LAWS - Earnings call transcript Q1 2021 | Distribution Solutions Group, Inc.

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Operator

Good morning, ladies and gentlemen, and welcome to the Lawson Products First Quarter 2021 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 the business as well as covering relevant financial and operational information. There will then be time for question 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 the risks and uncertainties that could 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 obligation 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 May website available will Products’ CEO, the turn will Lawson over I DeCata. call Mike to now

Michael DeCata

Good the share the XXXX. comment with morning for This call. joining about and thank first you morning, I’ll you some on and quarter thoughts

business our a Additionally, I’ll more detailed will of as will and demand monthly are well which was business pandemic This provide our as effect of August the update as and challenging variation. last review we the with quarter decreased and by and planned quarter core due year our our sequential we’re in followed compared of as we’re experience compared steady progress. slow growth financial our likely levels. on to disruption, we’re Knutson, unusual year growth X.X% XX, path a we’re progress on aside Since confident pre-pandemic in such first growth. basis, seeing the you XXXX to Partsmaster, be Overall, we of X.X% investing compared to Putting are pandemic-related of pleased occurred the $XX.X February which Monthly measuring XXXX. quarter levels. Partsmaster your that on CFO week XXXX. consolidated Partsmaster to first daily our achieved performance of return growth fourth performed on loss during questions. markets, we pre-pandemic acquisition, generated weather returning primarily normal our the due On pre-pandemic to based to ongoing integration to excluding to a but sales of as good to some Partsmaster in results the XX.X% the perspective, the sales by is an the in to the including returning quarter, Ron average year. million growth XXXX, from the customer a results of in

months. our overall However, year, that the see as business in on previous for which Lawson that a year. throughout by the core X.X% basis Lawson the will growth business expectation for nearly achieved significant sales last should EBITDA of fourth result grew XXXX. XX Core is for average earnings last in The versus growth has we daily increase compared achieved month XX adjusted quarter quarter. the to X% of The compared as the to the quarter

an and third our from strongest reminder, As are second perspective. a typically quarters EBITDA the

Our narrow which gross have to percent we core Lawson profit come band, continued be in expect. the to

profit SKU part impacted Partsmaster gross as which undertaking are we However, integration. was the rationalization, percent of by

of these be additional of nearly centers. of available a team. required additional centers has as our has X,XXX to We’re in sales large Partsmaster – inclusion SKUs, people the not a products the number required distribution combined making The distribution acquisition we’ll keeping the not new into and the SKUs result

However, labor hours the these infusion have accommodate products. increased of short-term to in the

inventory of fourth quarter terms XX.X% Inclusive the for quarter of one-time gross of processes for and these charge, core cash a XX.X% as flow. Lawson this long-term, positive the XXXX. will the Over compared have on impact was to profit

two to be Partsmaster. and combining shortly, Partsmaster exceed moment our continue to many And earnings like again, take I’d to Now Partsmaster fully degree the in will this organizations to discuss sales the demonstrated like great of Lawson of in confident increasingly integration very professionalism. across to Partsmaster. a and board progress made initial been teammates. of We’ve we’re People and Lawson aspects projections. have And thank a XXXX. and integrated. the committed growth our integration I’d our high for have plans

looking of our few program software. Georgia and on capacity at we’re improvements and our management conveyor modernization focused antiquated DCs, in center, our operations which on Now distribution embarked updating facilities. through a will warehouse We’ve expand of Suwanee, system

our our which – Additionally, and additional existing fulfillment within footprint. we’re also investing McCook volume also allow in process will at

a quarter. business the Our perform Bolt X.X% EBITDA Supply achieving very to continues well, for

the will the in Calgary our to relocating continued of square process double distribution which We’re center, our growth. footage support

our to size a a store quarter, it’s the start. great location, of As we doubled during in and also new Bolt well, Saskatoon off the gotten

a As are ago, doing all I primary businesses well. mentioned moment three

achieved Strategic to accounts turning sales. sequential good progress. Now

SLED, federal Sales up fourth as our the government while X.X% contributing this with supply First well compared to the growth quarter compared increases the continue compared and were business quarter as in new on This was relationships the our We Lawson that their the our manufacturing Lawson their new anticipate segment as existing it fourth up value they compared has enhancing growth of and fourth primary strength and XXX quarter as XXX proposition of as X,XXX locations leveraging in integrated believe to growth state, accounts sector bring the markets side locations. added grew growth. these and effect educational, overall We integrated and the the We rental quarter, business. XX% into driving new to local as of and led our equipment profitability. sales to by supply our as X% account XX% is of call third the others. quarter, strategic third us nearly was customers. drivers the was quarter through large sales partners, our up partners and the reps, through to strategic second to we continued quarter Kent

