GIC - Earnings call 1 2021 | Global Industrial Company

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Operator

Good afternoon, ladies and gentlemen, and welcome to Systemax Inc.

First Quarter 2021 Earnings Call.

At this time, I would like to turn the call over to Mike Smargiassi of the Plunkett Group. Please go ahead.

Mike Smargiassi

Thank you, and welcome to the Systemax First Quarter 2021 Earnings Call. be Vice Chief Officer. President will Tex Officer; call Senior Clark, and today's Barry Executive Litwin, and Leading Chief Financial

remarks by followed will Session. Formal a Question-and-Answer be

understood certain those is available on risk from SEC XX-Q. release due by factors report This XXK and annual The has under to factors, company's property It and Today's the differ copyrighted reports of projected forward-looking number in those may results and could in the include the Inc. and of X-K. the the should Form on discussion under on been form be including quarterly that Form call with a forward-looking website is actual Systemax is company's materially caption, press filed a statements. described statements

the I Barry over call will to now Litwin. turn

Barry Litwin

Thanks, drivers everyone, with Global we profitability of Mike. results, X%. products. an been our the into quarter the today. disappointed finished the gross summer. recovery million QX move our ease through the believe erosion were to for We line with joining of March in as optimistic We've continued Sales margin and for will demand And but new core $XXX our many demand you the about revenue year which an us very branded performance. remain pleased category core thank are performance growing economy, and strong in the of we Industrial signs improving a almost temporary with environment. that We daily first strong sales with top XX.X% solid the Good extended quarter categories, reflect and up average afternoon, and

demand our million products as freight totaling expectations. pressures the positions customers margins This took inventory result of demand offset certain to improved partially below performance for write-down inventory product as of during and of during contributed PPE and pandemic. we a of inventory pricing managed impact a normalization our We by that write-down period the was certain SD&A a ocean fluctuations. we well leverage. The and of was Domestic well is a believe to $X.X service the turbulent

key our needs them. the was in profit of during with categories the to This customer's strengthening a while investment PPE these respond allowed categories urgent relationship small our write-down to past Our fraction us gross year. contributed

The quarter storms significant during affected February distribution by customers our impacted soft and a winter was further both network. which

As provide performance, incurred we've provider. a noted transition on additional associated will to drive additional logistics our with improvement. and and also third-party Tex discuss details freight we impacted events last the to actions call, costs These taken

During an deliver continue across and on the we unrivaled efforts investments the strategy strategic These our will quarter, business. customer make ACE help experience. execute to us

succeed to customers and market Our driving and right And to mindset, and products, a the customer solution, the is advice help customer-centric mission grow. of continuous-improvement and the loyalty. anticipating with we're provide needs

to in XX% digital We advancing pace are orders more in continue all quarter, first of to shift orders our the electronic total up channels capitalize made on growth. e-commerce huge BXB adoption, the than and sales for further as transformation

continue retention. accelerating to conversion increasing and capabilities category core e-commerce improve. leading driving Our growth, sales functionality are teams and and marketing The

and solutions a knowledge, have initiatives highlight number product that of We the provide. underway expertise, we

in-depth During new and engaging articles of Industrial experience. Your the videos, Space' informative virtual room-by-room our tips broad Global and quarter, we range webinars, enhanced a with 'See to website the interactive and from content,

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allowing expand with in believe We of Industrial stock powerful and our we value are And model product distribution Jersey center direct been the filling us a capacity customer and which customer-growth in additional continuing bottle our Global medical provide. and drive and delivery customer position stations, for expansions strengthening will New these outdoor enhance us also competitive pleased to experience is refrigerators. the include products, that's Efforts line engagement the exceptional the which continue DC differentiation drinking quality By line our our fulfillment expectations to redefining marketplace. branded provides significant of e-commerce in products, invest we for to the expansion build product the deep we relationships. of products, and for conclusion, have Recent term. ongoing. to long BXB recent the Northeast. In meet point are and recognition of growth, platform and and fountains a delivery a We've they loyal excellence operations are help customer better

the Across optimizing a focusing managing to grow. infrastructure allow and business cost structure that continue scalable are leverage building operations, to we us the business, on our as we

