LAWS - Earnings call transcript Q4 2020 | Distribution Solutions Group, Inc.

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Operator

Good morning, ladies and gentlemen, and welcome to the Lawson Products Fourth Quarter 2020 Earnings Call. This call will be hosted by Michael DeCata, Lawson Products' President and Chief Executive Officer; and Ron Knutson, Lawson Products' Chief Financial Officer.

During this call, they will be providing an update on business as well as covering relevant financial and operational information. There will be then time for questions and answers. Please note that statements on this call and in the press release contain forward-looking statements concerning goals, beliefs, expectations, strategies, plans, future operating results and underlying assumptions that are subject to risks and uncertainties that cause actual results to differ materially from those described.

during of are today. made company's on statements as views addition, this based call the In The cause change. those anticipates views company that to future developments may Please that presented consider light. the information in update at point, but may, disclaims to obligations so. any statements company The specifically elect to made the some today do forward-looking This the via lawsonproducts.com. company's Lawson call simulcast Investor Products Internet being the audio website, Relations is on the page on the of replay the A through XX, XXXX. be on webcast March website available will Products' CEO, the turn will Lawson over I DeCata. call Michael to now Please proceed, sir.

Michael DeCata

environment, Good and more joining XXXX. Overall, of our the I'll for financial but significantly year our very due pandemic, Partsmaster morning, I'm the detailed review comment pleased current with well. Not the as call. results, comment on to Partsmaster going of lower nearly thank integration results. same you a very the only plans and for year. Ron also earnings questions. fourth This well Knutson, XXXX the is full the the will integration quarter and results quarter our your our morning, fourth fourth of the by I given our the as business quarter CFO, sales on and quarter of the followed provide fourth full will were as

start since good of let me quarter. sales financial We items. but a This on PPE some except will a details year both couple have also provide was our the above December for and off for X Ron the sequential the a growth to fourth weeks first slowdown the of in results, highlights. hit more May, attributed year achieved organic month-over-month X to month, which gotten with has

X.X% $X quarter. First, million for of adjusted the our was sales EBITDA or

of good Given that quarter typically the in X.X% are the achieved quarter weakest and the really our fourth year. is last improvement these an results over quarter, fourth

third driven Second, in by over our was This year a the Partsmaster quarter XX.X% consolidated of up acquisition ago. sales XXXX. were

of realized acquisition, were quarter the by were excluding our PPE sales was sequentially lower the increases, business EBITDA, unfolded. within which are our flat continued from with they third, third the we our very essentially categories the offset adjusted And acquisition, the Partsmaster organic these $XXX,XXX Excluding confidence product Considering demonstrating improvement most give as financial performance environment, sales. year results, going pleased as additional levels, pre-pandemic into XXXX. us and in

progress our are Now I'd take like moment Approximately in the aspect in acquisition. we to to combining and Partsmaster XXX of company, process recent great and We've the of and joined discuss have reps a Partsmaster Partsmaster. integrating Lawson made every sales products. Lawson

quarter During Partsmaster had mentioned XX,XXX SKUs. the third that call, approximately I

product the rationalizing offering. are We

cutting significant are Several we retain products. existing system and state-of-the-art treated our new of parts-washing categories, line However, tools a of Partsmaster likely cryogenically product as private additions and portfolio. product fasteners be will such Lawson significant percentage the to a label to

During products to XXXX, from we product benefit combined by reps. teams X,XXX broader the will intend supported to Customers all sales available offering. both all make

our of and as Partsmaster we bring the confident you we the the organizations and quarter, XXXX. to earnings sales for Partsmaster projections, exceeded teams initial are plans X commitment, growth fourth and the our increasingly professionalism and your for together. teamwork During Thank Lawson

continue While our to the Partsmaster, we've strategy. committed we ahead us acquisition of work to we at remain have also momentum built that

us from in team with relates improve distribution Lawson acquisition to XXXX. sales it optimism structural our pandemic. combination centers low the and company prospective April We continue across to The the lower due a along as to give of we're integration. to have candidates, sequential continues ongoing through growth strong costs for line due Overall diligence and the and count building discussions with

worked. measured improvements has center team managing per job operations by done to productivity great hour achieve distribution lines a Our picked

our second to with continues Strategic achieving daily during and accounts business fourth XX% EBITDA good achieved sales nearly XX% quarter the as sales new pre-pandemic Lawson integrated new to strategic sites positive gas, versus quarter. top significant was business quarter. throughout numbers Supply business which progress the a perform These third levels. the our third increase locations direction be of Automotive the in the Developing new the of an team the We the to XXX average throughout flat side integrated with the represented within supply day through XXX versus and Bolt on of strategic strategic for the returning very versus locations. the include focus adding our essentially which was move oil well well, suppliers account in added quarter, Growth and headwinds up continues accounts to manufacturing equivalent quarter existing continues as on Our nearly accounts. year. partners XX.X% On year. Kent basis, sector Kent partnerships

