Distribution Solutions Group Inc (DSGR) 2022 Q1 法說會逐字稿

Good morning, everyone. Welcome to the Lawson Products First Quarter 2022 Earnings Call. As a reminder, this conference call is being recorded. Now I will turn the call over to Steven Hooser, Investor Relations, to provide introductions and read the safe harbor statement. Please go ahead.

大家，早安。歡迎參加 Lawson Products 2022 年第一季財報電話會議。謹此提醒，本次電話會議正在錄音中。現在，我將把電話轉給投資者關係部的史蒂文·胡瑟（Steven Hooser），由他進行介紹並閱讀安全港聲明。請繼續。

Good morning, and welcome to the Lawson Products First Quarter 2022 Earnings Call. With me today are Bryan King, Lawson Products Chairman; and Ron Knutson, Lawson Products' Executive Vice President and Chief Financial Officer. During the call, they will be providing an update on the businesses from an operating and a financial perspective.

早上好，歡迎參加 Lawson Products 2022 年第一季財報電話會議。今天與我在一起的有 Lawson Products 董事長 Bryan King；羅森‧克努森 (Ron Knutson)，Lawson Products 執行副總裁兼財務長。在電話會議期間，他們將從營運和財務角度提供有關業務的最新資訊。

Please note that statements made on this call and in the press release contain forward-looking statements concerning goals, beliefs, expectations, strategies, plans, future operating results, the underlying assumptions that are subject to risks and uncertainties that could cause actual results to differ materially from those described. In addition, statements made during this call are based on the company's views as of today. The company anticipates that future developments may cause those views to change. Please consider the information presented in that light. The company may, at some point, elect to update the forward-looking statements made today, but specifically disclaims any obligation to do so.

請注意，本次電話會議和新聞稿中的陳述包含有關目標、信念、期望、策略、計劃、未來經營業績以及潛在假設的前瞻性陳述，這些假設可能受到風險和不確定性的影響，可能導致實際結果有所不同實質上來自所描述的內容。此外，本次電話會議中發表的聲明是基於公司今天的觀點。該公司預計未來的發展可能會導致這些觀點改變。請考慮這一點所提供的資訊。該公司可能會在某個時候選擇更新今天做出的前瞻性聲明，但明確表示不承擔任何這樣做的義務。

Management may also refer to non-GAAP measures, including adjusted EBITDA, adjusted operating income and adjusted diluted EPS. Reconciliations to the nearest GAAP measures can be found at the end of the earnings release. The earnings press release issued earlier today is posted on the Investor Relations section of our website at investor.lawsonproducts.com. A copy of the release has also been included in the current report on Form 8-K filed with the SEC. This call is being audio simulcast on the Internet via the Lawson Products' Investor Relations page on the company's website. A replay of the webcast will be available on that website through May 31, 2022.

管理階層也可以參考非公認會計準則衡量標準，包括調整後的 EBITDA、調整後的營業收入和調整後的稀釋每股盈餘。與最接近的 GAAP 衡量標準的調整可以在收益發布的末尾找到。今天稍早發布的收益新聞稿發佈在我們網站 Investor.lawsonproducts.com 的投資者關係部分。新聞稿的副本也包含在向 SEC 提交的 8-K 表當前報告中。本次電話會議透過公司網站上的 Lawson Products 投資者關係頁面在網路上進行音訊聯播。截至 2022 年 5 月 31 日，該網站將提供網路廣播的重播。

I would now like to turn the call over to Lawson Products' Chairman, Mr. Bryan King. Bryan?

我現在想將電話轉給 Lawson Products 董事長 Bryan King 先生。布萊恩？

Thank you, Steven, and good morning, everyone. It's great to be on the call this morning, and we're excited to comment on the first quarter stand-alone Lawson Products results. The purpose of this call is to discuss the operating and financial results of the Lawson Products operating company.