was this supply Kent attention Our business versus area was the chain. sequentially quarter Automotive our up One requiring X% quarter. closer fourth

including material shortages suppliers raw up to our of and due many keep factors, challenges. shortages, transportation to are Some struggling labor demand with

seeing We’re from also cost some suppliers. increases

We necessary actions to with will historical take continue to results. gross our overall margins line the manage in

with remains plan ended We territories. a through approximately sales continue strategy in quarter fourth We per area productivity and the as unchanged. XXXX. per sales past, improvement growth of key Sales reps underserved focus in versus to rep pandemic. the three-part the Our reps realized rep incrementally remained we in adding the X.X% X,XXX a day quarter

and successfully benefit making a large excellence acquisition strategy, Deeper continued our sales Looking channels our value critical our the demographics bolster accretive markets enhance exciting success managing XXXX. our customers. pattern on proposition structure. improvement several of I’m are making make times firmly forward, of our to with well business as in were programs in continue that expectations a line We’ve quarter profitability to encouraged products remarks results continued along by this in well stronger the sequential with cost underserved our that to as and three-part coming organization focusing the our proposition acquisition. growth first out We’ve we of strong believe and will Long-term uncertain and service labor into continue the our offering our of and Partsmaster the Let value me and XXXX. additional development conclude will part growth. my these a including that in operational to future we’re their growth invest and business penetration result in saying through market managed with new acquisitions positioned to become

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

Ron Knutson

first update during key provide Thank the integration on provide an first of you, quarter, highlights and of morning, the some the and discuss on some everyone. good business Partsmaster. takeaways the Mike, few and for trends I A I’ll then will quarter. details

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

driven X.X% by a average offset Excluding product PPE in decline daily increases categories grew small Partsmaster, by sales most organic products. QX in versus

Second, our was X.X% EBITDA sales. million $X.X adjusted or of

improve and we EBITDA and cash continue million to as with And under adjusted organic availability $XX over equivalents quarter $XX.X the QX million approximately earnings. revolver. we Partsmaster, Excluding approximately by our cash of our improved sequentially $XXX,XXX ended of third,

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

remotely work operate. our centers to of while all continue corporate to distribution a continue We perspective, from

see does our as on the quarter, categories reflect have first we aspects improve fourth we product rep over realized Most the many in of to to productivity. improvement quarter. continued As sales Sales continue business. increases sequential our

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

difficult quarter, U.S. weather daily a basis, which the quarter, a negative in average X.X% large that a X.X% average mid-February over of very impact of the declined includes ago. the the sales increased daily excluding the sales acquisition part compared fourth consolidated On to For year by hit conditions the

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

We are customers. on-site of to performing all visits essentially our

areas, email representatives, our continuing As communication through spikes and pandemic we in service are to outreach, offer customer additional phone we internal see support website. certain

service a is most able our most business customers to in are and than as degree this resume we However, onsite to being locations. lesser XXXX our of have done for of many reopened

year month in loss came basis Consolidated Our the XXXX. focus ago XX.X% to XX.X% standalone MRO in compared margin to in margin sales cost quarter before quarter is reclassification, a to On to for at for from XX.X% month compared a the QX. XX.X% sequentially grow during the service gross month quarter. was to

impacted in freight of in increase charge recorded the rationalization These one-time we negatively costs as part selling of net two remaining to and in decline. our with the approximately mix costs. points. Partsmaster PPE the drove exceeded items $XXX,XXX associated shift reserves and by price non-recurring a integration process in inventory, combined XXX QX, margins Higher which drop the a sales During basis market items our for an QX inventory

the expenses million Partsmaster a this increase was The million. For million severance and the inclusion a and to acquisition accounting remaining stages of $XX.X of million on our $XX.X were price early operating total in due higher based increase in pandemic compared stock-based of of of quarter, stock due flip costs $XXX,XXX. year compensation $X.X the to was movement for ago. employee the to the the of $XX.X expenses

