MSC Industrial Direct (MSM) 6 Jan 212021 Q1 Earnings call transcript

Good morning and welcome to the MSC Industrial Supply 2021 first quarter conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today’s presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. to of conference Investor like Chironna, to now President Vice Relations would turn over the John I and Treasurer. ahead. go Please

Thank on the everyone. morning with me Officer our and our call Financial Jason, Chief both Executive Actis-Grande, and Erik are Officer today. Chief Kristen you Gershwind, good

so technical on difficulties. As remote, last if us we call, with our we all are bear encounter any

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

presentation. our reference summary me Litigation which Reform under of Safe Let accompanying the of Private X Securities Harbor statement Slide is a XXXX, on Act the of

expected are on filed statements. current on XX-K Risk to are and risk factors these and based These plans profitability. well these meaning the place of These MD&A and obligation statements. statements. Form not Information potential actual operations, of impact the in Investors about differ our U.S. statements the sections the those Our supplemental include annual the these and other financial undue and could in impact well strategic on to call, the COVID-XX. our Factor as and of the report on investment filings. risks uncertainties providing including and initiatives, business on information expectations our the the contain results growth risks no press by are of that release materially future this forward-looking our within forward-looking SEC, COVID-XX from operations condition, on about reliance website, is to earnings and future forward-looking as our anticipated as cause SEC expected securities statements statements noted update of These as laws, these statements we latest comments comments company with other cautioned in involve forward-looking results benefits assumes on expected from results, our

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

our by Thank with I’ll good recent our a color year. progress. up you a wrap cost Thanks John, especially a first results quarter take our Kristen more detail and up of before growth in everybody. line review open and joining we and wishing dive on for on this there, and call you begin I’ll questions. deeper some for I’ll and the the will program. I’ll journey then structural us. healthy, provide the into initiatives. review each safe morning morning a our From perspective happy, new start financials then

with enter of against fiscal and pace which on we the but by numbers, we’re evidenced middle in is by critical importantly our more improving the initiative our the by is As This mission progress business. initiatives building. key part operating XXXX, increasing momentum

function MSC’s secure to we our in ago Better, to success captured MSC the on and We to like to built recreated floor, with retention presence supply pricing with like an we Make proposition, customer execution pace new ecommerce capabilities business. partner. deepen and moat brand chain MSC’s plant to for realization. a As our Built reposition Millmax. growth loyalty to to next several force, the You spot the so innovation time, the as mission critical improve decade-plus supplier we advancements value and built years sales did CCSG, MSC’s and platforms Since decided reshaped a that around accelerated buy this order remodeled price have new reminder, in new improve MSC elevated promise, and such We’ve our a a from of digital and new we’ve of

taken in mission outlined critical, faster. We improved call, On to change at culture accelerated more three-year order Finally, pathway into we’ve fiscal of capture two basis growth and by our translate market last to agile drive a our above performance. that shared targets and or ROIC. steps will points to XXXX. five changes those create levers we We outgrowth our were improving these share IP shared XXX deliver least

fiscal sales initiative also during a yield the powering would We basis operating improvements teens ROIC at by XXXX, back shared cost into time. XXX ratio to that structural high in expense least points that

by encouraged getting have sights started. progress, and we’re set just our high we While we’re

growth and being levers a cost and making project the five changes to one-year achieve moving with on across company. a the targets front implemented aggressively structural robust and three-year steady of on we’re We’re inroads drumbeat the pipeline our

that backdrop outlook showing of but the likely good on turn prior the company, you outside is vaccine Slide sales were Overall of on quarter gross our over will Looking XX was The X. is down indicators. positive passed X.X% remains happening margin down now first points versus the year front see I’ll this to and our the some fiscal can improve recently quarters. against coming period. basis news and the package which financial results, challenging a stimulus all

a which was a on by was and in GAAP detail X% describe influenced margin I’ll operating shortly. significantly impairment Our asset greater non-recurring basis charge

prior costs from see lower excluding and critical, adjusted Slide mission adjustments basis XX.X%, mission severance this supported year related sales impairment down by critical. can and our charge operating despite you margin was to on X, and associated points with the As XX

on share the basis. $X.XX this an adjusted in of for per quarter, earnings of or All resulted $X.XX

trends at sales improving levels. extended The company by at notably, We’re and total program, improved and janitorial Sales Most products, lines digits. sequential of and non-safety estimated the in PPE into over double anchored the our continued product low improvement declined X.X%. seeing non-janitorial continued our for our quarter with December growth through safety XX% sales quarter. growing

orders, low over year large by encouraging nonetheless of year. PPE down and the some December business, digits is the safety rest excluding single as in aided janitorial, was While the

