HWCC - Earnings call transcript Q2 2019

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to Houston Wire & Cable Company Second Quarter 2019 Earnings Conference Call. My name is Michelle, 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

statements releases but subject Comments statements. risk factors that may call summarized to filings. company are in are such press the reasonable, during assumptions SEC based are include believes that on and today's Any forward-looking

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

If website you this press morning, a www.houwire.com. at page under of earlier release can copy the Relations be found did earnings not receive a the distributed company's that the was Investor copy of

turn begin, are when and over like time, Jim to would President you Please At this Chief I Officer. the call Executive to ready. Pokluda,

Jim Pokluda

Thank an I'll quarter will detail. you, our the financial and call This on our everyone outlook then current of today. morning second to Chris, you over greater of the discuss us performance joining for half update XXXX, thank for Michelle. in results and Hello and I'll pass our provide call who XXXX second

to referring basis. results As today I'll a reminder, be on metals-adjusted a revenue

demand but midstream markets. QX basis good, began -- Overall was as the in and was second in sequential this revenue experience slightly matured, The generally first gas fastener oil declined to in quarter market quarter X.X% quarter versus which highest versus environment industrial the increased year. a the the we operating quarter and reduced end matured on revenue of XXXX, XX and of quarters

has the including margin of the million of made entirely in of to reduction and margin operating $X our prior decreased headwinds business, with the areas period sales to were in services We sequentially. $X.XX prior per which in share XX.X% but and progress gross demand not our year gross period. which versus $XXX,XXX we market increased points decline, and generation that from pleased business, core several I offset revenue of expenses, Despite of $X.X expenses and flow. with operating million am the improvements the able earnings repair X% reduction Year-over-year impact operations XX decreased of year and estimate cash in results reduction debt was of basis flat year-over-year maintenance operating have

activity geographies Trade supply logistics war trade and also negatively to reduced The of demand impacted in disruptions and in reduced and fasteners, from decline. were international supply oil markets these revenue disputes June war chain shortages product cost and additionally inventory by industrial revenues disruptions. with gas has impacted onshore end and sales. most contributed offshore the resulted which suppliers

the are sales of second year. in conditions and this better expect performance slowly we However, improving half

sales that versus be estimate to for heavy prior gas X% concentrated and manufacturing and in oil project and fossil sequentially. generation. We year compliance upgrades end environmental and continues the period Activity increase increase fuel markets industrial power X%

remain is areas Operational management, of capital levels. activity markets, business management working are prudent reduced is executing control. capital our end our seeing certain in the Expense and Despite are high. at of in satisfaction that we very top excellence industrial allocation within well Customer priorities. will peak as

purchase Chris which as development company's the stock our reactivation program, pleased of involving both will We further in discuss prepared of remarks. the the distribution as cost to are platform savings also recent his announce well

analysis a Chris? QX call of more With over to results. our detailed that, now for I'll Chris turn the

Chris Micklas

results, points Thanks We to operations. to multiple first quarter. improvement that are accomplishments but able were good are during highlight Jim my second believe throughout the cash on quarter few while I like the morning. through from a cover portion of execute prepared and Today a important will These margin to offset improvement I that projects. despite recent we expenses, XXXX reduced reduced softness would continuing and market $X.X operating meaningful generate sales the remarks, in million

quarter down second the income the of $X.XX the the per second net year. results and XXXX, Sales period negatively share XXXX had of million HWC per X.X%. share, of with which X.X% decrease $X.XX $X.X by million, impacting $XX.X earned last same from a In were quarter metals from for is the a quarter

of To sales decline lowered approximately at decline. achieve metal adjusted and offset basis to margin X.X%, We level managed similar $XXX,XXX gross or improvement, of expense expense staffing operating loss increase X.X%. down this XX of to costs we points with $XXX,XXX the is XX.X% a sales operating from an margin by which the

rose invest expenses and enhancements X.X% improvements focus and that in forward us we interface operating continued benefit will to system customer in strategic initiatives. as moving with Other digital our

