LAWS - Earnings call transcript Q4 2017 | Distribution Solutions Group, Inc.

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Operator

Good morning, ladies and gentlemen, and welcome to the Lawson Products' Fourth Quarter 2017 Earnings Call. This call will be hosted by Michael DeCata, Lawson Products’ President and Chief Executive Officer; and Ron Knutson, Lawson's Chief Financial Officer. They will open the call with an overview of fourth quarter results. There will then be time for questions and answers. This call is being audio simulcast on the Internet via Lawson Products Investors Relations page on the company’s Web site, lawsonproducts.com. webcast XX, available XXXX. the site the of March through replay will on be Web A

relevant results information. During providing that press business covering an call, statements update and this the and on as from forward-looking company on this well contain and beliefs, uncertainties assumptions described. are that goals, in could underlying point like to risks that plans, I’d and will call materially strategies, release expectations, concerning to cause actual be subject those financial statements out operational results, future the as differ to operating

In may the to information this I The the company statements in Lawson do over presented to change. cause are statements today. company’s some future update that based any to developments specifically may turn company that so. light. Products’ but addition, on Mike at elect made to forward-looking during call anticipates disclaims those of like the view point today, consider made DeCata. as obligation views CEO, call to would now The Please

Michael DeCata

joining our and then take progress. call. CFO, you questions. provide our Ron for review our comment the quarter and morning Good will Knutson, This morning, overall detailed a will financial on the results, thank of I and we’ll

has during this I well organization, very We’re the very our progress can years of performed helm pleased improving. say with and the business for quarter overall five fourth the our and full year. at that is After

XX% Every the of and of on daily over quarter sales sales grew board XXXX districts an grew. average X.X% basis. organic the were and our Our up increase across of an fourth region

been the XX% that the for year, an basis over few strategic ADS we’ve were on on Our quarter focused past up the for years. something accounts XX% very and

in to-date Including from expand of the our we and an immediately in missing Bolt at consolidated Western acquisition the of distribution year, XX.X% Canada. sales on grew our recognizing dollars have basis As From on customers benefits to transaction quarter. for with facility. not the gains only former sales contribution sizable in largest the early sale also successfully potential and seen the to terms our while not from standpoint, our closed ADS a margin our well, we beat but operational Supply, an network

we posted Finally, X.X in of just ago. versus million loss of operating a year income $XX under XXXX a million

but fell for perspective, dissect one-time remain in Ron bottom had From further, an this previously will our So was year this items, a as I an our And right excluding organic XXXX. on quarter in definitely to the range business that we’re positioned very believe line income through last conditions in if operating we with and the line top some best communicated, XX% five. for well line nonrecurring market XX%. the today, flow good

not the While quarterly of like get up to of I’d stronger. all continues feel is I company strengthening to the in numbers on the why the comment showing business yet,

broad-based across achieve company. to continue we First, growth the

growth achieved ago, category a grew growth. basis. an our business on mentioned and organic every one regions our Every moment achieved I of As Canadian product also

seasoned ratio. improvement reps to an our in and our an of Additionally, rep sales This resulted productivity each sales improvement in growth revenue in overall realized cost consistent quarter.

previous Second, we process conversion continue base, I’ve to to account which expand the calls. new locations our in on particular customer strategic mentioned

productivity to improve our costs to and inventory increased we company. and down over XXXX consolidated is We distribution line in at while grow rates turns. Third, center the X% sales basis, as percent profitability fill a fourth, our organic And total drive working DC same sales. a time of our On driving strategy centers. to operations acquisition improved the perspective, an count labor to improved driving from at distribution the continues our an while our continue

without Let on fourth announced The the acquisition X, quarter. me update Supply team has in was It XXXX. been Bolt and for expand to they’ve is Bolt if leadership our House team the a teamwork truly in well this October jumped The along shared together and working Lawson made of with acquisition as has Bolt Supply on issues. testament years. transitioned team vision. very the

to As great low growth and customers we’ve Kent a service The inventory. company with Western progress $XX Calgary is million Canada with toward together EBITDA. team developing reminder, enabling Bolt made and Canadian was a strategies double-digit the Bolt DC Lawson

to We this place XXXX. in be early by expect summer of

Calgary three-day branch window the to DC locations existing will customers which to Beyond within the to new the service-intensive our VMI expect us product our have model. our from to enable footprint, deliver commitment add to one come

