Q1 2020 Earnings Call
Good afternoon, ladies and gentlemen, and welcome to the official your hardware first quarter results conference call. At this time note that all lines are no listen only mode.
Following their presentations, we will conduct a question and answer session, which will be restricted to analysts only if at any time during the call you require meet its assistance. Please press star zero for the operator.
No. That's called is being recorded on April nine to 2020.
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Yes. He thank you good afternoon, ladies and gentlemen, and what clunky English I, just want front scope for the first quarter and that figure each one of my 2020.
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As you say no that some of studies issue include forward looking information, which has provided the usual disclaimer.
As you pointed you know if they're not shortsighted.
And you will the current circumstances this morning.
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You know called then should strict guidelines issued by <unk>.
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We respectfully ask all shareholders to Ghislain for my founding the meeting in person that's such Oh, So there's that sponsored by voting bike potency.
And the other possibilities to asked a question using two options made available to them.
As we mentioned you know a press release you should do we continue to monitor the call. Good 19 situation closely socially and to comply with all applicable health and safety guidelines issued by Oh governance opportunities.
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No. It's this quarter ended February 29, we're very pleased with all growth of 10.2% in sales.
2.9%, EBITDA and 18.4% in net earnings attributable to shareholders.
We benefited from the strong contributions although acquisitions.
To a positive internal growth you know a main buckets segments.
I'm pleased to see that they'll assisting innovation and acquisition strategies combined with almost good development initiatives are really show this concept and the depth of all product lines positively impacted the quarter's performance.
Furthermore, during the quarter, we make treat new acquisitions in Canada and the U.S.
That meet all growth expansion criteria and give us access to new geographic markets, while strengthening our activities in markets, where we will honor the present.
Did you acquisition other Fortunately 16, the on dollar in sales and then maybe it's just as well as new customers products and it's the keys.
Yeah, Nick what they acquire on December 29 thing, which serves a cost no big it's kinda didn't manufacturers Michael.
Also I called out in last December which serves a customer base with retailers in Canada and the U.S.
And the less so that's what I call your on Ciber to determine what school, which shows mainly manufacturers and operates two recent does enable high school High school, and South Dakota, giving us access to these new geographic market.
As we always knew what would create sales synergy would be you acquisition to all Nashwauk, which now comprise 82 centers in North America the.
To conclude this overview you done in Fourq two particular, she just current cash position and mitigate financial impact likely to resolve some the club <unk> 19.
Crisis. This morning, the board of directors have you looked at.
It doesn't look to declare a using the doesn't tell the first quarter of 2020.
Oh, it's not one to go through the financial highlights of the first quarter I would come back with additional comments.
The one.
Thanks, Richard first quarter sales reached 249.4 million up by 10.2% of which 3.5% from internal growth and 6.7% from acquisition.
Comparable U.S. exchange rates to 2019 sales growth would have been 10.6%.
Sales to manufacturers stood at 210.5 million up by 9.5%, 4.8% from internal growth and 4.7% from acquisitions.
In the hardware, we theaters and renovation superstores market, we achieved sales of 38.9 million up by 4.9 million or 14.4% of which 18.5% from acquisition and internal decrease of 4.1% caused by the decrease of sales to retailers in the United States.
In Canada sales are known to 256.7 million up by a 9% of which 3% from internal growth and 6% from acquisition.
Our silicon manufacturers reach hundred and 27.6 million of by 8.4% of which 2.2% from internal growth and 6.2% from acquisition.
That's for the hardware retailers and renovation superstores market.
Sales stood at 29.1 million up 11.9% of which 3.7% from internal growth and 8.2% from acquisitions.
In the U.S. fearful 70.3 million in U.S. dollar up 13% 5.1 person from internal growth and 8.2% from acquisition.
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92.7 million in Canadian dollar an increase of 12% and represented 37.2% of the total sales.