We account supply add including continue to integrated two strategic customers. customers,

sales Kent account daily were government our and Lawson quarter. Average X% additional third strategic XX secured During segment Automotive customers. in versus overall down the quarter,

was December versus However, XXXX. up of December slightly

business federal that primary local our and subsegments: customers. state, into remember educational government may divide You we two customers; and

shift mix XX% which now represents to market toward of government business. SLED, Our our continues total

accelerated By recently very SLED is contract, almost used with new trajectory growth platform military. segment. result Our may on growth our for awarded focused purchasing achieved for should military was in contracts a by which contrast, FedMall Lawson focus military SLED win a in good that Partsmaster's segment government a procurement. we rate government XXXX, exclusively This on. during result high is combined which bid business

of X,XXX quarter we unchanged. remained a Microsoft quarter incrementally will adding retention. Partsmaster to technologies time, reps, of We continue effect during sales rep, have strategy, Sales Teams XXXX. use X-part productivity per and refined and rep increased while use the area cost for the the We Over realized of sales focus sales We the X.X% with accelerating pandemic, use the reps these territories of per pandemic, new volume improvement and just-in-time XXX learning, in through versus growth in underserved third the distance Our knowledge. rep while day plan as other of and the lowering impacted including by a key of improving in sales such pandemic. XXXX. approximately sales the reps, remains technologies ended

Let is my the me believe customers' We productivity. of start, by to well, we and Partmaster monthly maximize going conclude need very company. across the our excellence integration operational saying to XXXX are off the is that supported pent-up increases our combination and their by demand, remarks a strong achieving consistent sales of that

our more I'd Now like turn on information financial to to Ron for performance. over it

Ronald Knutson

business some a I'll then quarter. Mike, into the the and key good as Thank fourth of everyone. some quarter. trends for morning, and during an first you, I'll highlights the the Partsmaster. as details first, few jump on of integration But update provide takeaways well

from First, QX by or improved Sales of million XXXX. or quarter XX.X% million. $X.X for consolidated $X.X were X.X% million over sales increased $XX.X over third the also the and Partsmaster quarter

Excluding in sales pre-pandemic categories, Partsmaster, by driven of products. core by in offset a essentially at product QX, increases levels. with PPE organic average daily flat sales approximately We decline most were organic our XX% XXXX versus exited

ago ago million Second, X.X% our improved sales of a $X.X quarter. million, $X year or adjusted over X.X% quarter a year to versus EBITDA

our operating million flow quarter ended year. proactively with and the of balance a and for sheet. Excluding of cash full $XX.X million strengthen Partsmaster, to cash the essentially liquidity levels. to managed million working of $X.X profitability evidence adjusted ago, million position the we $XX.X in and We EBITDA generated recovery quarter our year And fourth pre-pandemic We our to $X.X have equivalents. million capital $XX.X compared was third, cash

quarter second service As deemed in XXXX, us our previously allowed continue an discussed, we business the to were of early which customers. essential to

We since end March. have and environment current our to the work adapted to corporate remotely of functions the continue

quarter challenging cost profitability structure, this return to while levels reflects pre-pandemic during all to our needs ability fulfill environment. to a our our Our continuing customer adjust

improvement PPE quarter, we of by reflect sequential many locations sales of categories our as continued aspects As continue have metrics, Sales increases rep in product service month-to-month over productivity. lower we ship-to customer fourth and number realized on does offset sales. improve, QX, to business. to our Most our the see the

and continue team. to progress safety environment of focus the great sales, make ensuring driving We continue flows, while cost this our cash and our controls in on all