Additionally, to side are Bolt well MRO our prior integrated acquisitions into previous now business. our of four the

pursue with We acquisitions. acquisition continue strategy to our fill the and pipeline future

moment we ourselves Let how competitors. me comment differentiate on a for from our

to the into Lawson divided be We a They are proposition. There continue to proposition. to three strive value components superior deliver multiple can value categories.

reps and our technical sales managed sharing to refer placing on every as First, We best providing counting support customers orders customers. vendor service-intensive inventory. putting our practices, visit this and inventory, eight average days away to

ourselves teammates invoices, our and are our with customers, the the our items of customer department, Second, distribution charged we the doing beyond ease on service accounts one-off who service business. includes pride in for activities pack centers. specials our team, our XXX extends reps. team, our finding sales customer pick and of It quotes This team receivable people

mechanic. approximately back and our minimal orders optimized have XX%. and is to products third, continue at line And the private label of XX% levels service We for maintenance

nationally premium products label private branded products. Our of that outperform consist products

We these also products. demonstrate reps our to sales train

doing narrow But greatly the Regency customers technology and For teach that design. metals, business, customers we value need the our our a optimized of often does. superior combination ease understand bit service-intensive and they in performance value. this relationship is and through to with we process is through aspect improves gauge differentiated combination managed reamer a operational view, excellence to The customer. drill inventory set vendor In of which our of what reamer our every the do, drilling achieved immediately example, products when of

for strategy rewarded is this proposition. value unchanged. in for us customers XXXX, During our Overall, growth XXXX our

We will in reps add sales gradually underserved territories. continue to

also will apps, productivity Microsoft the new through discussed to We such sales assortments previously continue of as product training. and Teams, use tools mobile rep increase

will to pursue showing We for XXXX. continue acquisitions. All are encouraging signs

anticipate gains grow combined ongoing with all to will percent. With made XXXX the the toward considerable and we drive we’ve and to progress today of business, confident improving continue initiatives EBITDA that we’re dollars in we our

moment. comparisons quarter some in quantify Ron challenging, several While one-time to a had of fourth it bit make one-time will components simple a that the components these

that is reestablishment the deferred our in tax detail discuss assets. Another more of Ron will topic

and While confidence a future accounting strength that our signal regarding have in very is the we benefit, an this primarily financial the it company underlying of earnings. sends the significant

financial let fourth me it to for Now turn over quarter results. into insight Ron the more

Ron Knutson

morning, you, and Thank everyone. good Mike,

strong As increase the year with solid Mike our the more finished operating a and income. in we fourth quarter indicated, doubled sales adjusted than

of Our also Bolt the full House. quarter fourth results Supply the quarter reflect

results through catch-ups. taxes moment. in some a business our in I results. As noise our Bolt I’ll update, now from I’ll on financial have organic go some Supply QX consolidating in comment both do accrual combined and to on ranging We the comment to these the

the we tax want the benefit to positive First, address in that recorded I quarter.

that to net XXXX. the deferred the majority reestablish of previously our During were quarter, U.S. under required taxes off GAAP we in written were

that benefit a quarter tax provide a not it the a not to more to our fourth for realized. financial significant as than net does clear net tax XX% improved now likely has this from realized XX% of from Cuts these taxable reduction will XXXX, assets sufficient income in us federal indication that a to XX.X for our the be the million result While loss a benefit income of rate of as assets, is Act. and our of be is The cash this that Jobs to it’s Tax performance level net deferred reestablishing future

Here highlights. are QX some operational

First, versus up third sales year-ago daily Average for from quarter XX.X the quarter. XX.X% at were and finished XX.X% quarter. million the up sales the

a year acquisition, ago. increased the The Excluding daily sales average Supply impact X.X% Bolt of over

quarter income XXX,XXX year in million adjusted Supply for compared X.X our operating The ago. was from Second, Bolt the XXX,XXX. the of quarter benefitted a to amount

quarter by percentage And was third, nonrecurring margin total the offset comment was gross I’ll XX.X%. on some our additional shortly. this expenses for However, that

