HWCC - Earnings call transcript Q2 2018

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Operator

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

Joining us on the call today 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 and all participants are in a listen-only mode. the instructions we that will of question-and-answer conduct time. end and session be the financial will discussion, a At given at Comments statements. may call during include today's forward-looking believes on Any are summarized in SEC risk assumptions are and are reasonable, releases that factors such that but based the filings. statements press to subject company

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

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

Jim Pokluda

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

QX primary XX% financial growth barrel from increased pleased a oil business increased mark our fuel as X.X% quarter increased XXXX. QX experienced metals versus the fourth inflation. increased consecutive count services, QX X,XXX of very quarterly and maintenance, and in continue the day QX of On $XX Gross from quarter, industrial volume good growth to XXXX. quarter versus revenue. XXXX, of Markets XX%. approximately about sales core We results approximately due XX% demand results and metals at XXX these performance. XXXX, And rig with to versus in midstream and markets. total QX year-over-year sequential operations and of markets, pricing our gas rotary of XXXX, and and second margin also and the represented XXXX from from approximately estimate very basis which commercial and the upstream invoice strong MRO gas minerals, to and XXXX, increased to discipline markets per quarter are second remains prior improve points $X.XX. increased our report and in that construction transactional the continue in count of basis we measure activity. repair U.S. QX drivers in EPS and year X.X% XXXX. this of XXX approximately QX, sales oil oil We Strength of and XX.X% XXXX primarily XX.X% first revenue to increased price trends industry demand the in was in market per improved the land-based level to the QX the In $XX to Similar quarter

lifting wire, our XX% second versus On project 'XX rig count sequential X the basis project the for of 'XX decreased and QX demand and for QX which and because high offshore On fabricated reactivation with a is roll, activities QX at Our increased are end the transportation, represented markets increased approximately products. creates steel encouraging wire sequential and sales estimate basis revenue. to versus rig used of support count that We a production, work copper closing XX% 'XX, related extraction, XX%. the associated applications quarter performance less from sales X XX that storage 'XX. and have extensively QX perform well. of continued these gas oil than we're count was however, products exploration, in a pleased in that The the

decreased the in generation primarily environmental compliance, for QX increased primary three and and to over markets due market compliance this include markets. environmental utility Sequentially by upgrades. projects sequentially 'XX 'XX, Industrials Our Project recovering gas, XX%. plant and sales manufacturing power oil X% end QX were and power project generation fossil general activity sales utility XXX% versus approximately end infrastructure. market in and end fuel led market industrial year-over-year, increased and X% approximately

quick may categorized medium sales in occur a MRO comment Just small data space sales. for as but this these that super the we've on improved often the process some to the of our in have growth; products sales been industrial attributable projects and capturing past sized

sales commercial projects [ph] some discussing decreases markets. on Sales and to XX% the likely although public comparable, public demand me report that better have improved increased year-over-year, is calls, You've end possibly in to in sales from are these in now. of works however, we results operations. as being infrastructure the MRO which smaller which With end heard to this by offset due our entirely now projects able contributed card old in prior discuss projects process increases up the for and to transportation extent small showing market approximately I'm projects facilities primarily not

at continued margin book-to-bill pricing power is and nicely. ratio QX. experienced the in steady holding into revenue and is up was data strong positive most positive the Gross XXX.X% trends Our is and and QX second economic quarter

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

over turn expertise detailed Board a Chris? construction I'll gas generation in news the I announcement company our believe capital close that a power engineering call recent my and industry joined Raymond extensive his remarks projects company This and of an financial prepared accomplished interest Directors. for our Finally, results. is the for Bob I'd analysis our commenting as has is oil will Chris to on serve well. and leader, of our to like Bob by and now great of

Chris Micklas

per initiatives quarter XXXX, was up and from $XX.X from this increase second in of favorable margin the overall the are quarter per the of X.X% increases the percent materially is of is demand, XXXX. Operating XX.X% Gross activity, industrial quarter XXXX, XX.X% quarter as loss are morning. of defined gross million from as breakeven share, conditions, in XXXX. of an quarter second to ability the the rate of Thanks, divided in period the which of basis This gross margin of sales variable expenses. expenses margins good by an quarter first benefited improved the Jim, a which indicative in good first the year-over-year better prices, same operating from period and second $XXX,XXX from XXXX. of from company's improvement in the million and of row interest XXX a million improved product XX.X% of profit in is of industrial believe fourth control the or The growth mix. expense of XXX improvement the results $X the $XXX,XXX Sales $X.XX as sequentially. which are increases increased average improved improved from points sales performance is from points quarter and we is and year. second from points drove The income $X.X our the X.X% of operating XX.X% for million, XXXX, change economic as selling first sales and commodity are Interest result volume operating last quarter operational Overall, increased by very in and basis $X.XX of quarter our operating up plan. an In over and the profit as as Operating the the change increases of quarter performance is improvement expense trend of the gross up XXX of is X% executive this from is $XX quarter this which second well EBIT leverage. year. These XXXX. in than HWC basis same and increased XX.X% earned share of and expenses This points demonstrates a operating XXXX, strongest sales, X.X%. the first XX improved pull-through since or

