MSC Industrial Direct (MSM) 10 Jan 182018 Q1 Earnings call transcript

Good morning and welcome to the MSC Reports Fiscal 2018 First Quarter Results conference call. All participants will be in listen-only mode. [Operator Instructions]. After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions]. is event today’s note, being recorded. Please now John Chironna, would like Relations to to over conference the Vice Treasurer. turn and I President Investor of ahead, go sir. Please

Thank Gershwind, quarter Chief conference I In the Jilla, to you you, our me Financial our Executive call. good are Officer; with to Rustom Erik to first like Chief welcome everyone. XXXX fiscal room Rocco, and our Officer. would morning and

that found in accompany will we to financial the refer as presentation data operational of which slides Investor comments During both today’s call, section our our and various website. well on as of management Relations our statistics, can the be

Let Act statement Harbor of Litigation XXXX. me our Reform Securities Safe under the reference Private

noted obligation these are statements. statements update undue forward-looking the our no forward-looking risk expected are earnings on meaning place the on within sections plans. our results, in current risks providing release assumes and on forward-looking statements our could from not these comments and expected filed our press with the the guidance of share from XX-K Form Information contain these to on as Our differ These based our latest as by about investment ability those call filings. risks involve well we benefits on SEC other Investors statements to materially website the anticipated as strategic factors and this these securities in and reliance as regarding future uncertainties actual forward-looking results are is to well MD&A the statements. Report in market about gain cause to laws, our U.S. and of Annual expectations company statements. cautioned including expectations the that SEC information the supplemental These

call, reconciliation the turn presentation, Please Erik. reconciliations measures refer non-GAAP the call adjusted contain In the to the GAAP to we addition, certain to results comparable financial are of GAAP refer which the non-GAAP over in now of to our I’ll measures. which most directly adjusted may the this course during versus financial measures.

Thank everybody. you, John. Good morning,

with by XXXX. Year for start the fiscal wishing remained business calendar It’s in joining XX% as growth expectations, up average begin The me driven daily own and share of of on Let a pattern quarter stability, a thank sequential and line per price basis, line continued second by is Happy in an environment Revenue guidance. sales realization and reflected margin and earnings gross exciting us we our an first improved developments a quarter solid this of our in you you time today. New X% momentum. with

detail indices the to industry potential for is open our improved on a forward, significant up perspective but environment as positive on for I’ll will offers and questions. fronts. certainty pricing outlook earnings There inflation environment. then second quarter broader and our broader per after I’ll the these for XXXX weak our not tax continued customers on Customer tailwind is own an my sentiment several economy. for conclude And growth. part additional years discussion. Looking the results potentially growing a of with only some the and our also all multiple pointing touch provide manufacturing we’ll share, the share recent of remain reform financial then and of Rustom call guidance. of

and a average brings because down readings is MBI November to MBI readings held on look XX as about lag on environment. coming sales from metalworking to basis, XX continued also the meaningful, average at our deeper through XX.X, That rolling XX.X end high rolling a December is the XX-month Customer October. MBI a rolling had which basis to on order XX.X positive backlogs, both quarter Conditions remained reflected despite firm. first XX-month and The future expansion, steady MBI most correlation rolling current points XX-month have points the reading and with the four-month growth the business growth. of now fiscal to and back in recent manufacturing markets. for This months high begin opportunities. reflect in environment average, so also a Historically, continued in Let’s remained the volumes, the conditions. sentiment XX.X, sentiment this the were on in respectively.

impact positive tax forward. sentiment going on of reform also manufacturing hearing We’re about potential environment the of a lot the

new growth and agriculture stimulus particular end While magnitude of machinery, should a the tax perspective, as not further the market were timing all quarters. obviously create are the strength. as parts, coming an aerospace, manufacturing equipment of in for laws well areas yet, as and defined well From

As levels numbers. ADS as we positive customer at and long continue the indices sentiment to which hold remains should we expect, see solid current

growth in organic single was environment. QX improved rate the and Our the consistent high digits with

is fiscal X.X% roughly outlier this our capital organic Last December January, our post surged and QX, into Looking growth at election. of trend. the estimated first an even December spending from month of

December. December during smallest many an opposite we down XX%, XXXX. vertical, in acceleration more result, flat the the machinery, pending holding play with the potential spending capital-related over like this a particularly decade, well reform This the we’ve that single-digit at last back year. sales the year, in the quarter growth only down was that of a average this tax customers With in approximately in on went typical about XX%. impact drop year’s to in seems place, in December from parts fiscal reform. tax from for see as saw and historical year of it It outcome high seen average November, As purchases, our our equipment, which to now X%, daily dynamic We a of was in was capital-related first compared the

January is this government this bounce in in a were Generally, week following year. Once Taking the One, rates the spending would Southeast back part in to contracted. January and first the In budget across week types see dynamic, last we of see and impacted December. and did the look typical was customer the first fact, by in pick quarter, was finalized, in vacations. or week’s up other a And delay expect lift the the to due our due the addition potentially board. soft December atypically to at week remember, demand. resume we fiscal snowstorms two and is fiscal improving Northeast first But to December in is budget in steady to not snowstorms, our our various the two, our pent-up growth factors. due resolution,

call, CCSG mid-single customer had well high-single and QX time with the core in reached last National business government quarter in and listed the our accounts growth on respectively, and of digits at also into the growth growth the double digits, low-teens. mentioned was our I and DECO accounts As the double-digit their the double-digits. in maintained growth digits. finished the rates

e-commerce. We’ve to Turning our now included in numbers calculations. DECO’s

result, e-commerce. accounted was the coming e-commerce slightly XX.X% quarter, for sales but from As up of sales ago, no down a in through as quarter, from DECO were year XX.X% a last simply because XX.X%