quarter quarter of in were debt second with from the $X.X the which from the XXXX. $XXX,XXX, in second expenses quarter down XXXX, Interest $XX,XXX the average of prior is million down year

majority point However, from of offset was interest by X.X%. the a basis reduction rates in XX this increase

statement. income the on Finally

is XX% with Our XX%. range our and XX.X%, which expected is year-to-date consistent rate communicated tax of between

to balance liquidity. cash sheet, Turning flow the and attention the

believe activities a During We the on the improvement better debt metric million generated of the make second basis for and tracking seasonal progress. quarter year-over-year $X.X our monitoring working quarter. levels an was $X.X in of business capital XXXX, $XXX.X that our operations from we million, million

lower. the $XX.X million second $X.X Our quarter is the quarterly reduction quarter at $XX.X XXXX end XXXX in the million, of million of a basis and a was debt at is $X which million second the on from average of

inventory has I the the quarter. timing will temporary of end of the that a result a increased associated with increase This is as point at purchases million. by $XX out

past, demonstrated capital have and the factors in on working market our As make decisions we we accordingly. based manage

debt with focused on reducing by markets of seasonal end efficiency executing our our business good, our accomplishing stated Currently year-end. we track operating our believe programs pattern, are goal consistent remain on our and for

At we million $XX.X for was capacity. $X paid end year-to-date $XXX,XXX based expenditures the Cash capital the and We of year. available about the the covenants the full with $XXX million during in we compliance million quarter have facility. quarter for is in remain anticipate our asset $XXX,XXX of and

this is that quarter. of like happened the is of I'd share discuss modification end Attleboro second end the our the program. One items at of the the the -- the At second of point, two to and after our lease Vertex reinstatement buyback

connection our July, termination Vertex's, the million. Attleboro with landlord and with includes at we modification. changes the modify these of In landlord our our agreed Starting the pay approximately until the of Massachusetts lease of agreement terms facility. subleasing portion the early on lease end will of This to the lease November $X.X this space a year November. XX In of with we

savings of $X The this insurance, value rent, million utilities is a agreement us property future for anticipated maintenance. and approximately taxes, net in in

improved Additionally facilities our are we are strategically closer corridors customers. locate end now along to transportation freed that our up to

are in Chicago; to be modern an planning facility We in with the by equally two year-end capacity region. one facility Mid-Atlantic facilities, new in operating efficient a and greater more

four a $X the be combining and saving As new result, we the after over the the Attleboro approximately facilities, years. next from additional million savings will costs

Moving second to item. the

trading have the HWCC show stock. confidence remained above, continue holdings our recent industrial headwinds, the members XXXX increasing our Although in been performance Board market significantly results the by their stock disappointing. for of our to of conditions, stock Yesterday, performance and slowdown Despite the and time XXXX of has periods, financial during executives Currently, depending that press market has XXXX. available time on common $X.X conditions other our release suspended reinstatement the from was program outstanding shares since notification and the to activity factors. of buyback program been million purchasing stock business

In and improvement closing, to reiterate implemented that In several business cash, I'd areas. programs. to we're several improve expenses despite some able to market in generated cut continue we particular, like challenges,

our and strategic growth profitable our operating top growth, to debt disciplined priorities improving shareholder and retirement shares. using expense the of out forward, Moving techniques return, plan, remain and repurchasing management driving drive waste, lean executing

We on efficiency capital in maximization, working continued streamlining to fulfillment, our projects multiple improvement utilization. execute involving order

I'd to the to call turn concludes back like and prepared This the over operator. remarks the

Operator

of Instructions] Nierenberg Our Investment. you. Thank from comes David first question Nierenberg [Operator

open. line Your is

David Nierenberg

guys. morning, Good

Jim Pokluda

morning, Good David.

Chris Micklas

David. Good morning,

David Nierenberg

You confidence for doing nice thank in the second protecting along trade and as the the a did so, job went war that. you business quarter hurt a profitability quarter disputes

Jim Pokluda

You're welcome.