Sales of manufacturers reached 63.6 to 3 million in U.S. dollar up by 12.1%, 9.8% from internal growth and 2.3% from acquisitions.
And the hardware retailers and renovation superstores market sales grew by 23% of which 61.3% from acquisition and 30 or 38.3% of internal decrease caused by higher cyclical sales and initial sales made last year.
First quarter, EBITDA reached 24.9 million, Oh by 3.9 million or 18.9% over the first quarter of 29 team.
Gross margin was maintained and the EBITDA margin improved due to increase in sales and continue control of expenses and stood at 10% compared to 9.2% same quarter last year.
[noise] amortization expenses for the first quarter of 2020 was up 1.1 million due to increased amortization expense, resulting from a were leased as business acquisitions.
First quarter net earnings attributable to shareholders totaled 11.8 million up by 18.4%.
Diluted net earnings per share rose to 21 cents compared with 17 cents for the first quarter of 2019, an increase of 23.5%.
First quarter cash flow from operating activities before net change in working capital balances amounted to 20.1 million or 36 cents per share an increase of 19.1 person.
[noise] for the first quarter of 22 any dividend space to shareholders amounted to 3.8 million up 3.8% over 2090.
We also invested 26.5 million of which 24 million at 43 business acquisitions as mentioned earlier and 2.4 million for new equipment to improve and maintain operational efficiency.
The shop.
Thanks Glenn.
In this difficult time will tell refused to take all appropriate steps to ensure the safety of all employees, so cars customers families and visitors what continuing so bolting old customers.
In this regard we make sure that we comply and exceed all good guidelines from government authorities.
Cool didn't 19, I assume you sent back Oh, no business in most jurisdiction.
Oh, no open it shouldn't except treating Quebec go to you as a central services and comply with local jurisdictions.
We remain active wherever appropriate and that's why I.
No I know the organized <unk> activities in order to focus on essential services with most of all looking shouldn't still being open to show with Oliver <unk>.
Yes, it was number of resources.
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Didnt put anything on the strict procedures intended giving you my sometime between individuals although sometimes you some procedures.
Much sales were strong in the first half, but we started to see a decline toward the end of diamond and based on the last few days trend.
Considered it doesnt sales negatively impacted by approximately 40%.
Resulting from a from a declined 45% Canada.
I'm, 30% in the U.S.
Most historically.
We are experiencing a declined 75% in Quebec City beside you don't you.
25% in with some kind of though and 25% yeah. It sounds like audiences.
We took important and difficult deserves to adjust the cost structure accordingly antibody workforce reduction it did use hours.
On the call People's your offshore locations.
We also.
He was brought up they don't see my see you wouldn't really sounds like 25%.
The amount of grew by 20%.
We currently as well, but 600 employees working from home thanks to all IP development.
Well it was a noisy.
And we wish you wouldn't cash flows on the daily basis. We are currently I'm not I mean, all government support program that that queued up like to be sure you the future.
More than ever we make we make so to keep all business model well adapted to the needs of our customers in Canada and the U.S.
Thank you need they'll need and not speed than expectations, especially in these difficult bucket conditions.
Keep in mind, that's all network of 82 interconnected distribution centers.
Combined with all transactional website, which is also it's definitely otherwise to shift from every location of course, North America, the very short period of <unk>.
You should use that you either concept still based on all diversify a unique but upswing. All you spent is multi access service.
Shifting to online. So this with the show you that and the strongest species expecting a little too.
Oh strong balance sheet and cash position will certainly help us to get through these difficult times.
Thanks, I don't want.
Now I'll be happy to answer your questions.
Thank you.
Ladies and gentlemen, we will now take questions from analysts.
If you would like to ask your question. Please press star followed by one on your Touchtone phone you will hear athree tone prompt acknowledging your request and if you'd like to withdraw. Your question you will need to press star followed by too and if he using the speakerphone. Please lists the handsets before pressing any keys. Please.
Go ahead and press Star one now if you have a question.
And your first question will be from <unk> Patel.