customer at type, customers performance janitorial continued year digits. single teens surge to our and due double low National the safety was core year over to grow while Looking significantly accounts the and low by sales mid orders. down declined in our large declined government in digits CCSG

markets As over markets in did you with metalworking broader manufacturing can remained index. X, consistent did quarter. trend, range lag although digits behaved Most see the centric industrial IP the production negative but on Slide end the end to improve this continue single prior

compress, to positive build on rate We between momentum at plan quarter. the More we initiatives. as expected. a seen and our importantly, our IP have we to fiscal gap growth above a for exiting I’ll XXX that reminder, turn point gap growth fourth IP with as now to basis least XXXX and begin our target

over call, five discuss years, solutions, improved drive markets. will of and Today, diversified a next portfolio, growth the I outlined those On that and and them. are focus metalworking, on I’ll end our couple levers last the three selling our digital,

First metalworking.

by We both customers tremendous win distributors We’re and in do opportunities investing business so pressure progressing heavily is and local are track new lead. way by rate in in plan. current our our under order from One environment. widen the market, core funnel are we capturing our according who of to to

our our with as Millmax opportunities only $XX billion it applications. and most more market. size times provides roughly market share. the to capture broader to not customers’ aiding which one MSC locals Millmax the metalworking to tool access purchases, is cutting billion cutting each tool to passing of tools the are of XX% but cutting up more to come progress build their MRO We $XX of spend. the share within significant tools MSC XX% multiple represent opens month. is expect pressure capture efforts Milling that Cutting to under

We’re seeing strong new to reception early technology. the

starting of building funnel and is quickly new is produce Our to opportunities wins.

vending, with for MSC in we’re offering wallet. share As service incremental we exchange Millmax a as of do

The in while the underperformer second is we’re our hard a We’ve diversification pleased working grew feature which past an is PPE XX%. initiative quarter as two progress the from with fiscal tailwind, business I’ll been the we from largest to are our business to now years an first government benefiting over play. nonetheless turn outperformer, and over right our government,

we’re in including this opportunities adding area roles to new build current to the future, for dedicated investing momentum, creating hunter the for Beyond us.

force Third, order with we’ve years, important I’ll sales highlight that strategy. our each build-out. powers new our the is force recent our in consistent the of sales and Growing an reshaping headcount sales force down to reshape In enabler initiatives. taken five sales

we function, For the our restarted We that we’ve fiscal force. mentioned This had first to government. years, and those and headcount time but specialists, metalworking increased delay aided the which first hunting, of we’re sales or expand poised to the of mission now has our the development Kristen quarter, the the business now including acquisition pandemic, a by XX, sales was by our due In outsourcing in projects critical efforts. redesign as such call. one last roles effort been on talent several

We lower cost. at are hiring and faster a

source have Kristen, over to hard wide charge successful proven supplies From support the the products across we’ve scarcity safe. need PPE in I’ll the our customers the range PPE chain discuss and of nitrile outset now to been our certain to for we government workers turning widespread and worked things pandemic, lines documented to critical of be front items. to have effort impairment supply more the Nitrile keep of of well and industry a Before gloves and program gloves. related Despite the issues, in challenging. this

number in customers the several product. a Over of need months, us approached of scarce this large past our dire

not nitrile channels right under now. sufficient chain produce pressure could of normal global the quantities is extreme supply Our supply as glove

status, our during through We new securing market to scarce time. used for As an pandemic supply. a in and which us the has prepayments standard of to in has product September turned been practice secure been sources team effective priority result, tool this a

in of uncertainty the As received deliveries, secure amount the growing yet the of recorded the charge for we’ve to over impairment not of ability an full we gloves prepayments. and, our light today,

Kristen. possible of the this the with over importantly, course of of and, we’re to quite specific paths to keep of hundreds customers supply pleased from or most safe. our issue, now Pulling refund to ability prepayments. has pursuing substantial PPE either revenues are consisted secure program, our back leading it gloves I’ll We which to all pass transactions our a global

Erik. you Thank

quarter Let our first mission a me fiscal critical update of progress with on review you then I’ll the start our initiatives. and of

presentation, a reflects of on on be reference, For my focus morning. you’ll results, which X for will main the this first metrics X see the quarter reported Slide adjusted basis. key Slide the

both or year. X.X% of Our first basis, quarter sales $XX.X were average an quarter versus $XXX million daily last same on decline a million sales the