related adjusted lower lower to items compensation million, sales $X.X expenses primarily decreased due operating these travel employee Excluding and lower expenses. on

quarter quarter. for ago of $X.X first adjusted income $X.X operating in Our EBITDA was million On ago as the XXXX of excluding quarter was $X.XX the share compensation $X.X of adjusted the operating $X.XX earnings share for QX manage diluted an our per Capital On EBITDA quarter reported million Partsmaster $X.XX contributed in stock-based CapEx eliminated million an in was the the and the $XXX,XXX percent to the year and quarter, per adjusted for non-GAAP X.X% earnings adjusted were we to flows. for quarter. year and of $X.X cash basis, was sales Adjusted income basis items expenditures non-essential million non-recurring other income versus million in XXXX. quarter. as adjusted compared to approximately $X.X operating of of QX a

expect in future. be of $X total expenditures the million, planned the to million allow our upgrades $X increased to McCook XXXX to to Suwanee in range infrastructure including in We and capital for approximately volume our

Additionally, distribution be square Calgary to center our new we with footage. a location will relocating expanded

against is direct investments we our to uncertainty As while marketplace, business business the have continue the current make in in structure a there And balance some investments an in on and continue in sales. cost impact the areas sales in to trends. organization, make we that our particular, still

ended place quarter a of to on continue position net million. cash And we our the improving We working capital. positive in focus $XX.X

acquisitions. credit quarter that mind we quarter took approximately sellers, doing third Partsmaster credit to million under credit price the the we of of Partsmaster While million XXXX $XX availability future with under our so, we is on initiatives $XX net have $XX million growth facility in which remaining of in pay $XX of XXXX. for Keep the of second we for from ended letter of the will to acquisition. that in of million fund $XX.X we and acquisition million availability our the the the facility, related of After will quarter the purchase debt anticipate issued

future. how strong time into with Partsmaster As and combined expanded challenging is progressing be I with that to stronger position planned. originally this expectation Partsmaster charge of than both integration took stated we the it. all an in continued Mike previously, out Since of entered we the acquisition, the results we will in customers organization are a a integration to The be product come offering have have we this their company, offering will well-positioned product and into the while we service as to the environment related the of managing through

Let me our terms impact inflation. chain suppliers labor undoubtedly raw of are our increases material seeing us. Similar others in many transportation my supply experiencing what we’re the and comments challenges of that close in and space, on to shortages, will

organic we the narrow mix Over years, our plan manage to to percentage customer Putting manage range and that to which questions. high around take the gross preserve necessary many XX%. in fairly turn we’ve margin the actions going our operator forward, over that MRO same within range been product a aside levels. we’ll it now supports customer and for to service I’ll able margin,

Operator

Please Our with Instructions] Schemm question first is proceed. KeyBanc. [Operator from Carl

Carl Schemm

Good morning.

February, was April. on March basis of to an wanted the organic maybe through get into and from quarter, just First, a sense January the through for cadence how sales

Ron Knutson

Sure, Carl.

Ron So Knutson. good This morning. is

made, at progression on a I us. that you February comment the were stepped is little a will was base versus month January both QX, for business, sequentially X% nearly little look this the up commented that, I that if and MRO bit. we Mike strong of pretty And on – look a me back kind let if bit, we QX. over and at we overall So

recall, couple seeing March increase, saw increase February pretty towards we a was sequential February, we’re tough sequential in weeks. date the here and then middle particular, And the April. month, of you as As in to sitting end well, a over of

as compare March, stepped I February stepped both call the finished a forward where little consolidated overall I So in as single-digit And and a versus range. we basis, low we and a up at March in April. April January, on mid- bit step-up look in to again back then business it in we’re the

April how with pleased performing date. so we’re far So is to

Michael DeCata

a will of be had my month. this Carl, increase Mike. on And things on the basis, mentioned expect I in average, that its improvement an point. do was That’s on an previous but passing previous month, normal comments is month we month-to-month To the the that prepared over one variation over every

Carl Schemm

Got it. That’s helpful. Thanks.