Bolt, compared a gross XX.X% XX.X% year-ago percentage margin to Excluding was quarter. our

Let me now share some of the details.

of fewer As sales I mentioned, with more XX.X XX just on selling than days than the two days, one million but quarter finished we year-ago quarter QX. a

As compared quarter ago, year the benefitted fourth from a to following. sales our

quarter. million X Bolt U.S. Supply the sales in of for generated dollars First,

and technical management, Second, the achieve technology new who locations process to new for continuing the results. invest and significant drive reps, forms to we’ve on-boarding providing existing improving rewarding actions growth with This getting relationships, of accountability includes field are products the our support converting to growth. reps strategic more taken in driving questions, to reps

oil Third, million sales general improvement a year-ago to marketplace. in and MRO our And versus X.X segment up gas quarter. fourth, were the a

Mike business organic As represent both sales the U.S. of organic sales, accounts sectors an over Canada increasing sales up XX% XXXX segment up year volume. organic business XX% and our now while over increase acquisitions. Lawson realizing in and were was growth our gains. widespread X.X% product From the and ADS the a a all strategic of currency fueled local with throughout were sales On daily our excluding organic mentioned, large by X.X% national and regional XX% Bolt, basis, were categories average standpoint, previous our ago approximately up

our X.X% finished day. November October per X.XXX December X.X% million ADS X.XXX sales sequential realized fueled growth of sales Lawson also and business, in a the core sales segment From improvement basis, We rep million. daily Lawson solid was in X.XXX average per an by at were million,

reps we business. and with Lawson Mike less Bolt Supply ended than X,XXX quarter managers slightly territory As Kent the mentioned, XX in The sales

reps we’ve past, impacts in the sales earnings due adding in term the turnover investments. the to and As rep short our said negatively upfront

us further However, total our revenues infrastructure. leverage help drive it our will and allow to ultimately

sales continue team rep will our hiring focus terms during productivity. We of rep on XXXX both and to in

with drive at our will margins return priorities the the expected company. levels. highest to to We those balance Gross came in efforts

gross the margin Bolt margin The was a same percentage the in pricing Lawson’s our we has be strategic There primarily continued pressures. continues towards pricing percentages. our focus Consistent Excluding typically declined. customers Supply, lower same gross have gross for a was shift with XX.X%. pricing product at margin and slight in to customers driven decrease of to lot a organic by our ago, quarters year previous who when the not around from look margin marketplace

this price. cost Our offering. the the there between of difference recognize Furthermore, that a products premium they customers value premium that understand we and is understand provide and service for and our

lowest the money. solution time and is them ultimately saves cost Ours as it

on pressure past, the more downward pursue strategic plan to our in greenfield margin to increase percentage. discussed gross sales and As our will territories relationships customer put

initiatives for administrative consolidating these percentage quarter. as margin with expenses amount Selling, year-ago our And However, average fourth general increase X.X of the The were to margins compared will Bolt Supply quarter. brought million down anticipated, million business and the to our XX% was Supply XX.X quarter gross dollars. margin increase gross in closer in weighted million. the a Bolt primarily driven by The XX.X for

Excluding operating down expenses million. Bolt X.X were Supply, total

creating to sales opportunity of continue operating down the We business. of further drive for expenses leveraging a percent as an

the the company accruals, million performance intangibles sick noise incurred what required comparisons catch-up a negatively as as against pay of purchase. earlier, and the I This referred of approximately sales XXXX such includes acquisition year-ago. to of insurance carryover Supply benefit, related the incentives costs, items nonrecurring Bolt impacted Additionally, to costs, of amortization X.X our that

with primarily costs us we impact stated previously gives our Lawson the the shift EBITDA income leverage or share mentioned stock-based $X.XX quarter. million of Adjusted year-ago perspective, for The XXX,XXX the created loss for tax was grow operating customers, created $X.XX strategic XX%. towards our earnings in $X.XX heavily of end million diluted from sales. ended the compared we that a million per share of year benefit acquisition. a share. ago. by compared or net our can compensation, quarter. high non-GAAP along as we driven quarter the previously items, a was to XX.X benefit This was operating borrowings XX% diluted balance tax taking our with into quarter for at Supply the and per diluted to existing From acquisition of these severance the to infrastructure Net confidence Bolt XX.X income of the The sheet the Excluding quarter income leverage per Operating was X.X million XXX,XXX account X.X

