MSC Industrial Direct (MSM) 8 Jan 202020 Q1 Earnings call transcript

Good morning, and welcome to the MSC Industrial Supply 2020 First Quarter Conference Call. [Operator Instructions]

I would now like to turn the conference over to John Chironna, Vice President of Investor Relations and Treasurer. Please go ahead.

Thank you, Melisa, and good morning everyone. everyone fiscal New call. XXXX wish you and to our to first like a Year Happy welcome I'd quarter earnings me and our our Gershwind, Corporate Controller. President are Officer; and With Jilla, Rustom of Chief Finance Chief Clark, Greg Executive Officer; our Vice Financial Erik

As know, week. become Greg our Rustom CFO when next you the of Company the all leaves at will Interim the end

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

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

website as as the we investment this within gain supplemental and strategic regarding securities on meaning benefits acquisitions. of call including comments and the results to ability our Our expectations including market future well results, forward-looking share from expected contain expected expected guidance U.S. our about statements on the the laws, information are plans, providing from

obligation based on XX-K with our these no expectations these on update are filings. current as reliance release and involve from of on assumes risks the forward-looking well materially SEC, These as cause the statements. the Form latest results in could actual and is to forward-looking Information earnings that Factors statements sections Annual filed cautioned place to these uncertainties differ noted our press statements these Risk not SEC risks anticipated to in about our Investors other and the by those undue MD&A are forward-looking statements. statements. Report and our These Company

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

now I'll over to the call turn Erik.

reiterate a today. joining Year New happy John to to also everybody. and Thanks everybody. I'd good like morning Thank for healthy and us you,

call As strategic of full before XXXX into in getting morning's some with is this specifics begin our context fiscal usual now the quarter. swing. I'll the

journey, from partner opportunity North primarily their several Over saw because spot critical undertook for with plant we've the historic floors on help mission been an buy-only running repositioned that out our role partner to who fill we businesses manufacturing a the closely is MSC to this more supplier better. calling our and industry. a customers, And of positioned to past as American We in void. years, MSC uniquely have

increasing model our over foresaw coming pricing side spot of transactional business. on pressure time legacy increased the buy-only transparency also this We mainly in from more

past we've of years, steps the our realize several a to Over number taken vision.

trust building deeper a to in done model new with recently business. on we savings tools and to and focused which by We've so allows kind their trust bigger our of trust that play as us patented. robust customers. documentation, a building we such First, cost The developing role sales facilitate new

levels time, of growth has of shows our satisfaction loyalty. important time. because, early loyalty off higher customer seeing the over pay new implementation the higher While results to is plan taken higher and in this leads our And sales that we're data

in traditional customers operation. doubled categories core our invested are of and further to on build or Of new Barnes that introduction with innovation technical us our a Distribution high-touch the value of category. and now our down Acquisition Second, technical build of through services. product product of C specialists, leadership capabilities additional parts To the we closer center metalworking service and bringing CCSG. the expanded We in out add Class footprint We've the nature in

the heart of account wallet to We another grow build platform penetration. us and Each us customers both of and which that's our high-touch. these out to business through of technical at fastener share operations from AIS, also acquired a categories an provides OEM position entrenches

our expanding our half the of XXXX, MSC's those floors points vending fiscal that organic. Two-thirds driven growth & sales, total are onto initiatives solutions approaching revenues of to growth solutions. we VMI expect by vending are And our of in start though, along third, continued X,XXX Barnes primarily AIS we customers benefit supply VMI. of customers management chain And acquisition. basis was forward, the and plant with the Since looking Company solutions of through and the list and with inventory up and

rates value. some correlated A more our noteworthy that leveraging fixed less stream characteristic becomes and of over higher effective lifetime higher ROIC growth increases as it retention and revenue and produce yields model model time, meaningful better growth customer our by with costs. This higher new our retention customer that churn strategy is we

effect profitability During the last I margin refining initiatives operating supplier of programs they second, plan, to restore ultimately that and operating productivity stability And have in call, order near-term sales by of quarter's expenses. third, are first, outlined improving three this our attention expansion. improving our the and reducing

the focused our three fiscal XXXX. course We through remain these will on of

now to fit the I'll reposition explain how company. So they into journey our

new right, is the sales model cornerstone the of value proposition. getting our First, new

change spot-buy journey Our a a more in prop technical our from sales simpler one to a value required model.

that These on we implementation areas the were others. certain but refinements. fresh are leadership us team, plan, to resourced perspective to over was needed we're recent growth. it's were providing design refinements specifically, More on preparing allocated target new the accelerate finding under With our a while

over that from we see headcount allocated. reflecting took in quarter, operating can in which You our we areas first the sales stats down were the

headcount from include will roles, couple others. areas or development sales CCSG and a the growth We of business These over quarters. the here coming areas few hunter growth into with investments increase

the development of measure have measures progress. to the wins we're ultimate of gap Our new growth our of course which us such success encouraged on focused as interim business is funnel market. meantime, about In

is initiative of second profitability supplier Our programs. improving the

the is our as customers. proposition partner, mission supplier As that critical we is just suppliers to our value we for migrated it offer from changing spot-buy

we've share to result, exchange our MSC more supplier programs support in many for enhanced on a dedicated capture. more of from focus receive As market

