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Good afternoon, ladies and gentlemen, and welcome to Global Industrial's Third Quarter 2024 Earnings Call. At this time, I would like to turn the floor over to Mike Smargiassi of The Plunkett Group. Sir, please go ahead.
Thank you, and welcome to the Global Industrial Third Quarter 2024 Earnings Call. Leading today's call will be Richard Leeds, Executive Chairman and Interim CEO; and Tex Clark, Senior Vice President and Chief Financial Officer. Formal remarks will be followed by a question-and-answer session.
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 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 8-K. This call is the property of Global Industrial Company.
I will now turn the call over to Richard.
Thanks, Mike. Good afternoon, everyone, and thank you for joining us. Our third quarter performance reflects the weak demand environment and continued softness in our core SMB customer base. We saw a cautious customer purchasing behavior throughout the quarter. Revenue was down each month in the period and up 3.4% for the quarter, as compared to the year ago period.
Our strategic account business continues to perform well, delivering solid growth. In addition, retention rates and customer satisfaction across our customer base remained healthy. Gross margin was 34% in the quarter, an improvement on a year-over-year basis but declined sequentially as we continue to face increased cost of sales, primarily from ocean freight headwinds.
Bottom line performance reflects further investments in key growth initiatives, specifically across customer experience, web and a new CRM platform that will help drive engagement and strengthen our competitive position. And reflecting on my observations since I returned to the CEO role, it's clear we have a talented team and a terrific business that has a strong foundation to drive long-term growth. However, we are disappointed with recent results and have identified key areas for improvement. At times, we're trying to cater to every customer segment rather than doubling down on what we excel at and where we deliver exceptional value to the market.
In addition, certain decisions have resulted in us over-indexing on new customer acquisition segments that are more transactional and not aligned with the long-term B2B relationships we seek to build. We know what we need to do. We're addressing this with a renewed and sharper focus on serving the needs of our core customers and implementing a more unifying collaboration, specifically between sales and marketing.
Further, we're adjusting our process to identify, target and nurture accounts with the highest lifetime value potential. We believe this refined focus will allow us to better communicate our value proposition to the market, play to our established strengths and engage core customer segments. We will also continue to enhance the customer experience by improving web shopping and highlighting our product knowledge, exclusive brands offering and end-to-end solution capabilities. These are attributes that align with our more technically oriented customers, and which we believe are key differentiators in our offering.
During the past several quarters, we have been building a new CRM environment. In the third quarter, we started the phased rollout of Salesforce and expect to go live in the near term. We believe this new CRM will strengthen delivery of our seamless customer experience, drive operational efficiencies and provide a more unified picture of our customers' operations. We continue to enjoy strong customer satisfaction scores, and Salesforce is a market-leading tool to ensure we can continue to deliver an exceptional experience to our customers.
In August, we held our Annual Global Industrial National Trade Show in Las Vegas. This is a terrific event that brings together our customers and vendor partners. It showcased the broad product offering and solutions we bring to market and provides an excellent opportunity to gain direct insights from our customers. It takes an incredible amount of work to produce a successful show like this. I'd like to thank all of our associates for their efforts.
Finally, I would like to welcome Lisa Armstrong to the senior management team. Lisa joined us as our CMO in August and brings exceptional expertise in B2B marketing. She is a proven executive, and I'm excited to support her efforts to enhance our go-to-market strategy, drive brand awareness and strengthen connections with our customers.
In conclusion, while the macro environment remains challenged, we continue to focus on the factors in our control, including driving operational excellence and enhancing the customer experience. I believe our efforts to focus on our core product offerings and our target customers will take a few quarters to gain traction. And as they do and the market environment improves, we'll be in a strong position to drive financial performance, maintain an exceptional balance sheet, we'll continue to invest in our growth drivers and evaluate strategic opportunities.
I will now turn the call over to Tex.
Thank you, Richard. Third quarter revenue was $342.4 million, down 3.4% over Q3 of last year. U.S. revenue was down 3.4% and Canada revenue was down 2.9% in local currency. Our revenue softness was broad-based across customer end markets. We continued to see strong growth in our enterprise business as it capitalizes on both new account generation and existing account penetration. Price was generally neutral in the third quarter, an improvement from the pricing headwinds we saw in the first half of the year. We currently expect continued price neutrality for the remainder of the year. We have seen the soft demand environment continue into the fourth quarter and revenue is currently pacing down mid-single digits.
Gross profit for the quarter was $116.3 million, flat from last year. Gross margin was 34%, up 120 basis points from the year ago period, as we benefited from proactive price management. On a sequential quarter basis, this benefit was muted as gross margin was down 120 basis points, primarily as a result of elevated ocean freight costs. 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.
Selling, distribution and administrative spending for the quarter was $94.1 million, or 27.5% of net sales, an increase of 270 basis points from last year. SD&A primarily reflected planned investment in key sales and marketing growth initiatives as well as significant CPC inflation. This generated negative leverage due to the soft top line results. In addition, we had a significant increase in health care costs, which exceeded $1 million in the quarter. We expect SD&A levels to remain elevated in 4Q, which will result in negative leverage due to the current revenue trends.
We remain disciplined in the control of our general and discretionary cost management. Operating income from continuing operations was $22.2 million in the third quarter, and operating margin was 6.5%. Operating cash flow from continuing operations was $9.4 million in the quarter. Total depreciation and amortization expense in the quarter was $2 million, including approximately $0.8 million associated with the amortization of intangible assets related to the Indoff acquisition, while capital expenditures were $0.9 million. We expect 2024 capital expenditures in the range of $3 million to $5 million, which primarily includes maintenance-related investments and equipment within our distribution network.