solutions XX,XXX total our sales important the above number include customers roughly all with at of XXXX. slightly In that some quarter. selling effectiveness execution to fiscal As remains half growth sales of last inventory note less salable roughly machines aimed of net total or to X,XXX contributed XXX in year. to of the Product our vending for the vendor ended the e-commerce our still expect basis managed sales per I’ve quarter. and net than account The the selling. programs SKUs automated seller. pruning fiscal go hours quarter, at field start points forms X.X add e-commerce in of before, SKU fiscal of that is the slightly result X,XXX first our SKUs through said sales the and to service We of expanding to sales we our nonperforming count sales. first versus due million, quarter associates vending active In QX, declined continued This it’s a

top over programs allowing the Integration and business the begin acquisition line on into focus start the to take is high with far next we performing the advantage team value quarters to so fully a expensive business to we’ve has force growing quite increase expected. sales the motion. the relationship. We well is digits. well double sales now bottom The over of remains supply our as out service Execution of MSC strong been and restart service of few DECO next levels and with expect baskets to strong begin our deliver headcount to the remained and off effectiveness expansion in everything quarter sales the to and as

competitive Gross been contributions flat the margin being headwinds CCSG price quarters. pleased be increasing to continue and stable I margin, by gross Gross as like roughly and with margins few from results. remained to has margin past mix offset realization. growth our areas higher improving for Turning are

Looking at us calendar said of price feel the generally as gives better potential Last the that for to for discussed movement due encouraging. We price this on is the the time gross end have quarter, prices. visibility. for future, we more rising we margins year to a the the commodities outlook call, inflation supplier

manufacturer pricing In off recently know, movement as we’ve movements. sign, very good list This in fact, than we is years. past the price distributor a few supplier more did because price triggered see significantly seen of you is

a price this implementing increase quarter. later a we As will result, be

competitive the considerably few into of For years. it larger reasons, it not say to the should get suffice to that specific dates midyear increases be but amounts, going we’re or past than

should the turn remainder to on impact Rustom. it fiscal over the timing, I’ll the QX Given for And will small, of build things be but the our now year.

impact everyone. will Thanks, break continue remind we like I as to XXXX. that first we morning, Erik. out report you to DECO’s Good fiscal

first to detail. turn let’s quarter our fiscal greater in Now

the guidance, DECO in the than average year last more sales Our expected. line by in increased with slightly same XX% contributing first quarter daily quarter versus with

the was with margin in line for Our midpoint. quarter, guidance again, gross our XX.X%

first gross our price midpoint business and fiscal sales. was benefited margins higher down slightly Base better above DECO, in XX% margin from Excluding quarter. gross CCSG and XXXX’s our XX.X% from realization guidance

mostly OpEx operating with the the increase basis DECO, was than of continued $X year sales rest last that’s QX’s to OpEx million, variable and bonus $XXX million lower $X medical higher salary, to due Our to versus the XXX and and cost inflation. was million, expenses – volume-related last million focus costs year. $XXX sales points on last

and line XX.X%, Excluding DECO, with better Excuse our last basis guidance. points me. was our sales than to XX OpEx year in

XX.X%, first XX.X% fiscal was margin quarter impact from favorable XX.X% leverage improvement contributors reported same offset a accounting XX.X% on to came the the OpEx than OpEx a XX.X% XXXX in quarter latter as excluding Our year DECO. ago, The operating or an comparable was the rate. gross with expense lower lower share-based in more than largest at margins. guidance compensation of lower our being

So X% all first earnings from of last line and up $X.XX, resulted with year’s quarter our in guidance. of this in

Now, our turning to balance sheet.

QX. was up near DSO year-end. we three timing Our days, XX as from QX headwinds includes typically days the roughly calendar

However, increased by versus was sales. slightly $XX it Basically, We do to relatively flat QX cash – business. year. net mainly operating operations. our the we million mix at and of our provided DSO In last due X.X course last turned remain Inventory XX with over the months, into due about risen as has first level to increase income. of cash fiscal the improve million to higher income was from in aim this turns the flow net higher quarter, Account from XXX% inventories activities $XX mix along National of the Net expect to off it. times

were cash expenditures provided capital subtracting our after expenditures flow was cash net activities, $X free And capital $XX Our by operating million. million. just from

times, ended increase balance this our of $XXX use increase and strong the We believe of normally mainly an increase shortly. previous dividend is of with $XXX again, annual tax Jobs This we come impact XX% sheet, last and a fixed and facility shareholder positive debt, The flow – QX that enhancing impact X%. a tax was given of follows million a down back have seen, excuse quarter year. per and to comprised And cash regime announced direct rate our new the We X million returns, in and to ratio commitment times As cash the the $XX we capital. with $XXX from which leverage revolving I and X.X $X.XX balance cash on the share. you’ve recently on me, Tax I a our appropriate million earnings strong Act of Cuts tax total equivalents dividend QX in will week, will of in EPS new ended of quarter, consequence in signed expect to announced our reform was and last timed our debt. credit slightly million

second fiscal to can can with see you XXXX, for Now, without which X see which Slide quarter – the guidance is our shown on X DECO. you let’s move and as and of Slide on

QX We expect was ADS December period. the X% This increase from from reasons. as versus But rate Erik trend single-digit growth basis by and preliminary about growth high year organic deviation XXX noted, several to December’s prior recent includes X% X%. our our growth was to X% XX% points organic a to for DECO.