See I VC capital markets. Please go ahead.
Good afternoon, Richard Thanks for those that preliminary cigarettes I missed that some of them could you just said just remind us again, what you're saying you're quarter to date.
Aggregate sales were tracking.
Yeah, we try to actually we took all season, that's five days to me true that's when that I had the trend the very busy current Trent.
As I mentioned, all sales decreased by 40%, it's a and to support at 45% in Canada.
30% into in the U.S. This is basically the situation that seems to be stable five days, that's about five stages that we got the you know we described that I use it.
Okay, [laughter], if I can add the I mean I'm liking it like Richard said March March just started very strong. So why are we started to see the decline more towards the end of the month.
And also it's important to mention if you look at all source water.
I think we have started.
It did this year that in a very very strong matter with their sales increase in deposits increase that's we've seen unfortunately, a their credit 19 is changing anything but.
That's what's supposed to be a very strong strong year for <unk>.
Okay and richer are you seeing.
Your your retailers sales how are those holding up because from what we're seeing seems like the big box stores or are actually performing a bit better than the rest of the market.
Yes. Good question, we see a decrease of all said by about 40% there as well, but we think that that 40% should remain stable. So.
Not the least stable also the constant <unk> what should be both of those accounts is really a very very safe. So basically oh, we what we see I think it's probably the worse, yeah I think the the bottom up the barrel. They got thing to say that's why we tested it maybe we can see some some improvement in the future weeks.
Depending on the government's decisions.
Okay <unk> Richard I appreciate that 40% figure. That's that's helpful. <unk> I'm not sure if you're able to parse out it maybe how much.
How that figure would vary for your residential versus commercial end markets.
Well, let me see I actually it's a it's rather stable it sold them out get a thought that's where the money customer that also so I still walking because the at the there for the essential services Oh of course I Wonder if you will do you do you any parent roll things did you pay let's pick old due to difficult places, we said that I've emergency it needs a you see another part of being sold equity for the.
But they shouldn't the employees in the goal is to be stores on that and how do I saw it everywhere. So we we basically sell those products, we actually we sell a lot of product that are on T or whatever the at the Oh, you called that don't antibacterial products.
Very popular actually it's not that'd be sales, but it does create some sales on and then you have a crossovers are working on that or that type of projects.
And Richard if that 40% if we assume that that's largely a a volume figure are you expecting that well see some product pricing deflation that could kind of add to that or have you seen any signs of a product pricing coming off.
No we don't see that actually getting Oh I think it's also important to mentioned, we don't 75 degrees and you and we see all showed that we are on venture we actually it is healthy it's issue because we usually please the first quarter over the years they use a low quarter in terms of sales. So we always prepare the department said.
To make sure that we have this the inventory for the second quarter. So all the product needed that's where the focus it. Although you did the second quarter already in place on the ocean coming so basically we it even joint venture. We I think is important what's going to happen that's totally that thing that's more than two once we don't know, but so far.
Any simple tend to be secure we'd good inventory.
Okay and I I just want I was just wondering if you could comment on how you're out you're managing your receivables right now and.
Hi, any any you know data points you might have there.
Yeah, we're basically we're managing the receivable at a account by account to account. So we've we it's clear without were credit officers, that's where we're not taking additional risk with a with credit limits. So oh, we are a we are in vivo involve on a daily basis and.
And we make sure that we we monitor the accounts for accounts receivable on a err on the region by region basis. So so far so far we didn't we did not see any any deterioration in terms of of our day sales outstanding. So what's we're looking at it on a daily.
Bases as I said, so so far so good but obviously this is this is definitely a risk that we are are we are taking very seriously and monitoring.
Great. That's that's all I have no I'll get back into queue. Thanks.
Thank you.
Next question will be from Zach ever said National Bank. Please go ahead.
Thank you very much congrats on the quarter.
Thanks.
So a lot of you made your questions have been asked already but.
