Select Interior Concepts: Growth in 3Q 2018
ANAHEIM, Calif. –In its first report as a public-stone company, Select Interiors Concepts Inc. (NASDAQ:SIC), the parent company of Architectural Surfaces Group (ASG), posted 9.3% organic sales growth in this year’s third quarter from the same time in 2017.
In a conference call with Wall Street analysts this week, company officials also said there’s a “deep pipeline” of acquisition targets after the building-products and -services firm added two companies since June.
And, “negligible” sourcing of Chinese-made quartz surfaces shouldn’t have an impact on the company in the light of recent unfair-trade tariffs on the material.
“Our third quarter progress builds on exceptional momentum over the past year with trailing twelve-month proforma net sales, including acquisitions, at approximately $500 million, putting us on solid footing going into 2019,” said Ty Johnson, Select Interiors CEO.
SIC operates two segments: ASG, a surfaces importer/distributor, and Residential Design Services (RDS), a provider of turnkey design and installation services for residential and commercial builders. In third-quarter 2018, ASG accounted for $59.9 in revenues, while RDS contributed $68.1 million.
In August, ASG added Tuscany Collection, a natural-stone/quartz-surfaces/tile distributor in Las Vegas. RDS, meanwhile, acquired Buda, Texas-based Summit Stoneworks, servicing San Antonio, Houston and surrounding areas.
SIC posted an increase in $33 million in net sales in third-quarter 2018 from the same time last year. However, $24.2 million came from all acquisitions in the past 12 months. The remaining $8.8 million increase from sales volume and price/mix changes from ongoing operations, represents the organic growth of 9.3%.
Johnson noted that growth-by-acquisition will continue for SIC.
“Our strong track record of growth and proven business model still have a lot of runway,” he said. “Our scalable platform can be further replicated across geographies, product categories and services to build on our positive momentum.
“We have completed six transactions in the past two years. This includes four deals in the last nine months, with aggregate annualized sales of $57 million,” he added. “We have a deep pipeline of small owner operated businesses with targeted annual revenue of $10-million to $100-million dollars where we see strong complementary additions to our business.
“We expect acquisitions to remain an important part of our growth strategy and look forward to expanding our reach.”
Johnson acknowledged that SIC has seen a slowdown in some markets, although Johnson attributed this to delays in closing and certain projects “delayed slightly.”
“Our demand level is still very, very stone,” he added.
One area that shouldn’t be a major problem is quartz surfaces, which ASG offers with MetroQuartz™ and pentalquartz®, in relation to new tariffs.
“Our current sourcing of quartz surfaces from China is negligible, as we have durable contracts with a diverse group of international suppliers,” Johnson said. “This means that we are in an especially strong position withASG amid this evolving tariff backdrop. We have many efforts underway to create a closer alignment with national and regional homebuilders with a secure supply of in-demand quartz.
“We will likely experience some market volatility in coming quarters as certain Chinese importers exit the market,” he added. “We are quite optimistic for a favorable long-term pricing environment following full implementation of the combined tariffs and duties.“
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