– touch trying talking of far going of just margin. kind gross you sort level seen of to have what mentioned on environment. thus what increase actions? Have so of you of about channel? the conversations like with kind the cost are customers? you you’re inflationary maybe obviously, you to And an are seen in in doing terms And pricing you – maintain And price, How

Michael DeCata

this Mike. Carl, is Yes,

to those mind it’s suppliers. are to experienced – be We’ve piece in previous then machinery of supplier thousands hour and some increases this seeing where years remembering along an with our necessary, average $X.XX for We increases important and in can that of from dollars. customers. a of bear And that piece previous price downtime cycles. cost we do price But to pass of

Our again, intensity, customers us. and our service differentiates

on machine we feel $X.XX. customers putting more focused to going from $X.XX So together, all that far uptime like are our than

record our successfully all, pass real price being then very had of of combination a product inventory critical it success. service-intensive differentiated having good able are So our long And with more along the when modest necessary. and increases even shortages value macro our their customers track proposition labor underneath the overlay that makes of and have our we vendor-managed to very to

about to but in that sales. maintain when really value been rock customers ability, solid has So day our our the than our just more have of every all really, And past. together, is accelerate high margin, in confidence both increase and it to you and to we ever critical put proposition sales everything

Carl Schemm

for the go that. might expecting, Thanks. range. about looks that It in or other transitioning influence the XX% that you’ve there maybe rest past I obviously, a to the like here that Or dipped the rest MRO in fairly year, are a below And year, below sort but know any the you margin? bit factors to even guess, little above XX% just of maybe the quarter, even, specifically seasonality any of gross to it XX% it. other fairly talked of quarters the Got to I a for XX%? just is

Ron Knutson

is Yes, Carl, Ron. this

quarter ended the as we mentioned, at on about thinking we’re we the major movement an down in recorded QX that to margins. XX.X%, as gross brought the $XXX,XXX basis was related margin So this that MRO

XXX bit was impacted about a XXX that that over from basis points, recording. by basis So little points

puts to us So XX.X%. back it

We’re by to much margins gross seasonal vary of connected the pretty business in business of comfortable that don’t we bit and little can the typically level quarter, say more sales number margin don’t that days within And maintain develops. of vary XXXX I the if quarter. that volume typically certainly that but a margins The would for our – is terms much. that a

we of So percentile reserve that this the putting range able the that aside in manage for XX we’ll pretty comfortable recorded year. that back high be that inventory quarter, to we’re rest

Carl Schemm

I about me, jump then in believe. back for reps line, is territories. you briefly adding remarks, the sales talked and you’ve I And in Great. But past, the in just guess underserved prepared in this last mentioned one I can

Just curious headcount? are the kind or product verticals, of where And you today the those up areas. things and maybe at ramp today, if greatest opportunities Do looking I’m what into the just versus to cadence other curious you you’re geographies, pre-pandemic see pandemic, you at categories underserved looking there? what territories see

Michael DeCata

Sure, Carl, this is Mike.

that. to parts two So

all sales us part rep we through is of part reps the of second is of it’s have sales add the products. with access infusion first unchanged. access By got that now differentiated some It’s that many strategy. core sales Well, going the The still new the Those rep reps. way, the acquisition. Lawson differentiated. to products, the opportunity all very to have margin, Partsmaster and we’ve to for the Partsmaster it’s It’s all sales highly Partsmaster forward infusion and a Lawson products, rep productivity, products, high large of they are Lawson of huge number of productivity products, going are growth all our of three of sales growth reps, the reps, leg, highly this sales have

untapped is the Relative So combination very short-term families, should growth. line the territories. of X,XXX offerings, product there in within will opportunity share the be reps in customers reps, new win because see both acceleration existing enabling real teams of growth wallet the top product sales and sales always of their to two to

mentioned in initiatives. comments, of I my things One that in some again the investments growth passing, is prepared in

we deep point in XX,XXX codes work. transactions enough And they’re half There’s is sales in not density codes just geographically are detail a While interesting in Today, we’re great But to go ZIP very no we’re have about ZIP found XX,XXX ZIP great data prepared into America. beginning I not point drive business an at rep. reason codes. was this any the remote. that there for within that eye opening, this transact sort about because the of that time rational of

looking still So lot business at while a dense, at looking business. channels is of it’s to market, this not

always geographically will there be our sales add territories remote reps. growth to cost-effective add initiatives physical pursue And is is of sales to reps. opportunity So one not to where it

it’s fit strategy. So still random. all continue But add reps. And we within will growth things kind these to of three-part of the

cost-effective Coast, some most the question serve way even point, in reps. At reps. grows, remote the opportunities to very is, dense still business And geographically geographically As customer. in remote the a areas, to is most there’s add add that areas, opportunities there’s the to East

far, in again, about we’re America. of the So ZIP serving half codes

Carl Schemm

Thanks. Great.