quarter, the XXX,XXX. For was CapEx

distribution million for primarily We technology of of network, expect X.X XXXX improve for the be the enhancements the full customer-facing our to our CapEx distribution in X.X to capital the processes. range build million Calgary our and maintenance of in to year continued center out

our XXXX, put Before Relations applause in me let I comment for Investor Web on site. new

made to Over we’ve information and the that past navigate. is relevant enhancements quarter, provide it more significant much easier

Let look into on few comment items as me XXXX. now a we

First, XXXX given in indicators sales Bolt economic we other are the actions our drive are optimistic our recent quarters, Supply to acquisition few about and growth. our over past we organic space, taking

continue focusing productivity while sales to and also existing our with expand to existing will continue our force we will our Second, third, rep strategy current acquisitions. EBITDA. infrastructure on And we leverage drive adjusted to

over we over operating believe existing drive turn the cost to for leverage our firmly are profitability. that it to demonstrated past well quarters, the positioned now few As operator I’ll additional questions. we to

Operator

Thank you.

Instructions]. [Operator now will We session. our begin question-and-answer

questions. with Kevin Steinke Barrington is Research. proceed your Please question first Our with from

Kevin Steinke

Good morning, Ron. and Mike

Michael DeCata

Kevin. morning, Good

Ron Knutson

morning, Good Kevin.

Kevin Steinke

bit a the of the noted, high discussion the of on I wanted XX% follow of operating as to at the the business. end XX% for the historical up incremental Lawson you little to range margin,

XXXX out amortization You reoccur. Supply It one continue that I called one-time guess those into related will is thing cost also Bolt of in to like some won’t most House. the seems quarter.

in the just was and through that expect total amortization including that terms can the for how flow in continue or we the Bolt? margin, of affects business much of wondering amount in I’m of So how operating terms incremental to what XXXX

Ron Knutson

Sure, Ron. Good Kevin. This morning. is

is Bolt basis as certainly the those pointed past of quarterly of comment From impacted were the The one it to thousand items the that acquisition. dollars. me related hundred a that quarter this amortization on Let those Supply and assets a us of the some couple out, items for intangible quarter, you standpoint was

when basis. XXX,XXX back annual added the about so the a gets an EBITDA number in for because pretty that that’s it’s amortization Now solid calculating included quarter, on and

that I some in of And our mentioned, be will items recurring, impacting that EBITDA. one not negatively the although other particular really

that a you’re part, items of from which net in not margins nonrecurring strategic for we a other putting XXXX. the upon reoccur the the aside, growth of as to the overall continue in of The some segment But depending piece in should shift move see We in – business, margins our we’re be anticipating have that to lower other our throughout XXXX. most typically correct, the bit or would be organization. would items accounts that may they little

Kevin Steinke

right. Okay, That’s helpful. all

XX% the So following accounts strategic growth of the up the I very full think well, on strong as XXXX, obviously discussion in for you said year. up

the gas conversion but expect rebound as that’s it strategic in growth account on from think What XXXX? go we like. continued Obviously and difficult I in throughout a your should focus trend customers. we comps more the benefitted sounds oil for

of helpful? those would you be if So just could some factors, discuss that

Michael DeCata

Sure, Kevin. This Good morning. is Mike.

a corporate and Our strategic deliberate field a same identifying bunch process at then of all continues. locations not corporate strategic is all people, The accounts have accounts all of in them people strategic then marketing just of the of we’re conversion time identifying and very where a really accounts process systematic our systematic way we the way people with and serving. existing that our not

example as added of last about accounts process. new locations of part So that, we an within that XXX were existing this year conversion strategic

but really or bins a is customer, and sort up. you when but a the we really We on state local relationship, account a start it’s strategic products, it’s a way process usually a that Now long initial long the say you that the start I winning infuse pick rather new winning up works whether tail our will it’s to basis. to winning new process any of quickly steady ramp the cabinets business, a account, it of sometimes as refer long all new and business start

