Q2 2020 Systemax Inc Earnings Call

And welcome to the system at second quarter 2020 earnings call today's call will include formal remarks from very little in chief executive officer and tex Clark senior vice president and Chief Financial Officer. We will not be hosting a live Q&A session at the end of today's call. If you should have any questions on the results, please contact the Plunkett group or systemax contact details can be found in a release issued today, and it's just the max.

Thank you.

Today's discussion may include certain forward-looking statements that should be understood that actual results could differ materially from those projected due to a number of factors including those described under the forward-looking statements caption risk factors in the company's annual report on form 10-K and quarterly reports on form 10-q. The press release is available on the company's website and will be filed with the SEC and 1/4. Okay. This call is the property of and it's copyrighted by System. I think I will now turn the call over to mister Barry Lynn.

Thanks, Mike. Good afternoon everybody and thank you for joining us today the health and safety of our Associates their families and our customers remain. Our first priority is we continue with an essential business to support our customers. We had a terrific second quarter highlighted by accelerated Revenue growth of 4.3 and 6.4% in May and June respectable this recovery largely offset, the significant declines recorded early in the pandemic through much of April as we completed the quarter down only 2.6% over last year. I know the positive trend has continued into July Revenue performance was driven by growth and PPE and expanding pandemic product line and sequential monthly Improvement in Co nganh product lines as businesses began to reopen we generated year-over-year operating leverage by expanding gross margin through a higher concentration of private-label products suck.

Disciplined approach to managing expenses overall. This was a significant accomplishment given the current operating and economic environment.

Our teams have done a terrific job of executing our return to work plan and generating momentum with our strategy to accelerate our customer's experience. This includes initiatives within our a strategy game or accelerating the customer experience as well. As our restore return rebound Campaign, which launched in April Estates in businesses focus on reopening our ability to help them rebound wage position Global industrial with customers as a leading source for education and guidance on pandemic related Solutions and supplies as a reminder restore returned and rebound provides guidance on both room by room and End Market best practices for addressing the challenges of the covid-19.

this proposition

Should enables our sales force and digital platform to engage customers with a timely and practical discussion that not only covers PPE and related product but our broader offering of facility Solutions as a result. We are deepening relationships and establishing our position as a true long-term partner to our customers are sourcing and supply-chain continue to work tirelessly to suck high demand products as many of you know, Global industrial has a long history of providing high quality private label products as a key pillar to our a strategy we continuously look for opportunities to strategically expand our product offering in both emerging and existing categories the extraordinary demand we've seen for PPE and other covid-19 products provides a great example of how our team stepped up to the place to meet the needs of customers as the pandemic hit the supply of national brand p p e was extremely constrained and remains. So today our teams reached out to current suppliers and establishing.

Manufacturing relationships which allowed us to launch PPE and cleaning products under the global industrial brand the ability to Source fund and expedite this high-demand product highlights our sourcing capabilities and the nimbleness of our company as we quickly reacted to shifts in customer demand.

Overall, the business is operating effectively customer acquisition activity remains healthy and we've been pleased with the continued strength of our platform. We believe our e-commerce Center Foundation provides a competitive advantage that differentiates us from retail Focus Distributors. We're making further investments in both digital and marketing capabilities, including new resources and talent which will further accelerate our digital capabilities and drive sales efficiency over time in conclusion. We remain focused on our multi-year strategy to accelerate our customer engagement generate operating leverage from current operations, Investments and Champion a stronger customer centered culture across our entire organization. We're optimistic given the opportunities we're seeing is businesses reopened. However, the economic environment remains and further disruption is possible. If our customers continue to work through the effects of the pandemic

We are pleased with how we have managed the business and will continue to make strategic Investments strengthen our position for the future. We are well-positioned with a strong balance sheet and maintain significant financial flexibility. I will now turn the call over to text. Thank you Berry. I will now address our performance in more detail and would like to note that we have the same number of selling days in the second quarter of 2020 as we did in the year ago. In the second quarter Revenue declined 2.6% on a gaap basis and 2.4% on an average daily sales costs and currency basis over Q2 of last year revenue is approximately 242.1 million dollars with the US declining 4% Well Canada grew 39% in local currency Asbury noted. We had an improvement in Trends as we move through the quarter and a revenue growth in both May and June. We have seen strengthen the sales by buying a new or activities healthy and are open sales backlog while remaining largely unchanged in value from the conclusion. Yep.

First quarter is still elevated.

significantly from historical levels

Sales results largely benefited from the Investments we've made to accelerate the time-to-market of PPE in order to meet the rapidly changing demand profile of our customers early in the pin deck as we move. We focused our marketing efforts and pivoted the conversations with our customers to the broader facility solutions. They required to open safely and disport. They're ongoing operations in the aggregate as business office began to reopen our core product lines recovered the mid-single digit declines in June and sells a pandemic related supplies remain strong gross profit for the quarter was 84.8 million dollars down from eighty six million dollars last year, of course margin rate was 35% up 40 basis points from the prior-year and 130 basis points on a consecutive quarter basis margin of birth in a. Was primarily driven by mix shift two in stock and private-label products and the higher margins the sourcing channels provide as compared to products fulfilled via Dropship model.

We were pleased with gross margin performance and remained focused on maintaining our gross margin profile. We may see continued margin variability due to the current economic environment changes and mix as a result of our customers in a strong demand of PPE and other related products and historical seasonality selling distribution and administrative spending for the quarter was sixty four point seven million dollars or 26.5% of net sales and twenty basis point increase as a percentage of sales from last year power sdn, a ratio reflects, the impact of lower sales on our fixed cost structure partially offset by efficiencies in our digital marketing efforts as well as the benefit of a reduction-in-force action taken in April gaap operating income from continuing operations was 20.1 million dollars off a slight Improvement compared to the year ago. And operating margin improved Thirty basis points to 8.3% Total depreciation and amortization expense in the corner was 1 million.

Capital expenditures for the second quarter or zero point 1 million dollars and we continue to expect the 2020 Capital expenditures in the range of 3 to 5 million dollars primarily comprised a maintenance package Capital. Let me now turn to our balance sheet. We have a very strong and liquid balance sheet with a current ratio of 1.7 to 1 as of June 30th. We had approximately fifty eight million dollars in cash of violence one hundred twenty one point eight million dollars of working capital essentially, no borrowings and excess availability of seventy one point four million dollars under our our $75 credit facility in the second quarter. We repurchased 50,000 shares of stock at an average price of $17.65.

As of June 30th, we had approximately 1.5 million shares remaining under our current repurchase authorization. We maintain significant flexibility to fully execute on our strategic plan continue to fund our club David in and successfully navigate through the current market as such our board of directors has declared a quarterly dividend of $0.14 per share of common stock and we anticipate continuing a regular quarterly dividend in the future. This concludes our prepared remarks. If you have any questions about second quarter 2020 earnings, please contact me at the Plucky group or investor and media relations adviser or team directly contact information can be found on their earnings release issued earlier today. Thank you for your continued interest in systematics.

For calling France has now concluded. Thank you for attending today's presentation. You may now disconnect.