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Good afternoon, ladies and gentlemen, and welcome to Systemax Inc.'s Third Quarter 2020 Earnings Call.
At this time, I would like to turn the call over to Mike Smargiassi of The Plunkett Group. Please go ahead.
Thank you, Sarah, and welcome to the Systemax Third Quarter 2020 Earnings Call. Today's call will include formal remarks from Barry Litwin, 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 the press release issued today and at systemax.com.
Today's discussion may include certain forward-looking statements. 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, quarterly reports on Form 10-Q. The press release is available on the company's website and will be filed with the SEC in a Form 8-K. This call is the property of and is copyrighted by Systemax Inc.
I will now turn the call over to Mr. Barry Litwin.
Thanks, Mike. Good afternoon, everybody, and thank you for joining us today. We had an exceptional third quarter performance with revenue increasing 17% to over $285 million. Growth was led by our private label offering and expanded pandemic product line and solid gains from our core product categories.
We delivered this strong top line performance while producing record profitability as both gross and operating margins expanded. We delivered more than $31 million in operating income, a 70% improvement from last year, and EPS increased over 77% year-over-year. Free cash flow generated was robust at over $25 million, and we ended the quarter with $78 million in cash.
These record results are a direct reflection of how our associates have continued to embrace our customer-centric strategy; ACE, our Accelerating the Customer Experience initiative; and our ability to rally around the needs of our customers. Our multiyear strategy introduced in 2019 provides a clear framework for how we operate and differentiates our value with a focus on improving our customers' end-to-end purchase, service and delivery experience.
Growth in the quarter highlights the resilience and perseverance we have shown across the company as we addressed and learned from the challenges and opportunities created by the pandemic. We listened to where the market was headed, and by foreseeing the needs of our customers, we were able to quickly expand our offering with a leading assortment of Global Industrial-branded PPE and a full line of pandemic response products. As a result, we were there for our customers when they needed us most.
The pandemic has also accelerated how B2B buyers are embracing e-commerce environments. This is a positive customer trend and one that further empowers the ongoing investments in our digital platform and our strategy. We combine a strong e-commerce platform with a personal high-touch direct selling team that creates added value by enabling transactions and showcasing our products, solutions and knowledge to solve customer problems.
In the quarter, we continued to drive operational excellence as a key ingredient of our strategy, resulting in a better customer experience as we reduced freight claims and damages, improved customer satisfaction and lowered our total costs. We continue to add self-service functionality that brings order transparency, including automated tracking from order placement to delivery. As a result, we're seeing growth in customer acquisition, retention and overall satisfaction.
In addition, our sales optimization efforts are allowing us to extend relationships with customers as they purchase across multiple categories and get deeper into the offering. We continue to invest in both digital and marketing capabilities, which is all about empowering customers to protect their businesses with pandemic management solutions, helping them prepare for the fall and winter season and supporting their growth plans in 2021.
The week of October 12, we leveraged the Ready. Set. campaign and held Global Industrial's annual national customer trade show, Ready. Set. Show. The event was virtual this year and 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 and the entire organization. We believe we have a lot of opportunity 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 platform and differentiated go-to-market strategy that highlights the value we bring to customers every day and is allowing us to build deeper, longer-term relationships. We have great momentum 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, Barry. I will now address our performance in more detail. I would like to note that we had the same number of selling days in the third quarter of 2020 as we did in the year ago period.
In the third quarter, revenue grew 17.1% over Q3 of last year. Revenue was $285.7 million, with the U.S. growing 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.
New customer acquisition was very healthy, and our managed sales team expanded average order value as they deepen relationships with existing accounts. Sales performance continued to benefit from investments in our private label offerings and a return to growth from our core product lines, including solid performance in HVAC and material handling. Consumable products within our pandemic assortment, including PPE and sanitizing supplies, made up roughly 11% of sales in the third quarter as compared to approximately 2% of sales in the same period last year.
Gross profit for the quarter was $102.3 million, an increase of 21.2% from last year. Gross margin was 35.8%, up 120 basis points from the prior year and 80 basis points on a consecutive quarter basis. Margin improvement in the period was primarily driven by a mix shift to in-stock and private label products as well as from a reduction in freight damage. This is in line with our ACE strategy and is focused 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 exited the quarter. I would note that we will continue to see margin variability on a quarterly basis and have historically seen a sequential compression in Q4 margins due to a seasonal product mix.
Selling, distribution and administrative spending for the quarter was $70.9 million or 24.8% of net sales, a 250 basis point reduction as a percentage of sales from last year. Improved SD&A leverage reflects optimization in our marketing spend as well as favorable comparison in supply chain costs as we lapped the start-up expenses associated with the opening of our Dallas distribution center last September. I would note, SD&A is inclusive of an incremental $4.3 million of variable compensation expense over last year's third quarter, which is directly attributable to excellent financial performance.
Bottom line profitability was very strong as operating income from continuing operations was $31.4 million, a 69.7% improvement compared to the year ago period. Operating margin expanded 340 basis points to a record 11%. Total depreciation and amortization expense in the quarter was $1 million. Capital expenditures for the third quarter were $0.8 million, and we currently expect total 2020 capital expenditures in the range of $2 million to $3 million, primarily comprised of maintenance-related capital. Free cash flow from continuing operations was over $26 million in the quarter.
Let me now turn to our balance sheet. We have a very strong and liquid balance sheet with a current ratio of 1.71. As of September 30, we had approximately $78 million in cash and equivalents, $141.8 million in working capital, 0 debt and excess availability of $71.4 million under our $75 million credit facility. In the third quarter, we repurchased approximately 109,000 shares of stock at an average price of $21.78. As of September 30, we had approximately 1.4 million shares remaining under our current repurchase authorization. We maintain significant flexibility to fully execute on our strategic plan, continue to fund our quarterly dividend 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 third quarter 2020 earnings, please contact Mike Smargiassi at The Plunkett Group, our Investor and Media Relations adviser, or Systemax directly. Contact information can be found on the earnings release issued earlier today. Thank you for your continued interest in Systemax.