Systemax(US:GIC)2024-07-30 21:30Financial Performance - Consolidated sales increased 6.8% to $347.8 million in Q2 2024 compared to $325.8 million in Q2 2023, with organic U.S. sales rising 2.1%[4][21] - Operating income from continuing operations decreased 9.3% to $26.4 million in Q2 2024 compared to $29.1 million in Q2 2023[21] - Net income per diluted share from continuing operations decreased 7.1% to $0.52 in Q2 2024 compared to $0.56 in Q2 2023[21] - Net income from continuing operations for the three months ended June 30, 2024, was $20.2 million, compared to $21.5 million in 2023, reflecting a decline of 6.0%[34] - Net income from continuing operations for the six months ended June 30, 2024, was $33.3 million, slightly down from $34.8 million in 2023[67] Gross Margin and Expenses - Gross margin improved by 50 basis points to 35.2% in Q2 2024, while year-to-date gross margin declined 40 basis points to 34.8%[6][22] - Selling, distribution, and administrative expenses (SD&A) as a percentage of sales increased approximately 190 basis points in Q2 2024 compared to the prior year[8] - SD&A costs for the six months ended June 30, 2024, increased approximately 80 basis points compared to the prior year, reflecting planned investments and increased audit costs[9] - The company expects SD&A expenses to remain elevated compared to the prior year due to planned investments and increased costs[11] Assets and Liabilities - Total assets increased to $542.5 million as of June 30, 2024, up from $513.4 million at the end of 2023, marking a growth of 5.4%[32] - Total liabilities rose to $272.1 million as of June 30, 2024, compared to $258.2 million at the end of 2023, an increase of 5.0%[32] - Retained earnings increased to $80.3 million as of June 30, 2024, up from $66.0 million at the end of 2023, reflecting a growth of 21.9%[32] Cash Flow and Capital Expenditures - Cash and cash equivalents increased to $38.8 million as of June 30, 2024, from $34.4 million at December 31, 2023, representing a change of $4.4 million[51] - Net cash provided by operating activities from continuing operations was $25.0 million for the six months ended June 30, 2024, down from $65.5 million in 2023, primarily due to changes in working capital accounts[54] - Net cash used in investing activities was $2.2 million in 2024, significantly lower than $73.7 million in 2023, which included a $72.6 million acquisition of Indoff[55] - The company anticipates capital expenditures in the range of $3.0 to $5.0 million for 2024[14] Acquisitions and Intangible Assets - The company acquired Indoff LLC on May 19, 2023, for approximately $72.6 million, which is expected to enhance its market presence in North America[76][79] - For the six months ended June 30, 2024, Indoff generated revenue of approximately $78.5 million and net income of approximately $2.1 million[80] - The company recorded $1.6 million of intangible amortization expense for the six months ended June 30, 2024, primarily related to the Indoff acquisition[83] - The total identifiable assets acquired from Indoff included customer lists valued at $24.1 million and trademarks valued at $6.2 million[80] Credit and Liquidity - As of June 30, 2024, the company had over $155 million of liquidity, including cash and undrawn lines of credit[16] - The company maintains a $125.0 million secured revolving credit facility, with total availability of $122.2 million as of June 30, 2024[57] - The Company is in compliance with all covenants of the credit agreement as of June 30, 2024, with total outstanding letters of credit at $1.6 million and total excess availability at $120.6 million[127] Market and Operational Insights - The North American industrial products market is highly fragmented, requiring significant costs associated with warehousing and inventory management[123] - The primary component of operating expenses includes employee-related costs, digital marketing spend, and occupancy-related charges[139] - The Company continually assesses operations to ensure efficiency and responsiveness to customer needs[139] - The Company is exposed to market risks, including changes in U.S. and international interest rates and currency exchange rates, particularly against the Canadian dollar[148] Legal and Compliance - The Company is involved in various lawsuits and claims, including those related to sales channel practices and intellectual property matters[117] - The Company performs annual impairment testing for goodwill and indefinite-lived intangible assets, assessing fair value against carrying value[129]