million last share half on we've now implementing negotiated profit call, fiscal the equally attention mentioned split As about capture invested in the turning those improvements We're programs and of XXXX. those with roughly driving our $XX us. fiscal in I XXXX who to back and between annualized suppliers have

and operating as fiscal often gross new initiative built the streams operating quarter this and with them. management of is with because inventory more margins. such therefore the is focus XXXX reposition cost ready we third comes won began The efficiency this Company, in now which realigning our several with reduce our structure model to revenue business our lower fiscal we're to some productivity. critical, and the And We've improve process We as measures. we on new in improving tactical scale fourth expenses

in For significant example, we to distribution associates offered tenure our voluntary centers. with early retirement

eliminated up and intensity where is selectively ratcheted management focus also We changing. performance positions our

our few I to quarter severance headcount place on separation just of we the give last As further call, in took reductions minutes. details some which guided continue will and both noted fiscal the and would additional first of actions and a Rustom into those and costs

With will align more our thorough new and performance on we the steps the us, initial of opportunities are hiring model of to management. some we behind strategy. customer-facing For our assessment additional of in anticipate year, a selective operating focus maintain intense these roles now to the certain balance on focused

We forward the this will the becoming planning sharing also to results with leaner. within on or quarter focus We two. look you of next

our the open of for quarter. overview start fiscal our the provide all and up the of over the quarter to with line up and before environment first it a turn brief questions. then details recent update the then With on this I'll to we'll Rustom now results. I'll to context, wrap guidance an turning I'll XXXX I'll things and performance quarter review of and provide

environment. reflect fiscal and a execution better severance and margin slightly the quarter Our An reported separation to guidance both as expenses our better were guidance demand sales of and range. costs the results midpoint. both than first excluding midpoint were gross Sales in than solid operating weak

details. earnings share and in result, again As operating our provide and at more came range a the per guidance Rustom will end top our both of margin

reading still up is remain and back which coming growth and The the September MBI but points surveys Industrial Turning average MBI December were XX-month has The for tick steadily to readings rolling softness respectively XX.X. XX XX.X at average and been the XX.X October, November takes And while the to was in declining. environment. In and demand positive, manufacturing it distributor XX.X. data below output, the rolling evidenced that indices. sentiment from is weak. remains XX.X

announced to some continue layoffs and see in and suppliers and eliminate shifts We pockets restructurings. customers

heavy markets automotive, we Aerospace well. based February. With second of updates remains the global suppliers tariffs pockets customers areas businesses past our weakness that the end That truck, and anticipate increase In down along. over quarter, as in recent have and terms the end regards gas expect price of acute softness environment some increases have a all and those scrutiny few of with a with some to this strong, fully list is in decelerating likely toward industrial broad to in results the slow seen said, slightly like there price relatively the end the some pricing is price Combined and the uncertainty growth oil to comes that from and one the fiscal when pricing movement markets, due end environment, our year. taking continued. agriculture. of mid-year we've although demand than Boeing pass of choppiness seen continued We of with created softer

CCSG grew is bright to the now. heavily National growing quarter high as but sales down weighing Turning as mid-single this the digits. a the customers right in mid portion single metalworking accounts digit anticipated levered in low the from to declined Government soft our declined overall range levels most performance. fourth business was of still single to growth. slightly our core the which improved digits is particularly while in growth spot,

is both on Year's selling to close Eve because end down our from aided but New to inventory was due burn customers. was by month on timing, Looking and was most an ground those UPS and data basis always This that extrapolate year, fewer December of days. capital and year at Eve shutdown processing December largely ADS Christmas decisions to We day. not holiday point, X% on purchasing our shipments difficult the one by decided off recent of schedules

been X% is and of a a step Wednesday, from down revenue basis, total was Christmas historically holiday On had which weakness When largest on Year's sales. a down where New growth to fall on roughly we much the experienced we timing. drag running. attribute We significant this

December whether year see extended holidays. holiday have this say We January how It's a anticipating appear heard whether eroded was to yet around underlying for rebounds. timing about full conditions holiday trends also be well. strictly the week which a the or activity don't prevalence Unfortunately, customers shutdowns in us to tough greater of as slow to we

describe assumptions the will we So make Rustom the forecast. revenue for guidance

turn cover service. to thank I the his four to him want for it of Before to over financials, years Rustom I

and We're contributions certainly for his for a CFO. comprehensive grateful a miss are and We search conducting leadership we him. will permanent

As interim Clark, of position and President our Finance the Controller John of Vice mentioned, Corporate CFO. Greg will assume

We continue and permanent a are financial until has team transition to and and bench here operations Rustom will deep smooth at to been very replacement MSC. finance made. confident of a feel our a that I have talent Greg And strengthen ensure privileged the

I'll over now turn it Rustom. to

Erik. thanks and everyone morning, Good

a Erik, the good with especially associates, but of numbers, memories. great discussing only heartfelt words plus years him to let thanks my closely four for fellow my by partnering thanking host to and in and Before those Board a start his me for for of not finance kind

Now to the financials.

severance First, expected me that we you QX without both guidance charges we and to provided and the separation let remind with incur.