X.X% excluding decreased which X.X% compared Lawson due over November sales to daily average MRO quarter, September October were declined and PPE was over a acquisition, typically for a On sales ago. up from a basis, lighter daily X.X% while daily up the November. year For sales, October, average about sales, average to month the us, some nonrecurring December is

we environment ensuring while Mike safety generating in remain of teammates. on focused this revenue and customers mentioned, previously our our supporting the As

to perform are the majority of able to We our visits now customers. on-site

lower-margin driven MRO including reopened loss a a was to QX sales service are internal On deleveraging outreach, ago e-mail QX, offer of a on-site XX.X% customers in the QX cost in sales website, as the margin to service support for business distribution towards basis, and smaller the freight shift in XX.X% the representatives, product The resume We margins was XX.X%. primarily but locations. fixed higher quarter in than and year cost compared quarter stand-alone reclassification, much a to by our are decline phone effect to gross ago in communication and additional for lesser we continuing before our have quarter. base, at over PPE. for our expense many quarter net year customer the categories, came a and XX.X% mix from and Consolidated center service degree through able

was severance total Partsmaster impairment $X.X operating by costs million of of earlier a to lower our financial offset million in increase related acquisition The year that a compensation continue $XXX,XXX. of million the to $X.X quarter, stock-based were performance. primarily the expense $X.X year million, cost and $XX.X the to These higher ago. acquisition, of driven XXXX by and a $XX.X benefit For goodwill taken items million actions $XXX,XXX inclusion compared of of expenses were

expenses Excluding acquisition goodwill impairment operating over costs, stock-based and severance, the quarter. Partsmaster, decreased a adjusted or X.X% $X.X ago million year compensation,

quarter for On nonrecurring of mind year ago that the operating and compared $X.X million a sales. $X.X operating the QX X income in Keep XXXX million selling Adjusted as compensation to QX basis, fourth was operating million did non-GAAP lower fewer X.X% of an to QX. of expenses year was $X.X aggregate quarter. ago of income our adjusted on than in adjusted we in quarter. percent inclusive $X.X Our X.X% compared had was million, loss XXXX costs of days for of stock-based and other EBITDA as sales adjusted $XXX,XXX the

to CapEx Additionally, $X.X in adjusted flows. On XXXX. approximately of the excluding our nonrecurring eliminated the Capital adjusted of items, QX were manage million quarter and $X.XX an earnings were other per diluted $XXX,XXX, expenditures Partsmaster stock-based basis, quarter for we $X.XX for nonessential quarter. share as EBITDA contributed cash to compensation versus the

We the allow McCook expect range million increased XXXX our of approximately Suwanee This $X total be infrastructure to in includes for future. $X to volume to to in planned in upgrades the and CapEx million. our

As make impact business, an organization, we continue investments areas in particular, that the in on have sales. a direct to in

in continue there we marketplace, still sales and uncertainty against to current structure the make our is our While cost in investments business balance trends. the

as at by million $XX.X continue of balance We sheet of year. net manage our evidenced to positive the the our end cash position

secure on we While of the under quarter quarter $XX million sellers, credit due Partsmaster the credit of the of is of payable XXXX. This May sellers million to third to of acquisition for million in took in the letter the issued availability the related $XX acquisition with of net we to Partsmaster $XX facility. our debt the ended from the

about originally a organization feel I XXXX. come planned. have than of with managing combined have original are how is Partsmaster position we we through integration us we stronger our out pro strength it. of our the time and challenging that and will basis previously, progressing Mike The this both the Partsmaster companies expectation opportunities better in since forma, environment acquisition, stated growth of into the As the as additional outperformed making results on in entered a And this even

in the and coming turn up for questions, X-year comment uncertain members. that organization strength we're environment. forced mark Before me very on some make let team I changes of to was believe on It's our commitment the hard when to the dramatic it a over the

and stepped in team business, team to Products, over Thank been not Our and entire aspect have Lawson, you proving to significant entire Screw the world-class the is why Products Supply, for a year every Bolt for over on significant Kent, organization. a acquisition. to members now operator questions. taking I'll teams past mention the turn Partsmaster the has changes up of through the Lawson it

Operator

Instructions]. [Operator

Steinke Kevin from comes with question Barrington first Research Our Associates.

Kevin Steinke

Congratulations on this the nice environment. results in

Michael DeCata

Thanks, Kevin.