Given the end market uncertainty introduced by the attendant make what are your capex plans for the rest of the year.
Hi, before the <unk> before depend they make it was I too would I've been a between 10 and 12 million. So obviously with everything that happens the maintenance still needs to occur, but we're going to review in the a and make a any capex demand. So.
It's difficult to answer what it will be exact but it's going to leave for her is gonna be lower than 10 to 12 million.
I understood until it capex trend and the dividends suspended for now should we expect an activity to also be passed.
And then the activity or will there will always be part of our strategy. So.
We're always on the hunt.
We should not you should not be it's a good deal.
I actually think that due diligence on the ground might be a little bit difficult at the moment.
You're you're exactly right, where we are on the hot but.
In closing in closing I'd do they feel to it as after they would be obviously very difficult, but but the current environment will probably bring us some more opportunities in the future as well so.
So we'll see.
Perfect.
Then moving onto the hours and salary reductions at one wouldn't degree are we looking at their <unk>.
Our reductions and then he's got to salaries.
I can say that the over 50% of all employees have been touched by either a sample really off a pop time under the usually then you relation.
So basically I think it's a we've done oh.
What I said what has to be done and ER. Unfortunately. This is is that must be funny moves to make but we did not have too much choice in there and I think the next step Oh, So just trying to rise carefully the opportunity that the government support programs can bring to US I think that's one and steam would be working on that next week.
And see whats weekend debt, what do we can guess on that because retaining all cadence is very important you know a any company walk swelled because oh, the it's Steve and his good employee. So basically we we pay attention to that end, we pay attention to our people and we're going to you're going to we're gonna see a the best that we can do too.
Pain and to make sure that Monday business going back all automatons, Oh, so back with us and happy or at the same thing so, but we follow up that really closely actually we have a cash position which is positive.
And we will try to maintain that then do all bets to again not repeat myself to retain all tied into the long term.
Thank you very much in one last one from me you spoke a little bit to inventory in the supply chain.
On the 60 days on the water, but looking looking longer term, if we do see a longer duration shut down what kind of actions can you take to deal with international interruptions.
Well, we got canceled something some others, we can gunshots all forecast actually we we again mystery that is coming will come that's it but we do before we as you order we have to make sure that we we address all focus I called each well whatever the global men will with how do we believe the.
Yes activities that will take place.
ER visits Lee I think the best interests I won't go Goldman Youre when the a deep made some changes to make sure that the small on tractors or the manufacturers of cabinets or whatever.
I'm going to be back to life, because that's what he.
There are needed in this exciting and you look at <unk> and kinda down to U.S., 80% of of customers a small.
Manufacturers and these guys are a they need to ask I'm walking to eat you what you need to survive underneath the need to move forward. So hopefully the government programs, where you would contribute to a full davenport better start.
That's very helpful. Oh, and then just one front one we're seeing what looks to be a 3.6 million O <unk> million dollars lift to EBITDA from the implementation I first 16.
I would say that that's accurate and you think that the levels stay fairly steady for Q2.
Yeah actually it's a the impact on on the EBITDA is a in and the amortization and also a in the interest then the via the total the total impact is 4.3 million dollar a if you compare Q1 that this year versus you with or before.
I FRS 16, so the impact is 200 and a in 28000 dollar. So the the total in fact, the estimated total in fact for 2020 of the a I as far as 16 implementation is approximately a million dollar on the bottom line.
Thank you very much I'll leave it there.
Thank you.
Once again, ladies and gentlemen, we are taking questions from analysts. If you do have a question. Please press star followed by one on your Touchtone phone.
And your next question will be from John Mills X at Sea CNO. Please go ahead John.
Rocard is there any risk that you now have a over ordered with respect to inventories given you know the sales trends you mentioned over the last week.
You've been doing if that would be the case that we would be a b <unk> C. D. L mean things we need it. It is most space to fulfil stuck those are the those products that would be in excess of all needs, but I don't see that was a paul and because the problem that the part of the product that we sell cells that are no across North America.