$X.X $X.X this the of pretax pretax in of XX.X% first result, a better and than quarter a above million, income which the year. is loss quarter XXXX, the million second As is

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

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

Now flow liquidity balance sheet, and items. to turning attention the cash

was end our as from anticipate XXXX quarter in and capacity, million of our which debt with below The capital million from million the in At million. have working with in which point and is end inventory flat during is of end spend. are paid spend in And of our of operations. of generated at we flat other capital may $X remains account million, an $XXX.X $XXX,XXX, largest quarter compliance of the credit our capital expenditures to asset-based we that the is million the at XXXX. minimal decrease receivable a and to total quarter, the the is previous quarter, was Cash million $XX.X the second at million was normal of days, $X.X fund our operations sales $X.X up adequate sales remain of $XXX,XXX days accounts consistent facility. $XXX,XXX approximately which impact. $XX.X second year our the line XXXX [ph] XXXX debt the with quarter, our end million of July We data $X year-to-date. the additional quarter and quarter. growth levels cash to which ongoing XX available activity had covenants $X.X the We the with changes to outstanding that ended million of is by the of first elements down is $XX change all for in the $XXX increase end which At quarter the is working the During

of in and XXXX the encouraging. half performance results Our been have first

the streamlining management, disciplined capital. plus half fulfillment, maximization order remain utilization top improvement of projects in year, the of to Moving growth second further profitable and the priorities efficiency in involving into multiple working executing continue driving expense

the We operator. additional call the in time concludes I'll the success look reporting have made this forward are at turn pleased and to quarter. third and the remarks, back prepared to the we over with to-date This progress

Operator

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

David Nierenberg

how for you? I from you to performing update get is please wanted an on Vertex

Jim Pokluda

so Sure. the rolled done Vertex our general with profiling, to we're really of sleeves chain, the acquiring category really investment, performance training, economy, that. We've worked inventory since things company, supplier recover up with on hard to work. good supply and talent, happy product continued lot sales etcetera; market has relationships, a got

and company, a good said, As and attention with always been company knew that we've we a and giving I've we lot we've responded. it and solid -- of bones had infrastructure, they've

of I is have be markets the the and think good, moral are people to our that team, helped. part excited

with what's easy, at we're go, market $X.X I'm lot satisfied is this happening So you depending but more Vertex is look mean you end round billion really pleased, that management -- end pleased there at is a total to how up. satisfied, the it, that available $X or a plus doesn't I'm market if on bid billion

So a on and bullish it's I remain opportunity lot David of outlook. very

David Nierenberg

this we At in vein wonder same that's on the it that bit you having the reading if hear on production your time to maybe a should part growth a costs the business? that about exploration sequential business? impact the combination Permian [ph], and offshore I people's amplify which offshore same how be higher lower been of count. was rig could claim cost leading the prices of part the In and production have now your some encouraging are approaching in for about commodity lot of positive costs the

Jim Pokluda

get the my look was kind glance to a QX risen where not the bode happening, our the be that in commented up prepared rig we've well that these itself service remarks, use. and running takes of is the nothing case last count anything But rigs it's year. commented at only the rigs. that you've flat but in of all, lot for nicely basis, we it Certainly. a It At in and on as fabricated excited [indiscernible], for the QX view first has at that's vessels count to and in be again, the investment were when we're about would offshore exactly definitely year-over-year but you emotion not are not products

So and been coming. offshore we've been a time long with the today seen as several as years. it's I'm some benefit in performance pleased I there have markets in

a big is frac subject, different at tackle here. a opportunity, contemplated never brought I'll long-term really Renaissance -- ago. happening has level. you what's The are there about years that XX in XX really of decidedly as and have it opportunity a know, tremendous comment that's your people Now high really points could abundant view -- or