謝謝你，史蒂文，大家早安。很高興今天早上接到電話，我們很高興對第一季獨立的勞森產品業績發表評論。本次電話會議的目的是討論 Lawson Products 營運公司的營運和財務表現。

Lawson had another great quarter and exceeded our expectations with 13.8% in sales growth. The Lawson team has continued to deliver despite inflationary and supply chain challenges that exist in the marketplace. As most of you are aware, on April 1, 2022, we completed the strategic combination of Lawson Products with TestEquity and Gexpro Services that formed a specialty distribution company. Given that this occurred subsequent to the end of the first quarter, we've been advised to limit today's comments solely on Lawson Products' performance on a standalone basis, and we will not be taking questions. Beginning with our second quarter release, which will be in early August, we'll be discussing the consolidated results of all 3 operating divisions and taking questions again. We do understand the desire for more information on what the 3 companies look like on a combined basis as well as our strategic vision for this new company going forward.

羅森 (Lawson) 又度過了一個出色的季度，銷售額增長 13.8%，超出了我們的預期。儘管市場上存在通貨膨脹和供應鏈挑戰，勞森團隊仍繼續提供服務。正如你們大多數人所知，2022 年 4 月 1 日，我們完成了 Lawson Products 與 TestEquity 和 Gexpro Services 的策略合併，組成了一家專業分銷公司。鑑於這種情況發生在第一季末之後，我們被建議限制今天僅對 Lawson Products 的獨立業績發表評論，並且我們不會回答問題。從八月初發布的第二季度開始，我們將討論所有 3 個營運部門的綜合業績並再次回答問題。我們確實理解人們渴望獲得更多有關這 3 家公司合併後的情況以及我們對這家新公司未來的策略願景的資訊。

Accordingly, we announced this morning that we will be conducting a separate investor call, including a question-and-answer session to further discuss the strategic combination to create a more robust value-added specialty distribution company. That call will be held on May 5 at 11 a.m. Eastern time. We look forward at that time to sharing more information on the vision and financial highlights.

因此，我們今天早上宣布，我們將舉行單獨的投資者電話會議，包括問答環節，以進一步討論策略性合併，以創建更強大的增值專業分銷公司。該電話會議將於東部時間 5 月 5 日上午 11 點舉行。我們期待屆時分享更多有關願景和財務亮點的資訊。

With that, I will now turn it over to Ron to provide insight on Lawson operations and financial performance for the first quarter. Following Ron's comments, I will come back and discuss the recent leadership changes at the Lawson Products' operating unit and provide some closing comments.

現在，我將把它交給羅恩，以提供有關勞森第一季營運和財務表現的見解。在羅恩發表評論之後，我將回來討論勞森產品營運部門最近的領導層變動，並提供一些總結評論。

Thank you, Bryan. In terms of Lawson's performance for the quarter, we saw great progress on many fronts, including strong growth in our strategic customer relationships; continued growth in our Kent Automotive business, in particular, multisite locations; the relocation of our Western Canadian distribution center more than doubling its square footage size from 43,000 square feet to over 100,000 square feet; the continuation of our investments in the 3 initiatives of market segmentation, Torrent part washers and state and local and education initiative; our ability to manage through a tough inflationary environment while generating additional gross margin dollars to offset various cost increases; strong sales and EBITDA performance by the Bolt Supply House; and we exceeded our first quarter expectations even with increased costs in certain areas of the business, which I'll cover more in a moment.

謝謝你，布萊恩。就羅森本季的業績而言，我們在許多方面都看到了巨大的進步，包括策略客戶關係的強勁成長；我們的肯特汽車業務持續成長，特別是多站點業務；我們的加拿大西部配送中心搬遷，面積增加了一倍多，從 43,000 平方英尺增加到超過 100,000 平方英尺；我們繼續對市場細分、Torrent 零件清洗機以及州和地方和教育計劃的 3 項舉措進行投資；我們有能力應對嚴峻的通貨膨脹環境，同時產生額外的毛利率以抵消各種成本的增加； Bolt Supply House 的強勁銷售和 EBITDA 業績；即使某些業務領域的成本增加，我們也超出了第一季的預期，稍後我將詳細介紹這一點。

So let's start with some of the key financial takeaways for the quarter and then I'll jump into some of the details. First, consolidated sales improved by $14.3 million to $117.9 million on 1 additional selling day this quarter. Average daily sales increased 12% versus a year ago quarter and improved 8.3% over the fourth quarter of 2021.

