HWCC - Earnings call transcript Q1 2018

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Houston Wire & Cable Company's First Quarter 2018 Earnings Conference Call. My name is Sherry, and I'll be your operator for today.

Joining us on the call are Jim Pokluda, President and Chief Executive Officer; and Chris Micklas, Vice President and Chief Financial Officer. Today's call is being recorded for replay purposes. today's include during statements. Comments Instructions] call forward-looking may [Operator in that based believes risk Any SEC summarized are assumptions factors releases the filings. are to such statements subject on company and but are that press reasonable,

no statements such of differ from could the this statements. forward-looking call what actual as statements. only undertakes such materially statements in and are speak not obligation indicated of Forward-looking update and Any results to guarantees publicly is the company date

a copy was www.houwire.com. receive of when Chief and the Mr. earnings morning, If copy like that not Please you website Officer. found At Executive page of press release I to would Jim Investor to distributed a Pokluda, at ready. did time, the you're begin company's Relations this turn President earlier this over under the can be the call

Jim Pokluda

everyone, and our Good call of you Thank in Micklas, results, XXXX today. morning, discuss pass new who to CFO, will additional begin Chris performance our joining our our with I'll you, and an update the call then us quarter on detail. over financial thank Sherry. I'll first for

industrial increased pricing in We are controls, new and Revenue estimate was increased quarter QX XXXX, us and - outstanding, the invoice We points income the and which the that start out was pleased inflation. which decreased metals we volume core basis strong transactional from versus pricing transactional discipline X% X%. sales strong orders. Year-over-year day, million performance Sequentially, primarily call of was first measure QX the of XXXX at XXXX, our helped increased at $X.X QX results volume unprofitable since XX.X% result was count, we our X.X per to operating approximately X% which as believe highest due growth XXXX. year. margin with MRO increased our sequential gross In the increased the to XXX oil year XX% rotary and business, U.S. $XX XXX to and X% And represented industrial XXX from and which increased XXXX, to a prior approximately of upstream Operations of basis, resulted total oil minerals, fuel primary gas rig from X%. from $XX the and in and this sales Strength in metals drivers activity. QX oil XXXX gas Repair QX QX approximately count continued barrel QX increased land-based of market price revenue. demand markets the increased and quarter in XXXX. to growth services per construction, barrel in Maintenance On midstream from level per XXXX. markets. The approximately demand increased

Our performed markets extensively storage XXXX XXXX. of gas and at the that products markets. our sequential September used well. increased we're revenue. transportation, and fourth project in increased and We steel significant project to continues for versus XXXX extraction, copper and fabricated and offshore was decline QX products closing used wire of level in XX less end the and of basis On major XX% be XX% QX a for lifting roll count estimate high-performance of the rig categories sales certain offshore our XXXX, from wire, represented quarter in setback a XX%. the support The lowest XXXX rig pleased are than the production, XX The exploration, oil that since offshore applications in count count these QX sales

approximately in increased QX general XX% end due by generation include environmental approximately very Project and market were over Our infrastructure. XX% industrials the project primary market in power to and fuel recovering a decreased environmental generation markets. end and and utility approximately sales in increased the markets trends infrastructure plant Increases market in Sales utility continued My Industrials upgrades. versus reduction sales oil ratio led XXX% for XXXX, the in activity present, April and average XXX% Sales compliance sequentially power sales compliance, end three gas 'XX, this primarily public last market QX year-over-year, of thus projects into Sequentially XX% first in in sales X%. manufacturing At and generation, experienced May end growth. XX% fossil the positive day approximately up infrastructure April works, remains per transportation, misspoke. far to daily increased market projects increased quarter sales end over to with in May and compared XX% for sequentially. approximately contributed I commercial our year-over-year. up have revenue in results apologies, year. construction prior book-to-bill with and year. are good this

further broad and positive. that that is recover activity As improved most into Project to have conditions prior pleased we move data market continues XXXX, over macroeconomic we year. are