than Forecasting it’s normal. QX, the challenging of bit rest a more

In they the the the reform, impact of our visibility week as bounce reduced the following holidays. snowstorms to new back as variables tax addition such last the distorted typical

pattern. we follow sequential typical guidance assumes of our to Jan/Feb ADS on about that So X% assumption QX our QX based the growth

sales can resolution government that we results their spending. capital will for tax higher greater and customers expense our budget results investment and hopefully, the purposes see federal Now in as

we sticking for However, we historical for now guidance. a are now – are typical with trend

second the impact be gross base over primarily expect or the with last to flat. mix XX DECO minus our we QX margin basis of We That’s some quarter’s the as XXX headwinds. basis Sequentially, year, same margin down to points XX.X% and points. plus due relatively gross business expect to

from sales medical up – of $X operating variable estimate second the to QX million payroll investments million, as accounts costs expenses, plan And key tax from new cost $XX is salary to $X.X the fringe estimate be inflation. well mostly every $XXX About OpEx XX% increase using commences. medical that’s about million that this inflation for expenses represents million. inflation. January, comes mostly higher with from year’s rest spending, due roughly reset expenses sequential of growth. and expect usual remainder last We QX of quarter. of and investment is about our This $X The our a as QX year occurs from salary to to the million as two-thirds DECO is

points the that we XX.X% improvement basis year-over-year OpEx expect DECO, midpoint Excluding this XX.X% obviously. XXX to from yield will ratio goes as

midpoint XX.X%, derive XX the margin of and QX DECO. expect last actual our negative XX% So excluding margin QX margins, and we of XX.X% approximately up year’s even of margin from of impacts roughly QX a operating implied point absorbing Using midpoint first-half guidance, operating basis from after incremental we DECO. an roughly at XX.X% a guidance our operating roughly

Given on our typically higher, the second-half seasonality drives our that margins framework. operating annual they’re within track to remain

Tax X, MSC’s as of the Now, XX% new and mostly effective and Jobs has is January impact promised States to rate corporate tax XXXX. Act, gone income to the the from the from XX% Cuts United

compares will combined that must our state This impact and the As fiscal XX.X%. full-year rate XXXX’s tax to fiscal started prorate of year estimate we we the change fiscal XXXX’s federal earlier, and XX.X%. to rate around effective decline

full-year by estimated tax to quarter QX, Now of to was the at booked as fiscal XX.X%, already But require the future us need we rules end show year-to-date to the rate. take down our the XXXX QX fiscal XX.X%. accounting rate as

about QX rate QX effective so And only, an and tax XX%. expect we of

around federal XX%. me fiscal tax estimate will Let combined looking estimated very fiscal explicit and tax be be state that third quarter at the effective be should XX.X%. that we XXXX fourth rate rate And and forward, our our full-year’s

federal in the expect corporate QX to primarily rate, to system. tax addition a state change deferred a territorial and In a by tax net from benefit for a for liabilities, lower federal be net lower related recognize taxes partially tax tax one-time to worldwide above, we revaluation offset to benefits the the

the all slide, we’ve our the magnitude into to EPS, changes a tax X spells guidance. added our And of given presentation these that Slide our drivers. Now to out factored are the

share benefits impact tax includes shares and our year’s higher average between a And in the Our due from exercises EPS last to by increase XX% we diluted to and count share $X.XX rate million weighted QX QX share-based note versus EPS expect $X.XX of dilution. roughly of to $X.XX price X.X QX. benefit also compensation from that of

is wider benefit in of $X.XX fiscal to benefit. it’s benefit before between impacts catch-up, normal XXXX’s estimated to to A one-time to range I’ll range $X.XX. QX and the about QX back XX.X% guidance between rate balance assumptions. the sheet to benefit to $X.XX, of the Act EPS. – $X.XX EPS and impact year-to-date This to the Erik. now beneficial tax The finally, the to $X is turn reflects XX%, add of Tax following comp of for $X.XX but rate that without revaluation the tax one-time that’s tax-related estimate inclusive Our positive share-based add QX. Cuts noted, we’ve We net would compares than of to $X.XX $X.XX EPS. of an and And the Jobs items EPS net this

is Thank you, company. the This an Rustom. exciting for time

leveraging cost billion capital down drive manufacturing our our value carefully $X our deployed solution three and basis last proposition sales our last for several performance kept expenses rates digits. productivity improved headwinds. We roughly And on we’ve expanding We’ve chain a the base competitive by customers. metalworking intense the returned organic Over over quarter to returning products our gross for in our the basis. the points single quarters, supply at business in stable portfolios margins efficiencies strengthened by high the as by the enhanced expertise We’ve of XX growth savings environments an and expense of shareholders and the organic bringing business We the years. and and improved. as by of operating to percentage of nearly structure sequentially XX.X% past we’ve

serve better forward. poised the should inflation Price further is quarters, finally look boost manufacturing as in in coming only mean past rates. and to for supplier materialize see list the improve moving our and few performance higher. margin Tax even pricing that tailwind not has reform commodities price should which to a This ahead realization growth existed should U.S. to is we driving improvements Now potential the inflation gross years.

the leverage, allow enhances business efforts of evidenced of And more productivity our sustain expense by will capital significantly return for our top creating increase. prospects to the earnings Our allows power the reform of this, as our incremental us to tax dividend shareholders margins. and strong for recent on

our associates we executing an environment, improving our for forward, heads we brighter now team as the done just future our With up questions. see look past over so company. line As year. this the for down remain will we’ll plan even And well our have open

you. Thank

We begin go from Please question-and-answer the Hamzah Mazari Instructions]. question will now ahead. session. of Capital. Today’s [Operator Macquarie first comes

Good New morning. Happy Year.

question tax first on just is The reform.