and speak in which our costs. then our I'll of first of terms such, adjusted of the reflect terms exclusion results, results those reported As in

which ADS slightly last first than business Our was points basis better Versus of quarter of prior our the contributed average X% sales, year. quarter X.X% the million, XXX decrease total XXXX, negative on Mexico basis first guidance growth comparative range. the of the roughly a $XX.X our not versus was in for midpoint same quarter daily was sales. This ADS fiscal MSC a an period

lower as Our gross and of was credits. provisions XX.X% range the end rebates inventory result at guidance margin higher QX and of high vendor our a reported

basis points year, prior down for Mexico million, decline. roughly Total in was gross as QX than XX of Versus points accounting were slightly with XX the basis $XXX.X better operating expenses a our roughly margin percent of expected sales. reported

guidance of XX% reported our the versus margin XX.X%. such As operating was

quarter first year prior Our guidance for -- for to tax the expenses. the impact the quarter stock XX%, favorable compensation was the and of slightly rate better than due

resulted $X.XX. this of earnings of per share all in reported So

the adjusted me let move Now to results.

spending $XXX.X million QX, XX.X% as Excluding This midpoint than or severance better Again to guidance. of of and coming on in discretionary operating charges effectiveness reduction our the previously mentioned in from cost actions. ongoing function incurred and were reduction $X.X the of adjusted controls percentage the refinements million execution expenses by by XX QX slightly Total was QX's due the declined of sales separation Erik. bulk with the sales. a headcounts mostly of

last sequentially. cost OpEx other and costs headcount million reduction savings initiatives and was for the was Versus Our service associates as field last OpEx year, and down down offset sales business Mexico not increases. more adjusted owned additional the $X.X that volume-related year was XX lower than

operating midpoint lower adjusted XX a and a gross both sales to with OpEx margin XX.X%, higher guidance first quarter above Our of was basis slightly contributing. the points margin fiscal

On down range. of our operating the gross $X.XX. guidance adjusted high quarter EPS reported the year's driver. margin XXX for fiscal basis Last end with basis, first roughly adjusted was $X.XX year-over-year On was EPS basis, the was at lower margins our main points an

it balance very sheet, Turning to healthy. remains the

XXXX's, DSO be to QX XX up Our main fiscal continuing two the days, was driver. accounts national higher in from growth days receivables with

during by and year's decreased times times. inventory $XX the last lower million to slightly than unchanged Total from inventory $XXX million. X.X turns Our X.X were quarter Company QX

quarter, cash in by year our quarter million We operating $XX expect was $XX in our inventory provided to usual activities Net second primarily last base. first to end versus million the year. fiscal increase due

from Our solid as and million $XX $XX QX. activities, year's to by last cash a cash quarter were first million expenditures net $XX flow operating capital $XX so expenditures year's provided in last our the million, was versus in subtracting free million after compared capital

out our regular hand share. regular the Board a dividend dividends dividends the to reflecting capital balanced as in million to both made the of special be cash back on payments we ordinary declared also Directors XX totaling paid our year's quarterly bought and shares. quarter, in in We per out almost X addition per revolving of existing of $XX month, of philosophy will last share $XX Consistent QX, credit during our $X last shareholders, cash $XXX per paid These allocation dividend In million $X.XX our dividend returning share. on and of in announced million $X.XX utilizing February million facility. with

on million Our total debt comprised as million of the end of of the first and of and quarter was balance borrowing. primarily fixed rate notes other $XXX facilities long-term million credit our short-term $XXX $XXX

end was cash at net so, Our of million quarter. $XX the was balance debt million and the $XXX --

of to times one ratio year's times X.X decreased the and at as times QX as leverage to end compared last QX. Our X.X at

should and adequate flow around And these levels are ordinary from it decline capability, February Looking given to cash flexibility. ahead times. to our special ratio generation expect At our leverage our we of be and end we the maintaining out dividends, and X.X pay after we there.

for of last in fiscal Now let's Slide to quarter X. not severance quarter's business, significant the our separation Mexican this quarter. the you Similar second to XXXX includes guidance can which see move do guidance, second expect fiscal our to and expenses be on

prior the minus X.X% to ADS of expect the within QX versus year. to minus X.X% range We come

a was and modeled You X.X% drivers, minus the December guidance ADS roughly of our February. uncertainty from This step an rate to can see minus is ADS website implies typical lift growth X.X% in of its on significant around and the for November for January our down December's offsets average total on the QX the growth January. given

QX minus year-over-year margin expected roughly plus Our points XX headwind to XX Mexico. down from points, roughly XX% from cost mixed to be basis XX basis points purchase or XX and points sequentially down be impact is would QX's that's This gross due escalation, basis basis negative a XX.X%.