Given combined our plan, above, outlook one XXXX present with for our robust of remains the operating optimism.

turn His assist thank Before I the recently to to company. I'd HWC's over Graham, analysis contributed he Nick pass wish company, results. Chris, tireless Chris? that, success unwavering over to to like financial endeavors. and service of him in way in efforts abundantly our for I'll could have call his call desire With the to XX every the now future for to Chris and his years our we of CFO a any detailed retired

Chris Micklas

morning. good Thanks, Jim, and

Wire tell how Houston I'd to be First, to I'm Cable. like at & everyone excited

providing place company, the the getting seen During by dedication and the time. to customer the product spirit at to right my service quality right the short top I've time team with right

is liquidity. to that a like financial being sheet team's the I performance the cover said, of performance and efforts. would result balance the With operating then the discuss company's quarter's This and

operating the indicative our is XXXX and improved expanding ability in We believe as much initiatives of half performance to performance a The an difficult demand is first quarter first environment company's in is operational increase in well in trend of XXXX. the the from plan. XXXX of this row and improving execute conditions third from quarter of overall growth as the industrial economic of

over margin gross improvement X% the XXXX. is in and of are which XX.X% XX.X% quarter As the first points up of XXX Jim is an basis sales, mentioned, sales of

gross since yearly XXXX, $X.X operating from fourth of the million XXXX. some an the are first of fourth of is which up materially Operating $XXX,XXX the the income improved true-ups in of XXXX quarter improved are is operating expense $XXX,XXX the XX.X%, is rate half by fourth Operating and which is the X.X% quarter increased of from the expenses of sales, increased million basis and of XXX second quarter. by over XXX the million. much which points to While the percent improvement fourth is resulted $XX.X Interest and from quarter the sales points flat from quarter, fourth quarter quarter the in XXXX. from down fourth points in XX.X% $XX debt or margin are from the of the as million, as $X.X expenses the and the up XX.X% down first first XX quarters These results XXXX first of X% in a ended basis quarter. quarter. loss strongest average Operating interest from

and result, loss pretax income is than $X.X which of XXXX, quarter. a the the better fourth quarter As million, of pretax first million better is the XX% $X.X than

federal HWC the favorably in Our an which present XXXX a rate federal in based on XX%. full has to by Act, XX% tax translates impacted rate XX% historically ongoing was effective rate to and information, range of the the the statutory the been we effective rate reduced change payer, into tax rate XX%. from XX.X% of estimate, Tax

be these While the we will aspects quantified, Tax do there that impact. of been believe understanding, Act some not current are not based material still of our XXXX yet have on a

evenly was a the of rebates. At between lastly, which consists capital accrued of $X.X was Now which of an year-end. commodity receivables price accounts $X.X change liquidity for to the receivable are, of working of receivables due activity. quarter, bill $XXX.X of and in increases decrease a was attention inventory, million This of $X.X other increased first first by as working to a the largest elements million, to $X.X $X.X offset and turn season; trade a million, vendor the split mainly the items. to million in our decrease sheet up partially million million end decrease construction $X.X increased during satisfied sales a from close balance accruals the the were increase million, year-end the in liabilities and capital The quarter;

expenditures $XXX outstanding Our days the days the total XXXX available a we decreased remain million quarter asset-based capital the sales compliance anticipate $XXX,XXX, in we the by in This is spend. At $X million our during with is X.X and of for million. our ongoing line of facility. credit operations. Cash approximately end days. quarter, the to is spend fund paid adequate to $XX XX.X capacity, XXXX of have covenants which of We with

and is of with prepared our the some to techniques This to the operator. improving to working reduce to operations focusing capital our our and and back call on distribution inventory the As maximize remarks, of over we we forward concludes focus primary I'll remanufacturing the lines. look various profitability product efficiencies the initiatives, turn on are the

