Q2 2024 Global Industrial Co Earnings Call
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Operator: Good day, and welcome to the Global Industrial Company 2nd Quarter, 2024 earnings call. All participants will be in a listen-only mode.
Operator: Good day, and welcome to the Global Industrial Company second quarter 2024 earnings call. All participants will be in a listen-only mode.
Speaker Change: Good day and welcome to the Global Industrial Company second quarter 2024 earnings call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Operator: Should you need assistance?
Operator: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on a touchtone phone. To withdraw your question, please press star, then 2.
Operator: Please signal a conference specialist by pressing the star key, followed by zero.
Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two.
Speaker Change: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on a touchtone phone. To withdraw your question, please press star, then 2. Please note this event is being recorded.
Operator: Please note this event is being recorded.
Operator: Please note, this event is being recorded. I would now like to turn the conference over to Michael Smargiassi, Investor Relations. Please go ahead.
Mike Smargiassi: I would now like to turn the conference over to Michael Smargiassi, Investor Relations. Please go ahead.
Speaker Change: I would now like to turn the conference over to Michael Smargiassi, Investor Relations. Please go ahead.
Mike Smargiassi: Thank you and welcome to the Global Industrial 2nd quarter 2024 earnings call. Leading today's call will be Richard Leeds, Executive Chairman, and Tex Clark, Senior Vice President and Chief Financial Officer.
Mike Smargiassi: Thank you, and welcome to the Global Industrial second quarter 2024 earnings call. Leading today's call will be Richard Leeds, Executive Chairman, and Tex Clark, Senior Vice President and Chief Financial Officer. Formal remarks will be followed by a question and answer session. During the call, we will reference both GAAP and organic metrics. Organic reflects the performance of global industrials business, exclusive of the May 19, 2023 Indof Act. Today's discussion may include certain forward-looking statements.
Speaker Change: Thank you, and welcome to the Global Industrial second quarter 2024 earnings call. Leading today's call will be Richard Leeds, Executive Chairman and Tex Clark, Senior Vice President and Chief Financial Officer.
Mike Smargiassi: Formal remarks will be followed by a question-and-answer session. During the call, we will reference both GAP and organic metrics. Organic reflects the performance of Global Industrial's business exclusive of the May 19, 2023, and off acquisition. Today's discussion may include certain forward-looking statements.
Speaker Change: Formal remarks will be followed by a question and answer session.
Speaker Change: During the call, we will reference both GAAP and organic metrics. Organic reflects the performance of global industrials' business, exclusive of the May 19, 2023, Indof acquisition.
Mike Smargiassi: It 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.
Speaker Change: Today's discussion may include certain forward-looking statements.
Speaker Change: It 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 and under risk factors in the company's annual report on Form 10-K and quarterly reports on Form 10-Q .
Operator: This is a discussion and answer session and answer session and answer session.
Speaker Change: The press release is available on the company's website and has been filed with the SEC on a Form 10-8K.
Mike Smargiassi: It 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 and under 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 has been filed with the SEC on a Form 10-8K. This call is the property of Global Industrial Company. I will now turn the call over to them.
Speaker Change: This call is the property of Global Industrial Company. I will now turn the call over to Richard.
Mike Smargiassi: Thanks, Mike.
Richard Leeds: Thanks, Mike. Good afternoon, everyone, and thank you for joining us. Before turning to the financial results, I wanted to take a moment to comment on our CEO transition. Our nationwide CEO search is underway, and next week, I will formally take on the additional role of interim CEO. This is a position I previously held for nearly 20 years, and I have remained actively engaged with the business in my role as Executive Chairman of the Board.
Richard Leeds: Good afternoon, everyone, and thank you for joining us. Before turning to the financial results, I wanted to take a moment to comment on our CEO transition. Our nationwide CEO search is underway, and next week I will formally take on the additional role of interim CEO. This is a position I previously held for nearly 20 years and have remained actively engaged with the business in my role as Executive Chairman of the Board. I work closely with the senior management team, supporting their efforts during the past several years. On behalf of Global Industrial, I would like to thank Barry for his contributions and wish him well as he embarks on the next chapter in his career.
Richard Leeds: Thanks, Mike. Good afternoon, everyone, and thank you for joining us.
Richard Leeds: Before turning to the financial results, I wanted to take a moment to comment on our CEO transition.
Speaker Change: Our nationwide CEO search is underway, and next week I will formally take on the additional role of interim CEO .
Richard Leeds: This is a position I previously held for nearly 20 years, and I've remained actively engaged with the business in my role as Executive Chairman of the Board.
Richard Leeds: I've worked closely with the senior management team, supporting their efforts during the past several years. On behalf of Global Industrial, I would like to thank Barry for his contributions and wish him well as he embarks on the next chapter in his career. Over the past several years, we have built a strong senior management team. They have both the boards and my full confidence.
Speaker Change: I've worked closely with the senior management team supporting their efforts during the past several years.