company to year. We’re It’s to that our reflection going in us. working just this orientation or this now see more orientation the another It’s process. applied process like accounts. of of systematic strategic We for

very much broadly. committed more that So continuing process we’re to

gas we strategic about service, the the but various When was gauge. accounts large division pumping pressure point, little that that wells of your not we companies couple at that’s a and to look all of example a fracking. not a oil And for of to fields oil complete, certainly index companies, very specific drilled harder complete, Now had impact. various

that very little comps that And a continue and there, push customers challenging applies significant opportunity comps so few there’s in there’s 'XX a and be particular between because albeit a very difficult encouragement was it to but such step only 'XX up that we there. the still will

Kevin Steinke

apparent but the in getting makes that the that bit benefit comps more yes, XXXX would Okay, given then the a It just growth moderate organic you’re Bolt. rate from seems sense. obviously difficult

is I it? fair a that think So about guess way to

Michael DeCata

share and the optimism market regardless than don’t enables comment continue to processes, so across of Yes, our to and that. doing company operating up or real of new Ron will course downturn It it It very we of been and pick we Lean has Sigma, more the is. to trying of continue up Six do that customers see look, we the But But customers can And more challenging robust push all segments are share sees of look, us hard any as too process can orientation, though ever comps comps, and is against wallet. and pick up be our we’re everybody refine pick push wallet everywhere. hard market, in well. is. whatsoever we any but and to we even to everything win new

Ron Knutson

has XXXX XXXX. Mike’s tougher a question be we And just to little against asked started. up comps as because of probably part will the are I’ll the that onto point, first in relative tag how bit to

have start gotten the over up of also say incrementally it in sales and a 'XX that six where QX. range weeks are were our ahead average last currently in to of mid-single would off call solid ahead kind I daily of the digit first However, year we

So we feel as well. of XXXX pretty good about the start

Kevin Steinke

that’s Bolt bit me Okay, on And great. little let Supply – just a follow up maybe couple here. a

initiative. mention markets? You expanding branches in Did different if you of into talked about Supply maybe distribution new the center gotten Bolt geographic in with planning you’ve terms

Michael DeCata

Yes, Kevin, we this Mike. is have.

We in adding opportunistically branches to are underserved areas. committed

distribution to. a match that that’s similar out of and of great is which But our progress, And ability to some Western the course more we’ll to running of our service sort addition have us Bolt Supply with that’s you augment one Calgary going to Ken-related model a everywhere of that to this cycle when utilizing and in little have a the bit in fairly making do of in year. to here. in the Bolt model serve customers further building we’re Lawson impact what optimistic significant product we used to else branch with world. other cold I a the that part We’re the expansion to sort enables process center three-day Canada service-intensive the apologize, on time VMI Western Canada the customers product, a

good branch expansion So distribution yes, about and we’re feeling for center expansion Bolt.

Kevin Steinke

year-over-year Okay, accruals in just out you much how great. restoring in housekeeping a G&A of had incentive quarter last the fourth few of impact questions call here. Did comparison? terms Maybe of

Ron Knutson

throughout that additional our had XXXX in sales but incentives my some I Kevin, aside were their QX and organization as we prepared X.X didn’t remarks set specifically in that in is we particular would based growth say included upon in for out well. the million call

Kevin Steinke

operating also the year-ago just number would XXXX of And did other to income including or then meaningful the historical an as like that fourth costs change adjusted full there earlier right. that year any now earlier looks you acquisition-related add-back basis? a adjusted operating get that All a on to quarter acquisition-related it in Were costs impact of XXXX the number the income quarters bit. are quarters

Ron Knutson

full quarter in doing Kevin. activities No, for Bolt because significant it flat that was It just the essentially of Supply. related was the were year the well. more we fourth in XXXX the acquisitions to But as given

Kevin Steinke

will that just days have And you in by quarter of do number XXXX? business be lastly, Okay. the

Ron Knutson

Sure.

Let me me with bear quick – one second.

will quarter that be XXXX. first the XX workdays and there I’ll XX question. were come against QX in of know up I to So back in

Let Kevin. I’ll to back me for pull you, those come it days and

Kevin Steinke

Thanks All for problem. the questions. right, taking no

Michael DeCata

Kevin. Thanks,

Operator

questions. Our Steve Capital next with question with KeyBanc is Please proceed your Markets. from Barger

Ryan Cieslak

guys. on morning, is Steve. This Good Ryan for

Michael DeCata

morning, Good Ryan.