Operator

Investments. first Our Damon question Instructions] Benedict [Operator comes from Nierenberg with

Damon Benedict

start Nice you see? more just of that some a Just what's downstream. project detail the opportunities and of wanted driving on little the on and some hear to to see wanted business to up, picking

Jim Pokluda

are we model the cycle times we happy can our said we up, years. that and - these often is billion I What many followed than be likely has especially than to work, projects, picked works Damon, dollar-plus tend we on we in of megaprojects, late in megaproject you. are fit it where - chain, value one service project - into no about for have some several of because the the go

So And end. we tail what's that's come grounding, happening in et exactly at hookup, the cetera. Instrumentation, now.

is put every a good reason of and why things caveat choppy. much Vacation next ahead. see and nature me building. a understanding good optimistic months. company. a beast, though. steam down There That's the with especially I the coming. always the head of you're should to season. of a smaller for the us hopefully the fantastic, build. in not weather, that couple little too been full-blown is if tendency there long I'll construction doldrums. slow in it's time summer mind the what's season upon warm I'm view It about in when is worry won't delighted the to long surprise one for But the just rain, It's be business of for So their

we that. mindful to of So have be

we April outstanding. is that, said having today. through performance don't was any indications May's see good, Now, and yesterday just of

you to continues. give I your that. hope is Downstream And good. for it guess, see delighted So, I'll one more comment let's question. next

abundant We good. the There's reasons hydrocarbon abundant why single is reserves find Literally, day, are paper about can ever. pick an Permian. the and Midstream more or two Texas, Internet up needed in peruse also every about lot the than we you'll are the that. or happy you there. article a There in

as to get Well, the as out, you morning, what's is Even if on read once significant activity going to get it it you recently have you this in there and news, somewhere. it out. get

You it to to have Corpus, you to to have to get get it Beaumont. get Houston, it have you to

pipelines. stations, well marketplace. all we pipelines. although up infrastructure in space. There constructing need You we years pipeline And is future. ago, I, that of that very significant these a activity from have the more. Permian the compressor we Longhorn II. enough. benefit few stations, pipelines et need to is substations, We're to okay, tank farms, significant We capital is cetera, Permian in There more refine The aren't pumping the in it. in completed And set excel Those

Damon Benedict

And talk that on a up saw you bit for think. little reasons us? a a Can the of you pick about I just there, whether the more could back MRO slowdown, side, and little

Jim Pokluda

nice and by evidenced I it the look in signs a QX very think, similar of shown May. April just of at improvement, in are copper I the it in of and 'XX, what as way XXXX believe off growth to numbers, Those averages. few QX pennies Well already that you big occurred if behaved did has

as move of into So have effect. QX we copper sort probably a similar year-over-year we'll results,

cost average broad trails Now market caveat our accounting moves. there is the treatment

you, yet, MRO foresee effect may that there in in that I to in do the better now in quite same me those QX iterations equation with evidence QX. in it what just I that copper So see with just numbers mind has I QX assuming would but did of and 'XX keeping shared some can that that's be can't

riding in is points that that know XXX in on selective by did thing to market. that The is were really important margin And increase the we it not is inventory Another of We're to business our a pricing more low-priced having elated basis took as that's result point away from significantly. we system come big QX. up a deal. that. and

lot Our past the a year. has inventory cost average up over moved

plus the to commodity point inventory to there think - of our basis you result gross best, relative inflation. was, XX to margin a dollars XX margins, as if XX% at XX% effect on XX% about So basis a increase gross

So that our the is - though on unprofitable that we're may of result. what counts isn't has extent, you pleased I'm though, the pass why, happy MRO Net-net to discipline you on result may the orders. That's That's expected. The see have sales why aren't some that pricing worked. invoice to what you with down.