Speaker Change: On behalf of Global Industrial, I would like to thank Barry for his contributions and wish him well as he embarks on the next chapter in his career.
Richard Leeds: Over the past several years, we have built a strong senior management team. They have both the boards and my full confidence. I look forward to supporting their efforts as we continue to execute on our strategy.
Speaker Change: Over the past several years, we have built a strong senior management team.
Richard Leeds: I look forward to supporting their efforts as we continue to execute on our strategy. Turning to our financial performance, second quarter revenue improved 6.8% to approximately $348 million. On an organic basis, we delivered our fourth consecutive quarter of revenue growth, with revenue up 1.8%. We're pleased with the top-line performance given the current market cycle and the soft demand environment, which is reflected in both industry forecasts as well as a PMI index. During the quarter, we saw a continuation of cautious customer purchasing behavior, with Mixed Revenue Performance on a Monthly Basis.
Speaker Change: They have both the boards and my full confidence. I look forward to supporting their efforts as we continue to execute on our strategy.
Richard Leeds: Turning to our financial performance, second quarter revenue improved 6.8% to approximately $348 million. On an organic basis, we delivered our fourth consecutive quarter of revenue growth, with revenue up 1.8%. We are pleased with the top line performance given the current market cycle and the soft demand environment, which is reflected in both industry forecasts as well as the PMI Index. During the quarter, we saw a continuation of cautious customer purchasing behavior, with mixed revenue performance on a monthly basis. Our attention trends remain healthy. Gross margin was 35.2% in the quarter and improvement on both a year-over-year and sequential quarter basis.
Speaker Change: Turning to our financial performance, second quarter revenue improved 6.8% to approximately $348 million.
Speaker Change: On an organic basis, we delivered our fourth consecutive quarter of revenue growth with revenue up 1.8 percent.
Speaker Change: We're pleased with the top-line performance given the current market cycle and the soft demand environment, which is reflected in both industry forecasts as well as a PMI index.
Speaker Change: During the quarter, we saw a continuation of cautious customer purchasing behavior with mixed revenue performance on a monthly basis.
Richard Leeds: Our attention trends remain healthy; margin was 35.2% in the quarter, an improvement on both a year-over-year and sequential quarter basis. We remain pleased with Gross Margin Performance and have a strong track record of managing this key metric through various market disruptions over the past several years. Our bottom line performance reflects planned investments in key growth initiatives, specifically across customer experience, marketing, and sales functions to help drive engagement and strengthen our competitive position.
Speaker Change: Our attention trends remain healthy.
Speaker Change: Gross margin was 35.2% in the quarter, an improvement on both a year-over-year and sequential quarter basis.
Richard Leeds: We remain pleased with gross margin performance and have a strong track record of managing this key metric through various market disruptions over the past. Several years. Our bottom line performance reflects planned investments in key growth initiatives, specifically across customer experience, marketing, and sales functions to help drive engagement and strengthen our competitive position. This includes sales automation and tool to enhance efficiency and growth in our managed sales organization, as well as further enhancements to customer experience. Delivering a positive customer experience leads directly to higher attention rates and elevated lifetime customer values. It's a true competitive advantage.
Speaker Change: We remain pleased with Gross Margin Performance and have a strong track record of managing this key metric through various market disruptions over the past several years.
Speaker Change: Our bottom line performance reflects planned investments in key growth initiatives, specifically across customer experience, marketing, and sales functions to help drive engagement and strengthen our competitive position.
Richard Leeds: This includes sales automation and tools to enhance efficiency and growth in a managed sales organization, as well as further enhancements to the customer experience. Delivering a positive customer experience leads directly to higher retention rates and elevated lifetime customer values. It's a true competitive advantage. I'm pleased to report that our customer satisfaction scores remain above 90% in this second quarter. Highlighting the commitment of our associates in solid execution, as validated by our customer, It's been a challenging environment the first six months of the year, and our focus remains on the things within our control.
Speaker Change: This includes sales automation and tools to enhance efficiency and growth in a managed sales organization, as well as further enhancements to customer experience.
Speaker Change: Delivering a positive customer experience leads directly to higher retention rates and elevated lifetime customer values.
Richard Leeds: I'm pleased to report that our customer satisfaction scores remain above 90% in the second quarter. Highlighting the commitment of our associates in solid execution has validated by our customers. It's been a challenging environment for six months of the year, and our focus remains on the things within our control. We continue to make investments that will strengthen our competitive position, help us capture market share, and drive long-term revenue performance. We have a strong leadership team, our executing against our strategy, and as the environment improves, I believe we're well positioned to drive financial performance. With an exceptional balance sheet and healthy cash flow from operations, we continue to invest in our growth drivers and evaluate strategic opportunities.
Speaker Change: It's a true competitive advantage.
Speaker Change: I'm pleased to report that our customer satisfaction scores remain above 90% in this second quarter, highlighting the commitment of our associates and solid execution as validated by our customers.
Speaker Change: It's been a challenging environment the first six months of the year and our focus remains on the things within our control.