prior escalation year margin QX gross and through flow our waning the the Purchase onwards. beginning expected, see compress. mid-year will benefit begin to to from we price to As increase gap is is cost of

savings P&L approximately actions to $XXX from million down operating $X supply expenses, year's are second last reduction main expected up our through begin fourth Due by variable are to from adjusted headcount benefits initiatives be increase lower OpEx. our from $X.X that's $X drivers The million of to the of quarter. related are roughly QX's fiscal expenses QX's $X million to flow from Finally, around expected expenses quarter. down million, operating nearly our in volume million. be offset and $X merit annual almost our Sequentially, about million,

expenses, benefit increase offset The is productivity from million $X volume-related roughly November's growth lower productivity. of million remainder usual expect by net in wage variable our investments. roughly annual We $X of

the are margin XXX decline. quarter's operating expect to our basis of second The impact of We guidance, remainder the the of OpEx the the gross the points approximately XX and at lower on leverage. midpoint basis is X.X% point drivers margin year-over-year due lower of be sales to decline this roughly

the quarter XX.X% Turning to rate XXXX. in-line our estimated second expected to QX, tax for be with is

to EPS guidance roughly assumes This million shares. with share midpoints diluted $X.XX QX XX.X $X.XX Our a a of weighted count is $X. average guidance of

of my back years that success me now So ahead wish turn in and me and to the MSC prepared the let all remarks, to takes end Erik. it

these position completing that early on returns. focused growth remains aggressively. Thank the effectiveness focus you, and supplier price our the implementing to continuing three the the represents -- beginning the This which leaner. supplier streamline combined close on manufacturers and MSC priorities our with to structure be and to market industrial program includes areas industry. to mission to will delivering XXXX, fiscal business journey best investments model our Recent progress and new the margin gross end when Two, share ramping to our sales capture in are gap; up refinements, to be operating in Rustom. One, and three to critical the from continue our repositioning improving our We remain on trend of spot-buy cost an In partner fulfill transform purchase initiatives. world. at mid-year action cost distributor mission

We'll for the open questions. up now line

We question [Operator from ahead. The Manthey question-and-answer today Baird. go Please Instructions] comes began with now first the will David session.

Yeah. you. Thank

congratulations and off, of Rustom luck. First best

Thanks Dave. very much,

floor broadly the then solutions can compare the spot-buy model here you Erik, And shop business. the Sure. from shifting to

better sales But expectation noted view the capital paradigm? how gross about margins for You return talk under P&L and new and you the secular can an you and specifically, trends. on margins operating

Yeah, sure hitting recurring Dave, how the the mission technical critical mix as repositioned higher model of of is opening said the to which of new was look -- which at you're been think Company I about management has sort this model, the -- a heart inventory you this business. the morning, related

so, you a seeing one, time years, you're of number we out that in out imagine So, retention that over is customer of so come in small what attributes blow small significant number you couple And retention, higher -- the when reason that that model is yields from a customer retention. highlighting becomes value. value as as movements we're could lifetime in increases over important lifetime increases

of are why the reinforcing for streams. of there strategy. So is surprisingly, of the at that and many one the the least this we revenue attributes that other sort Not of right is one encouraged probably it's reasons

lower more move mixed margin related about gross course, share And So we some of over continually how years technical a the come examples business. the hear percentages. headwind, today and metalworking few that's you two reasons, vending we the of the one with talk why us of past being

lower cost the or we X,XXX is past about with the and take have this operating operating on end-to-end solutions we for holistic recognizing to the leads it model opportunity is look planned business with to some quite see broader the businesses What a high with if these vending because as up -- six scale opportunity model, considerable movement to we a come does look, supply technical now about will a Inventory of is the percentages a and a model whole level morning, think toward other business model, now point to the that chain model margin talked comes the an built So chain that cost so than the -- with basis out, that more in that -- metalworking scale premium service particularly we and going higher spot-buy spot-buy a referred years course at as which to for supply headwind. of be tees frankly. up, over with managed you very that take

Okay.

no of is change teens, expectation the operating in paradigm? under that but high achievable the Company, in So, to new the be margin secular used still the

part you time, Certainly of see is -- expansion. is one about Yeah, high we Dave, to look is traction, op teens, which formula, so no then now there the we and some see those to once right we I'll want I'd that? as say at return things me, stabilization -- Talking getting what and what start talk change there. to return I'd margin what for step how a about

got Okay. first severance looks that Thanks thought The you from given or quarter? quarter, would expected you've in And to for Erik. the can color fairly on cost variables sales you are to I the the is like but SG&A typically you roughly on second next is typical trends fewer flat decline quarter the have then would into versus flat actions, sequentially. second if we the Any be it one higher. triangulate flexing SG&A down. that gave which guidance, just us, that operating the provide day a see Company, for

in savings, right of come take-outs the our online big are from and that's period $X we to cost month. that's of So you the way we works are on QX. quarter. next want seeing a don't have them next to And during close staff And interesting, savings out sequentially then seeing again keep million people we contributor we to because take from the when actually, that that it's the the -- hire holiday the December, out, that but

saw compared year. because sequentially not QX last as in course well, Of we that to but

I'll not think in -- as Dave, QX I the add, we right you're we why that out I stand like, other Rustom down a this sales note I is revenues think does of are. think right color, were clearly, you feel X because outlier. -- know when total they be it the would is as down were bit sequentially down an the to

So, that the a one variable you quarter would necessarily sales there. hit is I'll But factor. the but costs, nature, higher of down QX on and not but in we making of Rustom could headcount, typically i.e., issue because around do leave QX. productivity. it Rustom way mentioned other see QX, We we But growth of embedded OpEx reason, the holiday have which in is at that and factor, another down levels kind mean was also QX sales are are described in permanently higher that we bring not in for making aimed we're in in specifically staffing investments in we are that QX. headcount won't to dropping generally coming that they're I couple one non-permanent type discretionary the investment the with that see