by partner our nature an and the spirit have customers the we progress to customers. position as and our utilizing to to entrepreneurial to value our exceptional and drive business satisfaction. deliver indispensable additional overall bring I'm opportunities we're an are customer We experience, strengthen excited making

call over now will to the Tex. turn I

Thomas Clark

performance that Thank quarter the of in in more year you, additional will detail, day U.S. as would X Barry. now XXXX selling I period. we like the compared had first the note and to address to in ago our

more grew Revenue growth a in daily of QX across channels growth our year-over-year. daily sales U.S. recorded of the from Canadian up X.X%. It January by points e-commerce, average for again revenue all quarter growth weather grew of sales offset led which Growth than almost growth country. while was saw February, XX% million We was quarter mid-teens X.X% average significant soft XX.X% impacted count, growth winter and daily decline was $XXX.X transaction sales by In average basis with the was over local currency. year. sales by in March highlighted year. once last first in XX.X% a XXX slight which the accounted prior the across by

Sales benefited shelving, product of from outdoor and and lines, including equipment. storage handling, material core rebound the HVAC

increase percentage our We offerings sales. of private-label as total also a saw

and acquire our targeted aligns order disciplined to This customers as with leveraged we quarter data Consumable strategy. the ability sales our of last the higher products recorded business within period to our and pandemic X.X% the and in in as in quarter of PPE execution in the compared sales assortment, drove made supplies, We same up analytics. year. improvement further retain values ACE including first X.X% of sanitizing

distribution across impact facility the the last as carrier a had country, pressures. This for year the margins a of closure year. product on the the quarter profit margin approximately as our availability up basis an $XX.X was offering share Gross increase of combination million, price was a points by was included larger from significant mix well X% partially a XXX limiting Gross driven prior Texas from impact including third-party $X.X to the a favorable factors, of logistics transition of partner, the storms storms ocean a of center. touched certain and the sales million and write-down as PPE distribution a Gross of This new freight continued reflects February also by supplies. and offset large performance of XX.X%, rationalization. our capturing in entire margin winter sections weather-related private-label network. February The

manage to As shifted a customer orders, costs that a the utilize carriers we availability we allow expectations. In carrier quarter, new expedite additional shipping to to maintain delivery incurred partner, long-term customer and will result, and costs separate levels. relationships, delivery non-optimal XPL which directly reroute to to had Global to

While drive both continuous experience. the transition market, LTL improvement the decision to were believe transitional in that of pressures the there this right and inflationary was we customer's

this the the in process of and have the completed carrier network. As transition within are we routing optimizing of week, of the now products

of and We are working a to improve recovery have closely actions our partners freight with number performance. taken

first sequential of near quarter. XPL the term. the costs, and currently pressures, We over have and end improvement congestion prior the elevated LTL freight new remain freight which the margin year include relationship, the availability quarterly recovery seen quarter some will expect impact in the container of believe We second in port at

leverage higher our million or margin proactive continue XX.X% and SD&A sales, our Improved sourcing capture point a We a as approach of leverage actively with price. Selling primarily volume net cost gross to on and to channels, $XX.X sales be in distribution margin marketing year. basis will grew. optimization profile, quarter as percentage and driving XX focused remain improvement well the of fixed administrative last manage as for from continued spend spending as reflects sales

These conversion million, to initiatives, investments margin year, $X.X invest and priority, improvements basis from is managing during the in first last including rates. Operating period e-commerce optimization help income our retention operations cost project. will structure from and XXX While drive and we at us was points declined a growth year's continuing customer in continue quarter. long-term our will operating throughout the always

of write-down the $X.X operating of would have income or inventory costs, sales. million the been X.X% Excluding

$X expense expect first And expenditures million $X the of we $X $X.X was expenditures and in in amortization quarter range to quarter were Capital Total depreciation the million. the for capital total maintenance-related from quarter. Jersey $X.X million. foot square in capital of the as continuing investments center. flow expansion was comprised primarily of Operating operations as New million, XXX,XXX cash to well a our distribution million related XXXX

balance our Let me sheet. now to turn

ratio current X.X:X. We liquid strong of sheet a with have a very balance

As credit XX, our had million cash, we X of and $XX debt March $XX.X of facility. in million million $XX.X approximately of availability

previously position the within our a from million, reflects disclosed Our discontinued contingencies of operations legal matter. $XX cash net receipt of

plan our dividend. execute on maintain fully our and significant strategic fund to We continue flexibility to quarterly