Damon Benedict

and initiatives that of you driving Absolutely margin past price competitive years the during are really right now? rationalization topic, gross that happy On set see have any you pricing couple That's in is to is Or more the downturn seen internal helping that the it the that discipline. strength? fantastic. over and

Jim Pokluda

Damon. Very, But redistribution there a the nonexistent where very rationalization, came to in - of little same. me, Almost today frankly. the players all we bit the space, in surprise are It little. reside in a

really nothing in has to well not Just reside chain. level, aware, we major value going as the there the about. meaningful been consolidation now but even manufacturer right you're comment on a at where Certainly,

results or performance efforts strategic results getting So supply provide. the result are our execute improved aberrational and not These for we on are change the results chain, of a the these model paid that services of to consolidation.

do if If you they may to else but for take in, just else. that. only Okay, a and second I'm - comes let's the in. get see Damon, don't, back happy rest somebody other be anybody

Operator

queue. I'm showing in the Instructions] your questions now [Operator open. Benedict, further line Mr. no is

Damon Benedict

did that. metals margins, gross missed of if On how was you I talk much increase about underlying? the versus Sorry,

Jim Pokluda

the Yes. We margin to impact on points. gross bps XX metal XX relative was that basis estimate to minimal,

Damon Benedict

did And give excluding you growth, metals? Great. then revenue

Jim Pokluda

it. infer can You

here and on prices our growth that increased, increased. year-over-year way based impact the COGS have The to do what's happening X% is our contributed that the because So calculation, metals we X%. metals was of essentially have

but top margin the same, it we So basis we the line in points. keep up goes this because the raised case, with XXX the margin actually

Damon Benedict

there? hearing cost on are topics you pass so thoughts And ability any and X labor, that come? inflation on to are lot seeing And might What freight along are your side, about. a the what we're your

Jim Pokluda

to and points basis might effect on as Haven't seen any effect labor quantified XX. you - freight. much not material Freight any on expect in as came out

So not noticeable. even minimal, almost very

clearly So I'd a done have say - that job so along. good passing we

Damon Benedict

of hear and on Vertex, And there, I'd updates outlook love to your the what about what on growth you're business is? for that focused

Jim Pokluda

very come top the We We've marketplace to engaged. key the good Vertex. more done of far a is The is growth in revenue in team really in were with time customers. expense. team with lot That drive the The pleased year-over-year at line short active at didn't things Vertex. a without

the scrutiny. a happy we've management, than now received focal would freight, a everything. of is remain the so labor-focused to to time, very So as to had where is is We're in under nature inventories this year-over-year see overtime, That forward. Damon. but reason it which point increase significant been other And going things then, Everything due this will the overseas. from why choppy in needs product we're be that's well, at with ago some line top expense coincident more year really we have growth,

come Asia. remind over you I'll from fastener that XX% our of products So

really show lead the Some of the of same And up against was time. excess lot QX. them in I of had we all thought took a months. saw in. quite have would a product us times, to working going was We storm at X very, "geez, Murphy very change I'm isn't than It thought, So long in expected. but I happen, bit the stuff it." we not brewing what more and this

now to We in it revenue. have active the plan form an work out of

going that, to see in that context, minute. So in in offsets a but about I'm be call result just a improved you will to an Chris QX the other certain put here there'll

the to be be working okay, the that more so chain, not of due needs nature will And expected. it to end of choppy the to than Vertex there better. purchasing inventory it, nonetheless, were But inventory, Margin is offsets we're now. some supply reduction on but

So years. it satisfaction, on-time sigmas than on service, Customer prior are well. performance, several we laser-focused few was the as better that in

happy that. made So very briskly. with moves the I'm Employee We there. changes development happy significant along with some fairly results.

ways, happy So with what we other work Vertex a remains I'm done. have plainly. - ways, disappointed, have in I'm to In and progress say, many they in

sort Damon's goal, I'm got little you've gives So and to we'll what a from there. good about bit some talk diverging I'm Chris, work that. but us so And we have of working there. accomplish it of to certain opportunity our do going question, on capital here