And million that $X that had roughly was the mentioned. I

guys. Thanks helpful. Alright

Hamzah Your today Jefferies. go question next ahead. Please Mazari comes from of

luck of New and you Happy morning. best Rustom. Year Good to

Thanks, Year Hamzah. too. to New Happy you

Year, Happy Hamzah. New

of of employee lot my had. you be Why this confidence will you. the you've have that your of change, there a question -- culture Has Erik, of others repositioning the to from first the spoke restructuring you Company. is, Company. at Thank Head internally, level you what's -- I a about lot relative know buying, Sales new successful more a had changed is outside

Just any be thoughts would helpful. there

Hamzah. sure, Yeah,

say would I what high. confidence is So my is

that. with start me Let

done. We have

So made talk my -- let happening refinements the operating me is and I high. specifically the because talk in confidence talked where sales specifically a about about being little let what's me

why a went to have sales of this tried So articulating about heavy the we strategy. two in I changing morning this proposition to ties last alluded through the over years, model to is those lot done changes, that you lifting that value new articulate and new we which the

and areas made. Martin, and and right new the the The with I which One intuition heavy the And plan saw headcount and of Eddie implementation who's is come tweaks a to QX. were basically, have we with are you happening and allocated behind and said, when lifting in and of over is that basically couple us observed a in needed primarily refinements a now look where were Sales, the is there is that say fresh as staffed and be by in concluded he tweaked. then being that results areas over tweak, two you data two that's we allocated over there's and Head

happen were was were So portfolios. of out one what in would of bit be reductions down going with which a a management saw the increase some to and management. so to spans portfolios things you lean undersized headcount and control And second is consolidation identify in areas

that instance but for up we're we about a still to new seeing year of that so and new people seeing early of in made area, BD where we part talked would in pleased allocated early investments function the speed the pleased And roles highlighted The is happen. a new and hunting the into flip with XX% we're of Obviously, confidence with already them or area this is some we're to that. particularly time signings, which that were were hiring areas it's need side year-on-year. that where under of progress progress. the bunch business why couple up Last we've get

So was per XX%. person year-on-year the up productivity about

as just seeing we're we it's like suspected it's early, total there. still what we So percentage now still a small of

will in seeing other of areas get was the the wrap to the capture. throttling refinement QX where so is saw point how drop here this, in before culture. I share your side like up the see And in and returns -- back you To that's about count come up is what we head it last we're point

I to think it's become and it's and would adept say Company a that responding has What I a change. to is adapting good more one.

more changes and time at we managing as change. in the think more I has have So become better gone on

add the pretty restructuring that the execution one if what mean is as point, Actually and I much planned. are we expected I'll QX. the benefits of we going that. think dollar actions about the actions of you final And we seeing expected

So too. growing is from that perspective that successfully

question helpful is. and I'll turn and follow-up Very over it Great. my

as milestone talked market watch about outgrowth for a to success. You

XXX retention today. look going XXX right by sort You as at Any behind about market metric you that guess of to bps. is forward growing thoughts restructuring to is you you to outgrew market know the us? the what rate. outgrowth historically the under and bps I talked Is Are the one that

it's weighing still acutely overall, we're down. but BD of mentioned, in conditions what it's we're what I But in. Hamzah, -- surveys, good at all market would percentage what rates, different soft side, the on small right which still our I growth given honed in exposure. are -- certainly late and things say early seeing happening you really is that couple with metrics, total, is more the metalworking of somewhere triangulating progress. see with the on We growing as now today a line, based we're as we softening of roughly etc, etc, it's a areas think pleased Look line I Yes, the are

stakes to and yes, talked range. to how of muting XXX share So or coming get line to about you're yeah, then this we XXX frankly And, down sort right, across these minimum quite forward, the seen. But point we've Hamzah of the looking in areas. of and we masking we've capture investment that some progress point and outgrowth of sort basis is happening certainly, what point say the in business water levels XXX table roughly basis kind the the back basis or see do

I it more focus time. areas stakes a and us, done somewhere we're to being and able early would for order the under mean, three our in customer ramping lot and is government. going down for do on as third happening growing than around over which with with that things, of of continuing improving we've gap. the be the investment head cost focused performance, past of a point we've the to where past. year sort done to as table Two on to to is into returns. growth just growth retention seeing progress mentioned, has the up government And effectively lift I be One, we on are solutions that restore quarter efficiently And us covers in depending we got core the

So that's where we're focused.

Great. of so Best much. Thank you luck.