因此，讓我們從本季度的一些關鍵財務要點開始，然後我將介紹一些細節。首先，本季增加了 1 個銷售日，綜合銷售額增加了 1,430 萬美元，達到 1.179 億美元。日均銷售額較去年同期成長 12%，較 2021 年第四季成長 8.3%。

Second, our consolidated gross margin increased $5.9 million. We have proactively managed margins this quarter despite the global supply chain issues in the marketplace and inflationary pressures that we are all experiencing.

其次，我們的綜合毛利率增加了 590 萬美元。儘管市場上存在全球供應鏈問題以及我們都面臨的通膨壓力，但本季我們仍積極管理利潤。

And third, reported operating income was $12.1 million for the quarter compared to $4.8 million a year ago. On an adjusted basis, our EBITDA was $9.2 million, up $745,000 over the fourth quarter of 2021 and up slightly over $9.1 million a year ago quarter despite being burdened with higher labor costs, including higher health insurance claims coming out of COVID.

第三，該季度報告的營業收入為 1,210 萬美元，而去年同期為 480 萬美元。調整後的 EBITDA 為 920 萬美元，比 2021 年第四季成長 74.5 萬美元，略高於去年同期的 910 萬美元，儘管勞動力成本增加，包括因新冠疫情導致的健康保險索賠增加。

As we reflect on the first quarter, sales continued to sequentially improve in the Lawson and Bolt business as does our sales rep productivity. Most product categories realized sequential daily sales increases over the fourth quarter. We continue to make great progress in this environment and continue our focus on driving sales, protecting our margins, cost control and generating strong cash flows.

當我們回顧第一季時，Lawson 和 Bolt 業務的銷售額繼續持續改善，我們的銷售代表的生產力也是如此。大多數產品類別的每日銷售額在第四季度實現了環比增長。我們在這種環境下繼續取得巨大進步，並繼續專注於推動銷售、保護利潤、控製成本和產生強勁的現金流。

We are excited to celebrate our 70th year anniversary as an organization. Over the past 70 years, the company has been built through strong customer relationships that rely upon us for our services, products and expertise. This has become more evident as labor markets continue to tighten and our customers look to us to supplement their labor needs. Partnering with Lawson will ensure that they continue to operate in the most efficient manner and reduce their downtime.

我們很高興慶祝我們作為一個組織成立 70 週年。在過去的 70 年裡，公司建立了強大的客戶關係，這些客戶依賴我們的服務、產品和專業知識。隨著勞動力市場持續收緊以及我們的客戶希望我們補充他們的勞動力需求，這一點變得更加明顯。與勞森合作將確保他們繼續以最有效的方式運作並減少停機時間。

During the first quarter, average daily sales were $1.751 million in January, $1.833 million in February and $1.933 million in March. The integrated Lawson Partsmaster business realized strong sequential growth during the quarter. Additionally, the Bolt Supply House set another all-time record sales month for March on top of a record sales month realized just last November. We estimate that of the 13.8% sales increase versus a year ago, approximately 9% is price related.

第一季度，1月份日均銷售額為175.1萬美元，2月份為183.3萬美元，3月為193.3萬美元。整合後的 Lawson Partsmaster 業務在本季實現了強勁的連續成長。此外，Bolt Supply House 在去年 11 月創下銷售紀錄的基礎上，3 月又創下了銷售紀錄。我們估計，與去年同期相比，銷售額成長了 13.8%，其中約 9% 與價格相關。

For the quarter, the Lawson Partsmaster MRO business grew 12.1%, while both supply sales increased nearly 27%, driven by success within their branches and a recovery of their corporate sales primarily to oil and gas customers. We continue to realize strong sales within the Strategic and Kent side of the business, up approximately 25% and 27%, respectively, versus a year ago quarter.