And The your from part there and cash a do benefit tax difference to a between is, reform? with rate secondly, flow is a tax of how cash what is sense Just first get you to expect of the taxes? then any proceeds? – trying do material booked much perspective,

Happy so $X.XX totally that’s So, sheet entire you is and Year item, non-cash, the The New Everything thanks, to hi, as balance is one-time that’s non-cash. $X.XX so – Hamzah, and benefit. to cash a right, completely benefit well. else

And so through cash – booked taxes. taxes booked reduce it and will proportionately with flow taxes

you strategy the take do you we difference have is to the to XX%, basis mean, on the do I – actually right, the had So capital help same you proceeds also philosophy I we that the a can numbers. the you with do and – continue unchanged. if take we if allocation before, What that go-forward you but math between quarterly is, have can mean, out simply really to give full-year

in investing disciplined keep that. drive no growing to moderately And dividends, paying then and finally, business ordinary to difference opportunity dividends, have return real our we efficiencies moderately also we the with organic so have the excess keep growth to M&A cash improve we shareholders, mix. we First, ordinary to

And just great. it I’ll turn follow-up Okay, question, a over.

frame an is learned M&A maybe investors go-forward past you. But You and a if about Barnes sort DECO any from deal, Thank on lessons for and M&A execution recently obviously thinking J&L from which perspective? differently basis you how you’re did the DECO maybe smaller could where than of historically.

Hamzah, very good question.

Barnes that quite we’re the is comments Rustom’s since pleased how that back done saying and with first you and hopefully me several Let start it’s we’ve picked up years well. going the by on quite deal acquisition performing. It’s DECO that

one were we high-quality I the think, of for of one certainly, really – acquire is, able reasons business. that the to a

The second is the in is sweet core, in our that, right spot. right our reason business

the So the thesis out. has for deal whole played

acquisitions As the we and to our our which successfully, look them certainly, do the remains is ability capital pointed be out, Rustom philosophy future same, going it us confidence gives pretty on allocation it’s in but on as M&A forward, to much integrate part of arsenal. to

we’re same looking, We’re but had before. we’ve bar high going the that to keep actively

you. Thank Great.

Matt go next our And question comes of Please Duncan from Stephens. ahead.

Year. New Hey, morning, good guys. Happy

are you? Hey, Matt, how

Good. Thanks, Erik.

question back tax first So to reform.

of increasing little may to What you think that growth You see a use bit result of early I’m be at plan of sure for customers could how to some I next high-level how CapEx conversations sort increase and with days, go you the how that, that the customers it’s as to years assuming it, and you talked to the much for know cash. sense know your they couple still hard is revenues your able adjust annual think to about about extra had of your that? so But as react a how for you’ve And might do customers occur for much it’s as in point. expenditure? that may this about

it. so hearing early. general, still Yes, Matt, what I’ll obviously I think, it’s in and take Look, we’re very

no look, for certainly for the mean, the as put to we for did to suffice customers of this of and did increases number investment. a to it our look or just flow how we percent about year, cash put say, this excited. didn’t stimulus. what flows our next increased in we would a in because there’s whole we I this pinpoint. know look, our not moving growth And we hear a spending customers through. very the prospects timing. heard and second out you But should hear. it to But don’t to us our quarter, But hard that goes to hard beyond guidance, hard look early to gets to forward, comments to yet question So next numbers two I as there pinpoint lot what out be conversations, that just assume month it’s part Rustom’s fast

it. be Got mind desire understand here. want to lot On specific pricing, help to I certainly been a margin, not about this I too because gross know very that’s the think could But how of people. for a of front

So you’re historically, guys to been correctly, very I small, is to when you normal. like saying have remember going Recent X% have price this done X% X%. more be one increases, obviously more been it’s if price than increases

let’s way is put normal. a that gross number this margin to a help from increase and on keep Can it that again, enough you out? How nice start is So to does but just that it, are see more cancel to gross happening the not margin. assume headwinds it or

Matt. Yes,

appreciate think and your I sensitivity. look, So I

You we the wanted movement we happened. could pricing based taking imagine, a of all to list that’s it on clear action be that will make

are We’re relative to to it few last we’ve more the encouraged the is, midyears meaningful that. in than the that best seen correct by years, much that yes, characterize way it, you

I it. the here’s think correct sort of Look, what in outlook. gross you of margin sizing are terms So

more past stable minus. out, look less DECO been business or or plus the and has the sequentially base we have quarters over few employees back as or you taking quarters, more the past less If flat underlying few out, over pointed we the been,

have certainly our by else you more What tricky by better. It I If a gross nothing could But on price there’s forward flat. I’m from underneath is, look in lift? we moving we expect something count assume that it gotten say could else quarters, slightly look, and trends point part, I It we that I by couple you would that and always of it the the many That moving move. could kind the down budget see you we margins of bring down. headwind. could in went recent change. pent-up we that would of in be a get and look realization assume that then margins bring midyear you it parts the surge spending, less caveat a that summer to margin, Matt, you’ll decomposition, if certainly over here, pricing this from a at scenario, slow demand negative that price to I’ll of seen to if the is. and see capital-related approved the way, so see If government or surge saying, could possible give that Matt. has realization at and is past any see see at the mix changes, said, look here, saying, gross mix to a see If I’ll going increase, the let’s because spending to

these there’s in from parts. But things it the many in expect live because stay so they did and to and way if here, pricing good realization, layer put qualifiers I I yes. So moving we here,

you. Thank guys. answers, the appreciate I Okay.