Thanks, Hamzah.

next The go Barry ahead. Please Buckingham today Robert question comes from Research. of

Hey morning. good guys, Year. New Happy

Hey, Rob, Year you. Happy to New

you. Thank

last week? noisy it extended December like how was So week shutdowns. you in tracking some Curious that before pretty mentioned holiday last were things timing that the with sounds

Yeah, Rob.

was question. I'll really, a it. really December So funky month, good call a

actually let me so start by saying weeks. was So softness, acute it two the last

on it's extended using fall was top team different the of and were that actually and the this we years. do customers with, Year's the a New the Christmas they shut and it's two the past was heard back, two timing, soft seen weeks. we just because downs weeks weeks fiscal for several soft say the begin our So, holidays. holiday sales was last the been to we saw our last not we've what things time lot this XXXX was, more seen -- because it actually on think year, we've But what from What I more so customers have to time Wednesday, our were track I what than we last that is when it from using typically would basically

sort a of double there. whammy you So have

portion the question as about get good weeks see was question. to we the relative was. would as certainly but not now December typically basis, your strong a two there and last I'll than it's of a on stronger Interestingly, first

again or as out One usually be it we have January. may sounds, in it Thanksgiving and not week crazy prove Thanksgiving on little post will the late itself the made December is one this quite a first interestingly, as as little going see theories So worse a two to November, better strong.

moved that So year this December. into

different be will that much January terms first we've But what and hit of happens will thought a activity. in or all being itself this as headline the So to the question big than week line. weeks, real sort noise more softer us for in economic pretty then we point a two And Rob, was the the whether in shutdowns. holiday timing whether was out little other

helpful. Right. That's very Right.

of off whenever And set kind to you improvement? for clear, be weeks to have the the just the which of did So guidance choose? seasonality you base we the of the the quarter sales, for which build

back actually We to We typical see would the of November. went from November of based that January, February sales movement November. we

estimate actually the know with finalized we we a and gave the actually So on. numbers the have put pass, it's we the the actuals then actuals of fully December estimate of actuals, we the moved you --

and me I the Got would which you're guess think everything I neutral quickly, from I of then But cost it. on bps gross XX like at midpoint just reach sources down else XQ? right, about XX think is growth, XX margin price for to I bps second for think kind pressure does mean bps in neutral account Got quarter, the guiding bps the of that and Mexico XX And in respectively. is which it. lastly that

the from remains negative, to actually range. onwards, and other and into increase, One QX and price from in that the mean that. some that when think when right? sequential Gross basis drop said two particularly it's too pretty rebates much let QX, there but about come worried by all normal which inventory downward coming planned. that we're performing I there me Erik of QX and trend, as buffer The as well about cost of is going benefits. XX and margin factors right, talked QX being price beyond the right, not is typical to our think QX of how the credits is drivers I the within that, rest points is you late, But the is and we should mid-year look is

And QX from but coming which onwards. it's see back QX it you in mostly we the it's second communicated $XX we We half in say Yes, is program the million about, of as supplier definitely in right? year. the benefits, talk

so so And our margin you combine -- all that's those gross outlook. things and that's

Got it.

price What Just margin? to was was to gross XQ in cost? cost price clarify

XX probably gives estimate was use decomps the look of which usually points, you decomp, when price/mix there, our if sort you there. at moment, in earnings I of we that what's It best looked mean, about in at you basis the the

costs, price from the our price it's increases And we yeah, margin. impacted is we also movement fundamentally go the on then of increase that being by Now, it the It's also, cost what until end the that cost our took earlier. the average end keeps get point, price just -- the rolling system going through system. of your is average -- you next you price whereas it have fact

price Yeah, sorry was just total of to whole much cost? the dynamic The which how between the decline, the XX and was thing? due

-- basis we Rob, growth contribution just to referring is XX in the I the to Rustom's so decomposition. be points, clear, Well shared price he's believe

I price think look talked you're generally about. talking cost -- we've

XX way in think a So that's what over price, is basis headwind -- cost, the to talked business if range we mix, and we've XX a cost, time the kind somewhere the about point factors about three saw right. mix with basis margin in we're what wash you a of And we've left said There is, price, point gross mix. is

Typically.

Okay.

talked going see is What -- reasons we about all strategy, Typically, cost, price to sort with is away. the we don't we're cost -- of is expect what happening as the earlier it right, to the been dynamics like for and quarter-to-quarter. feels don't negative dynamic we cost, we happen, moving describing of is beginning how it should we've on That what's moves price we've Rustom improve. price that Rustom said, around would

Yes.

all the you reasons described. For

and gave the curve I the in public number out the how moving domain for you us. cost described I price that's there is then

half You see looking better in it the second sure. for

ahead. John of Gordon question comes from Inch next today The Haskett. Please go

New everybody. Year. morning, Good you. Happy Thank

Year. John, New Happy

want Erik, assuming just than kind to average And want you. anticipated you. the the miss from of quarter lift so worse are just the daily that for to here. be to but square, Are November, business we'll then December. Rustom, going understand guide Thank you I sales

Or at second the ago. because obviously year is compares is So but issue? -- seasonally mean quarter is soft, just the I then that I it's that guess

You got it. John,

hitting on You're it.

Rustom October, Rustom's larger year we growth reason, is number So what so basically December a and Feb less described, his we're why what correct. did, whole than is QX. happened lift you if an exactly to in team Jan, lift and average The you're the a we Jan, September, saw to we of go last years, of saw than November didn't larger, rate last and in using was, large more basically point, to we -- or was back number November average it of a make What which -- so know orders worse Feb year, was it model

Right.