David Nierenberg

the also many with said share think at prices repurchase market our left current which with thank an reinstating itself opinion as quite program well you $X.X remaining you shares. by for -- repurchase in million least million, as I create which to And you at are opportunity two

taxes the personal by as of when take returning the an As amount there as both for outside by Jim us the well shares, has but CFO purposes, beginning as shares with on not Chris as repeated shares. purchases eye-opening mentioned, new tax two our occasions as he of in past joined paying Chris years, well often been directors to

most the of last the So than the considerably it been remarkable, today. insiders by sustained higher is price for over few has prices the years support share and done of quite at where the level shares quite

you So it now use I in as working Market DSO giving to capital and the hope your that Market as is to advantage and take stock which making to means pricing manage you all by use you is gift will of Mr. low that the will right you. seize debt paying continue Mr. seasonal cash terms flow levels more the of that is both down normal to gift inventory both to which down to and free

with Houston that benefit no from much share one being coverage I've to does got and price little know, trading but carpe with anybody, public now often time you to time severely Wire liquidity daily analytical certainly you the is diem. As market volume. mispriced and give a it you've company and from a what very has doesn't provide It wondered gift

Jim Pokluda

a on summarizing I lot a job And of you think lot excellent what's now. did was That going Okay. constructive. an right very

Operator

Our David Benedict of [Operator comes Nierenberg Investment. Instructions] next question from

Your open. line is

Unidentified Analyst

guys. Hi,

comments wanted couple own. and a questions my to echo Just David's of of had

and projects was difference I a markets, MRO on going you the trends and Just about different noticed us little the tell between there? more could hoping

Jim Pokluda

Sure.

the less it high project the In of been around the and CapEx we as to XX% and XX% most the market, part. up You'll for projects been recall that that's seen really projects jumped few a overall vacillate high as revenue level we've widely. relative can quarters XXs. hovers revenues. XX% a projects robust percentage market, of In aggressive A to

in and the discussion over lot hurt will widely what heels it. a marketplace mean on financial as the snips market United the consensus is States. markets for opinion couple will seen of of just CapEx been news. how war on it the move we've that trade the The past can about But There's days, based in now of that the in they

long-term that quickly. very correct What there marketplace lead uncertainty is definitely to the consequences can can and is which also tells it although in me that, concern

we in will CapEx example, and eventually return the issues event to these For resolve levels. normal when do

important, really offshore years permits doesn't mean is an But to that five in in licensing, are will it advance: this the petrochemical interim projects projects projects capital These larger entire out; decade. The years planned it are period and stop. three approval, etcetera.

term near up the in days. are as evidenced although days, huge financial by huge So days, huge down strings, markets the recovery wide there

the just are to issues bad long important practical push day not the projects side. in mean market, mind canceled. at all. all the a Capitol A be tweak doesn't it's those Hill, in major With going on to That's view to that the confusing

is Oh like But doesn't the they down. years. can term. with just several work next thoughts them. CapEx market's for They're and that. gosh. very near The my run let myopic people think It away their dead

I have wars What an Now call too saying that that. impact is, am on it's I'm not won't CapEx. saying to far trade soon the

team So keep please our I our and investors in that management mind. to advise

and to impacted Now been is down. fits gas pullback. respect in of OEM the and about a XX% is revenue, onshore with business and of Discrete oil this has down. markets, midstream activity along in our infrastructure the is the which There's our sales. MRO we manufacturing end starts have seen case malaise that

permanent But, that gas don't at that oil least -- as to as a with see again, markets, I state. or and a respect I certainly, -- see don't

five started cable performance for been product has our in turn the several fact, ago. about good steel all weeks wire Fasteners, roll, past categories. to very electrical weeks, In

versus So quarter, the ended first of couple June, the we down of quarter. the months

month. June, July looked the been And a of good. quite to and starting latter but felt has lot August improve really towards like the part

we reacting. So We're acknowledge.

trade environment an We but been have recently that and operate action we'll encouraging. plans countermeasures, improvements for place by has how bit we're little a MRO corrective in issues, seeing weakened war in that's

down. marketplace. about We're in remain think the we've process far often we that summary, is what's will MRO in too marketplace, in way, the company, here's to in is So discussed and a malaise the the supply in process. could CapEx the that That change soon and presume it's this. pullbacks heavy water. And quickly. experienced in dead industrial