Kevin Steinke

we've believe, significant? Or about weeks think by December rate for just the quarter. you improvement X levels wanted that as of as the improvement are Just we're slow, off seeing I sales fourth of -- organic and, first here? we start to I to new that asking XXXX about as we year. above trying mentioned the Should steady seeing been incremental characterize anything head more into the

Ronald Knutson

want Mike Sure, Kevin. This I'll well. Knutson. take to is may as on that, Ron and jump

mid- to us, X finished X basis we in increase strong the I kind entire for for we the a first, little But U.S., look where December. we're pretty single-digit tempered and weeks say, the a of in throughout so combined really to was January that increase we storms X conditions some -- Southwest. bit, So high the month, December. in single-digit off exited when where it, in on would primarily due particular, call over at weeks, February weather over of a the or

think I one with physically we even were week, a seen close distribution back I of for X a our to -- the the and of this in centers some bit X catch-up little again, weather to bit bounce we've of unfortunately, of a So Southwest, days. little here had think,

some seeing start catch-up pretty overall, So to we're quarter. there. a But strong the

Michael DeCata

they have more. depending as account continue many strategic customers, more we reiterate also, they're spoken that Kevin, on customers, to us and to

great we've of a think number customers. huge I a made on impression

market under-managed my on or the been belief that challenging consumable have see excellence and in and operational will in so outsource their processes. expanding, under with more specific has companies customers. their our inventory inventory with Our be expansion continues the market again, even we circumstances it by reinforced reputation as we we the And have sales and to see been the reps that turn to marketplace, conversations pandemic, the dedicated, early most

optimistic fronts looking really on forward. all So we're

Kevin Steinke

That's good to hear.

the product out change specifically You in that quarter, of Can the sequential fourth impacted sales most us give the sales although called PPE lower other change? comparison of grew. kind sequential of sense you in sales PPE a categories the on impact

Michael DeCata

The settled, have there quarter that saw a everything. to those Yes. then, really very We spikes on we like saw and have suppliers orders Kevin, represented about some feel disruptions of back PPE the a in renegotiated had when to was the quarter, we're October, real supply revenue items In supply large tapped about our and third some we're -- just X% that chain second been out. we disruptions, we just run and on Since good prior talking trend. total pandemic. the were

prior Now we the the spikes, items, these huge us quarter plateaued over these for and to putting second PPE larger quarter, about to to the where XX% in segment we PPE third pandemic. and increase have slightly be do aside were which we in a been XX% now expect had future, the items,

supplier. foundational our the But primary It what really trajectory we a Fasteners, seen cleared. as items, core in customers PPE has our PPE. the a our So items more our been disruption in is us. differentiate us are the still have focus. we of of we October and people, do But more specific step forward, have recognize ability, long-term step-up not

Kevin Steinke

Okay. All right.

if of So underlying kind a there it, can sense okay. kind it a no of -- of of sequentially Again, headwind was just of kind you get wonder PPE. have how trends, I was so that's excluding we meaningful much the don't

to see that we trying call if Just out. can

Ronald Knutson

Yes.

you impact activities. that both QX. into was but $XX,XXX QX day. daily this was in QX a of in just ago. about It When it's we ADS look as I our point, ADS $XX,XXX about like we decrease PPE and day about on year, average point, we're saw an mean, Mike's from year-over-year on an did QX the QX year us, Kevin, So QX up spread QX sales a on XX% demands it settled seems But QX, to kind basis, versus our of Mike's basis, a at, now and elevated to on

have opportunity And quarter point, so headwinds into the for quarter, and us it the second then against of your we'll will provide and some XXXX. first some to third in -- this

Kevin Steinke

incremental about But continued growth, No, that's head That's a sales Obviously, including on -- on should growth margins talk think and Appreciate EBITDA that. just we improving about should sales consolidated organic used used you about into about XXXX? How this adjusted for helpful. to but that MRO Lawson consolidated fine. we basis obviously, to Okay. how we that business. basis. to as XX% think you Partsmaster, assumes target organic a the talk that XX% wondering

Ronald Knutson

Yes.

that take So Kevin, is Ron. I'll one. this

we So I all, commented I this. Mike -- of on would and say, and both first

very did Our XX% quarters overall million that certainly XXXX. we mark, of for are results talked Historically, which that or of $XX.X pleased some XXXX, we've achieving X% about for adjusted sales. EBITDA we during

So to challenging XX% pre-pandemic be But that feel this very that able levels. with that operating and being back looking our standpoint. from to about X.X% to an good leverage in profitability into the still to way to environment, achieve get from we we're and able percentage really comfortable flow-through a XX%, XXXX,

operating a a still the is achieving actually have So publicly that aside, that, kind that, number that historically, going comfortable I one we've into and on XXXX, level discussed that. would basis, still flow-through. of XXXX to I that little putting know in say we're committed of consolidated bit. outperformed past, we're that achieving But guidance we

