Systemax(US:GIC)2022-05-04 01:23Financial Data and Key Metrics Changes - The company reported record revenue of $288 million for Q1 2022, an increase of nearly 15% compared to the prior year [6][16] - Gross margin reached a record 37.4%, improving by 660 basis points year-over-year [16][17] - Operating income was over $29 million, with an operating margin of 10.2%, marking the third consecutive quarter of double-digit operating margins [6][20] Business Line Data and Key Metrics Changes - U.S. revenue increased over 14%, while Canadian revenue improved nearly 22% in local currency [16] - The company is focusing on enhancing service and customer experience through investments in sales, marketing, and digital technology [8][9] Market Data and Key Metrics Changes - The company has seen strong sales trends throughout the quarter, with open orders increasing modestly due to customer demand [16] - Inventory levels increased by approximately 50% year-over-year, attributed to both price increases and the need for higher safety stock levels due to longer lead times [28][30] Company Strategy and Development Direction - The company is committed to digital leadership, with plans to launch a new digital e-commerce platform to enhance customer engagement [9] - The ACE strategy is being implemented to strengthen customer-focused culture and drive top-line growth [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the robust demand in the market and the company's positioning for long-term growth [14][27] - The company is closely monitoring supply chain challenges, particularly related to the impact of lockdowns in China, but has not seen material impacts so far [41] Other Important Information - The company announced a quarterly dividend of $0.18 per share and anticipates continuing regular dividends in the future [22] - A new state-of-the-art distribution center in the Greater Toronto area is set to begin operations in the fall to support growth in Canada [11][12] Q&A Session Summary Question: Was any of the first quarter sales growth a catch-up from constrained periods last year? - Management indicated that current sales demand is driven by overall business demand and expansion of the sales organization, with open orders remaining stable [25][26] Question: Is robust demand continuing into April and early May? - Management noted that they continue to see robust demand in the market, expressing confidence in future performance [27] Question: Can you break down the inventory balance increase? - The increase in inventory is attributed to higher prices and the need for safety stock due to longer lead times, with a focus on ensuring product availability for customers [28][30] Question: What drove the gross margin performance in the quarter? - The gross margin improvement was primarily driven by normalized freight margins, increased sales of higher-margin private brands, and effective pricing strategies [32][34] Question: Will SG&A expenses continue to leverage in the second quarter and beyond? - Management expects to continue leveraging SG&A expenses while investing in growth opportunities, particularly in the Canadian market [36][37] Question: How has the company been impacted by lockdowns in China? - Management reported no material impact from the lockdowns but is closely monitoring the situation [41] Question: Is the company considering acquisitions? - Management is open to strategic acquisitions that can drive category growth while focusing on organic growth strategies [42][43]