However, in small market have a grand things, we share. scheme the of

remains proposition Our value highly leverageable.

time there's even In this. very a lucid leverageable for it's why a fact, more like in agreement

are about ever, think this those to many in distributors, XX% more than product them you of If is whose a wire; specialty time X% support categories. us overall lean with them revenues when to on

So operating as things think my well that We're MRO, is we've we we're it's can late, of I but about control. environment. team pulled improvement. of signs controlling back, when myself, And in the seen disappointed

So your a us of really to question, lot long a the question it allowed out. story was answer to but Damon, get that a

So, thank you it. for asking

Unidentified Analyst

maybe is my more My petchem the stages on from on over And the of those side. projects of business the that in the they we pipeline of big tend LNG in along. understanding can as growth -- your the And work that years follow-up Thank you. you of was projects visibility to one recollection comment of large level also couple get earlier you and around outlook projects? the sort Coast, next and some move the into Gulf

Jim Pokluda

moves when cycle, all upgrades, liquefaction, broad later comes facility upgrades, projects, follow process. projects These that least are market a are you're referring crude quarter. heavy to at it hydrocrackers, power, in by definitely We to: Sure. cogeneration, those trains, generally

As books the I have five said, been those years. for on

about oil $XX Things south like below GTL, falls that, barrel. go talked we've they a when

the refining, work, them the referring not olefin We're work, work, those terminals, counting the I'm But projects business comments. all. So cracker the usual. the in LNG that's to these not as at

bit remains next positive. not uncommon. is the little work which a We've the But out five there. a summer experienced of outlook doldrum, is big still for years The

is is Our with growing but busy. not question ratio $X.XX your not great, We're we're okay. very this as positive. quarter. well. It's book-to-bill And happy about to still pipeline, that's

Unidentified Analyst

on And Appreciate the environment. we you. time work. and control cost next Thank Great. margins get maintenance a the in

Jim Pokluda

You bet.

welcome. You're

Operator

a is Nierenberg Nierenberg of Our next question Investment. follow-up from David

line open. Your is

David Nierenberg

update recollection to Damon a was share wasn't you I This about is downturn. and for to intended the five before encouraging David to thank hear about. last historical about forgot was the company the what to able I When last us be speaking but filibuster, and weeks do which during gratifying giving the

I he wasn't while the here correct that anything Chris might be So near-perfect say and at can time, would has Jim inaccurate. that recollection

much oil years skillfully come debt excess down that peaked five to ago And the of beginning your to $XX $XX was the and after your recollection over my to But that you the started time, And balance the time. you price your $XX $XX to that by million. a of at of costs and sheet about able so reduce debt time, were same managed from million continued million in net during was million. at pay the slightly under very over dividend of downturn, you

And same in and issued X% approximately you shares. roughly outstanding repurchased the of time,

so given have this. and DSO me can size the do possibilities the and now, of given a asset opportunity And another given inventory simultaneously those of have shown allocation reduce you other to repurchase. seems do all things substantial right did you you and You to debt that

place do Thanks. current ultimately you to them it ask thing it energetically at say begin. a over excellent and is when through. of up necessarily repurchases, I and many repurchase go many when companies watching is from share and Final million stakeholders companies $X.X your your only price Board to but helps some I'd all many really use time is really The material that don't a the more. is back to years announce nice follow hope continuing. Directors

Jim Pokluda

pretty your no Dave. so me is for memory you, too, good that. to Thank sounds like attempt to need Well correct Okay. it

Your again description occurred accurate. is of what comments. Once those you very thank for all

Operator

over There are to like for I'd turn Pokluda further questions. any to back closing no call remarks. Jim the

Jim Pokluda

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

Operator

all and you you the great Everyone This thank for today's day. conclude have does may conference. gentlemen, and program disconnect. Ladies in participating a

Houston Wire & Cable (HWCC) 9 Aug 192019 Q2 Earnings call transcript