Robert Then of our next today ahead. question go Please Susquehanna. Barry comes from

Hey, guys, morning. good

are how Rob, you? Hey,

New Happy are Good. Year. How you? Thanks.

too. You

So at December you’re just growth. about sales a dig little into X.X%. Jan/Feb after It for looking to in I sounds like the wanted X%

is it have gap an back was? So holding of to or that storms on in roughly you do estimate the impact about fair customers what points December assume impact that what that the the purchases, capital slowing, government X for X or the was is

of QX, line and would X%, to that’s expect in backwards what expected that. And of most a from growth in compression walk growth looking Yes. do Rob, of expected high number over Look, what’s December off single-digit seeing do what compression we which compression to the is which if given you severe high-level in you give in of and more some environment. quarter Obviously, factors. significant eight you’re a and wanted part, drop was done December year December was for to happening would tried rate last X-plus actually the say, me in of describe of we the what to it. a I comp couple I December biggest sort the the the December. because The is lower. is to start. looking the we’ve what QX’s walk, from is than I’ll at let the and compare But I influence from roughly it was with the

So historic a year, surge last that really saw the we December there’s last bought capital trend.

there’s growth. a so of few And points

opposite of a January post-election. from a there year December the versus week And point. a anecdotally surprised been that, to think I issue, little fact reform, of was If one November tracking. first it is wait-and-see the we in compare that, to nearly no us quantify historic year, to a pending been smaller big where is our On weather harder did in back over capital we The it where but was last bit tax little of and tied contraction that’s particularly few certainly just points resolution difference there a real you point to and there. the average, it’s a customers saw to the sort a last top relative a to there’s a dynamic led purchases of have the to mode then government that’s spending, growth hear surge this has any that related budget we whereas certainly spending as

We’ve week and of visibility we because quarter government looming looking following even always with January got this look, variables, tax We’ve impact year. story for is snow We’ve got forward we indicator that’s this want trickier walk. us So budget. the because tricky usually more February, the Rustom got behind an some Last December. a storms. lost visibility. That’s reform. the us, for to pointed It’s the and as important And the some the holiday. is out, we’re

factors basically So is, and it making of bunch back there’s we we looked a And… whole did history. And tricky. went what at we

right. Right,

…sequential patterns from QX to QX.

what typical is of QX So seeing a sequential you’re for QX Jan/Feb to pattern.

category? helpful. us Got of MSC it. you in Got remind you put the this what for percent purchase revenue it. Super Can capital

We bunch we is, specific don’t Yes. get stuff. And the about – it’s a reason whole didn’t talked We – year. it of number. last Rob, we the don’t

number. a we obviously, So, give can you

of related straightforward be along purchases, it big would that not that clear-cut. be are a to that that lot would there’s type number the a with line of machinery items go but have manufacturing We as tooling

best a have the thing was the of year, saw I on year last could so Look, so point is huge a sales. Last more it And percentage you year, typical. sort we was a give XX. to sales to don’t you. This large that, in average historic the minus XX, is, minus point, I particularly year quarter. to minus case December percentage November of X. last the drop, I it’s think, influence What So, of

Right.

So feel would big you was. that a how surge the for give

after – your tailwind pricing, curious great. the COGS just if on Right, right? what we the I’m come think, concurrent sounds it’s Maybe right. just about inflation? inflation, And to with pricing COGS putting even through. of about But mean kind great, just it’s finally I you’re don’t could enthusiasm – happening the slightly through to own happening I pricing see is damp like It comment. that the starting the to follow-up it’s great

if history, that, at Yes, more. I look tell Rob, tend when back times so to would can is at inflation, what benefit correct. there you generally, are like you you is But this we

back-half some at through we an the expansion to particularly such, can and and create opportunity actually expansion, this fiscal. it through as of negotiations create we is actually opportunity and timing So look

Yes.

– remember that sorry, in. for cutting Rob, I’m also But

Yes.

And communicated it Remember it’s through. that a holding as roll have right? through. the that And right, also, of lower that’s probably – mean trend, purchased we that holding a and – the not way we many we costing prices, are inventories, inventory we has times average at lot goes but fast John I

up. price takes to really the a being for increases to show it while So

Fair you. enough. Thank

you. Thank

of question from our William Please Ryan And Merkel Blair. next comes go ahead.

Good thanks. everyone. morning, Hey,

Hey, Ryan.

Hey, Ryan.

I think want to machinery. back of this mentioned go and pent-up I to demand in government, you idea

And two-part I quantify you secondly, when see for think then might you Can So sense do that any Is we there of guess, that question. us? timing? that?

Yes.

as could timing QX Rustom point And we’re one and customers that surge not if took major spending don’t be tax for start result when is on not it. to factors. there’s good Ryan, from perfectly reform, a We so we on a made actually factored a in they’re really two on guide. – leaning here history happen. honest, the our of What’s have feel So, that so which

not when The government be, resolution the at to second in factored don’t possible, would We budget a that will if there some surge. major and but but have budget. is – be – surge in point, will government any factored

share on government. within you the quite feel and our position I tell I’ll good Now based history market that about

changed So there. nothing’s

on the go in. What call a gets shorter further It pushed based makes times that actually resolution budget know meaningful. it we compressed position don’t as into out. spending is strong. up which But, Generally, this, But away. competitive haven’t the year, we gets pop, like could factored the when doesn’t just history, generally that happens, look, the be again, fiscal happening is, in also ends demand, much pent-up greater. so you Our

is happened that you into factor I be didn’t don’t mean, and we sold if budget of timeframe. and year will frankly, sort Erik’s ago what the got we a anything I a said quarter snapback actually about resolution describing. know because that We something, Ryan, our Erik quick Jan/Feb there a But in guidance, like repeated,

Right.

that Okay, was…

quantify, way, to you, mean, roughly try we I the XX% is sales. government by help you wanted Now if shared of to to just

the QX actually So single digits. in government We you color we you gave told negative. high in December through went

go quite likely negative budget year, Hypothetically, being there’s now But a fiscal when to XX% So of sales from growth impact resolution, point a there. look, on in and this feel what’s happen if it’s could for strongly not and can that if some to positive. QX. the surge, at you get and when rates there’s

I guess, that’s got now starting is single well. that. is Okay. digits. The for Thank is to it. Obviously, mix secondly, doing Yes, improve. customer I said mid core That, CCSG quite helpful. you you like

you to given to So talking could it’s over we’re couple backdrop the the high digits, the to quarters? about? What single do that Would that starting next you think core up get the to start of improve. expect do

Yes. Right, right, I would. And the reason I would is, it’s interesting.