Okay.

themselves in. we anticipating this That not they repeat baked but do, don't that's we're see not Hopefully, Right it. now year.

on seeing Right. price, of And you Eric, are all anything is in customers mean with deal. X price what back. things or give it? how is you other asked say there guys respect this play Is up to on some your about you're and of mean going to saying does Phase sort and tariffs of increase. there are anything I you as about could I contingent trade have to be your costs roll this kind and anticipation Do thinking bit a the little because I tariff of

that's we through have right the pointed you -- we've let and was at on of be How on tariffs right. me uncertainty then in higher there and recently still small. list let the will tariff, XB impact and amount we've the and calculated We've impacted at of numbers. looked there before, So that point remains for me tariffs, our fairly so that the we've But made the annual and us, out we for the really that before inventory tariffs many cut at more small the course looked as actually by -- XA and come spend, know is the now this. that and impact

So our GM. we're any it impact material as not having seeing on really as -- having

of of you flat expected a sort I'm generally then move trend? kind like your about and industry -- mean, of Got just Or performance of about thinking the how throughout and I interpret rebound kind e-commerce you it. to I versus you curious year-over-year attempts wisdom, or you decelerating Erik, your do encouraged of model lastly, of by are think are high-touch it? how just do you flat how sale. in guess sort e-commerce is. Then our e-commerce you more in of structural it, It's the interpret to been the transparency do trend growth obviously to do is how that more year.

metric categories be how right revenues, going management To inventory focused honest, percentage of through a much touch. business and that other been flowing are coming e-commerce now it through lifting buying. product that is the make solutions high technical an are yeah, the part certainly, don't we John, of Yeah, sort categories, don't what I seen our how too e-commerce way. And on because then, landscape solutions, way, product the it's in is in is our flattened. part as either of we've it's question, business as from of with interesting solution. much I customers of and of much and the make either a too it is just it's Honestly because how of percentage, service yes, customers focus on our much of how of our more because much think

So the concerned less focus is, e-commerce way honest that's be to the either about percentage. where

Okay.

Company, as an So given like to necessarily versus in better head, is words Or kind Company? don't mouth. it the the lot get necessarily it's your new restructuring, expecting shift the of sales e-commerce of of not put outcome you're to all I the sounds a strategic overall sort that the want

want think investing experience e-commerce marketing to in great presence is is a an electronically digital Yeah, important, I for that to John customers a e-commerce having sure. going It's important. transactional -- buy strong we're having continue

underpinning the value of proposition, question. an no it's So

court in you're what hearing full lifting total. not focus is percentage of I an on outright think that press --

understood. Yeah, Thanks much. very

Sure, John.

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

everyone. morning, good Hey,

you? are how Ryan, Hey,

Good.

a idea this a model. on point finer So want put to transforming first to leaner operating of I

So questions. two

about? are the the terms give us then know changes maybe but of bit just a you you're OpEx opportunity, Erik? And just of So be versus thinking that sense secondly, the it might range of structure. can in a of cost little what first, sizing major sales the I prior points early, basis

start Ryan, Rustom. sure, and then turn to it I'll maybe over Yeah,

does In Look, What move strategy think, of terms is what mean the new the are I about some mentioned, to of and and the aligning that this to it. operating model the changes. as specifics. the I

look opportunity, I business. Ryan, and out be by saying taking end-to-end the biggest call think an the we're at I'll I'll to start going

every are and more cranny effective. the of nook So us business be on, for to ways there

out. some sales us other is here In efficiency key mean metric the growth, OpEx in as for cases, Now, ratio. fuel investment that's cost cases, business the the may going to it into we mean look to at effectiveness

So will some it cost mean investment. some out

the is A supply could o'clock small would chain at X quantities. out getting an be sense the spot-buy business prime shipping for in in next example you're and order tonight that, if servicing which morning sure, as you imagine it you're

from they every and get goods managed for away, our how not way are out it's managing and in facility day they everything we how not shipped then replenishment where vending a it's are when from How be a we're how in customers it machine can periodic centers equation out, at different they a flow then manufacturers. inventory and and free, Looking put our the into manage emergency the to may be our nature. distribution planned

do goods cost not How to the manage and look at process? premium model opportunities of flow? is a look say cost in to other at etc, services we're teasing But And but umbrella. is higher spot-buy do it's out etc, experience optimally we our business is and bunch way improve improve thing You would be model an and still we frankly, customer quite the to of one, bulk how an now imagine a how too. purchases, manage that of we nice opportunities the early, would that given -- lot the the There that freight? opportunity a here How bunch efficiency. within -- one the cases, we only

Rustom touch little So size. and to more that let bit a I'll would color the be based on

yes. Ryan, So

look couple but potential points improvement. basis it to hundred of a know this, you that for of a the on too early target suggest set As is benchmark

Okay.

just Can the more investments? you're you to secondly, invest seeing or So the investments invest you're much investments. in that's to early then going to going the to one meaningful. growth this are That's you're helpful. the just two and in spike going of ramping heavily All back right. hit this, that that growth ramp And you out returns. on going then how Erik, year

so good question. Ryan, Yeah.

So I gave little a color.

but step going doing to that sales in which down, back Step are and showing two did. them early returns. buckets the refinement, and critical are we only where say for areas we're we take the look allocated was not two was again, that new strategy, what where the basically, one -- were over those So are to strategy

so is the of CCSG the role BD for in as drivers area. a is And behind that showing that another others areas sort We well. poster There's that biggest child be will some function of the that probably hunting of of one one traction is nice couple of the increase. mentioned which

in is chunk In look, terms down big of I a obviously, big count would sizing and say we took QX. timing, a Ryan, what

number in You again the can QX. QX QX again in to and lift in expect

above would and count be in that attrition, where is sales head the it started. that of end to management we What year Ryan, the expect nature headcount QX would and to of hiring when the it's be by hard Given I service precise. was offer

in And will better showing rise with returns. be from it it So driven a areas again, will meaningful here. be

Okay. Very Great, luck. best with helpful. working Rustom of you.