Michael DeCata

the respond we've little and able Ron concurrently, beyond perspective, the pandemic, of notice to From at the where on if completed to this acquisition -- year, we and assertively, just numbers short nimble. time done. company and middle color to aspires Yes, largest that aggressively that just a we the add mentioned. every same very be strives in were my just I add Kevin, can the also And to

prosper acquisition, about our have been. and pandemic, haven't kind has And because any through a which in combination an we future, whatever so the us been environment, activities we've same this very of gives large than at really. more before prior gone of the the even sort looking time, and well, making we're accommodate any lived us two manage confident forward still assertive now, ability happens to extraordinarily parallel of very actions big that very experience, the we confidence quick And took; more recently, tested ever with were and happening: of we little environment in

Kevin Steinke

helpful underlying Great. should trending Or there that's still we back to here Yes, any How any business you XXXX? color. need recover Are expenses that? think into that as about G&A from comments on meaningful pandemic? in come costs the the

Ronald Knutson

And I is us. -- that Kevin. the In activity selling forth sales, expenses you mean, items, No, would vary if type sales run to I QX the us. at that But as activities will certainly, of they march expenses a selling that continues are down the increase. so a for certainly good of most and as say the pretty percent percent sales. of of on look behind as rate that around as G&A a furlough -- particular, -- historical

million we of -- we versus last of QX So a some of of off this side where year some But we year. ago were G&A the $X.X MRO than lower side, the of versus costs bucket. fixed within the getting are that business on on year leverage just QX about are the

ago, were G&A million. did the this I $XX.X And So on expenses being a we on about the $XX just we about business. were MRO about in the per talk pretty now at quarter a $XX of benchmark. And million We at think side year quarter, good -- million. for that's that

number that quarter. march that and run down to the rate we the with comfortable continue we saw feel in pretty fourth So

Michael DeCata

all or Sigma, absolute very through the in since environment. sequentially part savings Kevin, has in what mapping, to down is we've years Lean achieve. XXXX, we for work. has sales for important was redundant XXXX. Lean work really this Again, these And things being it, our the shed up Six our Six percent sales, every the will we talked all Sigma back Lean as the And year. our underpinning most see through feel numbers, been everybody But But the percent as that step Sigma, of reasons. yes, able headcount primary about become Six to 'XX real And since DNA, think enabled this a beyond non-value-added about challenging again, step G&A had be along gone team tough cost measure and they COVID stepped all prioritize great that, we come and of has G&A the about and individual to process not because effectiveness it. the environment. the And do of our up of this ability in of important really really We too. we've structural every and -- of company this a

Kevin Steinke

piece just that Yes, -- pandemic? makes Right. business? still good related business of of that of kind the lower that feel outlook long-term that want to of the driven ask I just sense. impairment charge. of about to I think kind Can for And by portion goodwill the the we as the Should a quickly about of sales function

Michael DeCata

Kevin, that's exactly Yes, right.

to with of see and flow their produced. volume of utilization, resource them. like machine ebb customers we record in based some got Screw business. Screw our time very affected a hours Underneath are an time the other aspects the just very their to And pandemic production their Products, we proposition, we of committed, at strong were are units Products. case capable experienced track in have great in faith machine and good many business. down and feel Lawson. much value they've We whether production by the and It so what we've our Screw very operation, We slow on nature of people was very -- Products, or committed dedicated the the about when long broader people that's customers' it, it's And

it's just that the COVID business, feel we the is answer short goodwill the affected nature good and about yes, impairment. of the So

Ronald Knutson

would hit add, I I think and just on. spot and Mike I where Kevin, it think -- Yes,

of did We get have accounting that impairment tremendous relative charge in so And confidence when rules an complex the to to and that kind little we acquire. a business forth. this take around

found other require this with the well So many the unfortunately, in that of that overall sure year accounting business. organizations impairment. technical the ourselves we which But the feel as rules, complied good case did making in the we about piece

Operator

[Operator Instructions].

comes question with Capital Carl next Our from Schemm Keybanc Markets.