Richard Leeds: We continue to make investments that will strengthen our competitive position, help us capture market share, and drive long-term revenue performance. We have a strong leadership team, are executing against our strategy, and as the environment improves, I believe we're well positioned to drive financial performance. With an exceptional balance sheet and healthy cash flow from operations, we continue to invest in our growth drivers and evaluate strategic opportunities. I will now turn the call over to Tech.
Speaker Change: We continue to make investments that will strengthen our competitive position, help us capture market share, and drive long-term revenue performance.
Speaker Change: We have a strong leadership team, are executing against our strategy, and as the environment improves, I believe we're well positioned to drive financial performance.
Speaker Change: With an exceptional balance sheet and healthy cash flow from operations, we continue to invest in our growth drivers and evaluate strategic opportunities.
Tex Clark: I will now turn the call over to text.
Tex Clark: Thank you, Richard. Second quarter revenue is 347.8 million dollars, up 6.8% over Q2 of last year. Organic revenue is 307.4 million dollars, up 1.8% year-over-year.
Speaker Change: I will now turn the call over to Tex.
Thomas Eugene Clark: Second quarter revenue was $347.8 million, up 6.8% over Q2 of last year. Organic revenue was $307.4 million, up 1.8% year over year. Organic U.S. revenue was up 2.1%, and Canada revenue was down 1.1% in local currency.
Thomas Eugene Clark: Thank you, Richard.
Thomas Eugene Clark: Second quarter revenue was $347.8 million, up 6.8% over Q2 of last year. Organic revenue was $307.4 million, up 1.8% year over year.
Tex Clark: Organic U.S. Revenue was up 2.1% and Canada revenue is down 1.1% in local currency. Our managed sales channels led our performance, and we continue to see strong growth in our enterprise business as it capitalizes on new account generation. Revenue benefited from volume improvement, while overall growth rates were impacted by modest pricing headwinds. Price volume has narrowed since the start of the year, and we are optimistic that price can continue to move towards neutral in the second half of 2024. Gross profit for the quarter was 122.5 million dollars, up 8.5% from last year. Gross margin was 35.2%, up 50 basis points from the year-ago period, and 90 basis points on a sequential quarter basis.
Thomas Eugene Clark: Organic U.S. revenue was up 2.1%, and Canada revenue was down 1.1% in local currency. Our managed sales channels led our performance, and we continue to see strong growth in our enterprise business as it capitalizes on new account generation.
Thomas Eugene Clark: Our managed sales channels led our performance, and we continue to see strong growth in our enterprise business as it capitalizes on new account generations. Revenue benefited from volume improvement while overall growth rates were impacted by modest pricing headwinds. However, price volume has narrowed since the start of the year, and we are optimistic that price can continue to move towards neutral in the second half of 2024.
Thomas Eugene Clark: Revenue benefited from volume improvement, while overall growth rates were impacted by modest pricing headwinds. Price volume has narrowed since the start of the year, and we are optimistic that price can continue to move towards neutral in the second half of 2024.
Thomas Eugene Clark: Gross profit for the quarter was $122.5 million, up 8.5% from last year. Gross margin was 35.2%, up 50 basis points from the year-ago period and 90 basis points on a sequential quarter basis. The year-over-year improvement was primarily achieved due to proactive price management, as well as an expanded private-label balance of sale. Margin expanded in both our organic and in-doff business. Management of our margin profile remains a key area of focus, and performance will continue to reflect the impact of strategic promotion and freight actions as part of our competitive pricing initiatives. In addition, ocean freight costs remain elevated and have increased in recent months.
Thomas Eugene Clark: Gross profit for the quarter was $122.5 million, up 8.5% from last year. Gross margin was 35.2%, up 50 basis points from the year-ago period, and 90 basis points on a sequential quarter basis.
Tex Clark: The year-over-year improvement was primarily achieved due to proactive price management, as well as expanded private label balance as well. Margin expanded in both our organic and end-off businesses. Management of our margin profile remains a key area of focus. Performance will continue to reflect the impact of strategic promotion and trade actions as part of our competitive pricing initiatives. In addition, ocean freight costs remain elevated and have accelerated in recent months. Higher cost inventory is flowing into our cost of sales, and this is something we continue to manage. Selling distribution and administrative spending for the quarter was 96.1 million dollars, or 27.6% of net sales, an increase of 190 basis points from last year.
Thomas Eugene Clark: The year-over-year improvement was primarily achieved due to proactive price management as well as expanded private label balance of sale.
Thomas Eugene Clark: Margin expanded in both our organic and in-doff businesses.
Thomas Eugene Clark: Management of our margin profile remains a key area of focus. Performance will continue to reflect the impact of strategic promotion and freight actions as part of our competitive pricing initiatives. In addition, ocean freight costs remain elevated and have accelerated in recent months.