Sequentially, year. XX.X%, call. quarter XX our margin fourth basis margins, quarter mentioned last on first XXXX to gross of that margin improved points first XX to compared PPE the gross compared sales Moving the basis last large some our quarter headwind was gross points a to despite of we decline from

to continue of performance to the initiatives. traction our solid see due We

operating the up in sales Our sales execution of mission $X increased supplier This million review costs headwinds our year. versus price programs. pricing gross the purchasing on gross about in the million XX.X% million execution has margins both as of solid due well cost trend and made to over quarters. that severance solid our related quarter XX.X% both prior first strong expenses and been realization to about $XXX with of SKUs the PPE-related on of fronts. next increase, The from of price of continued the or critical. as We our of operating improvements could, couple or annual amount. December see margins related were the to includes fronts one-third to Total in model, the severance and however, $XXX

impairment on in operating to charge minute. percent that resulted margin sales. Excluding of operating also keep the X% as our excluding XX.X%. decline prior the We I’ll GAAP earlier, able opex were to critical of details expenses compared the in Erik same costs into a progress these related mentioned the million ratio initiatives continue of in despite operating $X.X this go in severance, asset to all were of of of flat Including critical our were to In mission period last the costs, mission XX% savings. more adjusted expenses as a year, the sales sales deliver to XX.X% initiatives year. sales

share impairment was as an costs, Excluding for XX.X% charge were prior charge, margin adjusted as in per Adjusted adjusted adjusted GAAP our other the costs, earnings year. the related and XX% earnings the and well versus severance other severance share per $X.XX. impairment were related $X.XX.

driven $XX of payable Slide $XX was prior This to payroll deferral year. cash to and ahead moving our the as we flow accounts Turning balance achieved the management to in free in the under improvement and compared of million the quarter CARES X, by sheet million Act. taxes the first

of carrying continue. over end were should specific quarter. surge masks. half $XX million QX, $XX products and inventory, ample we million As virus of disposable Roughly is of last This that from of is of PPE the to the fiscal $XXX is that million related supply down to

the paid and $XXX our our we very During liquidity closely of quarter, continued we facility manage QX. million revolving to credit in down

$XX end paid primarily the revolver. of $XXX shareholders which term total million, million, $XXX part reflects our of our balance returning we of borrowings. short a from $XX million dividend at rate dividend special debt to and philosophy long maintaining comprised approximately borrowings, allocation quarter fixed and Since as credit Cash term quarter. of capital while balance December resulting first the The our fixed then, the Our revolving rate our to balanced of $XXX our cash the conservative on a debt longstanding in sheet. as net commitment primarily $XXX a end funded million we of were of capital in facility, was million million equivalents of million special $XXX of

million we cost On X, I let million original through Before fiscal had turn mission out for achieve $XX savings On million to achieved critical of our goals. and see million me our XXXX XXXX back an that million first cumulative investments call, shared $XX that $XXX of pleased $XX expected of $XX $X cumulative you in provide the This report program cost in is million to on quarter, reflect in Slide it fiscal of goal of year. million as $X to taken our an of million fiscal end million to take first savings to the and versus additional fiscal to and this gross to savings the I’m goals of $XX was fiscal goal we our and of end by savings against the productivity roughly Erik, by not our in another takeout bringing ’XX million million we fiscal of out $XX our does $X $XX can that XXXX. ’XX. last ’XX. quarter update

by some start did our does fruit, fast and not to momentum low-hanging executing year the quarter programs. While and critical a one our make in continued year we capitalize on encouraged productivity I’m our mission

quarter, signed sell In addition also to are some of the we XXX,XXX initiatives XX I as planned, York proceeding agreement to one on our foot facility served our New acres mentioned which This of co-headquarters. square an last Melville, as facility.

million complete, the hybrid spring late our foot Once relocating square which XX,XXX space $X nearby location working model. be will accommodate this We a roughly to our new will will sale save operating smaller of expenses. annually is current in we

it turn opportunities. We now I’ll to review footprint our to estate real will back additional for continue Erik.

we hard our over we’ve that’s past the several improved work mission critical Last performance. Thank financial quarter, years performed aimed at you initiative turning into Kristen. the outlined

Our be set growing teens. end firmly into returning by goals referenced at company’s are fiscal least on Slide achieved ’XX: XXX to basis above on first, the high back two the points of IP, our and ROIC second, sights XX

that reductions operating sales we structural points. of powering basis our We least growth initiatives at market share executing a percentage we cost and significant are as expenses improve to XXX have aspirations five expect by

inside four This we them. improving each middle with execution we’re the that improving there energy Most As the an is building MSC of and move significantly, numbers to the evidenced by projects momentum encouraged we expect inside our and walls fiscal is building passing behind the of grow. into of quarter, energy by the that’s year, company. by

in achieved We for of we’ll will by being questions. stakeholders. line distributor you, not the have all rest the our measured of the four world mission open now until we our up best as industrial Thank and