The is manufacturing core mid which core you’re is digits. So single base kind of associated with of our right. customers

of performing quite single look As there digits. Quite what’s digits get the strongly. are that you high our verticals, verticals meaning, double interesting covers up make business either under most or actually strongly when said, the low at the you core and

So which very really within the particularly core are in agriculture are is down. they’re strong. isolated pulling as fact, us growing all machinery And is And not nearly one. what equipment well. in Aerospace, the automotive, Midwest we is pockets that found

specific are look are them to we of that off couple as that or of and the very tied a so, regions at sectors And country.

isolated have of a So what course, gets confidence up if all and high here, very got that, something of of low net the is we single gives to the me sudden, if or that will changes there digits, different. pockets comps, you’ve broad-based digits couple is actually a double

That’s helpful.

so Okay. okay, much. I’ll luck. pass it along. Good Thanks

Rob. Thanks,

Thank you.

question from go next Junk our comes of And Please ahead. Luke Baird.

guys. morning, Good

Hi, Luke.

Hi, Luke, how are you?

I’m well. Thanks. doing

First question, Erik, what up. price customer today are just like and demand both conversations curious picked as around inflation

are say? would curious, similar to periods similar, conditions, different in it prior Just you them you much is than finding be or

time do easier on when shop time are out products the $X.XX, say, in to generate regardless have equation have I – busier door price that customer number I help to get slow, no that the customers me shop, revenue. have customers going to door to conversations because conversations. do are get question one the the less are to than how and is, thoughts when changes two from that mind I are how products Luke, my So, come Look, there’s

is that cost and we’re their cost proposition them of to connection years, is So And it comments, metalworking, and lot environment price price, specialists of say, on it sort But the is the our customers when would structure go and needs metalworking helps why between some specific I price are sitting in the I last conversation, the a a value to particularly tried the this doing low they’re conversation never because there it mid to is comes focus I of lot lot be MSC price comes environment over of is a course. And as digits, have why easier hard to where influences. would saving think, showing more down that thing down, do cost digits, make we’ve when easy, a explain case. bringing conversation what put a think savings, couple total in second and that to of of cost there up our cost we single ownership. and becomes about single our total the

on can you you, or work growth color that right maybe speak on terms second share same Okay, of the additional sales color in helpful. And uptick ranges teen seeing of in the done which low then the force question to integration any you’ve for and similar, you can now kind just Erik, of CCSG cited? we’re the

to sort business business. it We’ve like talking – is were last than probably that to few look, I up think, I’m the but going it’s gives of of I the as work accelerating is been look, do for the as been I up And numbers, I about say, the seeing. – CCSG shows and one points we’ve to the until a we what sales Yes, the reserve progress it forces is seeing judgment showing over directions. factors in what done which cross-selling several the to that it the we’re said, But year point more bringing under in on confidence together numbers. I in look covers in on initiatives quarters forward. me why, both the

or over As next now I initiatives the are hitting a me we of sort like we’re that growth good we in waves quarter confidence be the that so yes. sales forward, flight the have together the look internal and can going have momentum. out gives beach a coming nicely that hitting teams The seeing beach are sustained, few

Luke. chain as not well, Supply sales, just ones driven

it I’m understanding just quick a And Okay. then sure Rustom. That’s to right. clarification helpful, make question

be going just this on is XX% guidance that going of be should the the rate, impact, to clear is we using good Just XX.X% forward year is the a number and tax that year because the partial right? forward for

Absolutely.

rata the for is the thing. I XX% And that of number the So you mean, pro XX.X% onwards. effect is estimating fiscal we’re nailed XXXX – it, from

in And added right. first-half and as of XX.X% basically well share-based the QX comp XX.X% we’ve got bit there’s to of that’s be average what would an so is, and get exactly a do little coming QX, for plus as then

so much. Thanks Perfect.

Uhlman next Cleveland question comes And from of our Adam ahead. go Please Research.

Hi, guys, Year. Happy New

Uhlman. Happy morning. New Year, Good

Uhlman. Year, New Happy Yes,

some dislocation start competitive try could flow signs over their market pricing go if about Hey or through, discussion, a was to savings the wondering that that in there might at wondering could share we to some if that pricing saving to you’re of others be of tax as the be weapon any hearing back any of signs some I’m all? industry win to in as using I the those seeing environment

I no tell no. signs to you Adam, – nothing date, at would that, all of

I’m wondering, still early with et forward days cetera. you’re growth the I’m we And up center magnitude have then be the should automation, gotcha. any had And year. if investment savings. it thinking going frame it’s of of that in plans CapEx that, Okay, related then your that might back-half be for longer-term to of you pulling could people about? us wondering, the to ramping sounds sales just distribution capital for But company type tax the what if you’re that

If just your well? be that that as helpful talk you on would thinking through could

let into take Erik So pricing quickly that and me one then can get thing.

If right? mean, as you We’re of X% sales think our business, so I about they’re a basically. requirements, not capital-intensive

we any or $XX looking investment dollars. same be January. until had making. were would obviously about is – that. were and billion if course, will so perspective, of yes, and in we make – a for they – billion and we always we’ve if we something thinking are needle off We said move we that, short say, small really had and whatever the thing, if I – from haven’t manufacture also because the of after had that just held been that all needed at and other it’s mean, that investing our $X mean, the not we to and drive productively So business would we also But we if I small the have much all Having answer let’s have us, continuously like

let seven eight so easiest And benefits the of tax get cash Rob the question. And of coming the expensing you of get the – than basically big over Erik part or subset years the to the get you I’ll straightaway,

now And signaling say Yes, to really for out sales that’s next over force produced effect of so, of sense and results. us you in integrating made is Adam, ratcheting a these CCSG the that result, the now we really – down it. right service it particular past would I been it’s essentially look, initiatives that signal some And come flight, where year the know, few see being we’re a that here drop of bit one we as on to what bottoming or of a others. if what been sales headcount pointed headcount the to and what those Look, headcount, head a is, good sort up note we’ve quarter couple sales we is so, performance at there’s What as you’re of look management, sales that’s is with over sequentially you quarter-by-quarter. of wanted slightly number. the back in

a quarter. by a sort opposed ramp sales plus slightly gradual in look, it for move and up I But minus, it now describe So bottoming back force sharp would around of headcount. or tick as any as could to up

that rate modest additions. a modify and a the for I really that’s back it think, and fiscal. should always I But of as tick up we the we good, now see for something that’s describe the would remainder bottoming of really working can increase

Okay, helpful. thanks. That’s

Adam….