Thomas Eugene Clark: Higher-cost inventory is flowing into our cost of sales, and this is something we continue to manage. Selling, distribution, and administrative spending for the quarter was $96.1 million, or 27.6% of net sales, an increase of 190 basis points from last year. SD&A primarily reflects planned investment in key sales and marketing growth initiatives, which generate negative leverage due to the softer customer demand environment, partially offset by a benefit associated with accounting for executive transition.
Thomas Eugene Clark: Higher cost inventory is flowing into our cost of sales and this is something we continue to manage.
Thomas Eugene Clark: Selling distribution and administrative spending for the quarter was $96.1 million, or 27.6% of net sales, an increase of 190 basis points from last year.
Tex Clark: S.D.N.A. primarily reflects planned investment in key sales and marketing growth initiatives, which generate a negative leverage due to the softer customer demand environment. Partially offset by a benefit associated with accounting for executive transition. We expect S.D.N.A. levels to moderate from QQ levels in the second half of the year, but remain elevated when compared to the year-go-quarterly periods, as we continue to support our growth strategy. We remain disciplined in our control of our general and discretionary cost management.
Thomas Eugene Clark: SD&A primarily reflects planned investment in key sales and marketing growth initiatives, which generate a negative leverage due to the softer customer demand environment, partially offset by a benefit associated with accounting for executive transition.
Thomas Eugene Clark: We expect SDNA levels to moderate from QQ levels in the second half of the year but remain elevated when compared to the year-ago quarterly periods as we continue to support our growth strategy. We remain disciplined in our control of our general and discretionary cost management.
Thomas Eugene Clark: We expect SDNA levels to moderate from QQ levels in the second half of the year, but remain elevated when compared to the year-ago quarterly periods, as we continue to support our growth strategy. We remain disciplined in our control of our general and discretionary cost management.
Tex Clark: President. Operating income from continuing operations was $26.4 million in the second quarter, and operating margin was 7.6%. Organic operating margin was 8.1%. Operating cash load from continuing operations was $18.7 million in the quarter.
Thomas Eugene Clark: Operating income from continuing operations was $26.4 million in the second quarter, and operating margin was 7.6 percent. However, organic operating margin was 8.1%. Operating cash flow from continuing operations was $18.7 million in the quarter. Total depreciation and amortization expense in the quarter was $1.9 million, including approximately $0.8 million associated with the amortization of intangible assets related to the IMDOF acquisition, while capital expenditures were $0.9 million. We expect 2024 capital expenditures in the range of $3 to $5 million, which primarily includes maintenance-related investments in equipment within our distribution network.
Thomas Eugene Clark: Operating income from continuing operations was $26.4 million in the second quarter, and operating margin was 7.6%. Organic operating margin was 8.1%.
Thomas Eugene Clark: Operating cash flow from continuing operations was $18.7 million in the quarter.
Tex Clark: Total depreciation and amortization expense in the quarter was $1.9 million, including approximately $0.8 million associated with the amortization of intangible assets related to the end-off acquisition, while capital expenditures were $0.9 million.
Thomas Eugene Clark: Total depreciation and amortization expense in the quarter was $1.9 million, including approximately $0.8 million associated with the amortization of intangible assets related to the Indof acquisition, while capital expenditures were $0.9 million.
Tex Clark: We expect $2024 capital expenditures in the range of $3 to $5 million, which primarily includes maintenance-related investments of equipment within our distribution network.
Thomas Eugene Clark: We expect 2024 capital expenditures in the range of $3-5 million, which primarily includes maintenance-related investments of equipment within our distribution network.
Tex Clark: Let me now turn to our balance sheet. We have a strong and liquid balance sheet with a current ratio of 1.9 to 1. As of June 30th, we have $38.8 million in cash, no debt, and approximately $120.6 million of excess availability under our credit facility. We maintain significant flexibility to fully execute on our strategic plan and continue to fund our quarterly dividend.
Thomas Eugene Clark: Let me now turn to our balance sheet. We have a strong illiquid balance sheet with a current ratio of 1.9 to 1. As of June 30th, we had $38.8 million in cash, no debt, and approximately $120.6 million of excess availability under our credit facility. We maintain significant flexibility to fully execute on our strategic plan and continue to fund our quarterly dividend. As a result, our Board of Directors declared a quarterly dividend of $0.25 per share of common stock.
Thomas Eugene Clark: Let me now turn to our balance sheet.
Thomas Eugene Clark: We have a strong illiquid balance sheet with a current ratio of 1.9 to 1. As of June 30th, we have $38.8 million in cash, no debt, and approximately $120.6 million of excess availability under our credit facility.
Thomas Eugene Clark: We maintain significant flexibility to fully execute on our strategic plan and continue to fund our quarterly dividend. As a result, our Board of Directors declared a quarterly dividend of $0.25 per share of common stock.
Tex Clark: As a result, our Board of Directors declared a quarterly dividend of 25 cents per share of common stock.
Tex Clark: This concludes our prepared remarks today.
Operator: This concludes our prepared remarks today. Operator, please open the call for questions. We will now begin the question and answer session.
