Ingram Micro Inc. (IM)

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Ingram Micro (IM)

Q1 2013 Earnings Call

April 25, 2013 5:00 pm ET

Executives

Damon S. Wright - Senior Director of Investor Relations

Alain Monié - Chief Executive Officer, President, Director and Member of Executive Committee

William D. Humes - Chief Operating & Financial Officer and Principal Accounting Officer

Analysts

Brian G. Alexander - Raymond James & Associates, Inc., Research Division

Richard Kugele - Needham & Company, LLC, Research Division

Benjamin A. Reitzes - Barclays Capital, Research Division

Robert P. Anastasi - Raymond James & Associates, Inc., Research Division

Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division

Bill C. Shope - Goldman Sachs Group Inc., Research Division

Ananda Baruah - Brean Capital LLC, Research Division

Jim Suva - Citigroup Inc, Research Division

Scott D. Craig - BofA Merrill Lynch, Research Division

Louis R. Miscioscia - Credit Agricole Securities (USA) Inc., Research Division

Osten Bernardez - Cross Research LLC

Presentation

Operator

Good day, and welcome to the Ingram Micro First Quarter Fiscal Year 2013 Conference Call. Today's conference is being recorded. [Operator Instructions] At this time, I'd like to turn the conference over to Mr. Damon Wright, Head of Investor Relations. Please go ahead, sir.

Damon S. Wright

Thank you, Stephanie, and good afternoon, everyone. Joining me today are Alain Monié, our President and Chief Executive Officer; and Bill Humes, our Chief Operating and Financial Officer, both of whom will make initial remarks. After which, the call will be open for a question and answer session.

We've also prepared presentation slides to highlight key aspects of our financial performance, which may be found with today's news release at the Investor Relations section of Ingram Micro's website at ingrammicro.com.

During today's discussion, we will make statements that are forward looking. These forward-looking statements and all other statements made on this call that are not historical facts are subject to a number of risks and uncertainties. Please refer to today's news release and documents filed with the Securities and Exchange Commission, specifically the Risk Factors listed in Item 1A of our Form 10-K for the fiscal year ended December 29, 2012 for more information on the risks that could cause actual results to differ materially.

Additionally, throughout this call, we will be discussing certain non-GAAP financial measures. Today's earnings release and the related current report on Form 8-K describe the differences between our non-GAAP and GAAP reporting and present the reconciliation between the 2 for the periods reported in the release.

Please also see the Investor section of our website for our slide deck, that includes additional information disclosed in accordance with SEC Regulation G.

I also want to remind you this conference call is a 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 1 week on the company's website or by calling (888) 203-1112 and using password 8684873.

I'd now like to turn the call over to Bill. Bill?

Alain Monié

Thanks, Damon, and good afternoon, everyone. Q1 worldwide revenue grew 19% over last year. All regions contributed, helping drive organic growth of 6%. Our recent acquisitions of BrightPoint and Aptec added 13 percentage points of growth.

We also made good progress on 2 important initiatives: Australia and the BrightPoint integration. Earnings, however, were impacted by a gross margin decline in the Technology Distribution business.

When compared to last year, gross margin was down, driven by 3 primary factors: first, a continued greater mix of lower margin products, such as tablets and other personal devices; second, a competitive pricing environment, particularly in Europe and North America; and third, margins last year benefited by approximately 10 basis points from favorable pricing on hard disk drives.

I will cover the impacts to our Q1 results, and Alain will speak to the actions and strategies we are driving to address these areas.

Turning to our first quarter performance. Worldwide sales were $10.3 billion. North America delivered strong revenue performance with sales up 7% to $3.9 billion, led by year-over-year growth in all U.S. divisions, including double-digit growth in our advanced computing and specialty divisions. However, Canada sales were down 2% in local currency versus last year, as weak government spending was partially offset by growth in retail.

European sales of $2.7 billion were flat in local currency. And our key SMB market continued to demonstrate relative strength in most countries, although the challenging economic climate and competitive marketplace continue, especially in pockets of the retail business.

Asia Pacific achieved record first quarter revenues of $2.2 billion, an increase over last year of 14% in local currency. Aptec contributed 4 percentage points of the growth. India stood out with double-digit growth, led by continued strength in large-format retail and mobility. China contributed solid year-over-year growth, although moderated from the high rates of last year. Australia's revenue increased 11% over Q1 2012, and we reduced the operating loss by more than $5 million sequentially from the 2012 fourth quarter.

Latin America maintained its momentum from last year, delivering record Q1 revenues of $462 million, up 8% in local currency. Mining and export in Brazil were the primary drivers, offset somewhat by the year-over-year declines in Mexico, due in part -- large part to limited government spending.

Our new Mobility business added $1.1 billion to worldwide revenue for the quarter. HP and Apple products were the largest contributors to total worldwide revenues, accounting for 16% and 10%, respectively. Worldwide gross margin was 5.7%, compared with 5.41% in the prior year quarter, which you may recall benefited by approximately 10 basis points from favorable pricing on hard disk drives.

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