Carl Schemm

vending and the A leading to focused cost using labor distributor on is VMI direct serve. and to technology reduce

I was guys in have Partsmaster-managed more think inventory, to you little there. would a what I LAWS talked stay a bit about dig into VMI but initiatives you place hoping and just has competitive

Michael DeCata

it Yes. that, vendor-managed manifest as is customer an Thank with and the are and can committed different term, the customers, vending that Partsmaster, are upon sales you, of a a Carl, placed of XX in it constrains for people again, days. and having kinds we're lot to machines, much place much inventory, machines, there about very there's certain visit the are call itself Yes, vending say machines. depending in committed for we And that how well example, deploying of because vending said mean optimizing supply. vendor-managed When that, every now XX,XXX it's still But ways, addition being our products executed. that and we reps use our inventory question. we very service-intensive that we

PPE is out want safety. taking if Or need they're someone you machine, So if you items track, you you may ideal an have to a of like and injured, to If or that that [indiscernible] you that bandages because have vending. band items and for aids that's have know recordable. are OSHA items,

of and proper a it, the would we're have and it, technology, deployed. washers piece a very got probably washer. machine -- using ideally yet expensive is not you And it capital for vending a of flat flat is we've not use bunch $X.XXXX for place the in piece equipment of idea. a there embraced So we them $X.XXXX It's

locations make not and circumstances even parts optimize the generally, machine, content, replenish vending vending ideally that a would we and the open and for use So someone sense. make some that the the still that are suited for the And to vending. machine whereas has sense products in technology,

cycles it modeling Sigma, at We frequent and analytical the that varies every sales should how Beyond by looking that again, season, we brings varies vending, And DNA. and just of on orientation, consumption, that become frequency visiting look customers, part be Six replenishment with the analytical by project. based every to That's has Lawson way. at and our it orientation how Lean of combined day everything. do reps

in a only make customer we COVID, And to sales Not application we executives, practices them. about calls, a a machines all of visiting to use sales it's So sales reps, problems a across average customers we obviously. days, sales industries. XX inevitably, all that, for our new the the combination our waiting know because different sales by of every our of bit is replenishment. use best solve. translating the way, But as And sales the many people. appropriate little of of our with on vending list are sales in all and And context for is make But analysis, rep times talk that but customers our reps the reps we're there rep solve problems calls.

So how a of to use but a is or application-specific best not sales or to specific use broad-based that fluid-specific specific tool rep but brings practices. automobile-specific, not technology something rather, customers, our

ability that product company we service visit. of as are ourselves the practices So mechanic. that's as and share consider while part on best our needs we every do, optimized And to well is of approximately special maintenance application a private a label as label process replenishment customers reason at the to the problem that solving XX% that the even solving's private also the -- mechanical important they parts. that replenishing is much customers value us just what part of for though problem least company, are bring And of an not add,

the So reason band. quarter us. what gross the is X the of years in of combination, that to we the mechanic needs the margins every retain been we've aspect optimization of maintenance able what service-intensive a narrow the profit our differentiates really And very product and that's for do optimized it's really for

Carl Schemm

Great. that's color. think That's a lot And of really a good good I transition.

obviously, Partsmaster headcount, thinking And it 'XX? sales just like but with sequentially XQ you down looks and rest the added was -- how maybe headcount headcount about talked then duplicative into Partsmaster? of You've Was territories are quarter-over-quarter. that

Michael DeCata

Yes.

the we So headcount moment, we're That's COVID. actions at in the really seeing. what stabilizing from you're took

much always of territories. very up mentioned new reps sales on share pick strategic are adding in accounts, underserved focused wallet in we to as with locations. We both committed and adding accounts within and share, strategic new we're customers, incrementally And as existing

our will now is can excellence, those had early are our boys, market. want operational can expanding they And competitors expanding. themselves. say And focused significant And be mechanic business sales bolts, win of that, footprint, drivers. their fittings, in say that and we more fragmented consumable primary and because incremental, early insource our given it. But But incremental believe we believe that I rep share than market seeing a needed I such than of So connectors, are reps where it on our just is it. incredibly stuff with outsourcing been we productivity territories disproportionately much huge buying evidence, or X with it again, before. to shop because hydraulic more is percentage rep some they sales there's to too with an who during available adding a we maintenance COVID, evidence of sales and the we They underserved supervisors, to and stock pursue cut do to because and always like trend served for customers market electrical nuts

shortage a driver driver customers has overarching or our is every everywhere growth. is Because shutdown -- of for thing the the industry, want which maintenance in been the of part fitting. mechanics primary a Now a last machine hydraulic $X.XX they

or believe spring to even COVID, That's is a demand thing we customer beginning when fitting. line of for fully a where shutdown last the $X we're come So coming the pent-up machine hydraulic out have in. that seeing wants we a loose, to a

take through for time last continue optimized than one more and continue coming and reps told that us, months, So is reps because we continue of the and us to even it of we COVID. depending to hiring, companies will add that will to will prior add long of a specialize through share they short the we're acquisition at vendor-managed And in. service-intensive have to were out in the on recently we customers COVID weeks inventory even again, we they're