Manthey David from is question ahead. Baird. first go Please The instructions] [Operator from

Yes, happy year good everyone. morning, and new

happy new year. Dave, Hi

Dave. Hi

Hi.

costs or hope the you you could kind how a role the and efforts? big productivity mean, that? of MSC, customer outline maintain First question, service doing to us give are you’re picture, mission and if technology you cutting of examples? of I the you couple improve critical Can in

as Yes sales is would what on and question, Dave, described I the side force of I as the say it’s cost it’s--so initiatives. the the know, way enabler, think and good side. we sales side the you just or growth something an the is of force that’s that expansion doing, each enables powers underpinning everything growth and five on we’re on the Technology

into talked the that get side, five into side--and growth your the to investment pricing gross of digital, one technology levers, on question and cost growth on some then had of in as the form investment as beginning I’ll emphasis On heavy to using we’re we margin heavy about realization initiatives. costs, on the on the structural improved power translate yes, see analytics heavy course, line, of the price to of

certain get this how and that that it’s to allows for new up technology the and what’s take-out recruit just just was in Dave, how shrink for us we buckets it. all do in Yes, doing what not moving opens that, pools see cost to This a sales in G&A, Melville, footprint, building, u is most downsizing example, with especially exercise that I go - core you’d we and we That instance, us that by estate think is business. of rethinking work underpinning the across the move to to project an is gains, an perfect three the a of if but an not it of can is and in really chain significant to Melville. does been at but it work areas. what is the real often way would allows only hybrid the locations, we do in exercise mentioned lot of but to using model. functions not big what you stripping we’re has think it wed and technology supply there be it, a is other us, example travel productivity so Obviously of together, of we’re here, so technology project talent improving things, I open is cost need Kristen of service, our a rethink it out

Okay, No. say that on to but clarify were improvement Then say year you’re sales talking you to? non-safety thank year each Slide Is X just improved, sequentially rates? that that. one you What is the when growth average daily are dollars there? where improved referring you thing, you for down to sales month, about

daily That would be our Dave. improvement in sales rates, average

you very thank right, All Perfect. much.

Our next from John Inch go Gordon from ahead. question Haskett. Please is

good Thank new year. you, Happy everyone. morning

Hi happy new John, year.

you. Thank

in Let talk me up. trends pricing material your start, Erik Have products, prices supplier the been about actions just the and increase, general. maybe could Kristen. and in going have seen Erik, of you reflected are you thinking Raw price and purchased that and about how, you costs annual

you’re right John, early metals. see I is out been translated. you it what it folks would to What a sourcing have it’s something as date, on we have--our pointing closely, so is to - you’re relates particularly little eyes their tell to

to com for one movements of We increases, sustain. do yet have build the you a not As inflation translate seeing supplier into going though, following which in that in list earnest. commodities that’s triggers the should real know expect, us for is while, the us

beginning a increase. look most the encouraged. The inflation price to the what figure range, execution, the of decomposition, it a we our starting early, growth we’re now, price X% seeing was of is our it’s in QX, still but price was think price over modest improved see thinking so that see if increase is took would we’re realization. you expect realization. is only now. analytics, summer. was out recent form lot As time, the end I’ll into It back you’ll a the of thing We’ve low little in we’re of to pretty in we’re and we the kind other thinking roughly given invested of QX improved we John, so implement point Timing-wise, at

are kind costs So into it’s yet answer, waiting just of going the based to if lag, higher traditionally your or are rising soon raw on too they tell and and the product prices your competitors What’s translate seeing? costs? are raising material also to

in and a our it back, several think on depend a there it it’s of coming when have of time how--you it’s along. to lag, history We but say pricing would from I watch Generally will seeing if I snap would depends a manufacturers it hold, to course movement, suppliers month of bit on--exactly know, that how that date, we’ve lot it pass for seen we’re on now a sustained what a usually lag. be would depends yield carefully. not does they would time. is matter suggest It our before of fast and increases inflation and

No, makes that sense.

say target? as Just the XXX market breakdown, details so you by more of basis XXX points XXX, square some for so the to the give If industry, us I’m - assuming your Erik, might question, case - plan more government granular provide follow-up targeted any outgrowth, targeted be than less? that’s can some up aspects a does a so

we the have a look have few company, John, look. Certainly Yes, inside ways. a XXX type, out by broken - the we so customer

our and level by levers. service five the We geography, have down the at that’s also code, and look we big by zip have look initiative literally another product of a a to category, so

you’re [indiscernible] I than We industries One is going to have is would us--for faster us, a balance. that to see multiple it. say couple What going there’s a Certainly grow at be it’s others. things.

