued growth. Maybe just to touch on Rahi, are we still on track for 20% growth for this year? And then on utility, just given that we're sort of stalling on growth in the fourth quarter, how do we feel about the environment in '24?

Yes, Rahi is on track and has proven to be an outstanding acquisition. We're very pleased with how it has integrated seamlessly into our operations. We merged the legacy data center business that was part of CSS with Rahi, now known as WESCO Data Center Solutions, and we're nearing a $2 billion annualized run rate, which is a fantastic combination. Our global capabilities have greatly improved, and we feel very positive about our data center business. Rahi has enhanced our offering with a higher value in services, more content, and an impressive range of end-user customers. I cannot emphasize enough how pleased I am with this acquisition. Rahi's size and impact cannot be underestimated, especially considering its effect on the broader WESCO enterprise. It operates well above its expected capacity. This is even more relevant as we recognize the role of AI and generative AI as catalysts for growth in global data centers, which makes me even more optimistic about our CSS and WDCS outlook. Regarding utilities, we have a strong leadership position with a compelling value proposition and are outperforming the market. This year, we have seen record sales and EBITDA margins in the third quarter, although there has been some moderation from Utility customers in the fourth quarter. I have no concerns about market demand or the utility outlook. Customers are slightly delaying purchases to manage cash flow, but as I look forward to next year and beyond, I am very confident in the long-term growth drivers for our Utility business. We anticipate an acceleration in grid modernization trends. The U.S. electric grid will need over $2 trillion in investments in the coming decade to maintain current reliability levels, not to mention additional government funding for renewable energy investments. We must also modernize the grid and upgrade the power infrastructure to support electric vehicles and other renewable sources. Historically, the Utility sector operated in line with GDP growth, but it is now positioned for secular growth. We remain very optimistic about Utility, as demonstrated by our performance over the past three years, and we expect strong growth in 2024 and beyond.

Okay, that's great color. Thanks, John.

Our next question today will come from David Manthey of Baird. Please go ahead.

Thank you. Good morning, everyone.

Good morning, Dave.

John, you just spoke on data center being, I think you called it very, very strong. And clearly with your CSS outlook at up low single digits in the fourth quarter versus plus 4% in the third, you're really not seeing any signs of softness in that particular segment. We've heard a few pockets of slowing in data center. I take it from your commentary, you're not seeing anything in your CSS backlog or incoming order rates that gives you pause relative to data centers specifically?

No, not at all, Dave.

Fair enough. So second on EES EBITDA. So last year, we were sort of 9%, 10%. This year, we're more in the 8.5% range. So I understand that revenues are down moderately. But when we look at that 100 basis point, call it, margin downdraft, can you just talk about some of the key factors there that are deleveraging EBITDA and I assume gross margin a bit in EES, specifically from 2022 to 2023?

Yes, Dave, one of the big drivers on the margin decline in the EES business, clearly, we've not seen the same year-over-year top-line growth that we've seen in some of our other businesses. We've seen a decline in gross margin. That was primarily driven by the lower supplier volume rebates. So we had highlighted supplier volume rebates as a headwind coming into the year. That has played out primarily in our EES business, particularly when you take a look at some of the product categories where we have seen some challenges, including wire and cable. One of the other things I'll highlight is we had been investing into the business against some of the secular growth trends. We've moderated that. When you take a look at how we've outlined our sales expectations for 2023, we did take aggressive actions on cost reduction. So again, sequentially, we've actually seen a modest improvement in the margins for EES. And again, we've highlighted that we expect those margins to continue to improve into the fourth quarter.

That's great. Thank you. Thank you, both.

Thanks, Dave.

Our next question today will come from Ken Newman of KeyBanc. Please go ahead.

Hi, this is Katie Fleischer on for Ken today.

Good morning.

Good morning.

Morning, wondering if you could clarify your updated price guide a little bit. Is that assuming carryover actions from last year primarily from mix within EES or is that more of a pushout from 4Q into 2024?

So one, when you think about how we've looked at pricing, we posted another 3% on pricing. So our pricing as a benefit to sales over the last several quarters has declined sequentially. We posted a plus 5% in the first quarter, a strong 3% in the second quarter, and then a 3% here in the third quarter, primarily from the carryover benefit of actions that were taken by our suppliers in the previous year. We have seen the number of supplier price increase notifications has moderated substantially, and the rate at which those announcements are coming in terms of the percentage increase to their prices has also moderated substantially. So as we think about the fourth quarter, we're still expecting there to be a low single-digit opportunity on price, but again, we've seen moderation throughout the year.