Directors our of the a and our dividends share we quarterly quarterly stock, As regular in $X.XX continuing dividend of anticipate a result, declared future. of common per Board

prepared questions. concludes remarks. call the This our please for open Operator,

Operator

Our Instructions] with first comes William question Merkel Blair. Ryan from [Operator

Ryan Merkel

questions me. of couple A from

margin. freight was First How an like impact several that? negative. lower much It off, drivers you gross biggest sounds was the of the listed of margin

Barry Litwin

about, areas cost XPL brand to that long-term to us as the around on customer terms talked it's few relationship our in period an good in experience. a Ryan, significant you. freight in that well we we overall our A benefit as optimization has That of brought hear relationship new. primarily improvement overall

can and service better levels direct So costs our a managing also through term we believe long job managing relationships. carrier we a better on do

due that. had we've saw So that certainly completed costs and increased some to transition,

through period. costs LTL our in the elevation some saw also We

So which lot impact and mitigate. ease and to impact us, many throughout able of summer, a those side, the optimize of will of some those port to the been to market given congestion an the terms But supply with that. of in continue as the factors think networks, we and to that around we're around widespread certainly carrier we've availability, kind well. reports continuing constraints And container of in given chain had continue

Ryan Merkel

back the mentioning, what the items been add first I That's in Okay. if one-time that helpful. margins had guess I quarter? would gross you're

Thomas Clark

Yes. there. I'll Barry, in jump

So out Ryan, obviously we came inventory identified of XXX the that points basis adjustment.

was that So write-down. a

a of parts, discrete there Barry number Obviously, around balance one-time profile. enumerate of didn't all typically So balance. events, we the highlighted, that's The freight moving are, a our event. as but

While we is that mitigate thing those believe can that think pricing Obviously in costs about nature, the costs. when or one have inflationary we obviously even you market, are very increased important. transitional those in LTL you

location. being that So more optimizing the one do carriers on manage thing to ability freight as right side much pricing have able we forward. to as And get really network the that to the right going well your in that's

as think into the see early of hard that sequential improvement that those one-time months. do some move we where or it's through now. already of at we specific while quarter the started part the we to ease to So nature identify they coming improvement we're the will of And from costs,

Ryan Merkel

more could I one sneak Okay. If in.

in to sounds there'll margin sequentially, lift the the details you into little provide sort think some seeing small then in be of Can Is half. way more It on gross recovery sort the you're XQ. year? list cadence a into right about So bit second XQ of and it? you the get more as a maybe through like that

Barry Litwin

say right, would that's Yes. I Ryan.

about have we as think factors. we start to easing, several talk I the

will optimization XPL helped So start we improve. think LTL, to really the

margin freight sequential we quarterly seeing as the improvement. we the through And had XQ as see On well. improvement are full side, Tex mentioned, certainly

that are area improvement on So through taking fight the major to which help one that continuing is But congestion through we're obviously but start actions see the those container the to think of to I we're availability, improve. working optimization piece, we'll some areas think I port and on. we're

Operator

comes Lebiedzinski Sidoti Our Company. next from & question Anthony the with

Anthony Lebiedzinski

core sense by So first your first your can at you non-pandemic looking how us driven was like much the quarter, revenue give growth as a merchandise? of to

Barry Litwin

you. When overall the from improvement Yes. in definitely core to take overall good we Sure. mix. you our in a it's growth Anthony, hear saw look at quarter,

a been everyone has change PPE saw the bit where XXXX profile So quite of relative and to safety. that

the handling, So with in our we've supplies. of been HVAC and particularly growth the pleased and core storage products, overall outdoor shelving, material

the back, for think I those and didn't. of to are economy coming there companies are So obviously growth, signs and as they starts looking products, come whereas clear back

we'll we're of of to core sale on the higher be a throughout what And see going continue that's So balance certainly growth relying that continuing. to year. volume