So the conventional what has It's really activity. done? non-OPEC that impacted drilling

periphery in that are to continues on do Because grow. Meanwhile, If trillion. at supply industry. macros, that fracing, and that. infrastructure, investments you now a begin at the of and Arctic I particular somewhat X $XX That's they but Bakken stack in in don't been fracing it's [indiscernible] of lot ago place. was get going focused I in says to costs and And the overlooked of the but in people X there well, I say, in then resources out conventional In about -- to investment use can eventually hydrocarbon of to the that, profitable is comes Permian as $XX this cutting oil data abandon of of oil risk. the Why? in been XX about, high frac consumption coast the past a they away; Norway, ago conventional ease low today profitable profitably had that $XX, $X appears $XX are extraction has we and a by off mean think non-OPEC subject billion. the amount forget only is half technologies, couple of on years largely dwindle, think outstanding. look initiatives, that's oil we it's about to the recovery to as oil There past because existing astounded with cost this Ocean, abundant like out the field is of a as years but investment One Half months, it's for that go $XXX oil for so the recently, field to fair what of years of buzz certainly by of and recovery will lot but something conventional the do? oil improved gas there $XX, worldwide above. resources is to you of able because that's replaced be mean, the extract been I --

a think it will long-term, a of around -- don't and will I our conventional that going again, the dead, on be a long argument as not is about lot more swallow. be little at never all to that the drilling comes bit So company. of but benefit look this the There that's macros to it's very and we'll the it's see profitable; long-term, notion know, kind interesting to I that that's

David Nierenberg

have of relative those making the kind been of that and developments using agree benefits making the may assessment with offshore productivity productivity possible of three [ph] the previous propend onshore was increased same are benefits it years fully earlier. that that or seems in Permian dwindling We while it who that four the be or great to the

to coming for nice it's back this business So you. see

opportunities final the least in I'll that, your surprisingly probably get Let rising hear driven that you ask to one to inventory Having that to said in acknowledge for create want the interest were prices. reduce July you borrowing rate that does extraordinary buy advantageous market free then month a volatility me the out politically in flow copper of I you of have question environment. of to queue. to price It's just able the and at occasional begin gratifying apply cash line to at

copper, taking the at you managing availability? and to the take borrowing you of same price share the your with please time lower that So advantage us approach could of Chris

Jim Pokluda

long the our I'll had a and then a those X.X market puts versus takes in things. into and find down are is Chris can we're whether do purchases copper, it moves our their to is, too and at happy talk copper goes try happens way not the lot bait directly an for year usually and certainly. hand debt over bad chatted end expensive. treatment to copper I've bit do products But flip while those scenarios; we mind, quarter really one Yes, with as and and there, a trap little ex-handle occasion, audience aggressive dead and about a question; on subject company, there the takes based lot end on to taking don't get both it lot just up of carrying it. answer a accounting around in that's their our so average things the to inventory about But drops Nonetheless, a and get I'll copper numbers, What those and so your of more sort copper in trying good value. that of flow are on too the the Yes, and X.XX keep we who time talk talked the we I'm do are with or I've not of past things something in they and my don't it about at when experience, less cost goes ago. in a QX. cash suppliers on it to

service to to suggesting based know what's this market bet. objective buy to I pretty outlook, our our advantage not a market, that as those taking we and distributor/customers. attention demand good of focus I but of Chris? care will really buy more some events, the I think So is is -- our outlook, but much time necessary in trying that types just you on in to tell to My something on deals objective taking risky like you're that's of as present we're -- and

Chris Micklas

to is other wind operations. confuses and market it to the to push-out going experience, my up because and based to trying you pull-in was I it raises difficult on just your cost time piece is And say operate the or having

way take situation the advantage quick changes sheet of So is or better more with to you opportunities balance you operational to problem therefore or efficiently, your inventory the with your -- flow up approach or is efficiencies, time don't stress copper going this down at same and down.

I in agreement the to and in handle total Jim movements are on commodity prices. how So

David Nierenberg

Again, quarter. another great I began; where I'll end

above talk for for many $XXX earnings we their and We have of is which create of And you and guys the back -- get recovery feel several company to this an the talked overtime would your something quarterly recent remains that about recovery keep where revenues drive back going you in opportunity economy, in how -- were infrastructure knock me get the the reasons [ph], you're performance $X investment left-up necessity commodities the executing, smoking makes to I'm overtime there. good, million not years about per cycle. words economy above share that

So, thanks a lot.

Jim Pokluda

Laser David. focus, welcome, hard. You're down, heads working

maybe that to jump kind you're Now enough queue. the you of out say the queue, you

you if in other from or second questions. otherwise any I a you have open So we'll hear up to it just anything may else,

Operator

questions And this time. further showing for would remarks. any the any at Pokluda to I'm I not call further Jim to back now like turn

Jim Pokluda

shareholders, Thank you, ahead. team the period the day, joining and everyone. Good dedication and to continued for success work in to the To us Chris. their call today, on look our our members hard And thanks appreciate forward to you we company.

Operator

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

great a You day. disconnect, everyone and may all have

Houston Wire & Cable (HWCC) 12 Aug 182018 Q2 Earnings call transcript