本季度，Lawson Partsmaster MRO 業務增長了 12.1%，而兩個供應銷售增長了近 27%，這得益於其分支機構的成功以及主要面向石油和天然氣客戶的企業銷售的複蘇。我們的策略業務和肯特業務持續實現強勁的銷售，與去年同期相比分別成長約 25% 和 27%。

Consolidated gross margin for the quarter came in at 51.3% compared to 52.7% a year ago and 52.9% in the fourth quarter of 2021. On a stand-alone basis, before the classification of certain service-related costs into gross margin, the Lawson Partsmaster MRO margin was 58.2% in Q1 compared to 59.9% in Q4 and 59.4% a year ago quarter. Excluding the movement in noncash inventory reserves, Q1 gross margins were within 100 bps from Q4, driven by a sales mix shift towards larger, lower-margin profile customers and increased vendor transportation and labor costs that we are all experiencing. Our gross margin percentage was also negatively affected by approximately 50 bps due to the strong sales within our strategic customer base, which do have lower margins.

本季的綜合毛利率為 51.3%，而去年同期為 52.7%，2021 年第四季為 52.9%。單獨來看，在將某些服務相關成本分類為毛利率之前，羅森Partsmaster 第一季的MRO 利潤率為58.2%，而第四季為59.9%，去年同期為59.4%。排除非現金庫存儲備的變動，第一季的毛利率與第四季相比在100 個基點以內，這是由於銷售組合轉向規模較大、利潤率較低的客戶，以及我們都經歷過的供應商運輸和勞動成本增加。由於我們的策略客戶群銷售強勁，而其利潤率確實較低，我們的毛利率百分比也受到了約 50 個基點的負面影響。

While our actions allowed us to create $5.9 million of additional gross margin dollars over a year ago, the recovery of these rising costs on a dollar basis actually narrows the overall margin percentage slightly. We remain strategically focused on growing our gross margin dollars and being diligent in managing through the related inflationary supply chain and labor shortage impacts.

雖然我們的行動使我們比一年前創造了 590 萬美元的額外毛利率，但以美元計算的這些上升成本的恢復實際上略微縮小了整體利潤率。我們的策略重點仍然是提高毛利率，並努力管理相關的通膨供應鏈和勞動力短缺的影響。

While we are pleased with our overall margin percentages for the first quarter of 2022, we are experiencing challenges to access certain products like everyone else in the industry. Our customer backorders and service level metrics have improved sequentially from Q4 to Q1. However, they are not yet back to our normalized levels. We are adjusting our actions to manage through this unusual period. We remain confident in our ability to navigate through this unusual time. However, we do expect that many types of these challenges may continue throughout the remainder of 2022.

雖然我們對 2022 年第一季的整體利潤率感到滿意，但我們在像業內其他公司一樣獲取某些產品方面面臨著挑戰​​。我們的客戶缺貨和服務水準指標從第四季到第一季持續改善。然而，它們尚未回到我們的正常水平。我們正在調整行動以度過這個不尋常的時期。我們對度過這個不尋常時期的能力充滿信心。然而，我們確實預計許多類型的挑戰可能會在 2022 年剩餘時間內持續存在。

For the quarter, total operating expenses were $48.4 million compared to $49.8 million a year ago and $54.8 million in the fourth quarter. The first quarter of 2022 includes approximately $5 million of net nonoperating benefits related to the mark-to-market accounting for stock-based compensation, offset by severance costs and costs related to Lawson's business combination with TestEquity and Gexpro Services. Excluding these nonrecurring items, adjusted operating expenses were up $5.2 million compared to the year ago quarter, primarily driven by higher compensation to support higher sales, the return of more customer-facing selling activities, planned upfront investments to grow sales by expanding our channels to market and increased health insurance costs.

