Mike Smargiassi - The Plunkett Group Larry Reinhold - President and Chief Executive Officer Tex Clark - Vice President and Chief Financial Officer

Good afternoon, ladies and gentlemen. And welcome to Systemax, Inc.’s Third Quarter 2018 Earnings Call. At this time, I would like to turn the call over to Mike Smargiassi of The Plunkett Group. Please go ahead.

Thank you. And welcome to the Systemax third quarter 2018 earnings call. Today’s call will include formal remarks from Larry Reinhold, President and Chief Executive Officer and Tex Clark, Vice President and Chief Financial Officer. We will not be hosting a live Q&A session at the end of today’s call. If you should have any questions on the results, please contact The Plunkett Group or Systemax. Contact details can be found in the press release issued today and at systemax.com. Today’s discussion may include certain forward-looking statements. It should be understood that actual results could differ materially from those projected due to a number of factors, including those described under the Forward-Looking Statements caption and other risk factors in the Company’s Annual Report on Form 10-K and quarterly reports on Form 10-Q. I would like to highlight the non-GAAP metrics that are included in today’s press release. The Company believes that by presenting the entire North American Technology, Products Group, and our divested European operations, including France as discontinued operations, as well as excluding certain recurring and nonrecurring adjustments from comparable GAAP measures, investors have an additional meaningful measurement of the Company’s performance. Further, unless otherwise specified when discussing revenue changes, management will be referring to constant currency, average daily sales results. This call will include a discussion of certain non-GAAP financial measures. The Company has provided a reconciliation of these non-GAAP financial measures to their most directly comparable GAAP measures in today’s press release. The press release is available on the Company’s Web site and will be filed with the SEC in the Form 8-K. This call is the property of and is copyrighted by Systemax, Inc. I will now turn the call over to Mr. Larry Reinhold.

Thanks, Mike. Good afternoon, everyone, and thank you for joining us today. Let me start with our Industrial Products Group. Industrial delivered an all time record performance. Third quarter results were excellent and reflect the strengths of its platform as sales increased over 15% organically compared to the third quarter of last year to $235 million. The rate of sales growth at Industrial has accelerated for five consecutive quarters. Demand was robust across the business with solid performance in our managed sales channels, as well as continued generation of new customers through our leading e-commerce platform. Sales of our historical core categories, including material handling, storage and shelving, janitorial and maintenance and business furniture, delivered low double-digit gains while sales of our newer smaller categories grew at a faster pace in aggregate, consistent with our product strategy and focus. Gross margin percent was up slightly from last year, reflecting a relatively stable selling and purchasing environment in the quarter. Operating expenses were well managed overall and leverage remains healthy with segment operating margin above 10% for the second consecutive quarter and expanding approximately 40 basis points from Q3 of last year. We saw no material impact on the business or profitability from tariffs in the quarter. Tex will have additional commentary on that later. We also made further progress on our operational excellence initiatives in the quarter. We are seeing initial benefits from our warehouse optimization efforts, which are delivering improving inventory turns and will allow us to more efficiently support the sales growth of our stock products. Our sales force training programs have resulted in improved sales efficiency and support our efforts to deepen relationships with both existing and new customers. For select product categories and customer end markets, we continue to add subject matter expertise, which allows us…

Thank you, Larry. I will now address our performance in more detail. I would like to note that as of the third quarter, the France operations are being reported as discontinued operations for the current and prior periods. And at both 2017 and 2018 third quarters have the same number of selling days in both the U.S. and Canada. Starting with Industrial's financial performance, in the third quarter, revenue increased 15.6% organically on an average daily sales constant and currency basis over Q3 of last year, an improvement from the 13.8% year-over-year growth reported in the second quarter 2018. Revenue of $235.8 million was a record for the segment, with strength continuing throughout each month of the quarter in both our U.S. and Canadian operations. Growth in the U.S. was 14.7%, while Canada delivered its seventh consecutive quarter of double-digit gains, generating revenue growth of over 30%. Revenue performance was solid across the spectrum of product categories that we offer and in each of our inbound, web and managed sales channels. Industrial's gross profit for the quarter increased to $82.2 million from $71.2 million last year. Gross margin was 34.9% and up slightly compared to the year ago quarter, reflecting continued positive product and selling general mix. Gross margin improved 30 basis points sequentially. Selling, distribution and administrative spending for the quarter was $58.3 million, a 40 basis point improvement as a percentage of sales from last year. We remain disciplined in the management of marketing spend and general operating expenses, and continue to drive leverage within our fixed cost structure. This was partially offset by an increase in distribution center staffing levels in an effort to keep up with increasing demand of our in stock items. Industrial's non-GAAP operating income for the quarter was $24.2 million and operating margin…

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. End of Q&A: