Lawson Products Inc. (NASDAQ:LAWS) Q3 2018 Earnings Conference Call Transcript

Oct 25, 2018 • 09:00 am ET


Lawson Products Inc. (NASDAQ:LAWS) Q3 2018 Earnings Conference Call Transcript


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Good morning, ladies and gentlemen, and welcome to the Lawson Products Third Quarter 2018 Earnings Conference Call. This call will be hosted by Michael DeCata, Lawson Products' President and Chief Executive Officer, and Ron Knutson, Lawson Products' Chief Financial Officer. They will open the call with an overview of the third quarter results. Then there will be time for questions and answers.

This call is being audio simulcast on the internet via Lawson Products' Investor Relations page on the company's website, A replay of the webcast will be available on the website through November 30, 2018. During this call, the company will be providing an update on the business, as well as covering relevant financial and operational information.

(Forward Looking Cautionary Statements)

And now, I would like to turn our call over to Lawson Products' CEO, Mike DeCata. Thank you. You may begin.

Michael DeCata

Good morning, and thank you for joining the call. This morning, I will comment on the quarter and our overall progress. Ron Knudsen, our CFO, will provide more detailed review of our financial results and then we'll take your questions.

Our third quarter performance was strong and represents a continuation of our solid first and second quarters. We continue to successfully execute our three-part growth strategy of adding sales reps, increasing sales rep productivity, and pursuing a disciplined approach to acquisitions. Beyond sales growth, earnings and leverage have performed as forecasted during our last call, and this quarter further demonstrates the inherent leverage and earning potential of our business under a wide variety of growth scenarios. We achieved $7.3 million in adjusted EBITDA versus $5.4 million in the third quarter of 2017, and adjusted EBITDA growth continued to outpace revenue growth.

So a really good quarter in both sales and earnings. Also the fact that we were able to slightly increase our Lawson segment gross margin percent is further evidence that our customers recognize us as a critical partner in their success. Now, let's discuss some of the details. Total sales grew 17%. Our organic sales grew 4% and the Lawson segment achieved a 6.6% increase in sales rep productivity. Despite facing challenging comps on a year-over-year basis, every market segment group, our strategic accounts increased 3% versus the third quarter of '17 and 12% year-to-date.

Considering the 45% growth we achieved during 2017, we are extremely encouraged by the continued growth in this segment. Our Canada automotive segment grew by 4.5% for the quarter. During the 2Q call, I mentioned that we work closely with one of our key customers to bring the cloud-based procure-to-pay suite called Coupa, and digital workflow online. Our Microsoft team's knowledge-sharing platform was especially useful for our sales reps to answer technical software-related questions on behalf of the customer. Now that we have built the digital links to Coupa, it will be available to other large customers along with other digital platforms such as Arriba. These tools greatly improve the efficiency of the procure-to-pay process for our customers and Lawson.