core. see you’re hand, invest continue one to our to the On going us in

gets sectors have and been manufacturing those hard. metalworking heavy hit is that metalworking sold pretty core into Our

focused benefit segment. will markets some metalworking look real in those have been way heavy you point At an by think IP that we’ll outsized snap and at there’s lagging. centric been when staying numbers, they’ve back, the If Those on recovery, lagging. we end a

by fifth will, encouraged be--you expect the the and be we’re we the of balance, there. that right level we’re end John focus would if portfolio, size the relative Certainly its government. for and size - in on, momentum the you us given market, now know, diversified sort would markets there. would is outpace piece you for of biggest is one putting lever touched XXX investment second the our to one of sure, The That

Yes, your you it call, metalworking the continued mentioned the metalworking of in plan? last a on does faster grow XXX so is focus, XXX, Erik, than or based kind as around

move John, execute, I and function of capture. think it we will around, obviously it will how share be much we a how

I we widen and given that to share metalworking, XXX basis way it the lead, we relative the result pretty base were market have, in points at if our the us think above the we’re growing starting with. of a size would look would IP at and given in metalworking good is size allow be that we

sense, Makes thank you.

Thanks John.

Our Hamzah next go question Please comes Mazari from ahead. Jefferies. from

Hey, morning. Happy new year. good

Hamzah. Hey

market share. is question reacceleration of My around the just Hey.

is about you’ve restructuring those the new You there, we Maybe and XXX inside a how from do items? mentioned buy-in are then a this about points, think building numbers perspective, how ROIC, the the of sort mid-teens? How two energy you basis put there’s out the different company. talk could conservative cultural

What as the say, company, stretched. would a over much I that’s I’d bigger is company, if public company, been by XX lot if I the the at go large Look Hamzah, goals you it the life back we’ve particularly inside a inside of of past a DNA start around where years, change. to now, that question one than over - through right years measure is. going look, you’re [Indiscernible] having was and let say were our energy, the we’re the virtually, me back go time. now you on it and would company is mean, growth energy, few this of changes. this that with life and feel company always the there the a

and We’re idea legacy the big other and the and out are thinking that reconnecting changes the side goals. with setting stretch of coming of

one that’s that’s that’s that reconnection idea from a it, the biggest of think things, is I of the the idea team with stretching leadership and embracing [indiscernible]. embracing

through company you beginning group how are things, I that we’re inside you goals, stretching you could talking is as its for the could of point are aspiration? the way Sure. we your conservative trace to most sales, imagine, imagine the inside and higher a To to there think that about that’s look the organization. any about, like for goal -

on of cost group by aspiration? big. that’s the we the there focusing the and the company area, For are build trying side to into Sure, think is a stretch higher because mentality

those know it. do and where have gross Got but to big I areas? force be just going how are or sales million I of $XX the to growth just will of going of be reinvested, sales is savings all there thinking the target gross cost look rebuilding savings number, sense on Then you’re million, order you a in into reinvestment would $XXX and of a talked magnitude, reinvest? and hunters - much how XX, think other you you to the you’re like, as it about said

that Yes, be would $XX - fiscal ’XX. reinvestment looking for for year, we’re this at million a so

can ’XX, number and ’XX for definitely step annual to that For look you down.

online. we’ve though, come I’d to changing, in We’re going a That’s when invest--I ’XX. to for given don’t we ’XX always look the things the of at look million for and to say million prioritization continue of $X as specific continue more add pipeline, range it, to think $X you to probably but could reinvestment

year digital very we’re the and more particularly cost three. areas chain in in and quickly, - bit As focused see to you’re investment focused all up goes, but underpinning a ramping areas, on board. the is service on initiative the far sales service. supply G&A, investment out going three across as really where sales the This It’s with investment the

cost and due and on a investment, bit requires at stuff more service. would across be As it nearer Erik so transformative board, to really the lot looking a sales mentioned, side we’re weighted of is the the term

it, much. you so Got Thank helpful. very

welcome. You’re

Deutsche go from Kevin question Marek next from The ahead. Bank. Please is

Hi, good morning everyone.

Hi Kevin.

Good morning.

in then through happened what versus it non-safety and sales the just month terms update in you How trend through performance? quarter, December? by on obviously did of safety Can

specific what’s you We on. general sure. is numbers. as picture you going the Kevin, get give Yes, can to indices. in It’s sort I’ll of what do, with seeing we’re the What consistent

in particularly the I sequential and are performance We seeing build by mean business, of base, non-safety, non-janitorial. a base the

XX. If PPE what’s high XXs, real growing climb happening a janitorial, been through in to been story quarter that non-safety/janitorial, XXs. up. and is in which But is safety to December the proxy which our stepped has you the a the core great was look steady the first for the close low at I program, of business, the up think

You go the other down, was pleasant a all depths believe to in gradual it Obviously were up. the we on the surprise pandemic, nice, thing, teeth we’ve this a of back got of climb been I and in December business make, we that it’s the of talking CARES sort sign, low business. was spending mid-XXs was a of single was climb base trend but an Act not some in so it digits, steady expiring, as of the down benefit does a one base month been got encouraging up some we where

seen out for I there you’ve is as as gross Q you concerned? would change call over a are it, seasonality Got QX from a far any follow-up, trends in Then typical margin call December Q. you. thank that expectations implication of as doesn’t think much the

lot we context and margin this things you in margin told time, the a may on the around gave back we range, touch gross the see me but or couple up for biggest that strong headwind. same be mix, say can to share the of expect larger that selling for December. headwinds. - then, margin about BPs to it masks put given better alluded our range, quarter quarters, seen like I’ll a within with know, year, past The we performance, larger to is execution you happen. Two, by couple flat two, BPs. framework. has and really we’ve those. mask last gross envisioned. good surprise quarter down of and got likely operating than a change last quarter or What no the even end One, At XX is had PPE large still been on of PPE pricing variable a really you strong, price-cost virus PPE the thinking on XX price higher guidance really come as we we has flat down Yes, over let driven we’ll position the down cost behind of inventory the one, maybe is, the to is it’s the fall it’s surging, a through Since headwinds that what’s of we I’d there we’ve

PPE, if very what still line around is it’s that as were thinking pleased with growth and on there. ROIC More see most happens Regardless that possible, protect focused that PPE we’re a and I of we us ’XX beyond. mission as to two risk what couple the If quarters. gross the could trying broadly, we’re growth do to possible critical back see whether think investments price-cost margin down those drive stray what I on, we of headwind much really headwind, what enact outside to to improvement. that committed it’s capture XX on become countermeasures, large, a mitigate targets think you’d underlying range. but really the it and temporary market overall dynamics, P&L, is BPs or really are we’re that’s The elsewhere the still going the the with in to happened,

Happy Understood, guys. year, thank it. Got you. new

year. Happy new

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

quarter. Great everybody. morning Hey,

year. Thanks new Mike, happy

new a I full-year mid your revenue half end single of on of framework. seen Historically to the the meet on the annual year. given margin financials first you framework high your to touch decline. business, low a but slow seasonality digit have were able Happy wanted your start to

Assuming mix what opportunity, are of the is SG&A factors normalizing to and terms end in your and your gross price to assumptions push building embedded momentum the of of for just curious, maybe I high was annual framework? that the would what cost-out margin, benefit

still in SG&A op terms out on on operating the framework that our quarter, bit a of the last margin holds, laid we in drilling so expenses really. Sure, thinking

well, to that the seeing flat are to down on look end as for slightly opex you still. down, If you up be revenue target and slightly expense we can for

programs. over-driving could us what you upper end at If you margin have framework, overall of say to the potential I’d productivity drive the the where potentially would about think op one you’re looking

be more We’re to in looking things on aggressive department. that always

confident likely gross are next price side, those, not the I sure quarters that in still take end couple I’d with through, a it’s is margin, anything that do is the still mix moving of be expense largely underlying say especially would to strong But behind seeing the PPE the line and range. framework. On performance. the either if us so down margin volume upper BPs PPE could in headwind of you to still could we those Gross feel we again advantageous we cost I’d and flat the mix the say we’re range, yet us that headwind. operating have XX saw because against in

initiative I’m you Can remind appreciate government. of CCSG well as maybe I as revenue within core percent and customer assuming trends Then your some you Okay, some nice and Millmax is? have. you combined milling mentioned that. to us milling your a the catering what that’s as

core Let sector. through within me dynamic, maybe manufacturing MRO category is in ancillary really--you’re frame it heavy power is talk see what the metalworking you Millmax though, right, other and the little The Mike, powering Millmax, is I’ll business. do we which to an powering is products for interesting the a but it’s bit, opportunity

upon $XX in based the a market. to $XX we happening what’s explain it billion, at Let Metalworking me little size bit. and U.S., billion fluctuates the

company’s lower butter tools soft, time. the metalworking. can You economy represents of Cutting end it’s XX% as imagine that. a the at now being That’s with right whole and to long a the bread for been XX% of down, being spending

tool cutting and been of throughput the tools. look, is in to Within within productivity biggest improving customer the cutting productivity, really applications milling of have the designed MSC encouraging. terms results one universe, is Millmax really, where show That’s

locations spending, and we many manufacturing in for cases capture. so far, the early, candidates it’s would where roughly customer that to around customer’s be for of dollar we’re a frame XX,XXX of and of we for opportunity of heavy capture some that very tools universe fit basically right the market see if generally U.S. going there that’s a service tools. the spend we’re milling in that’s may not then share what believe into in incremental manufacturing in in locations, go may purchases, the is So there, MSC cutting Millmax, that’s and asking The and typical multiple happen share and market really us the the just--it’s service, every we happen It customer’s for obviously opportunity still In may for go is cutting as improve we’re they’re the to productivity, providing exchange so doing spend, or applications. it’s not seeing, us. MRO though, to for described, ancillary so you bigger they’re and operation, on is there, the

All is basis XXX of we’re towards. this, gearing to the point ourselves obviously, that outperformance power

OEM, you’re these versus I an right. you’re versus a of a favoring an you or distributor might? important If best going work because provide and perception Millmax All and maybe upon to relationships with the is why touch hands you’re you that little one works, OEM that your product could providing maybe and product dig best the the right in services, does supplier can that finding into further, to maybe how where solution, know able have you’re another in, is so my

One a great think it’s be as couple the question, to this as and To by puzzle. here is you The the love for what need unique, one are that, is look doing, tech. to about improve itself it’s Yes technology the Mike, but reduce I market the the is to think productivity not Millmax perfectly piece throughput, a etc. positioned helping bring reasons. customers we itself technology a I do of end technology by is to much finding - that’s This I and and enough. wasted materials,

person a the footprint our need our and field question centers. on technical this. we’ve or of top about understands and to metalworking, gets our of suppliers data, in customer that, suppliers, obviously care largest the interpret which Mike, actually alongside manufacturer and who could the machining your You Then specialists got metalworking to tech in this the national somebody do

what face: because objectivity, does MSC bring business performance. broadest Here’s ultimately The their the has interpret MSC going in the nice to to by a moves it customer the this removes tool benefit it thing challenge the is we’re to right--we’re The we’re it that with it give doing then brand portfolio and they there metalworking to to give them preference and answer is and industry. them deepest problem. the data the going right has going is

this have I a maximize really of we’re think components think together those in three. to all to I all three to thing, fortunate needed value are and what’s position

along. Thank pass you, appreciate the I’ll time. it

question next Uhlman Cleveland from go Adam Research. The from is Please ahead.

Happy morning. new Hey all. to guys, good year you

morning Good Adam.

year. Happy new

force add are million investments more year the was think $XX folks to going year. not is--do be could forward the we plan if as the this that about just maybe your as for digital looking how sales of the of headcount I’m to sales and the force, wondering and if I wondering start being rest you reinvestment, for the then--or more related? discussion dimension of you willing many you’d a for to with hiring

start. I’ll Adam,

the growth with bigger start me Let on investments. question investments,

going, But the investment now you’re government, then force focused those momentum into three-year--if digital, right Where full get the going are five. hitting got it’s it going that’s selling are those we XXX all is growth the which on power portfolio, underpinning growth to enough, is levers points sales I expansion, We’ve critical this the haven’t and metalworking, We again, five into solutions, those which diversified directly along going see and is segments, plus, I’ll basis to building five points way. basis to. really and believe the five plus, sales five, to said the XXX that force and - the and investment.

following we’ve since force now the for a Adam, In sales the sales years been--it’s particularly, look, we’ve you’ve few story our terms expanded force. a while. been of been

the over Eddie’s through was to We taken force and life, under order whole we in headcount couple so of business to to the sales up, in meant now what metalworking and watch, have reshaping that hunters farmers, down been that in we needed certain were last the we’re some found other and roles bring of not because in force. did we’ve thing have sales this in years repositioning this what we’re the enough throttling was we key that over-assorted i.e. roles, reshape

the can We’d add pace, and You to quarter. the the balance in end we we’re we us force, see XXXX we by saw fiscal. the people levels right addition and know, or investment--you we’re sales work growth plus obviously we’re that Kristen funding what get stats fiscal, and like that our in rate the going minus, that’s to continue through on the that the could headcount be first is If that that of idea doing, at service productivity we’re to as to where the XX publish of and back hiring sales going continue described. be the funding it the for

you PPE headwind Kristen, could provide this you gross Okay, the great. just point That’s quarter given you. correctly in that in say here of the helpful, secondly, XX you’re Then and similar or is still in orders, surge very within did seeing with PPE margin so a air? thank December I that the up what that headwind the in quarter decline, magnitude to the basis far second hear

be to is second I’d quarter higher. likely Yes, say

We’re out but QX, with happen larger see do for based on PPE to for the a inventory think December, going probably not QX. we it seeing we is door, yet what in headwind moving also