Operator: Operator, please open the call for questions. I will now begin the question and answer session. To ask a question, you may press star, then one on your touchtone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two.
Speaker Change: This concludes our prepared remarks today. Operator, please open the call for questions.
Operator: To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed, and you would like to withdraw your question, please press star, then 2. At this time, we will pause momentarily to assemble our... The first question comes from Ryan Merkel with William Blair. Please go ahead.
Speaker Change: We will now begin the question and answer session.
Speaker Change: To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys.
Speaker Change: If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our...
Operator: At this time, we will pause momentarily to assemble our questions.
Ryan Merkel: The first question comes from Ryan Merkel with William Blair. Please go ahead.
Speaker Change: The first question comes from Ryan Merkel with William Blair. Please go ahead.
Ryan James Merkel: Hey guys, thanks for taking the question. Hi Ryan, how are you? I appreciate it. Good.
Ryan Merkel: All right, Ryan, how are you? Shade it. Good.
Ryan James Merkel: Hey guys, thanks for taking the question. All right, Ryan, how are you? Good.
Ryan Merkel: Let's start off with revenue. You mentioned that M-markets are a bit weak here. Are there certain customers, products, or M-markets that stand out as being particularly weak?
Ryan James Merkel: Let's start off with revenue. You mentioned the end markets are a bit weak here. Are there certain customers, products, or end markets that stand out as being particularly weak?
Speaker Change: Let's start off with revenue. You mentioned the end markets are a bit weak here. Are there certain customers, products, or end markets that stand out as being particularly weak?
Thomas Eugene Clark: Yeah, I think, Ryan, when we look at our business, again, as you know, we have a very fragmented customer base as well as a very broad product set that we offer to our customers, and that diversification tends to help us, actually, in certain times. When we look at the actual customers, our managed customers and under our account management as well as our enterprise larger customers perform best in our portfolio this quarter.
Richard Leeds: Yeah, I think Ryan, when we look at our business, as you know, we have a very fragmented customer base as well as a very broad product set that we offer to our customers, and that diversification tends to help us actually in certain times. When we look at the actual customers that are managed customers and under our account management as well as our enterprise larger customers, perform best in our portfolio this quarter. We actually saw a little bit softer business in some of the small, really that small medium business, the smaller customers, and some of that e-commerce channel had some of the softer performance in the period.
Speaker Change: Yeah, I think, Ryan, when we look at our business, again, as you know, we have a very fragmented customer base as well as a very broad product set that we offer to our customers. And that diversification tends to help us, actually, in certain times. When we look at the actual customers, our managed customers and under our account management as well as our enterprise larger customers perform best in our portfolio this quarter. We actually saw a little bit softer business in some of those small, really that small medium business, the smaller customers and some of that e-commerce channel had some of the softer performance in the period. From a product set, again, a mixed segment within there. We actually had a pretty strong seasonal campaign with different types of outdoor furniture,
Thomas Eugene Clark: We actually saw a little bit softer business in some of those small, really that small medium business, the smaller customers, and some of that e-commerce channel had some of the softer performance in the period. Our product set, again, is a mixed segment within there. We actually had a pretty strong seasonal campaign with different types of outdoor furniture, cooling, and HVAC. With a warmer season earlier in the year, we've actually had very strong performance with that in the second quarter, but really, there's been a fair amount of soft across the board we've seen with different customer buying decisions.
Richard Leeds: From a product set, again, a mixed segment within there, we actually have a pretty strong seasonal campaign with different types of outer furniture, cooling, HVAC. With a warmer season earlier in the year, we've actually had very strong performance with that in the second quarter, but really it's been a fair amount of soft across the board. We've seen with different customer buying decisions. Okay.
Speaker Change: cooling, HVAC. With a warmer season earlier in the year, we've actually had very strong performance with that in the second quarter. But really, it's been a fair amount of soft across the board we've seen with different customer buying decisions.
Thomas Eugene Clark: Okay, next time. And what about the outlook for the second half? I know you don't have much visibility. Are you seeing any green shoots, any signs that, you know, trends could get better, or is it pretty uncertain?
Richard Leeds: What about the outlook for the second half? I know you don't have much visibility. Are you seeing any green shoots and signs that trends kick it better, or is it pretty uncertain? Right now, I think there's still a fair amount of uncertainty. As we mentioned a few moments ago, even within the quarter, organic growth was 1.8%, but that even included some weeks up, some weeks down, and really some months up, some months down. Right now, I mean, it's one of those with a lot of fluctuations. It is a challenging market to forecast how we're looking at.
Ryan James Merkel: Okay, makes sense.
Speaker Change: And what about the outlook for the second half? I know you don't have much visibility. Are you seeing any green shoots, any signs that, you know, trends could get better? Or is it pretty uncertain?
