Financial Data and Key Metrics Changes - Consolidated sales contracted by 0.3% year-over-year, totaling $91 million compared to $91.3 million in Q1 2019 [14][22] - Adjusted EBITDA margin increased over 200 basis points to 10.4% of sales versus 8.2% a year ago, resulting in an adjusted EBITDA increase of nearly 27% [14][34] - Reported operating income was $18.6 million for Q1, inclusive of a stock-based compensation benefit of $10.7 million, compared to $5.5 million a year ago [34] Business Line Data and Key Metrics Changes - Strategic accounts achieved 1.7% growth, with 14.3% growth excluding two oil and gas customers negatively impacted by oil price declines [15] - Bolt Supply grew by 8.4% year-over-year for the quarter [15] - Government accounts contracted by 1.8% for the quarter, indicating broad-based softness [15] Market Data and Key Metrics Changes - Average daily sales for January, February, and March were $1.447 million, $1.468 million, and $1.356 million respectively, showing a decline in March [23] - April average daily sales for MRO business trended at approximately 61% of sales compared to the first two weeks of March, resulting in a decline of approximately 35% year-over-year [29] Company Strategy and Development Direction - The company is focused on maintaining safety and health protocols while continuing to service customers during the COVID-19 pandemic [5][9] - Actions taken include salary reductions, furloughing employees, and consolidating distribution centers to manage costs effectively [11][37] - The company aims to emerge from the current environment stronger and more resilient, with a commitment to innovation and customer service [18][60] Management's Comments on Operating Environment and Future Outlook - Management noted that the economic impact of COVID-19 began to manifest in the second half of March, with continued softness into April [21] - The company remains proactive in supporting customers and generating revenue despite challenging conditions [30] - Management expressed confidence in the company's ability to recover and grow post-pandemic, emphasizing the importance of customer loyalty and employee commitment [51][60] Other Important Information - The company ended the quarter with $4.1 million in cash and cash equivalents, with an additional $88 million available under its credit facility [22][39] - Total operating expenses decreased to $30.3 million from $43.4 million a year ago, reflecting effective cost management [32] Q&A Session Summary Question: Has there been any stabilization in sales as April progressed? - Management confirmed that stabilization has been observed throughout the weeks in April, with consistent trends [42] Question: How are the cost reductions distributed across various categories? - Cost reductions are primarily within selling and G&A expenses, with a significant portion being fixed costs [43][44] Question: Is the consolidation of the Georgia distribution center a permanent action? - Management indicated that the consolidation is volume-based and intends to bring back furloughed employees as demand increases [45] Question: What percentage of customers are deemed essential? - Management noted that while many customers are in essential sectors, they do not track this ratio specifically [46] Question: How has the process for winning new customers changed during the downturn? - Management reported that some new customers are more receptive due to being underserved by existing suppliers, presenting an opportunity for growth [50] Question: When will new sales reps start? - New sales rep start dates have been deferred until at least July 1, primarily due to training logistics [58]
DSG(DSGR) - 2020 Q1 - Earnings Call Transcript