本季總營運費用為 4,840 萬美元，而去年同期為 4,980 萬美元，第四季為 5,480 萬美元。 2022 年第一季包括與基於股票的薪酬按市值計價會計相關的約 500 萬美元的淨非經營性收益，被遣散費以及與 Lawson 與 TestEquity 和 Gexpro Services 業務合併相關的成本所抵消。不包括這些非經常性項目，調整後的營運費用與去年同期相比增加了520 萬美元，主要是由於更高的薪酬以支持更高的銷售額、更多面向客戶的銷售活動的回報、計劃的前期投資以透過擴大我們的管道來增加銷售市場和健康保險費用增加。

Let me take a moment and comment on our health insurance claims briefly. For the quarter, our net health insurance costs rose approximately $1.5 million or 50% versus a year ago. This was driven by an increase in the number of larger claims as well as the frequency and severity of non-large claims. Many of the trends that we experienced in this quarter are not inconsistent with the rise in health claims throughout most industries coming out of COVID. Historically, for Lawson, this tends to smooth out over the year. However, the increase that we experienced this quarter negatively impacted our first quarter 2022 adjusted EBITDA margins by approximately 125 basis points.

讓我花點時間簡要評論一下我們的健康保險索賠。本季度，我們的淨健康保險費用比一年前增加了約 150 萬美元，即 50%。這是由於大額索賠數量以及小額索賠的頻率和嚴重程度增加所致。我們在本季經歷的許多趨勢與大多數行業因新冠疫情而出現的健康索賠增長並不矛盾。從歷史上看，對勞森來說，這種情況往往會在一年內趨於平穩。然而，本季的成長對 2022 年第一季調整後 EBITDA 利潤率產生了約 125 個基點的負面影響。

Our reported operating income was $12.1 million for the first quarter compared to $4.8 million a year ago. On an adjusted basis, including nonoperating items, non-GAAP operating income was $7.1 million for the quarter compared to $6.1 million in Q4 of 2021 and $7.2 million in the first quarter of 2021.

我們報告的第一季營業收入為 1,210 萬美元，而去年同期為 480 萬美元。調整後（包括非經營項目），本季非公認會計準則營業收入為 710 萬美元，而 2021 年第四季為 610 萬美元，2021 年第一季為 720 萬美元。

Adjusted EBITDA as a percent of sales was 7.8% for the first quarter. On an adjusted basis, excluding stock-based compensation, severance and acquisition costs, diluted EPS was $0.57 for the quarter versus $0.52 in the fourth quarter of 2021 and $0.58 in the year ago quarter. Capital expenditures for the quarter were approximately $2.1 million, including work being performed to expand our Suwanee distribution center capabilities, information technology investments and the purchase of Torrent part washing machines.

第一季調整後 EBITDA 佔銷售額的百分比為 7.8%。調整後，不包括股票薪酬、遣散費和收購成本，本季攤薄後每股收益為 0.57 美元，而 2021 年第四季為 0.52 美元，去年同期為 0.58 美元。本季的資本支出約為 210 萬美元，包括為擴大 Suwanee 配送中心能力而進行的工作、資訊科技投資以及購買 Torrent 零件洗衣機。

As an organization, we continue to make investments in the business, in particular, areas that have a direct impact on sales. While the ongoing uncertainties and unevenness from the pandemic recovery and the related supply chain challenges continued, we were still able to generate improvements in the business while balancing our cost structure against our sales trends. We ended the quarter in a net borrowing position of $10 million with $83.4 million of availability under our previous $100 million committed credit facility.

作為一個組織，我們繼續對業務進行投資，特別是對銷售有直接影響的領域。儘管疫情復甦帶來的持續不確定性和不平衡以及相關供應鏈挑戰仍然存在，但我們仍然能夠實現業務改進，同時根據銷售趨勢平衡我們的成本結構。本季結束時，我們的淨借款部位為 1,000 萬美元，根據我們先前承諾的 1 億美元信貸額度，可提供 8,340 萬美元。

Before I turn the call back over to Bryan, let me thank the entire Lawson team. We've had significant activities taking place on many fronts to drive our business forward, including managing through the lingering effects of the pandemic and more extensive inflation and supply chain challenges than most of us have ever faced. The team continues to work through these challenges to make us stronger for our customers, our employees and our shareholders. Thank you for all of your commitment to the company.