Operator

next Our is Please with Instructions] from Barrington Associates. proceed. Research [Operator Steinke Kevin question

Kevin Steinke

XXXX. though you a pandemic, being Can curious confidence and to that gives the on the your to from and receding or – Ron. to maybe contribute challenges, Good a your bit that? to seemed somewhat just you et supplier and talk learn on morning, growth given able you was I sequential your seasonality disruptions more potential goal you little of achieve that about Kind to typical achieve initiatives Mike monthly basis can what that and be throughout focus sales even might growing how cetera. more about

Michael DeCata

with off you. thank that. start us I’ll Kevin, Yes,

mentioned, with the products new folks factors for Carl, part myriad and the that folks. confidence the of a into a that go That’s infusion I So as Lawson just of Partsmaster it.

factories. We’re area our spoken growth value is is they integrated accounts of a evidence with yet, our large subsegment even supply they do, we’ve believe, presence, with about in the their strategic bringing strategic accounts. and proposition. partners, One at our have that of partners presence generally in that one strategic on-site in that within relationship us supply And that growing accounts, as integrated seeing on-site continuing we number enhances

factory week, counting got of that someone’s are not at a And but certainly suppliers not small MRO, work. our away with for products. the inventory So and chemicals. for integrated on-site electrical are fasteners, putting to inventory, optimized large away generally be every connectors still and service-intensive vendor-managed They putting not quantity optimized kind

now first that’s in that a built growth we there’ll a So It’s even than that likely, sector likely is be so more construction another growing. equipment. more investment, infrastructure that with plan

of money. of So a home a them specific are board, markets. segments, macro Across one-third lastly, drivers demand some and marketplace, with in year of people lot customers lot there a to of subsegments, myriad governments. are the of sat them of do couldn’t happening spend for pent-up that mean, I some a just the structural, in things specific the And encouraging have market

more across run customers maintenance ramping of has be So ramping we board, up happen. more across expect machine And be customers our the your production. XX,XXX that machine, the active to will the our the you they’ll up to the

part labor customers, So the a more continuing our proposition that, critical. makes combined even value our of with shortage in

VMI, encouragement not customers believe operational within over I consumables us. market will, like the will in excellence – happen. of it to to us. that more consumables, to we’re inventory be markets. sort to great interesting and years share see whether currently in-sourcing But whether of will are that next more for VMI those years, over us believe companies next of We’ll the of the certainly existing couple see existing management the turn our available but win and if I So companies of or customers couple able gives expands that it market outsource

we you By in upon month the of are upon a way, business very I could for one month while continuous So together, put little incremental when this very, every built, thing. just a which we’ve quite month plan Kevin, all come. confident add that step-up other the to has

For crossed milestone recently, we’ve over to an us. important

over very place, savings excited crossing perspective, structural We’re perspective, $XXX so during about every a of we’ve proposition in value large that it’s quarter. cost last infrastructure many just I those. is see and to round position that cost an us. different small. in like just but nice savings about embraced, it’s number, put place in jump customers, technology structural million company a more It’s our is but the big sure for cost were in a dimensions a we Ron, That, number, talk and I’m mean, the from combined a great resonating year. it’s and you’ll round great want also feel really we most – in we an and on from – But important put quarter the result important, the milestone with as part pandemic, with

Kevin Steinke

you of That’s do integration? the did – inventory? more with of And done? the and stand forward part that great. integration, That’s And Is are move we of rationalization the commentary. in what the helpful that you how Partsmaster where Is products. terms it

Michael DeCata

a you’ve as feeling the this Well, come anything to of like is and way we’re all – integration do we’re methodical way if Six Mike, now Sigma is into long systematic DNA. in long is know, about how our part very embraced and fully a us, we again, things. Lean there’s

work a systematic in so down streams. are knocking And we way,

Our parallel and get of managing streams on no incredible job team road. integrated all integration seamlessly the going Partsmaster in large that fully with team the to were number, have bumps XX an in done integration work a

over be think that about, We be through that of are pretty coming us. much the number – of will not talked are work SKUs that the number over. mostly inventory coming will we and through SKUs the I That we behind positioning is