Okay, that's helpful. And then I wanted to dig into your comments a little bit on the broadband end market. So I think you said that you expect that to remain pressured through the second half of '24. Can you just provide any more color on that, what you're seeing within that market right now and how you kind of expect that to recover going into next year?

Yes, there are still elevated inventory levels at the end customers, leading to a destocking effect. We remain optimistic about broadband over the mid to long term due to clear growth drivers such as 24/7 connectivity, automation, IoT, and government spending. Programs like the Rural Digital Opportunity Fund and the Broadband Equity Access and Deployment program are expected to support this growth. Our customers are actively recruiting and training line crews for the upcoming rural broadband expansion, reinforcing our belief that the current softness is temporary. While the market is currently down, as reflected in our numbers and those of our supplier partners, we believe we are outperforming the market. We have a strong value proposition and market position, and our business benefits from cross-selling opportunities across CSS and UBS. We are very well positioned in a market with fundamental growth potential, and we believe this downturn is temporary.

Okay. And just to clarify, I think that Dave said he expected to see a recovery starting in 3Q '24. Is that correct?

We said broadband second half of next year.

Second half 2024.

Our view is second half of next year. That's our independent view based upon talking to customers, looking at our inventory position, the contracts we won, et cetera, and just customer feedback. I would say that's probably relatively consistent with what others are saying. That's the prevailing view. It is our independent view as well. Okay, thanks for the color.

Ladies and gentlemen, we have one more question and that is from Patrick Baumann of JPMorgan.

Hi, good morning. Just had one on really the fourth quarter and kind of what gives you confidence that November and December pick up from where October came in at. Is it comp-related or something else? I remember last quarter, you talked about like a counter-seasonal improvement you expected in the fourth quarter related to like, I think, mega project and maybe some end of destock or what have you. But with October starting slower, it seems like even though you're expecting the fourth quarter to be down normally seasonally, you still need kind of November, December to pick up a bit from kind of where you've started the quarter. So maybe some color on visibility to that would be helpful.

Yes. Certainly, Patrick. So we do see the typical pattern where we, as we mentioned, expect our fourth quarter sales to decline sequentially. We typically see a step-up between October and November historically, and we have assumed that in our outlook for 2023 Q4. And then we would expect to see some moderation in the month of December. What gives us the confidence on our outlook is the project backlog and what's expected to be released during the third or fourth quarter. So that's how we modeled this one through. And again, our backlog continues to be at historically high levels. It's moderated sequentially. But again, it's really the timing of that backlog release which is informing our fourth quarter outlook.

Okay. Could you provide some insights into the commercial construction environment? It seems that sales showed some recovery in the third quarter, but your comments regarding the fourth quarter were somewhat cautious. What are you observing in that area, and could you share details about specific sectors within it?

Yes. Let me start with the third quarter. We actually saw very strong growth from projects in the third quarter, and we continue to see some impacts to our stock and flow business. We called out some of the destocking back at the end of the second quarter. That continued in the third quarter. But our project business continues to be very strong. And it's across a number of verticals within non-res construction. So from our perspective, it is still very heavily reliant upon projects. And we feel comfortable with how we provided our view of the fourth quarter relative to EES in total. It has been a challenging environment within certain end market verticals, including our construction business. But again, we're confident that we've got the right value proposition going forward. And we've got actually an increase in our backlog year-over-year in EES.

Okay, thanks for the time.

Thanks, Patrick. Okay, I think that clears our queue today and it's a little bit before the 11 o'clock hour. So let me bring the call to a close. And thank you all for your support. It's very much appreciated. We look forward to speaking with many of you over the next two months as we'll be participating in a number of conferences. First, the Baird Global Industrial Conference; second, Stephens Annual Investment Conference; and third, Citadel Securities Investor Conference. So we will participate in all three of those in the fourth quarter. And additionally, we have our date for our fourth quarter earnings release locked down, and it will be February 13, 2024. So with that, I know we have many follow-up calls scheduled. Thanks again for your support, and have a good night.

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