Ryan Cieslak

you total business cash the what if free is, flow overall the question free XQ? you what out core was us First strip was quarter can for and Bolt, in in cash tell flow

Ron Knutson

the the really Ryan, when was show XXX,XXX press look X.XXX our we about of release, million. Bolt at footnotes operating related. one Of it, within adjusted that, we income within

operating business was our the to gets on say income What the is, Lawson would to that an down side low. closer that for quarter the is So about us CapEx XXX,XXX. of I relatively

pretty typical. We business benefit much push So the MRO on of a bit which standpoint. a it flow free of the side of little is QX, for from got cash was pretty a a

Our and borrowing borrowings versus the end of $XX million. between million net our the about the QX was our end net was $XX year about at of cash position at the

significant up $XX pick to into receivables and ended guess the with. on pretty pretty some million we we reductions typically is we of the look answer as which just So expect pay is in see forth of that that fourth typical the so the in we that other forward But quarter. of cash down I piece XXXX positive flow year some debt

XXXX, into big cash free down look we to significant that flow a to piece be as So of pay able certainly debt.

Ryan Cieslak

you picking and in And seeing are you price the then thinking cost now? input up revenue Okay. right are legacy increases business, about how with increase

Michael DeCata

we are of pass like right. along. feel suppliers, We we Structurally, and this are pricing our the price industry aren’t the them out of knows We’ve able and is ordinary. before. handful religiously they them that well, to increases mentioned pass do seeing a along There anything

to So prices. increase not our primary drive is

in that in making and seen change environment. any We’re always we competitive But haven’t everything sure the sense makes the competitive adjusting environment.

cost and recognize other our and manage as are us a either the way a the really that. to interesting. as and supply little productivity. our As helps cost well And channel cost we get of more just though, on one And us or structural side. an effectively way by more on aside, market I it haven’t seen the as to They or side we and I bigger any the it changes found suppliers will chain say able side price more the we value goods

look you GDP last really over a see five half it a at If quarter our for we a five into and And the in about narrow about very don’t varied has way and years. every years, – half that changing much.

Ryan Cieslak

Okay.

more believe Just margin. that quarter The improvements me. for room Bolt you distribution center? the in for their find more center your portfolio do of a now, gross couple see improvement for Last one Were Supply able distribution I as the you quarter? And productivity efficiencies? Was then this cited with in drivers you profit to case

Michael DeCata

I some on a it. can bit of little comment

labor did We’re one modest. get Sigma in bit us. out. non-productive – take a We of Six the it’s work but where of The always non-value-added is heavy distribution Lean is out, these you’re looking behind to work centers processes productivity always lifting

Now it’s improvement The the things. really quarter distribution the this we past well. we kind continuous kind great whether about we they that’s all and distribution kind that’s continuous incremental are companies are where a of state it’s and of saw improvement do But the time. now little now. hundred centers things inbound about it’s incremental steady freight, it’s or that, all as it’s productivity, on of And improvement will of little packaging, focus always and are labor it’s that outbound

Ryan Cieslak

you XX% forward XX% do think profit then run now? good is margin And to Okay. gross going rate that a

Ron Knutson

Ryan, Lawson And range be us business weighted the as gross Bolt between margins in. good Lawson the had the and came came side Bolt at to so of for well being fourth a the as XX.X% we a XX.X. that’s at pretty on basis we at business. in in for Supply quarter the expected where

given mix on have bit can little the That and number a I Mike bit, product customer think the our little a just both and move this. commented can around mix. move I around percentage

overly is, not long creating comes that margin is to little can we’re if our gross particular the dollars this group we’re Lawson last side we year. our So concerned target as on if well down grow as number what which bit a as similar really more strategic account in

Ryan Cieslak

me. one And for Okay. then rep per per I just of model sales company typically day. more the off

think model The As the about to company and still the an you evolves adding Bolt that’s Supply company? way acquisition and appropriate do thinking branches,