So we’re long into a that. way

all get benefits. we Now the

in there And no the bumps been have so far, road.

has as through optimistic We’re with gone, continue we’re very and the extremely from gone will how smoothly today. much go September we’re it end process that that coming pretty as closer to pleased X process it of has to the as

answer inventory work yes, So is behind much pretty directly – us. the but to your question,

Ron Knutson

add my on top prepared just a But just million payable in quarter. Kevin, I make haven’t in second of you’ll do we this of that, we’ll Mike, to here $XX had remarks. the that have recall that

cash so of a credit that we position goes to that. we that payments sheet with because just of is have aware I be for will want letter we which get effectively a under on that everybody hand make million once away because balance sure are the currently cash already, sitting that our from And really through from cash payment availability getting And our credit the via pay facility be of that and we paid balance close that perspective, will the $XX to on. through majority

exactly reinvest position fund in continue in acquisitions. future the to Mike’s to So I point XX great we we back are It’s up way and the business mean did a year why months facility plus that ago. earlier, we to to ago, a set probably

flexibility feel tremendous and the about So our forward. really strength sheet, it overall financial gives we balance us of going really, good

Kevin Steinke

versus growth that fourth of you Great. quarter? quarter sequential overall on first able the Were kind the of challenging just weather, to due the impact February the in measure to of in week kind

Ron Knutson

it, week. And did we say look that at sequentially, until we would We then stepped I And every back. what is up that Kevin. were week growing

kind but the stepped So in question quarter, of back in do I’ve the earlier aside, I we on week February. Karl’s didn’t entire the that growth terms sequential calc putting of that around mentioned

February have slightly I week of month been for or versus think positive as January weeks, excluding well. that we would X.X the

commented and earlier, we So that week XX good that where of where about – to overall March kind is quarter, April days finished post rebound saw trending. week for still the I and then or we but feel as really even the

there little a bit but quarter, middle in the recapture pretty blip to So quickly. of the seem a it of

Kevin Steinke

Great.

I that’s sequentially based driven, think one quarter. piece up was I Kent you. what And that the been business Automotive just X% you on mentioned think business of of in the the economically of parts miles have more sensitive first the the

you business back what trend? you seems of of kind starting it’s like – of it Or It on a is back path kind get up seems that like nice a really seeing? but are to is that, on is, So rebounding? are

Michael DeCata

it’s Yes, for trend, Kevin, I two not trend think a nice it is reasons. on but a nice

to First, miles other thing have exciting we’re driver but to up, is driven a sort the more even of continue I winning effect that is share. creep will us certainly think as a that

We’re picking up customers.

And market operational service so be product to share thing an thing is no in superior do, environment, the and and market hard we locations. a able winning matter excellence should sales fragmented, but say what and We’re to our easy it’s up a doing and is proposition. in that differentiated our to through an pick our reps

able doing. markets, highly what matter in the fragmented is you should it’s to no grow again, be So market

customers of new But trajectory a very our locations before. achieve. that again, getting to new a win hard – existing to ability very part were But customers. say is, success onto that thing thing big on our within Kent they and in easy yes, makes a existing Now and a to also customers back

as to fronts it both on relates pleased Kent. we’re So

Kevin Steinke

in year-over-year of expenses were Okay. selling up the a first as quarter. Good. percentage sales And

the selling kind that, level of growing of item? expenses higher run selling kind some the think off of sales. factors we first of should throughout that percentage Should quarter move a of kind mentioned year? as normalized behind we about as how or think we selling Partsmaster expenses, about Or this activities, more of that line You the of rate reinstatement

Ron Knutson

Yes.

as a you’re Kevin, So certainly of – quarter, versus that and aware, expense those for of all there’s in piece that variable think we the XX% were I about XX%. is

because would you the is what the that – closely is commission tied it if being that the variable portion strip to of out it piece sales. So most I say of

again, expenses putting versus $X.X we’ve aside year within taken our the in ago. the As line, at comparing QX probably components from expenses, about variable a other you in we’re look million that down QX selling that out