Chris Micklas

Yes.

manufacturing and mentioned in we GE, So, I the some and - are my in script my at inventory point it activities, out sales. and going some have be be in that reducing increased we system, through up Damon, we that is, and I would to the at I focusing looking profitability the things sales lean inventory. picked as we're doing days looking And thing had we're increasing

the to almost out script, receivables our of days in as million pointed quarter a first out in again, trade sale. that's So days and were coming my up with few the $X

can because the probably we you'll days be that. on many tight be expect, So working We have you are an in have sales, really pay. dues don't of as to can the are an past - and to we going amount offset see strong there in increase we capital

a you to of increase. really some see can expect receivables, but good it's our So turn

Damon Benedict

and calls, of happy growth. problem comes the stronger, in And on to And of keep you the you'd grow revenue obviously, sort I an growth keep sticking to flattish hear to was little a that what inventory think if update point but just at which being the inventory is it on flat? goal the a in despite versus couple growth topic, to it's able last that threshold think have wanted

Jim Pokluda

here Well, to This this we gross More doing doing do better needed lot if a But recently tell paid get the inventory. remains fantastic would hopefully, for levels. with didn't flat. you job then because school of better these we're in I than do very we We is good and inventory, we're a have works to it, assure macro it these our going keeping time. right, job - jobs business We're that. QX. have. B margins goal at a you

have a it's can model fair turns. you capital. how a look amount can of consume model that So depending frustratingly working that, slow a It's at on it,

have but going of excuses. to of are some for capital et not strategic right So crosshairs, our inventory tolerance we turns, cetera, we're them cetera, that, very of working part the ratios, as our use in important plan. middle Sales et

very a support As job competitive to you said, for it's come With and hesitant target it. of important didn't but QX. respect do to a reasons, do focused AR, by I I kind you that but will an good that's going that be giving to We're to QX. but unexpected. I'm I revenue of It's tell not in level subject. number this will inventory, on we down - offset Inventory won't, growth in so sales

improved see You'll results.

Damon Benedict

you're little that about and some sort and there. company digital of work know ordering, a electronic investments from the seeing it? talk bit been I you effort and On Can more into results you've putting what

Jim Pokluda

every the high the best our opportunity for that we yourself are seen will a is major, not are single haven't you you're And when what But you're space disrespectful of the I digital. I talking might really the Internet. or that I my people that we're That be I'd our we to careful what ordering that of buying don't But have well, makes competitors our very I'll profile These excel say and order wheels order to on here The have it purposes, goods this Amazon-esque competitive means. products in talk say to or efforts are from by because Damon, I mass overoscillate just - what really, for - best-in-class what breakout off with here does in call sell organizations. us concentrating consider been leaders I plug-and-chug want describing be don't would And share where in frankly, accustomed my industry, any in I applicability. any customization but performer. an doing. are need difficult, space, to the that of anything there the they content. too with but I In everybody, and be those over about level. areas. hasn't The the a segments to get

very, important I important my So and to be very in tempered behind team it. the that that guarded believe need know comments. is that It's you we it's

allocated to The it. have capital customers want We it.

not we We point, as evolving the will that over said, out space, my wheels. customers. to are appropriate things doing our get to and an opportunity, I at I far comments probably and deliver but need It's I that in my too deliver think this to flat

Operator

and ladies for now the session. closing in participating for would remarks. over back any management you, question-and-answer to Thank to today's like I call turn gentlemen,

Jim Pokluda

shareholders, today, to day, success you, Sherry, valued period and for joining members us to their and dedication Okay. you work ahead. thanks we company. look To forward and our all appreciate to in the everyone. team hard the our Thank Good we

Operator

Ladies and program. thank today's conference. in the does This participating gentlemen, for conclude you

You may all disconnect, and have day. a wonderful

Houston Wire & Cable (HWCC) 12 May 182018 Q1 Earnings call transcript