Ron Knutson

that’s little daily that that in although an we’re we Yes, the information new number in per piece sales to so keep big on a well. per number. of is that press the generates business. all-in how historical as a tough the that day reps would day represent on component model table the adding, because a approach, per so that’s We weighted of release, be the many rep a Lawson’s It’s we what the included of input big fair try the clean think trend per do sales side the the fairly sales upon that rep depending certainly average

reps, performing. look years So and been a what’s at the the also what is are veteran we and three half how really reps newer us for with those internally three that of have to then productivity

the So upon get bring on. from number can that that number quarter-to-quarter new distorted of a we depending little hires

Ryan Cieslak

Okay. All time, right. Thanks for the guys.

Michael DeCata

Thanks, Sure. Ron.

Operator

[Operator Instructions].

Our Brad Please Capital. your is Far proceed View next from questions. Hathaway with with question

Brad Hathaway

guys. Hi,

Michael DeCata

Hi, Brad.

Brad Hathaway

about margin of and above the was guess is combined of still EBITDA well. kind I as the kind this get dollars encouraged comment I kind digits business? the as target EBITDA XXXX. the know midterm, increasing margins increasing to How’s hear XX% that it Bolt over I going? to in low-double EBITDA was of

Michael DeCata

as part Once accelerating, Certainly in to holding, is on wisely sales, yes, a costs, I to milestone, are our continuing of we with much to we reductions and focus expectation. not push. hold we like reason kind that with fall get yes, and creeping the to the to to feel touchstone. continue reason over will sales – good It’s invest XX% like holding going the a we hopefully will XX% we stated But very but more pretty We of that it’s And the we a can continue it have just flow up say make G&A is. the costs, previously in our centers, thing. committed said nicely. all capacity the margins grow, keep it’s on lot term talking we’re it we Brad, we’ve XX% this distribution that about long Yes, we are costs GDP along G&A progress. number through costs and bottom feel that line. to the our

Brad Hathaway

XXXX that of Okay. And abnormal is up? change normal is profitability in at the look that that step you might there anything kind

Michael DeCata

I would say no.

Ron Knutson

would say no. I

mentioned we think I I XX first in XXXX, that into will first so year. down holds early it be the quarters versus a look quarter entire we and as the on quarter the for comparable actually days in of versus selling day basis that we’ll have XX a earlier XX be of the QX day XXXX, –

that then look in year, year Next year the you at not so first nonrecurring that have expense XXX. we anything standpoint. full typically And some go are into fact, unusual that XXXX comparison would expenses standpoint coming And typically XXX-day But is the seeing from we a through some I versus in a and XXXX. comparable taxes payroll from will forth. we we’re benefit quarter higher an feel say see as as we

Brad Hathaway

kind be that are see talking kind about then that’s the if you there’s you. that business pipeline, more that’s of very falling? similar in curious based to of – Thank to on guess about Great. obviously acquisition I about days. XXXX quarterly similar pipeline the I business how the in and was and understand MRO or And the optimistic on core helpful. going more And pipeline the year I to where Bolt you variability

Michael DeCata

a continue we We’ve we’ve ongoing build folks with out out Brad, of back are Bolt of of while. opportunities conversations quite pipeline. what be to are very us for these people independent are that and is that proposition, had with people direct now a and of to same just do, that we’d smaller. are to there adjacencies. reaching to kind more then kind reached There competitors folks contacting the done, asking are if adjacency. And or us People we course we’ve then near interested. the that value mostly albeit near near more very

more you was XX% than -- fasteners XX% Bolt. bit at a little If remember, than more

but with was branches they’re different that similar, very slight So XX also.

are and us very are People there that to but fronts. people identical both us. almost smaller are on to So near that opportunities

range we continue to of broad pursue So a these opportunities.

as it’s of you pulled know, But to are you a yes, pipeline course with filling any the boat. Of them little get one we a predict bunch them. of with hard the into

Brad Hathaway

sign to it’s dotted unclear both but on Great. some Excellent. line, the able will Obviously parties be Hopefully, -- we’ll fruition. to see come when

Michael DeCata

ask mentioned, a I and If folks which strategy We One first strategy Canada. I we Canadian though strategy. actively acquisitions the an our Canada. opportunistic our love our well on it it’s Yes. few It’s teammates, ones but pursuing U.S.-based have is Canada not. come opportunistic are internally some U.S. just very Even focused even thing that have if as through acquisition and interrupt. of both could should is the Canada-only

Brad Hathaway

continued on look Fantastic. and to develops. how good forward XXXX seeing Well, I congrats progress

Michael DeCata

Thank you, Brad.