Carl Schemm

little to side. little I on Maybe to bit Good a margin. bit I in just margin a the on more maybe the If transitioning SG&A, Great. wanted dig from gross freight but to increasing remember leverage about the margin you right, of kind PPE that X sales, lower the mix cost headwinds the and fixed talked guys quarter. gross is sort of in color

out contributed. So each how could by I wondering you ex much maybe the way. if Partsmaster, speaking, those break of was just I'm maybe

of much could you break XQ, kind out Just kind of how -- that carries much if those what how each contributed those XQ? if of of into into and headwind carry

Ronald Knutson

Sure.

Carl, -- is is this this So Ron.

I'll base and -- remarks MRO prepared our in mentioned the business. we and -- that the kind talk of about on So

your margin, the reclassification is of it's that's this rules see gross and We question the require. accounting did kind excluding think of for service cost Partsmaster I from the that what combination. a is, now

margin, to that MRO was compares and margin quarter XX.X%, Lawson for XX.X% Our the QX. versus MRO

XXXX the inventory we're is the sales. fact I fixed remainder mix the some costs that on movement other of spreading into XX%. we some the up is have related And of into some I quarter, XX XX% kind year what that just actually of terms QX, that XX.X% in, look would QX of hurt versus costs About about by are a -- we band. bps that XX components in and freight be reserves an say the the line. comfortable more of and XXXX. ago, the for decrease, of in But between fall points little in of -- pick that that types fixed rebates over and got X pretty XXXX at a that moving components base little same And within I of of even a we to we those of bit a range. is we forward within year your were and We question, into that see the selling So might increase this margin feel feel came talked versus will vendor days did is quarter. then Versus of always a some QX narrow -- in at to around as quarter. we then X/X did some bit ago, XX.X% at about fewer XX items over for like And PP&E lower that, remain a this bps the because sales We've the as look the lower about quarter. the

cost. narrow inflation higher So But increase, as to able We're we might we'll close certainly, on in we've help in manage fixed eye that leveraging sales we overall, band. will XXXX. of anticipating saw within be a on have than the keep XXXX. that been bit the the that, to And certainly, us ability a little what a pretty that

Michael DeCata

kind all cost that goods the sold, for of as -- value revenue proposition. use price, retention, proxies we Carl, of And separating out

So the very marketplace. other can customers value to us our number for drivers us are and proposition market that for more even it's we've not, maintain expanding is share sound, deliver, or whether confidence, based gives a with and confidence gives pay years labor fact that this to every that of other again, quarter X retention we in revenue and taking band value are take the that metrics narrow again, willing the proposition, demographics, we the value us on, we able been demographics and great for combined an

proposition, with business. ability of confidence leverage cash, of the future. gives strong this, our great combined the us in aspects team, optimism value and real Again, to for all our us incredibly an gives our So all underneath generate

Carl Schemm

helpful. Very mentioned I kind on to Great. you I M&A. the guess here was maybe wanted just last -- of point touch

Can a are still Or out you fully diligence due of you there? that's -- running? sort about ramping? the talk team up is conducting that and built pipeline. on just what You've stage at like team Or what

Michael DeCata

they the Well, incredible all an area again, functional is company, have the an just team. within I'm know folks and done proud that, this you job. specializations, These so are areas, the what, of

practice done acquisitions, X We've we've Now of revenue. it. they've of lot $XXX acquired at a million got

to little team, very more the complex, for same best deliberate functions, of a sort the one, candor acquisition, including and process this of next delta, the in are products, pricing, beginning, learned, for So but even functional the next is to little people every acquisition. through going and of larger, process teams finance, leaders a and sales, these -- middle plus of in and what practices, systematic of trying the the sort their and course, of a end real HR, change of lessons groups large with Partsmaster improve looking all IT, at

