Financial Data and Key Metrics Changes - The company achieved consolidated sales growth of 13.8% compared to Q1 2020, and 5.6% compared to Q4 2020, with Partsmaster contributing 9.1 million, representing 8.8% of sales, with a sequential improvement in organic earnings [16][22] - Gross margin for the quarter was 52.7%, down from 53.7% a year ago, impacted by inventory rationalization and increased freight costs [20][26] Business Line Data and Key Metrics Changes - The Bolt Supply business achieved a 9.1% EBITDA for the quarter, with significant expansions in Calgary and Saskatoon [10] - Strategic accounts saw a 4% sales increase compared to Q4, with strong growth driven by integrated supply partners and new strategic accounts [11][12] - The Kent Automotive business was up 7% sequentially, indicating a recovery in demand as miles driven increase [54] Market Data and Key Metrics Changes - Sales in the government segment increased by 3.7% compared to Q4, driven by state, local, and educational sectors [12] - The company faced supply chain challenges, including labor shortages and raw material increases, which could impact gross margins [13][26] Company Strategy and Development Direction - The company is focused on integrating Partsmaster and expanding into underserved markets, with a three-part growth strategy emphasizing adding sales reps, improving productivity, and growth through acquisitions [14][36] - Investments are being made in distribution center modernization to enhance capacity and efficiency [9][62] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving sequential monthly sales growth throughout 2021, supported by pent-up demand and operational excellence [45][47] - The integration of Partsmaster is progressing well, with no significant issues reported, and is expected to enhance the product offering [50][51] Other Important Information - The company ended the quarter with 65 million available under its credit facility, positioning it well for future growth initiatives [16][24] - Capital expenditures for the quarter were approximately 5 million to $6 million for the year, focusing on infrastructure upgrades [23] Q&A Session Summary Question: What was the sales cadence through the quarter? - Management noted strong sales in January, a dip in February due to weather, followed by recovery in March and April, with overall positive trends [28][29] Question: What cost increases have been seen, and how are pricing actions being handled? - The company has experienced supplier price increases but maintains confidence in passing modest increases to customers due to the critical nature of their service [31][32] Question: What is the outlook for MRO gross margins for the rest of the year? - Management expects to maintain gross margins in the high 50% range, despite a dip in Q1 due to inventory reserves [34] Question: Where are the opportunities for adding sales reps? - The company sees opportunities in both densely populated and geographically remote areas, with a focus on increasing sales rep productivity [39][40] Question: How confident is the company in achieving monthly sequential sales growth? - Management is confident due to various factors, including new product offerings and structural cost savings, which support their growth initiatives [46][48] Question: What is the status of the Partsmaster integration? - The integration is progressing smoothly, with inventory positioning largely completed and no significant issues reported [50][51] Question: How is the Kent Automotive business performing? - The Kent Automotive segment is experiencing a positive trend, driven by increased miles driven and gaining market share [54] Question: What is the outlook for selling expenses? - Selling expenses are expected to stabilize, with some increases due to resumed activities, but overall savings from previous years are anticipated to continue [56][58] Question: Is the company still confident in achieving the 25% to 30% incremental adjusted EBITDA margin goal? - Management reaffirmed confidence in achieving this margin goal through top-line sales growth [60]
DSG(DSGR) - 2021 Q1 - Earnings Call Transcript