Ingram Micro (IM) Q1 2012 Earnings Call April 26, 2012 5:00 pm ET Executives Damon S. Wright - Senior Director of Investor Relations Alain Moni - Chief Executive Officer, President, Director and Member of Executive Committee William D. Humes - Chief Financial Officer, Principal Accounting Officer and Senior Executive Vice President Analysts Brian G. Alexander - Raymond James & Associates, Inc., Research Division Craig Hettenbach - Goldman Sachs Group Inc., Research Division Osten Bernardez - Cross Research LLC Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division Tina Zhu Presentation Operator
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In addition, this conference call is the property of Ingram Micro and may not be recorded or rebroadcast without specific written permission from the company. The presentation slides and a replay of the call will be available for one week on the company's website or by calling (866) 465-0333.I'd now like to turn the call over to Alain. Alain? Alain Moni Thank you, Damon, and good afternoon, everyone. I'm pleased to report that we opened 2012 with a solid quarter, maintaining the positive momentum generated towards the end of 2011. Sales were just below last year's record first quarter despite the slightly negative impact of weaker foreign currencies. Profitability increased significantly over last year as we benefited from residual favorable hard disk drive pricing, and more importantly, strong contribution from our higher-margin specialty businesses. Our associates throughout the world responded well to the challenge put forth to accelerate the execution of our strategic plan. We're beginning to see initial progress on many fronts. Over the past several months, we have worked hard to rightsize our fee-for-service Logistics business. We eliminated unprofitable lines of business, restructured selected contracts and added new customers. These efforts yielded positive results in Q1 as IM revenue and profitability grew for the quarter. Our pipeline for capturing new business is robust and encouraging. Our Data Capture/Point-Of-Sale business had another strong quarter, posting double-digit sales growth, with gross margins meaningfully above the overall company average. The demand for these products is strong throughout the world as businesses look to Enterprise Mobility solutions to boost productivity and customer service, which we expect will help continue to drive strong growth rates. Our focus on establishing Ingram Micro as a significant partner in the mobility space continues to generate strong revenues as we're capturing the high-growth profile of this market. The operating margins are in line with company averages, and the solid return on working capital and low cost to serve more than offset the relatively lower gross margin profile. We're making organic investments here to ensure we have the expertise and infrastructure required to generate significantly greater future returns. These investments will let us leverage the excellent relationship we are building to augment our current mobility revenue streams with higher-margin products, services and solutions.
We're also channeling investments into the Enterprise technology space, data center expansion and the multitude of other opportunities to capitalize on what is now referred to as Big Data, promise to keep this a rapidly growing marketplace for years to come. We already have a large Enterprise footprint, and we know the vendors and customers well. The opportunities to leverage our significant market presence to further move up the stack into higher-value products and services, while also improving our ability to be fully recognized as a technology solutions provider.We continue to build on our established cloud leadership position to ensure we're delivering our growing variety of efficient, effective solutions for our customers. Already this year, we have added new solutions around data protection, unified communications, business continuity and disaster recovery from partners including CA Technologies, Siemens Enterprise Communications, Descaler and Accent. Today, we have 48 cloud solutions from 27 vendors such as VMC, IBM, McAfee, Symantec and Trend Micro, which we believe is the broadest selection available by any distributor. Turning to some regional highlights. North America kicked off 2012 with an excellent quarter. Sales grew year-over-year for the 9th consecutive quarter, and the region drove excellent leverage as operating income increased at multiples of sales growth. The traditional broad line business was solid, and we drove improved profitability, benefiting from favorable hard disk drive component pricing as well as stronger contribution from higher-margin Enterprise technology sales and solid IM logistics profitability. Read the rest of this transcript for free on seekingalpha.com