Yes.

into one you and little about the mean, sales for asked $X thing worth in enough and comeback, you and I mean, to benefit we infrastructure well, everything have know we’ve I that and I put real roughly our CapEx. too, just as capacity but handle this, one others to billion know office that remember, just place. Adam, Sorry, for between the

another mean, I Do for question have I’m well – Erik? pretty positioned, sorry, actually we’re us, we for sorry have you cutting off. For

chunk that that would Northeast maybe of you markets follow-up Erik so out? that of vertical load there pockets that’s industry are to – would there consistency it, the and or noticed call vertical I big on a but there’s mentioned just any wanted you the weakness trends. I

Yes.

prevalent right that, I encouraged think before it as average big you’re gets a the and single is heavily described ones well a as couple in Northeast. really, our core metals that lot forward isolated look the which pockets And fabricated one as digits, for way give a Fabricated different call are in you would for Adam, areas, are I’ll that out I particularly while pretty meaty have way down, I Ryan’s a, was customers, And we the up weighted when vertical is instance, metals. Northeast I number say particular more is towards down, So, really look is, mid of broad that. a to of of than question firearms us off. the I Northeast. is me what is at are What the includes

And it’s one off so be bringing while not down, a of business, huge percentage that way the so call it’s I’d would and numbers out.

Okay. Thanks.

Ryan comes question of Please Cieslak our ahead. today Northcoast Research. And go next from

good Hey, morning, guys.

Hi, Ryan.

Hi, Ryan, how you? are

that Was with to any have line around those into expectations it expectations, questions. at prior your price how the my you’ve months, Good, you announcements, know quarter? recent announcements meaning, taking above maybe maybe compared your to could back I be going increase these helpful? look in in obviously back Erik, Really and the curious would color Thanks go good. for supplier just, seen you in quick.

ago, moved I – so yet. look, Yes, mid with a bunch would lot that absolutely frequency we there of for to low typical lot much when terms was. is a there I haven’t a the digits. have like probably more reserving in of suppliers in was the to spoke be judgment there single also I pricing discussions knew always I certainly with bunch I was research that this saw when I of Ryan, expectation say the I on period the the I our of line a manufacturers suppliers. as of a December What in terms us, would activity, the And number say were or expected. because increase November, Ryan, pricing, would about we size, the say, quarter suppliers would would are most coming the say it would somewhere there expectations. say, was was of

a going increase. to So cycle are I like it’s guess, one But every there there’s not I be it’s of some think sticking lot there manufacturer, look, they the in early it’s the wait-and-see. of of playing in market the sort our And for see particularly And wait-and-see. that chance a that those their peers healthy year. are could of later pricing movement, increases more a be in because coming

Okay, that’s helpful. just follow-up that. And on a

what of If environments guys, guys Is at think pricing the increases for case going – you’ve history seen the and or the beginning implement is let’s about pick back in year to depending several maybe the and you at on and forward. way strong demand the and of from the pricing what you frequency price the assume years see you actually again, increases during last price to you’ve or go the midyear, there that’s you opportunity, environment look essentially actually up when so?

Yes.

hot, used be I environment this do and where would increase so the going the to years I to would could the sometime that comment, move. potentially. third. – say, the we the in room the what QX, we have suppliers But we’re say, to big summer, back So sitting lot What here in to that prior see is telling been February, That’s my certainly going you leave is if booking is summer. be a would we need have it’s so refer January to late in where certainly January, more the or as norm, What increase to you’d midyear. say, what norm. I we’re would Ryan, inflation the past, just now is there a going would

should increase. other that probably be something a our And more the a not to there we on movements, We’re in-between. with – of but lot, wait were we doing consider mindful a summer build there were next hand, If could customers. into and movement, the certainly if can lot inclined supply that have rhythm we not some to

recent that then the turn Okay, update question Can negative you with know, from and that new most how in just maybe the getting I’ll a some here last inventory, you maybe recent I we over. think, and just SKUs guys And think in fiscal in them mix how are to for this that’s terms Thanks. and optimizing I quarter, of years, do in about then going those it where helpful. you headwind added mix my was SKUs of impact just into XXXX. think or recent about forward?

good Ryan. Yes, Yes, point.

this about actually remain. down is, vibrant we right, on is mean, are was start did healthy the that to customers we’ve It margin, forward SKU of there’s that So, and going look the are lot net referring is for a that a mix to quarter. margin, direct remains, of thing One product total the been headwind, Obviously, the gross up a does XX,XXX. mix flat a to a to program. margin ship SKUs, variety, what What is the not it products they year, I headwind. side. side numbers. that you’re adding gross so so described the net number probably the to of part pick but But new we’ve number that so – slightly at the program be essentially, the that headwind are additions of

you’re that’s not of fruit we’ve and and continue supplier has taken will the seeing headwinds said, still advantage be the bit, that the of low-hanging in So number net what runway plenty as SKUs new surprising to That the program of a business. down additions. big is of one coming

we point will we right, what also as bring You’re make see I’ll getting is, as – stock. multiple products we them and typically do last the into hits, these selling these

we’re So providing service great a experience.