Thomas Eugene Clark: Right now, I think there's still a fair amount of uncertainty. I mean, as we mentioned just a few moments ago, even within the quarter, organic growth was 1.8%, but that included some weeks up, some weeks down, and really some months up, some months down. So right now, I mean, it's one of those with a lot of fluctuations; it is a challenging market to forecast out what we're looking at. We know that there are a lot of key indicators in the market moving in different directions. So right now, we're really focusing on those things that we can control and making sure we're best positioned for our customers when those buying decisions are prepared to be made.
Ryan James Merkel: Okay. Yeah, I appreciate that.
Speaker Change: Right now, I think there's still a fair amount of uncertainty. I mean, as we mentioned just a few moments ago, even within the quarter, organic growth was 1.8%, but that even included some weeks up, some weeks down, and really some months up, some months down. So right now, I mean, it's one of those with a lot of fluctuations, it is a challenging market to forecast out what we're looking at. We know that there's a lot of key indicators in the market moving in different directions. So right now, we're really focusing on those things that we can control and making sure we're best positioned for our customers when those buying decisions are prepared to be made.
Ryan Merkel: We know that there's a lot of key indicators in the market moving in different directions. Right now, we're really focusing on those things that we can control, and making sure we're best positioned for our customers when those buying decisions are prepared to be made. Okay, so yeah, I appreciate that.
Ryan Merkel: Last one for me, SNA was above our model and, you know, Alkore revenues by quite a bit.
Ryan James Merkel: Last one for me, SG&A was above our model and, you know, outgrew revenues by quite a bit. Richard, you mentioned you're doing some planned investments. I'm just curious, are you thinking about trying to control costs in the second half, just given the uncertain revenue outlook, or should we still assume that you go ahead with these investments and in the second half, SG&A expense is still pretty elevated?
Speaker Change: Okay, yeah, I appreciate that. Last one for me, SG&A was above our model and, you know, outgrew revenues by quite a bit. Richard, you mentioned you're doing some planned investments.
Richard Leeds: Richard, you mentioned you're doing some planned investments. I'm just curious, are you thinking about trying to control costs in the second half, just given the uncertain revenue outlook, or should we still assume that you go ahead with these investments, and the second half SNA expense is still pretty elevated?
Speaker Change: I'm just curious, are you thinking about trying to control costs in the second half just given the uncertain revenue outlook, or should we still assume that you go ahead with these investments and the second half SG&A expense is still pretty elevated?
Richard Leeds: Yeah, I'll jump into the air again, Ryan. I think SNA is one area that we definitely highlighted that, as we exit Q1, we were executing on certain key initiatives, and while we do believe that our absolute SNA will moderate down from the second quarter performance, we do still anticipate being up year-to-year.
Thomas Eugene Clark: Yeah, I'll jump in here again, Ryan. I think SG&A is one area that we definitely highlighted as we exited Q1 that we were executing on certain key initiatives. And while we do believe that our absolute SG&A will moderate from the second quarter performance, we do still anticipate being up year over year. We want to make sure we're investing in those key areas that are long-term in nature and helping position the company and help position our customers in the right way. So again, we do continue to plan on investing in those sales and marketing initiatives. Okay. All right.
Richard Leeds: Yeah, I'll jump in there again, Ryan. I think SG&A is one area that we definitely highlighted that as we exited Q1 that we were executing on certain key initiatives. And while we do believe that our absolute SG&A will moderate down from the second quarter performance, we do still anticipate being up year over year. We want to make sure we're investing in those key areas that are long-term in nature and helping position the company and helping position our customers in the right way. So, again, we do continue to plan on investing in those sales and marketing initiatives, but again, it will be more moderated in the second half.
Richard Leeds: We want to make sure we're investing in those key areas that are our long-term in nature and helping position the company and helping position our customers in the right way. So, again, we do plan to continue to plan on investing in those sales and marketing initiatives, but again, it will be more moderated in the second half.
Ryan James Merkel: All right, thanks. Pass it on.
Ryan Merkel: All right. Thanks. Pass it on.
Speaker Change: All right, thanks, pass it on.
Anthony Lebedinsky: The next question comes from Anthony Lebedinsky with Cedodian Company. Please go ahead.
Operator: The next question comes from Anthony Lebiedzinski with Sidoti and Company. Please go ahead.
Speaker Change: The next question comes from Anthony Lebiedzinski with Sidotian Company. Please go ahead.
Anthony Lebedinsky: Good afternoon, gentlemen, and thank you for taking the question. So, I guess, you know, first just a follow-up on the monthly trends. If you guys could give some colors. I think text you mentioned some weeks or some months were up and some down. So, anyway, to give, you know, more colors to how the quarter progressed?
Anthony Chester Lebiedzinski: Good afternoon, gentlemen, and thank you for taking the questions. So, I guess, you know, first, just to follow up on the monthly trends, if you guys could give some color. I think, Tex, you mentioned some weeks or some months were up and some down. So, any way to give, you know, more color as to how the quarter progressed?