Ron Knutson

Thanks, Brad.

Operator

Instructions]. [Operator

We have from with a Research. Please Steinke question Kevin proceed. Barrington follow-up

Kevin Steinke

Hi.

did you count How focused the productivity go plans, about hiring count thinking and rep hiring as throughout we XXXX existing in slightly very the the growth rep as the down and of rep XXXX tick you reps. are in on count? Just on

Michael DeCata

you. thank Kevin,

moderate a adding reps as we in customers, We at albeit and a There’s balance add existing customers, we – takes it underserved will continue between territories build as time. penetrate we reps, pace. as to more add

to commitment reps quarter, and succeed five the the to then next helping so road. gradually XXXX succeed and is really trajectory them you’re a which first reps. year to seeing continue they and is the that add get years in next long-term on focus three in four, territories their into So our enables sharp What down

So continue if we see continue in going hire. a and part incoming to far unchanged. drive is beyond. you’re and ways to strategy at work not tend to But We’ll 'XX management. the to out, Where pace moderate more we What to result with a of performance rep. our an add as our reps as plan, likely it’s seeing

Kevin Steinke

tax on with front? then recognized, that deferred to more rate of what should Any And expect now XXXX? the we tax in a on Okay. kind asset normalized expect comment

Ron Knutson

Kevin. Yes,

indicator on back not, think not note, asset this. I is a So significant on to well. did that Mike allow mentioned balance put our side as of ability. GAAP sheet. than an financial doesn’t those just the it’s and as I It’s our balance It put assets forward moving you if but back likely realized. to sheet confidence the be that more will clearly not

to those the rate a can does forward, rate Relative will is move at given changes losses, And really XX% a to tax We more certainly then where tax a some the at reestablish our XX% have closer that all-in that higher continue rate and recording to of on it so to where that’s we’re the XX%, expense new going our state feel is tax in put position which we assets. that as little and deferred going laws, to point a bit basis. us net in well. as we the good business combination So operating however. do component Canadian a forward be be routine we tax than we now

we’ll from throughout those on through cash to we perspective, will now go-forward that able expense flow will come a So actually But utilize the basis. some a be have XXXX. P&L

Kevin Steinke

when lastly, expect very And that’s helpful. XX-K right, would All filed? be you the to just

Ron Knutson

that later So our intentions are to today. file

Kevin Steinke

sounds up. follow Thanks the great. Okay, taking for

Ron Knutson

Kevin, just your previous up question. a follow to

quarter the versus all in the days. And XX is quarter, number XX at consistent in exception of the is which quarters on the quarter 'XX So – quarter, XXXX, are and of in quarters XX first on second in fourth the the third this XX days with were the first the XX quarter. XX with

Kevin Steinke

Thanks. perfect. right, All

Ron Knutson

problem. No Sure.

Michael DeCata

Thanks, Kevin.

Operator

to Mike Ladies for turn like of question-and-answer we and reached I DeCata to back gentlemen, the closing end would call have our session. over remarks. the

Michael DeCata

much. you a the fourth call and quarters The to basis. for consecutive trend six Thank Thank year-over-year quarter Products. improving joining growth Great. following sales makes of you everyone very on our continued and for Lawson

will meeting and have proposition which finished out and especially previously in and line communicated. promote both flow XX% XXXX, We’re programs on our We laid through our the Yesterday, believe value a sales team. top sales. have to increase our optimistic we in feel we XX% positive confident several that previous impact will a actions with our that investments the bottom leadership We line. we

work I’d and Lastly, again great hard thank to and year you teammates. for is customers to very day Lawson day. our a succeed. Thank like They to enable our XXXX going customers serve our to good Products. have every dedicated to a be

Distribution Solutions (DSGR) 24 Feb 182017 Q4 Earnings call transcript