that time, low enhancement of opportunity For customers off a but base. does the over provide margin

numbers. is So in a mix that’s net-net, headwind still it our

question from Please of Stifel. last ahead. comes Robert today’s And McCarthy go

for days couple Chironna so terrible the me I’m you for the Thank everyone. occurred sure morning, black John wearing of in. event ago, Good fitting is my condolences.

benefit you believe, the which I of came game in all did have semifinal the Rob, the way they back.

short a the a had you that so days a… you that’s of before business couple euphoria cycle are reality, [ph] Well,

hanging job of authorized Speakers] out [Multiple We’ve the

Yes.

order. out Now I’m will taken of short that be sure in flush my

sounds Hollywood overall, good around Squares Thanks the event, over. concerns any call the taking some for in So time. like is It a December.

of a is of about there should If X% SKUs, be get we’ve context the from some of you’re in or large to risk, in how questions terms we of inflation bears are given talk your story going you’re risk? good and material material there. dynamics of the X% kind very the competitive of to kind risk, be the that you new your risk to pricing? what the could to how business of there think about I’m transparency think terms think, that around in the pricing back the I pricing base do – perhaps technical price can’t any we which very in the also specification. seen overall. that about degree that very could out is, monitoring Is broader credence there SKU just of of the line pricing the watching the of and But I price. and of way parts is around your XX% or that some price high insulated some metalworking, material your argument you’re products you’re how mean, if of maybe comes portion transparency, because stagflation of you’re that SKUs, very part just maybe, are business distributors you tied just right your it with bears standpoint There’s in these about SKUs, not do direct about the that of you see are transparency do just the the from ignore commodity assess a but positive inflation think able through, to actually to

Yes.

gross So, last start a I year, what margins take story. realization Look, benefit of the Rob, quarters back good two new the relatively it inflation. think look, flat the a out I I last think is over just stable by over saying, – you without look price

inflation top positive. a question, it’s everything. net do on answer I of that. think, To certainly layer your you monitor we So

our by price modest at a tell I measure are it last what to number So, there we – And customer you, we increase, for it’s Rob, monitor we’ll type, we dimensions. respect product at by carefully of at across type, look course, to good of is, about years. and we monitor while and look realization and back would look we’ll a summer we’ll increase some of generally there transparency, what been you I think, feel it. If risk tell I time, over price with number

is competitive rising. headwind. I a about think, intensity talked it We

look I but at we sure, I as you, happening, look over So don’t a as think for concerns. what’s And we that net it’s it’s pause of particularly see would look, couple there post positive. last anything major I quarters, increase, think look the gives realization, tell for me at price I

very, Let and mean, of in couple that, So of by together, particular our of any the and customer, were the me alluding particular leaps talked efforts it’s years. no, haven’t And well. sort cut of very traveling it profitability a I been signs by to. time that I any mining, focus when over predictive what out we’ve Rob, the last running a at look all data all mean, line any shows product and seen of area. as about right? we’ve and ongoing analytics there product tools I profitability we Hey, you rest predictive sort by group We’ve product been Rob.

or could probably Okay, your you’ve around doing just entertaining you capital a thanks for – the think that. around a about talk of a and about on I maybe capital allocation anything answered the new overall this mean possibility? the that environment priorities and in just obviously, capacity dividends, is question CapEx for close have tax volumes. last existing allocation growth there years question capital allocation, lot of reform? I mechanisms the Last Is call that, How talked in is, utilization done you circle? past, you possibility? you about think, that, plant special questions do But to the and and for

and the same answer mean, dividend, XXXX tender what well. of receive Well, our the But August end did shareholders, special and the at right, you comes EPS we I auction and owners in So lower count, short end, cash. you a it. day, Rob, ordinary Dutch benefits which very all to tender, the dividend. earlier the the right? of much very that – to cash it’s a at the using our of with and returning us back end, said of achieved reply the with you’re left offering same is us ability thing at question, But use effectively of went to the benefits instead towards in know share the have rest I back pretty we really the a that the

You have then the of the and we’ll do that. growth steady and it all rest

We very are on focused total return. shareholder

situation if the cash” So have time, mean, return everything. we we’re in return that, that to our not to “surplus acquisition have we we and driven we end to I same clearly, shareholders. out driven have At we we’re where don’t cash and get a we – – discipline, think of accretive there there’s ton not then opportunities, luckily, up good

buyback shares we X total noticed have out also add in authorization buy I mean more we we like mean, probably want Now at shares. by that X.X million there? anything or back just Erik, go X million. that and authorization increased that It now anything you million have means will to that. doesn’t an tomorrow you And the is

think Rustom hit it. I Rob, think, I No,

going think to as on, to take, approach same I said he we’re earlier allocation. capital the

have organic look have good approach, for we’re to cash, acquisitions, net is And same more shareholders. dividend range, payout a growth fund it in in, but the the within steady opportunities. return we’ll excess invest reasonable to coming buyback business, look the cash we So ratio if which ordinary fortunate for

special one Dutch talked Rustom mentioned auction of about vehicle tender. dividend. a the You another,

going to excess business we’re over, smart there’s to and the how. a that’s deploy smartly cash left if the But return way is, really we’ll the find it. in idea So

Best quarter. New for Happy Year. the wishes

Happy New Year, thank you.

Thank you.

to question-and-answer turn management back over this And any the conference I closing the like to concludes would remarks. session. for

us thank and for Rocco, you, Thank joining you, today. everyone,

some of be well as date We’ll shows. is for the XX, set as months, April coming over earning at next a institutional conferences Our doing XXXX. road number

look coming we over to speaking you the with So you. then forward months. Thank

all sir. presentation. And attending you, thank And we Today’s thank conference today’s has for concluded. now you

may disconnect a have lines wonderful and your now day. You