Anthony Chester Lebiedzinski: Good afternoon, gentlemen, and thank you for taking the question. So I guess, you know, first just to follow up on the monthly trends, if you guys could give some colors. I think, Tex, you mentioned some weeks or some months were up and some down. So any way to give, you know, more color as to how the quarter progressed?
Thomas Eugene Clark: No, it really was, Anthony. We could see it up and down. I mean, it was week to week. We saw some weeks up, some weeks down. So, if we were up in the beginning and down in the end, I would highlight that, but it really was fluctuating quite a bit throughout the period. And that really continued into the early weeks of July, where we've actually seen it currently fluctuating down a bit. So, it's an area that we've seen some ups and downs in, and we're just trying to make sure that we're positioned as best as we can be.
Anthony Chester Lebiedzinski: Gotcha. Okay. Yeah. Thanks for that, Hex.
Tex Clark: No, it really was, Anthony. We saw up and down. I mean, it was week to week. We had saw some weeks up, some weeks down. So, if we were up in the beginning and down at the end, I would highlight that, but it really was fluctuating quite a bit throughout the period, and that really continued into the early, early weeks of July, where we've actually seen that it's currently fluctuating down a bit. So, it's an area that we've seen some of those ups and downs, and we're just trying to make sure that we're positioned as best as we can be.
Thomas Eugene Clark: No, it really was, Anthony. We saw up and down. I mean, it was week to week. We saw some weeks up, some weeks down. So if we were up in the beginning and down in the end, I would highlight that, but it really was fluctuating quite a bit throughout the period. And that really continued into the early weeks of July where we've actually seen that currently fluctuating down a bit. So it's an area that we've seen some of those ups and downs, and we're just trying to make sure that we're positioned as best as we can be.
Tex Clark: Gotcha. Okay. Thanks for that.
Thomas Eugene Clark: And then, you know, in terms of gross margin, it was up nicely versus a year ago. Can you just go over maybe a little bit more details as to what drove that and then how sustainable are those improvements? I know you mentioned ocean freight costs on the rise, but how should we think about the gross margin outlook for the balance of the year?
Tex Clark: And then, you know, in terms of the growth margin, so it was up nicely versus a year ago. You know, I know, can you just go over maybe, you know, a little bit more details as to what drove that? And then how sustainable are those improvements? I know you mentioned the ocean freight costs are on the rise, but how should we think about also the growth margin outlook for the balance of the year? Yeah, I mean, our growth margin is always a little bit seasonal, based on the kind of the mix of sales and the mix of categories that we that ultimately make up our selves in a period.
Anthony Chester Lebiedzinski: Gotcha, okay, yeah, thanks for that, Hex. And then, you know, in terms of the gross margin, so it was up nicely versus a year ago.
Anthony Chester Lebiedzinski: Can you just go over maybe a little bit more details as to what drove that and then how sustainable are those improvements? I know you mentioned ocean freight costs on the rise, but how should we think about also the gross margin outlook for the balance of the year?
Thomas Eugene Clark: Yeah, I mean, our gross margin is always a little bit seasonal based on the kind of mix of sales and mix of categories that ultimately make up our sales in a period. But we think that we did a really good job.
Speaker Change: Yeah, I mean, our gross margin is always a little bit seasonal based on kind of the mix of sales and mix of categories that ultimately make up our sales in a period. We think that we did a really good job. There was no one-time items in that gross margin improvement in the quarter. It's really through a combination of pricing initiatives as well as continuing to focus on our private brand goods. And those traditionally will bring a little bit higher gross margin for the business as you know. So it's an area that we are confident that we'll continue to be able to manage gross margin, but we have to make sure that we're paying attention to the market and addressing any changes that we see in the competitive set as well when the time is right. So it's an area that we are confident in our ability to continue to maintain margin. The one big unknown, as you highlighted, was that ocean freight cost.
Tex Clark: We think we did a really good job. There was no one-time items in that growth margin improvement in the quarters, right through a combination of pricing initiatives, as well as continuing to focus on our private brand goods, and those traditionally will bring a little bit higher growth margin for the business, as you know. So it's an area that we are confident that we'll continue to be able to manage growth margin, but we have to make sure that we're paying attention to the market and addressing any changes that we see in the competitive, says, well, when the time is right.
Thomas Eugene Clark: There were no one-time items in that gross margin improvement in the quarter. It was really through a combination of pricing initiatives as well as continuing to focus on our private brand goods. And those traditionally will bring a little bit higher gross margin for the business, as you know. So it's an area that we are confident that we'll continue to be able to manage gross margin, but we have to make sure that we're paying attention to the market and addressing any changes that we see in the competitive set as well when the time is right.
Tex Clark: So it's an area that we are confident in our abilities to continue to maintain margin. The one big unknown, as you highlighted, was that ocean freight cost. Early in the year, we thought it was going to be a little bit more transitory, but what we've seen is that it's actually sustained and accelerating some of those increases in the ocean freight market. While that's not unique to global industrial. It's an area that does mix into our cost of sales, and it's something that we have to manage. But again, we have teams really focused on making sure our pricing is right in the market, and we've been able to do that while increasing our growth margin profile here over here.