XXXX a first that’s dropped So permanent standpoint. resume end good savings XXXX, as throughout – that from for from year in example, for areas April And where the as But plan those in will year. activities, realized a significant you ago. versus XXXX. XXXX little challenging those compare XXXX, trend becomes pretty really quarter we because from most the versus expenses XXXX I of And Those basically we put a we able through of I for we comparison standpoint. that certainly, travel-related items, the the of have there’s in think are pretty example, at travel-related a look a of, our to the if to we part, forecast sales savings, to were still that were increase versus category more the in go-forward

a into quarters we now lot the future at so move a got, I move we’re as comparisons just up be those we’ve the and low QX. against into side, on resumed as of that forward really that because even more have are think going to again, numbers least So expense and we activities challenging bit QX little

Kevin Steinke

it. of year? have throughout you the drive you didn’t Okay. EBITDA that confidence the you mention, to ability incremental in but XX% to Got XX% margin adjusted goal those still as And I lastly, assume move kind

Ron Knutson

Kevin. Yes,

on So as that XX% guidance Yes, get provided the would past we’ve in well. the comfortable to this with – a And we being operating we’re that leverage go-forward able XX%. basis guidance of of to Ron. is

So sales. many Mike I a ago. quarter really quarter focus driving as important growth think three-part years started heavily strategy milestone it’s a And we this line that organization, this we that. our reflection the mentioned, And the to was on all is driven so by reason that hitting top of

So we’re incremental – our but growth. yes, with – profitability, overall to top-line we’re and driving primarily through that operating sales still yes, leverage improvement comfortable

Kevin Steinke

Okay.

great. Sounds,

Michael DeCata

very distribution picked as in little our And large the Bolt Kevin, that over over we will the we McCook comments, but doing our of will the be generally it probably talked we well, job bit moving been CapEx talk really of step this a and if prepared capacity facility investments, happen quarter a function, size by didn’t be time, has time, size of that we also about mention the facilities. has. But be would a all much well doubling we is remiss center about modest Calgary as store lines doubling don’t great with Bolt doesn’t XX%. increasing a we in along. increasing that

boost As investments, us further our management give acquisition. a of CapEx warehouse will well with again, capacity, tremendous that modest the warehouse small all through growth very investment enabling we’re in making to software, update Suwanee, in conveyors very, systems and

and a about enables excited further get acquisitions, which continue with capacity grow input to you growth, course, we’re to So that through very ability huge our because modest of organically.

Kevin Steinke

can kind handle you you’re additional handle top you how additional what Have you’re of you much can of with sized capacity how adding? handle can revenue that revenue you adding that? and Or on currently Great. much

Michael DeCata

have anticipate throughput certainly, $XXX just some and But of north we’ll that well. say the Yes. I Yes, facility, we an out get our of of capacity incremental – would million throughout within Suwanee we additional capacity Kevin, McCook DC is network. as there

tremendous So us puts These capacity one, tremendous a forward. us, point, the even infrastructure existing opportunity aside, bring gives or investments our it putting to still then us Partsmaster to going growth and in in into allow position. great activities that Mike’s

So pretty – in we’re that equipment for replacing. right example, that’s mean Suwanee, antiquated now I

that that upgrade be nice So will for a as facility well.

Kevin Steinke

hear. good the questions. Thanks for That’s taking Great. to

Operator

back Mike over would remarks. our to concludes to like closing This the conference I session. for turn DeCata question-and-answer

Michael DeCata

paying as today. in to as you. We’ve call the Actions that over in start both result sales XXXX. a initiatives quarter. growth for and pandemic and in We’ve and crossed million will the sales to joining new you great Thank that well are off $XXX took response earnings dividends year, for those growth. gotten achieved threshold we both Thank the in the milestone last a other

of well maintaining cost we recede, expect the growth. new focus benefit our within while impact time that the operations, continue on we’ve this As from embraced to begins structural as reductions the as technologies pandemic during to

again demonstrated most us once difficult have they We to our keep can to depend customers that them the under running. on even circumstances,

unchanged. growth of foundation we’re Our rep addition acquisition reps, growth The through the three-part sales to sales that company productivity building the be and continues is on. strategy

are in do. we everything to excellence growth Lastly, and teammates committed our

look We on our forward to call. and are grateful next to day. Thank Have wonderful with the We commitment you a day every speaking professionalism for your values. you.

Operator

now concluded. has attending you Thank Conference for today’s presentation.

You may now disconnect.

Distribution Solutions (DSGR) 2 May 212021 Q1 Earnings call transcript