DSG(DSGR) - 2021 Q3 - Quarterly Report

Financial Performance - Total sales increased by 16.9% to $105.6 million in Q3 2021 compared to$90.3 million in Q3 2020, driven by improved business conditions and Partsmaster sales [117]. - Revenue for the nine months ended September 30, 2021, increased by 24.5% to $315.7 million from$253.5 million in the same period in 2020 [127]. - Partsmaster contributed $44.6 million in sales in the first nine months of 2021, compared to$5.4 million in the same period in 2020 [127]. - Operating income for Q3 2021 was $4.6 million, compared to$2.0 million in Q3 2020, reflecting improved operational performance [110]. - Net income for the nine months ended September 30, 2021, was $10.2 million, down from$14.9 million in the same period in 2020 [126]. Cost and Expenses - Adjusted non-GAAP operating income was $7.3 million in Q3 2021, down from$7.7 million in Q3 2020, primarily due to increased supplier costs [110]. - Selling expenses increased to $72.9 million for the first nine months of 2021, up from$55.4 million in the same period a year ago, representing a 31.6% increase [130]. - General and administrative expenses rose to $79.5 million in the first nine months of 2021 from$57.8 million in the prior year, a 37.5% increase [131]. Profitability Metrics - Gross profit margin improved to 53.1% in Q3 2021 from 52.3% in Q3 2020 [115]. - Gross profit increased by $8.8 million to$56.0 million in Q3 2021, compared to $47.2 million in Q3 2020, primarily due to increased sales [118]. - Consolidated gross profit as a percentage of sales was 53.1$7.5 million on September 30, 2021, from $28.4 million on December 31, 2020, primarily due to the payment of the acquisition liability related to Partsmaster [136]. - The company believes cash from operations and available funds under the Credit Agreement are sufficient for operating requirements and strategic initiatives [143]. Acquisition Impact - The acquisition of Partsmaster for$35.3 million contributed $13.6 million in revenue and an operating loss of$0.8 million in Q3 2021 [97]. - The company deferred $3.5 million in employer-side social security payments under the CARES Act, with$1.7 million expected to be paid in 2021 [101]. Operational Metrics - Average monthly PMI was 60.2 in Q3 2021, indicating expansion compared to 55.2 in Q3 2020 [106]. - Average sales per representative per day increased by 8.2% to $1.352 in Q3 2021 compared to$1.249 in Q3 2020 [107]. - Bolt Supply sales improved by 13.5% compared to the prior year quarter, contributing to overall sales growth [117]. Financial Position and Compliance - As of September 30, 2021, the company had $10.9 million in outstanding borrowings and$87.4 million of borrowing availability under its Revolving Credit Facility [140]. - The company can borrow up to 3.25 times its EBITDA and maintains a minimum fixed charge ratio of 1.15, remaining compliant with all financial covenants as of September 30, 2021 [141]. - Non-compliance with financial covenants in future quarters could lead to higher financing costs and restrictions on borrowing, adversely affecting the company's financial condition [142]. Challenges - Supply chain disruptions and inflation continue to pose challenges, impacting inventory acquisition and customer order fulfillment [108]. - Capital expenditures were $5.7 million for the nine months ended September 30, 2021, compared to$1.3 million in the same period in 2020 [137]. - The company has a stock repurchase program authorized for up to $7.5 million, but did not repurchase any shares in the first nine months of 2021 [139].