So have we pipeline. a do

We're we at We on. been the have -- are successful range and open-minded and about very there, small large discussions of active possibilities going acquisitions. have out

a we for going for and integrate Now a a our feeling and That all not one happen for but integrate, we to do bottle, us little way my when it to as next reference acquisition. in said and when how that the we with we weren't acquired, pull casual want company to we've teammates. in great use when does was everything happen, make to people sellers to when like acquisitions we to acquisition the to an acquired discussions about them hard the predict, are into we're integrate, is goal --

So very a and deliberate systematic process.

really Partsmaster, had of we Partsmaster XX to -- session what's course, people the people week, with in last just the of improve well lessons-learned middle for a and going dissect what including to one. great next So on

becoming strength company. our of is a So this real

Carl Schemm

adding for talk maybe That's M&A you're dig at geographically, focused where kind lever the the the for last primary a you on what's synergies? Are you this the at Like helpful. lines? what's there, just deal? like the stage? expanding around the will any Adding this just thing of and focus? SKUs me. pull color make then drivers for about And further Or be little of to -- and Looking Can product headcount? what on some might you

Michael DeCata

an XX in product of XX fragmented billion-dollar it There -- has Right, right. maintenance I are consuming the mean, our lot market a incredibly mode been. estimates, and Well, people by some categories. it's like such huge. in repair

the got we Lawson Partsmaster unique mean acquiring categories realized are from product just of Partsmaster. there So the -- pretty the perspective, Partsmaster. of products specialized expansion as we But with a of people added picking we and exciting that and that to feel just that the we doesn't we've from like Partsmaster up to a are product aren't opportunities all offer or well And products new waterfront with categories broader we've covered. product customers. course, some product feel for number has now really It

that. there's So of all

and We a that Canada the also is reps, But with said feel X,XXX fragmented covered. having that, have sales market. and well we huge U.S. untapped it

than product they keep just just us rate and broader reps, or more bring not, albeit likely acquiring line. into very One high is going, more maybe more So spots acquisitions they filling companies with and like X a a in because which retention a of sales X will have fall business, categories. book

Then branch-based different, same ways, very and the many that Bolt near companies Like Bolt acquiring fasteners, in of a Supply adjacencies. still XX% in is But the are lot us business. there us. go-to-market So Western Canada, as to us. so slightly like similar very in case a are

is of that a other -- us. for there kind separate a are like platform Products. then adjacencies near there So Screw And

into are have products. as of our acquisition kinds us, for needs set those we a For companies broad can If will of X solution customers overarching customer acquire well. categories. broaden There the to fall the ideas that base,

traditional Some of it of into is some goes MRO. it OEM,

MRO. it is service-intensive vendor-managed inventory Some of

all from the customers' we life we make broaden everything easier. How areas. in perspective. at the So solution, do we customers' pieces we our foundational But do, look have today,

already to it's addition more that likely, And have. we so basic foundational the pieces

Operator

This concludes Mr. Michael I like to to conference over DeCata for Instructions]. question-and-answer remarks. session. closing our [Operator any would turn the

Michael DeCata

and much, joining very you call thank for today. the Thank you

to earnings in over adopted the commitment has been entered team sales unprecedented who growth demonstrated Lawson respond has really customers to a a We XX,XXX our year, XXXX depend While and trajectory. their challenging has good demonstrated We've an business to pandemic March. on the us. new and and technologies, quickly team assertively on this environment ability starting

We growth, and excited Along We're entered. about to in for reach to acquisitions position customer also acquisition continue strong and organic employee market. an with broaden fragmented and optimistic future loyalty. years in engagement a the come. stronger very XXXX entered the resuming trajectory growth with strong We're a than and our we exiting many extremely Partsmaster growth accelerate

ability us to gives the us to and resources on sheet we focus balance plans, accelerate strong what's gives the Our culture need our important.

Lastly, teammates, safety paramount. of customers our suppliers is and

team in our place of you our our including with Products. teammates, protocols customers Bolt to Thank managing -- Lawson loyalty all in your put and and We're have team and Supply grateful our Partsmaster and and our mind. as business to the are We that suppliers. for dedication

proposition Our is underlying strong. value

speaking We us. Have have We with next earnings to great a you future of call. the look forward on day. a ahead wonderful

Operator

This conference today's presentation. for attending has now you concluded. Thank

You may now disconnect.

Distribution Solutions (DSGR) 27 Feb 212020 Q4 Earnings call transcript