Global Industrial Company

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. 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. Please note this event is being recorded. I would now like to turn the conference over to Michael Smarjasi, Investor Relations. Please go ahead.

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 Industrial's business and exclusive of the May 19, 2023, end-off acquisition. 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 to 8K. 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. Before turning to the financial results, I want 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've remained actively engaged with this position in my role as executive chairman of the board. I've worked closely with the senior management team, supporting their efforts and wish him well as he embarks on the next chapter in his career.

Over the past several years, we've improved 6.8% to approximately $348 million. On a organic basis, we've delivered our fourth 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 the PMI index.

During the quarter, we are continuing to continue to evaluate the performance of the market for the cautious customer purchase behavior, with mixed revenue performance on a monthly basis. Thank you. trends remain healthy. The gross margin was 35.56%. We have a quarter and improvement on both year-over-year and on a 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 and key growth initiatives Thank you, Richard. We continue to invest in our growth drivers and evaluate strategic opportunities. I will now turn the call over to Alex. Thank you, Richard. 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 in. Gross profit for the quarter was $122.5 million, up 8.5% from last year. Gross margin was 35.2% points from the year 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 non-organic markets. Performance will continue to reflect the impact of strategic promotion and freight actions as part of our competitive pricing initiatives with planned investment in key sales and marketing growth initiatives.

which generated negative leverage due to the softer customer demand environment, partially offset by the benefit associated with accounting for executive transition.

We expect SD&A levels to moderate from QQ levels in the second half of the year, but we expect SD&A levels to remain elevated when compared to the year-ago as we continue to support our growth strategy.

We remain disciplined in our control of our general and discretionary cost management. Operating income from continuing operations was $26.4 million for this quarter, and operating margin was $1 million, which primarily includes maintenance-related investments of equipment within our distribution network. 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 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 we continue to fund our quarterly dividends. As a result, our Board of Directors declared a quarterly dividend of 25 cents per share of common stock. This concludes our prepared remarks today. If you have any questions, please feel free to open the call for questions. We 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 speakerphone, please pick up your hands and fingers before you press the keys.

If at any time your question has been answered, you may press star, then one on your touchtone. If you would like to withdraw your question, please press star, then two. forecast out what we're looking at. We know 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. Okay.

Yeah, I appreciate that. Last one for me. SG&A was above our model and outgrew revenues by quite a bit. Richard, you mentioned you're doing some planned investments.

I'm just curious to hear what you think about the cost of the second half, given a certain 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?

Yeah, and I'll jump in there again, Brian. I think SG&A is one area that we definitely highlighted that as we exit 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 perspective, performance, we do still anticipate being up year over year. 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 continue to plan on investing in sales and marketing initiatives, but again, we'll be more moderate in a second. All right. Thanks, Pasadena.

The next question comes from Anthony Lebedinsky with Doty & Company. Please go ahead.

Good afternoon, gentlemen, and thank you for taking the question. So I guess, you know, first just a follow-up. 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 more color as to how the quarter progressed?

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 it was up.

beginning and end, I would highlight that it really was fluctuating quite a bit throughout the period, and that really continued.

You mentioned the ocean freight costs on the rise, but how should we think about also the gross margin?

We did a really good job. There was no one-time items in that gross margin improvement.

It was really through a combination of pricing initiatives as well as

continue to focus on our private brand goods. 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. big unknown, as you highlighted, was that 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. And while that's not unique to global industrial, it's an area that does mix into our cost of sales and is something that we have to manage. But again, we have teams really focused on making sure our pricing is It is right in the market, and we've been able to do that margin profile year over year.

Got you. Okay.

And then just as those sales reps get more exposure to your own private label products.

Yeah, it's an ongoing initiative. We saw an improvement in the gross margin profile in a lower margin. to grow that over time.

Got it. Well, thank you very much and best of luck.

Thank you.

Thank you.

Ladies and gentlemen, this will conclude today's question and answer session as well as call. Thank you.