在我將電話轉回給布萊恩之前，請允許我感謝整個勞森團隊。我們在許多方面開展了重大活動，以推動我們的業務向前發展，包括應對疫情的揮之不去的影響以及比我們大多數人面臨的更廣泛的通膨和供應鏈挑戰。團隊將繼續努力應對這些挑戰，讓我們為客戶、員工和股東變得更強大。感謝您對公司的所有承諾。

As Bryan mentioned at the beginning of the call, we will be conducting an additional call on May 5 at 11 a.m. Eastern Time to discuss the strategic combination that closed on April 1 between Lawson, TestEquity and Gexpro services. We look forward to that discussion and being able to answer questions at that time.

正如 Bryan 在電話會議開始時所提到的，我們將於美國東部時間 5 月 5 日上午 11 點再進行一次電話會議，討論 Lawson、TestEquity 和 Gexpro 服務於 4 月 1 日完成的策略合併。我們期待屆時進行討論並能夠回答問題。

I'll now turn it back over to Bryan.

我現在將其轉回給布萊恩。

Thank you, Ron. Earlier this month, we announced a key leadership transition at the Lawson Products operating company. This management change was made as part of its coordinated succession plan, and we were pleased to welcome Cesar Lanuza as Lawson operating company's new President and Chief Executive Officer. Cesar is a high-energy executive with a long track record of industry successes, and he is well known for and has a reputation as a customer-centric leader. We're thrilled to have Cesar leading the team as well as the Lawson operating business to the next level of growth and profitability. Cesar stepped in right away and is already making an impact and was quickly embraced by the Lawson team.

謝謝你，羅恩。本月早些時候，我們宣布了勞森產品營運公司的關鍵領導層換屆。此次管理層變動是其協調繼任計畫的一部分，我們很高興歡迎塞薩爾·拉努扎 (Cesar Lanuza) 擔任勞森營運公司的新總裁兼執行長。塞薩爾 (Cesar) 是一位精力充沛的高管，擁有長期的行業成功記錄，並以以客戶為中心的領導者而聞名並享有盛譽。我們很高興塞薩爾領導團隊以及勞森營運業務達到新的成長和獲利水準。塞薩爾立即介入並已經產生了影響，並很快受到勞森團隊的歡迎。

I also want to take a moment to recognize and thank Mike DeCata for his thoughtful leadership and significant contributions to the successes of Lawson over the last decade. During Mike's tenure, the company and team have grown through his commitment to operational excellence and continuous improvement. He has truly been instrumental in the company's turnaround and steady progress and a significant value created for our shareholders, and the Board and I are grateful for his leadership and drive. We're delighted to have Mike continue as a consultant to the company and as a continued shareholder.

我還想花一點時間來表彰並感謝邁克·德卡塔（Mike DeCata）在過去十年中的深思熟慮的領導以及為勞森的成功做出的重大貢獻。在麥克任職期間，公司和團隊透過他對卓越營運和持續改進的承諾不斷發展。他確實對公司的扭虧為盈和穩步發展發揮了重要作用，並為我們的股東創造了巨大的價值，董事會和我對他的領導和推動表示感謝。我們很高興麥克繼續擔任公司顧問和持續股東。

With that, I would like to close out today's call and thank you for joining us this morning. We look forward to talking to you again on May 5, and we genuinely hope you will join us for what we welcome as a robust discussion about the future for the company. Have a great afternoon and thank you very much.

我想結束今天的電話會議，並感謝您今天早上加入我們。我們期待 5 月 5 日再次與您交談，我們真誠地希望您能加入我們，就公司的未來進行熱烈的討論。祝您下午愉快，非常感謝。

Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.

謝謝你們，女士們、先生們。今天的電話會議到此結束。此時您可以斷開電話線，度過美好的一天。感謝您的參與。