Let me now turn to our balance sheet. We have strong and liquid balance sheet with a current ratio of 2:1. As of September 30, we had $38.9 million in cash, no debt and approximately $121 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.
This concludes our prepared remarks today. Operator, please open the call for questions.
[Operator Instructions] Our first question today comes from Anthony Lebiedzinski from Sidoti & Company.
So I guess in terms of the weakness in your core customer segment, which is the SMB, just what are you generally seeing in terms of average order value and average order frequency? Are you seeing the declines on both? Or is one outweighing the other? I just wanted to get a little bit more color as to what's behind the weakness.
Sure, Anthony. So as we highlighted that we are still seeing very good customer satisfaction scores. And our customer retention rates, especially within our managed sales channels, is still very strong, still very healthy where we expect it to be. But again, that order frequency as well as that AOV is down slightly. We're seeing some less large projects coming through as our customers seem to be holding back a bit on some of those larger opportunities that they're seeing forward.
In terms of some of that softness, we are definitely seeing that maybe on the smaller end of the customer set. And we talked a little bit about those transactional-type customers that they may be coming from onetime buying activities. And that manifests itself both on some of our web sales and some of that unassigned account business that we have within the portfolio that we've seen a little bit of greater softness in. And that did continue throughout Q3 and has continued into the beginning of Q4.
And then in terms of the comment about better communicating your value proposition, are you looking to do more advertising? And if so, I mean, how should we think about the financial impact of that?
This is Richard. So one of the things that we've done is we've improved our website so that we're able to highlight the benefits of our products versus competition. A lot of our private label products are superior to competitors. So we would [ definitely see it on ] the website. [ We've highlighted ] that. We fixed that. And we're making sure that our pricing is spot on where it should be for all of our products, not just for the private label products.
As for the advertising, we've done some reallocating to the marketing where we're looking to drive higher returns and have stickier customer relationships from targeting the ads to those customers that we think are going to deliver that. The CPCs have gone up. And as we navigate through that choppy waters of higher CPCs, we're just reallocating and following the data to what's going to drive higher customer retention and higher long-term customers.
All right. And then as far as the growth initiatives that you referenced in the press release as well as in your prepared remarks, I guess, which ones do you think will be the most impactful near term? And which of the initiatives will take longer term to play out?
Sure. So these -- we're -- as we discussed, we're putting, implementing Salesforce and Salesforce marketing. So that initiative is probably going to take us through the middle of next year to get Salesforce marketing up and running. That initiative, I think, is going to drive a lot of benefit for our sales reps where they're -- right now, they're dealing on relationship selling with not the best tools that are out there. Once we get Salesforce and Salesforce marketing up, they're going to have state-of-the-art tools. And I think that's really going to drive that.
And our next question comes from Michael Francis from William Blair.
I'm on for Ryan today. First, I want to piggyback off that question on the growth initiatives. Is that something that you've decided to do a little more with the market being soft? Or is this something that you've been doing for a while, and you just wanted to highlight more on this call?
Yes. I think it's as reflection. We've been going down the path of arming our sales force with those right tools. For the better part, we began the implementation and discovery of that process throughout the course of this year. It wasn't a direct reflection of the results that we've seen in recent periods. But I think it trends well with kind of the way we see the market right now and making sure we're best situated for those managed customers.
We have seen some of the midsized and larger customers being more resilient during this time. And giving our sales team and our managed sales account managers the best tools available to be able to target those customers, to be there when they want and have that full 360-degree view of that customer experience, will allow them to really drive better results. So it's something that it's -- the time line has been merging with kind of the current results, but we've been working on phased rollouts, and we'll be going live with some of those modules very quickly. And as Richard said, as we get into the early and mid part of next year, we should be fully implemented with both our sales and our marketing technology enhancements.
Okay. And then on the SG&A number, obviously, I appreciate the color there on sort of the ramp since last year. Is there anything you can do to sort of throttle that back to conditions stay soft? I know you've got a lot of the initiatives you're talking about. Is there any sort of costs that might roll off there at some point?
Sure. I mean if we think about a couple of the areas when we talk about costs. So one, that CPC inflation is one that as we -- as Richard highlighted in his remarks that we've seen some higher costs in acquiring new customers. And that really again shows up through our web channels. That's an area that as we reallocate some of those resources, we believe that we can get a better return on those dollars. And that's really again, as Richard mentioned, on product prioritization and customer targeting through the digital marketing different efforts that we have. So we anticipate that can improve but it's a test-and-learn approach. I mean we're following the data and seeing where that moves.
Otherwise, obviously, we are focused on cost controls and all discretionary spending and some of that on an ordinary basis and obviously, especially in these downtimes that we are managing down. But overall, again, there is a fixed cost nature to our business between baseline salaries as well as occupancy costs and other key fixed costs that are just naturally going to be -- they're going to trend as they do and that will, at times, lead to negative leverage when the top line is soft. So again, we are throttling back the spending where we can in the short term, but knowing that, obviously, we need to get that revenue line turning in the right direction, which we are taking some key actions to turn around it.
And ladies and gentlemen, at this time, we'll conclude today's question-and-answer session as well as today's conference call. We do thank you for joining the presentation. You may now disconnect your lines.