Thomas Clark

Yes. And Barry, of me bit well. that add little to let color a as

we've X.X% about the we up quarter this year. little first Anthony, year last sales identified So as X% kind as those did throughout last of that They PPE the in quarter. the highlight about versus made over same of to supplies a X.X%

saw that decline the we to both saw growth February And PPE as actually, winter little reverse on based which our mean would with core January in saw those a do March as highlighted, we accelerate the we that definitely quarter. upon continue aggregate year-over-year, through But supplies small supplies we And slight a in moved those actually in math. bit of storms. increase mid-teens So you increased. and in engineering decline we a can

So…

Anthony Lebiedzinski

And provider, the in terms we new of then be to quarter logistics costs second should transition the that costs any was wondering there if in the of. aware additional just

Barry Litwin

yes... I say, would

Thomas Clark

No Yes. ahead, go -- Barry.

Barry Litwin

Yes. ahead, Tex. Go

Thomas Clark

Sorry. I'll take it.

Anthony. Sorry,

really mean, transition, our in transitional aligning did about recently I'll as we of new I this call costs, yes, on as think So carrier we week we the completed terms as relationships. it the actually --

that continue was level. time we new relationship, optimizing some the we're obviously was that moved our our some There increased through there take relationships, in costs costs, the costs. optimal new as have carrier are were locked So will there duplicative an ones that to transitional at Those we network, -- some that with get period. the now to obviously

compared So move forward. at first a yes, to think those muted into to will but quarter. that do expect we we And we level the continue in improvement as second quarter, see the costs

Anthony Lebiedzinski

Got it.

Okay. questions for And X more me.

better wanted As sense to about is -- know get a has I that. write-down pandemic-related just took far to current write-down for how much took now, of sense a just wanting you inventory as assume your position I get as -- your everything that that needed or products. to inventory you you the to,

Thomas Clark

there. in jump I'll Yes.

reserve value. write is So yes, down if you think, take you Anthony, based the realizable on inventory obviously net an that

and a little the there. getting in yes, believe accounting at the the is. inventory the on on at But of so sell Sorry, look through you appropriate we value what we product sell price, that level realizable look determine of

possibility thought period, did any there not one we we time. was in isn't there'll necessary based obviously that another at the that yes, QX inventory believed our we through the we future, amount we the be -- was on but reviewed, identified and appropriate the that we the say take and levels That's appropriate reserve. as So close, closing to move of what

Barry Litwin

too… thing, Yes. right, And Anthony, other Tex. the That's

Anthony Lebiedzinski

Got it.

last my And question... Okay.

Barry Litwin

out just look No. of the as part was saying, the towards I middle year… we

Anthony Lebiedzinski

ahead. Go ahead. Go

Barry Litwin

to back opportunity companies No. they was those as just start to add I product the continues going return, in for the nature that still come as pandemic there's and that to return. facilities in exists economy

need So periods. kind I those of get us to what through we've we assessed think

Anthony Lebiedzinski

Got it.

rate what tax in had came for we expected. the Okay. then last question And me, lower than

about year. wondering the we rates how tax rest of think the Just should the for

Thomas Clark

Yes. my question. That's definitely

of benefit. in combination So the stock largest it option factors to of yes, being a lower came definitely at expense contributed that, level, impact

Obviously, the in kind that overall of were of level. to given that level, were income that of exercise contribute the the value it did and that that options recognize you exercised Now net QX. options on exercised the

sales saw, also you our obviously grew XX% mentioned daily on basis. an -- Canadian, We who roughly we Canadian business heard our average

With to NOLs a some we're business tax able balance with the there in sheet, Canadian operating -- its there. benefit was

is could be still performing -- to model that be still how term we tax rate our that run, But model. short well, keeps would XX% tax think would bit favorability forward. to rate if But Canada overall of tax under a we do the -- of code right again, in internally. little to the in the very right the So XX% going of is kind in there be XX% long XX% current the kind XX%

Operator

This question-and-answer Thank concludes our for session our today. presentation. and today's attending conference you for

may You now disconnect.

Global Industrial (GIC) 4 May 212021 Q1 Earnings call transcript