That does he doesn't have the question, where I don't think we have Louisiana. The walking does this would come back and go until the order.
The inventory my cost some some money to us maybe me, but no cost new wells in products temporarily doesn't that's causing fortune.
Nothing seems to want that inventory, he but but the I'm just curious how do we would be due to the Astoria. We are what you did that things that's for sure that we hold out it'd be calling out here.
But I don't see that as as a big part of them that could be a human Gonzalo that see it fives. Then you don't already excess of an entry aren't when I don't think that that good or ours, a lot that in terms of cash flows and I think I'll be aware warehousing costs. It does it that doesn't come from fortune and ER, we don't.
That's true that these all dirt is good and century. These I would put us that they'll need to buy a although part of <unk> North America and don't forget that if we have a potent Michael but if there was also have a problem.
We don't have enough and bench really for you could be full.
Templeton for all of us throughout the.
So I wouldn't entry.
Any any concern that you might the inventory itself may be overpriced, I mean, we're seeing deflationary pressures Bolton resins and in various metals and I just wondered if you thought there could be a potential impact on margins going forward. If we see these deflationary pressures on the raw materials continue.
Yes, you're right there that we could be in pet and back to back that by how much I don't know, but again all the industry. We have the same problem I I guess the Knicks, although that has been a place for the future quarters would be I thought lower price, yes, Tom poorly almost Jim could be affected by Paul Doug that we have paid at the right price of that.
And that we bought it but that you see all doing all the same product it would be at a lower priced yes, that's a that's a risk.
How much or what is the Empaque exact same dollars I don't know.
But the other stuff and then back yes.
And I know you deal with a vast array of customers from very large to very small any concern in terms of bad debt, particularly with your small and medium sized private customers.
Yes, I think we won't have that concern nothing I'm 20 steam when you talk about very closely first of all good see that 15% to 20% of assays off would there be theater, that's why the safe we sit on the North of course noted that seem to active basically the they make good money and if it a bit as well and the other costs, where that's well go to small I wouldn't.
It's one complete the how he sees that but did the small customers are you thinking individually I look big risk, but overall, though yes that queued up as I just don't go bad debts. We don't know we're very conservative Oh, that's what I will let you compete that because you have the old all the numbers in my.
Yeah. We're we're working we're conservative on beyond a under bad debt probably on the provision certainly, but oh, we have like I said the earlier, we we monitor the is the accounts receivable on a daily basis, we we make sure that we Oh, we do not increase their risk on non credit limits.
We encourage the a great payment by credit card. So there are many things that's where we're doing and we're monitoring without were with our credit demon.
But as of today as we speak we haven't seen.
ER and I I deterioration of the Oh the of the credit so.
As we speak but it's gone as if if there if there is there will probably be one it's it's going to be in the next month or so.
If I may contain with it where you find me compete with the yet, but the public Wednesday that we sell a actually all customers. If they have some business are they come back in business I think it's good for them to pay as you should use because they they need all products away.
No go to out of any fill up all that you would have to put a bill that doesn't help yeah. This is what we see that we've seen in the past and that should be the case again.
I think it's a good move for customers to pay the figuring although to have the Indian and victory that they will need to continue their business.
Yeah. Thank you very much messy bolzoni.
Let's see.
Thank you, ladies and gentlemen, as a reminder, if you do have a question at this time. Please press star followed by one on you touched on the phone.
And currently Mr. law, we have no other questions. Please proceed.
There's no more questions. Thanks again, it's always a physical talk to you. Thank you very much for all your good questions on that wish you a good held stay safe until that well go next meeting for the next quarter. Thank you very much if you need to caught us where there. Thank you.
Thank you Ms., Sheila ladies and gentlemen, this doesn't deep conclude your conference call for today. Once again, thank you for attending and at this time, we do ask that you. Please disconnect your lines enjoy the rest of your day.
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