Likewise. you. Thank

ahead. question go Fargo. The of from Please Wells Michael next McGinn comes

thanks time. for Hey the guys,

Hey good morning.

Good morning, Rustom, best of luck.

Thank you.

in you digits, down, growing is if correct? hone was to was metalworking on, I that it right, heard wanted single mid CCSG just I sounded like but

That is correct.

similar. a why guidance. end end businesses the between two is? gross your basically know both in my to guys -- So, you maybe been you of have that just, assumption in hit what Can margins sort gross top categories you needed market it been on of for dichotomy little Can need you mix -- grow working of the would the about those margin just fundamentals seem those talk and

the manufacturing by basis top points on range. couple and in the gross been the Rustom gave the a drivers fundamentals, to metalworking Michael. margin, biggest midpoint the manufacturing I'll way over factor, right of and the is absolutely, metalworking biggest there. terms thing the is soft of XX the Yes, the Look, point Michael products look, are now. acutely But into metalworking that of sold in

So at look there the then weakness, of presence. the markets if where metalworking strong most to look they end you surveys is at tend and have

truck, weak. be would gas ag, oil, heavy automotive, examples So

so And is metalworking market end being influenced really by exposure.

Okay. switching And capital then to just allocation. gears

back I special now that that think forward from you reason delever mentioned? the guys I the and did to is the rhyme we're going to last Is times think for reverse there path you you dividend. time a or you you after a tender the going special did, X.X

and take then can So crack a he Erik Mike maybe that more add I'll to. wants at if

what a look is have we So allocation capital balanced strategy.

we shareholder returns worked, increase -- means. try using to used So various we've we've -- we

with mean that past I do and the that again if it on, opportunity of right? in of happen else improve nothing -- And balance buybacks talking plenty will returns mean forward that open returns funds tenders, market going flow so won't as X.X is it sheet all auction reduce you it sheet purchases So total doesn't mean remaining goes and at more leverage the dividend I our strong our and and But that. special is. basically shareholders we've about our point, know as as time our importantly lot at times they it's strong generation cash done a to you're balance shareholder cash as happens, being to of -- this some as Dutch is, with to.

it that time. add look, say -- is go -- balanced the we've And over Rustom approach forward. we've of Yeah. What terms just I would had to in a -- on had

while going any meaningful I of as these M&A. we're right for pretty the the think is through we're now in changes focused us high said, on business, bar we've on all

anything checks to when saying enhance dividend So as to shareholders in going both to allocation, that's tied the think to it appropriate right as cash a capital it return special we returns way we're to necessarily those comes going and other we're shareholder -- boxes. than not now,

leaders business the point run in Great. helpful. more and run business success. And on just is want back the one fixed breaking maybe you that and if Very cost -- step don't growth we step initiatives. to where count funded in say, Obviously before managers But there -- -- that where to head hey, hand hiring you're a show where to the you to I Is that long-term your the sneak and improvement here. internally segment what's more forcing drive again? is there point before for could margin, you up starting want improvement for

Michael, it's Yeah, question. look, a good

example is creates intensity as increasing the with person the not if on it. we can inside heavy nicely performance performing and you're the that to rehiring somebody down selective out and the performing you think is, somebody the focus it's and it a replace quarters of there'll I going be taken we're keep is rehiring that good over manage biggest, message incentive doing selective To who Company that couple that's back it was to be important up. management some last going clear, feel we a one talking about it where pretty headcount

back more in do to capture returns be is selling hand-to-hand We customer business, to it will driver and do to adding it service, we of Look, capturing time, efficiently areas headcount. be share think to to that's big over it's we that share. sales back sales, The that is heads a need come is really goal example to very can that's and based. we're which do But facing is -- fragmented, where more is going headcount combat and in. So still do one course share that in sales street so an critical increase efficiently. this would the why

the right. Thanks time. color. All the for appreciate I

of our last comes today from Stephens. Please go Hirschman And ahead. question Blake

guys. Yeah, good morning,

morning, Good Gentlemen.

GM to it soft back you things that strike Real you again, of after that was a pick the how call do did little and as up quick on out due auto, see think much you ended?

what is has I been strike, -- look it's bigger is would notwithstanding think GM. -- the auto I say GM Some the than soft at Blake

soft So still right early I for to I'm the now, pretty numbers mean, of is thinking say us. auto

but notwithstanding the auto So would help strike. certainly, look it expect the was is a will headline I than more I soft, bit, think

Got there. it. I'll right. it All you leave and Thanks luck good to Rustom.

Thanks, Blake.

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

us joining everyone today. for you Thank

XXXX to to coming the date Again Thank X, a is start earnings we for you great and of next Our speaking I look wish XXXX. April you. forward with set you months. over each

is The today's now concluded. you now conference disconnect. attending for presentation, Thank may you