Thomas Eugene Clark: So it's an area that we are confident in our ability to continue to maintain margin. The one big unknown, as you highlighted, was the ocean freight cost. Earlier in the year, we thought it was going to be a little bit more transitory, but what we've seen is that it's actually sustained and accelerating some of those increases in the ocean freight market. While that's not unique to global industrial, it's an area that does mix into our cost of sales, and it's something that we have to manage. We have teams really focused on making sure our pricing is right in the market, and we've been able to do that while increasing our gross margin profile year over year.
Speaker Change: Earlier in the year, we thought it was going to be a little bit more transitory, but what we've seen is that it's actually sustained and accelerating some of those increases in the ocean freight market. While that's not unique to global industrial, it's an area that does mix into our cost of sales and it's something that we have to manage. But again, we have teams really focused on making sure our pricing is right in the market and we've been able to do that while increasing our gross margin profile year over year.
Tex Clark: Gotcha. Okay.
Thomas Eugene Clark: Gotcha. Okay. And then just to follow up, as far as the gross margin that ends off, can you speak to that as far as that improvement? And then, like, as far as... the introduction of private label products. How is that going? How is it being received at ENDOF? And did you see that as an opportunity for you guys to benefit from that as those sales reps get more exposure to your own private label products?
Tex Clark: And then just to follow up as far as the gross margin that end off, can you speak to that as far as that improvement? And then, like, as far as the introduction of private label products, how is that going? How is that being received at end off? And did you see that as an opportunity for you guys to benefit from that as those sales reps get more exposure to your own private label products? Yeah, it's an ongoing initiative. I mean, so as we highlighted, we saw improvement in the gross margin profile at both our end off subsidiary as well as the core global industrial business.
Speaker Change: Got you, okay. And then just to follow up as far as the gross margin that end off, can you speak to that as far as that improvement and then like as far as...
Speaker Change: the introduction of private label products. How is that going? How is that being received at ENDOF? And did you see that as an opportunity for you guys to benefit from that as they gain, as those sales reps get more exposure to your own private label products?
Thomas Eugene Clark: Yeah, it's an ongoing initiative. I mean, as we highlighted, we saw improvement in the gross margin profile at both our Indof subsidiary as well as the core global industrial business. So that was nice to see.
Speaker Change: Yeah, it's an ongoing initiative. I mean, so as we highlighted, we saw improvement in the gross margin profile at both our INDOF subsidiary as well as the core global industrial business. So that was something nice to see while INDOF still does remain, still does maintain a lower margin profile than Global Industrial. We did see those improvements, and part of that is the introduction of our sourcing from Global Industrial, especially our private brand, into their sales partners. So it's something that we're continuing to focus on, and we're arming them with the right tools to be able to sell that product and continue to cross-train with their partners. So it's something that we'll continue to push, but again, they have a shorter history with our products. We've been doing this a long time at Global Industrial, but they still fit very well into what INDOF is looking to accomplish.
Thomas Eugene Clark: While Indof still remains, and still maintains a lower margin profile than Global Industrial, we did see those improvements. And part of that is the introduction of our sourcing from Global Industrial, especially our private brand, to their sales partners. So it's something that we're continuing to focus on, and we're arming them with the right tools to be able to sell that product and continue to cross-train with their partners. So it's something that we'll continue to do.
Tex Clark: So that was something nice to see while we end off. Still does remain, still does maintain a lower margin profile than global industrial. We did see those improvements, and part of that is the introduction of our sourcing from global industrial, especially our private brand, into their sales partners. So it's something that we're continuing to focus on, and we're arming them with the right tools to be able to sell that product and continue to cross train with their partners. So it's something that we'll continue to push. But again, they have a shorter history with our products.
Thomas Eugene Clark: But again, remember, they have a shorter history with our products. We've been doing this a long time at Global Industrial, but they still fit very well into what Indof is looking to accomplish, and we're confident that we'll be able to grow that over time. Got it. Well, thank you very much.
Tex Clark: We've been doing this a long time in global industrial, but they still fit very well into what End Off is looking to accomplish, and we're confident that we'll be able to grow that over time. Got it.
Anthony Chester Lebiedzinski: Got it. Well, thank you very much and best of luck.
Speaker Change: And we're confident that we'll be able to grow that over time.
Tex Clark: Well, thank you very much, and best of luck. Thank you.
Speaker Change: Got it. Well, thank you very much and best of luck.
Speaker Change: Thank you.
Operator: Ladies and gentlemen, this will conclude today's question-and-answer session as well as call. Thank you for attending today's presentation. You may now disconnect your lines.
Operator: Ladies and gentlemen, this will conclude today's question and answer session, as well as the call. Thank you for attending today's presentation. You may now disconnect your lines.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, this will conclude today's question and answer session, as well as call. Thank you for attending today's presentation. You may now disconnect your lines.