Q3 2020 Systemax Inc Earnings Call

We are looking forward and continue to adapt to the needs of the market this fall. We launched The Ready Set Campaign, which is all about empowering customers to protect their businesses with pandemic management sucks helping them prepare for the fall and winter season and supporting their growth plans in 2021.

The week of October 12th, we leveraged the readyset campaign and held Global's Industrials annual National customer trade show ready said show the event was virtual this year in an incredible experience that allowed us to showcase the breadth of our offering and deep product expertise. It was our largest show yet as we connected more than 1,500 customers with over 150 vendor partners and our entire sales force in conclusion. We had an outstanding third quarter and I'm proud of our employees in the entire organization. We believe we have a lot of opportunities ahead and we've been able to thrive and grow despite the Economic and Business disruption caused by the pandemic.

At the core of our success is a focus on the customer, which is delivering results across customer growth quality improvement sales performance optimization and private label expansion. We have an exceptional differentiated go-to-market strategy that highlights the value. We bring to customers every day, and there's allowing us to build deeper longer-term relationships. We have great real men in the business and are currently on track for a strong finish to the year. I will now turn the call over to Tex Clark

Thank you Berry. I will now address a performance in more detail. It would like to note that we have the same number of selling days in a third quarter of 2020 as we did in the year ago. And a third-quarter revenue grew 7.1% over Q3 of last year revenue is 285.7 million dollars with the 16.1% while Canada grew 40% in local currency growth was fairly stable as we moved through the third quarter and has remained in the mid-teens in October. We recorded double-digit growth across all sales channels led by e-commerce which accounted for more than 55% of our transaction count in the quarter bought a new customer acquisition was very healthy and are managed to sell theme expanded average order value as they deepen relationships with existing accounts sales performance continued to benefit from Investments private label offerings and a return to growth from our core product lines, including a solid performance and and material handling consumable products within our pandemic assortment including PPE and San Jose.

supplies made up roughly 11%

The sales in third quarter compared to approximately 2% of sales in the same period last year gross profit for the quarter was 102.3 million dollars an increase of 21.2% full year gross margin was 35.8% up 120 basis points from the prior year and 80 basis points on a second consecutive quarter basis margin Improvement in the. Was primarily wage by a mix shift two in stock and private label products as well as from a reduction in Freight damage.

This is in line with our a strategy and its focus on driving higher-margin sourcing channels and improving operational excellence. This is an exceptional gross margin performance. And we did see margins normalize as we took the quarter. I would note that we will continue to see margin variability on a quarterly basis and have a historically seen a sequential compression in Q4 margins due to a seasonal product mix selling and administrative spending for the quarter was 70.9 million dollars or 24.8% of net sales at two hundred fifty basis point reduction as a percentage of sales from last year improved SDM reflects optimization in our marketing spend as well as favorable comparison in supply chain costs as we lapped the start-up expenses expenses associated with the opening of our Dallas Distribution Center last September, I would note STNA is inclusive of an incremental 4.3 million dollars a variable compensation expense over last year's their third quarter, which is directly attributable to excellent Financial wage.

Bottom-line profitability was very strong as operating income from continuing operations was Thirty one point four million dollars a 69.7% Improvement compared to the year ago. Operating margin expanded 340 basis points to a record 11%

total depreciation and amortization expense in the quarter was 1 million dollars Capital expenditures for the third quarter or zero point eight million dollars and we currently expect total 2020 Capital expenditures in the range of 2.3 million dollars primarily comprised maintenance related Capital free cash flow from continuing operations was over $26 in the quarter. Let me now turn to our balance sheet. We have a very strong wage sheet with a current ratio of 1.7 to 1 as of September 30th. We had approximately $78 in cash and equivalents 140 1.8 million dollars in working capital zero debt and check availability is 71.4 million dollars under our $75 credit facility in the third quarter. We repurchased approximately 100,000 shares of stock and the average price is $21.78. As of September 30th. We had a personally one point four million shares remaining under our current repurchase authorization.

You maintain significant flexibility to fully execute on our strategic plan continue to fund our quarterly dividend and successfully navigate 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 third quarter 2020 earnings, please, it makes my jaw see I have to pluck your group our investor immediate relations adviser or system that's directly contact information can be found on the earnings release issued earlier today. Thank you for your continued interest in sucks.