QX. see I did went which increased the similar quarters really think QX PPE third reason there in second on is I orders mix heard to that that was you in a the as see large would driven and we expect by mention some door, in out well. something risk some We that headwind

was out? margin your purchasing gross to pricing and do think you if you positive closer had, with back to you that flat the So that were

closer were we say to flat. I’d Yes,

you. thank Okay,

chime hit bit little to look points. couple a I just gross underscore in on maybe - Kristen with two to Adam, and of a this, margin, cents want

seeing One points. for we and we year we’re cost on on two quarter, execution since seeing things. down the XX to side. we’re ourselves like we’re we--you the we I hey, basically flat what price see we basis seeing know, purchase Since side is and think the what said sourcing last like what

I think positive. net that’s a

we pronounced two we on more the though, see headwinds factors or PPE what potential for next in based quarter is Kristen think do that the are saying, I the described.

or we for You’ve got for pronounced seen much prices secret may quarter is the big two. quarter the not PPE headwind we’ve down as no potential There’s than last more surging, virus in inventory, absorbed, two as mask we’ve have or two. there a next come on a been or so what masks, face the but next in some quarter that the

I’d me, It to want hard predict hard really ago, to saying, for to to here think at underscore, that’s months is it’s stuff, was hard we’re episode really now. what of predict hey, a looking talking what really the kind I PPE in predict. I’m generation about once a

The For where on us me, again, cost. real underlying going price for on we’re what we be and the improvements. are like creation sights That’s ROIC drivers three-year value to goals set seeing. the

you. That’s it, thank

from Markets. Steve go Keybanc The next Barger question from ahead. Capital is Please

good Thanks, morning.

couple follow-ups. a Just of

slow as in should cases is gloves we it’s for the based long on about impairment, the for stuff get down more I’m if be increasingly risk worried trying as been, Is that understand is said specific? just you question. Really, progresses. other the how ability First, to or there to something ’XX inventory pandemic hopefully

the I’d are the worked was when uncertainty certain gloves you practice all which a size. worked fairly pursuing many prepayment a say so followed--not is a The pandemic, that’s accounting most and certain this Steve, we when pretty no, say, in tool exposure, is date, clear, to terms details, prepayment. only through reach with but a to out nitrile was prepayment in and What without though, imagine if times of an clear this point terms out. and the prepayment really difficult of possible, a--this gloves, over it’s don’t It’s asset, to through been--it’s exposure a than we and of that I unique unique is What of this the used actually of going, look this secure rules a situation unique. we’re you have become path going impaired uncertainty, like we another where pretty nitrile pandemic every could product. scarce case Yes you’re reached we hasn’t and isolated a but during is we it it is of really situation standard time. - the case This would this. see In is point industry

for a you products? truly other one-off, So see related don’t inventory risk pandemic and

how would the with risk about, we’re function Kristen of But sitting inventory. obviously we there any virus nitrile gloves Certainly how the will described, Look, of mask prepayment see lot don’t we’re what be see That know, facts is I on as a risk. a moves. it of that. with Is depending Sure, moves. the what set you upon there? the isolated prepayment, of course, talking to

XX you it does how you versus the break were productivity metalworking Of out specialist it. to new of reach the take did a sales metalworking new Got people and person? long specialists level hunters, added, that the versus want many how

technical the their to when book a installations, number there brings. business. a geography doing we’re our the sort see one we specifically. the in way for then metalworking they’re primary supporting--so of for own we’re don’t competitive I the are we individual sales they who Steve, break coming metalworking three would certainly they’re big metalworking What in not. are they people specialist, because Millmax have in hiring you What necessarily generating the ramp-up expertise is tell sensitivity, of hunters, generally out metalworking XX, we benefit did you the can gave I three most metalworking, of don’t with industry which BD is a areas buckets We find with in focus. of going sales out are of lift is a because specialist, government we’ll faster see say expertise. The it the caveat, the cases their but What see as we one,

the door, to to up other products? MRO a to fast And them in ramp them presumably leverage Millmax get to really speed hopefully to on that’s get

but aggressive not it the technology, been so just metalworking ramp doing a There rate. not of mentioning new we’ve all new for it’s and our I and that’s out where science, metalworking investment, rolling rolling but person is little and about investment certainly trick, it’s piece certainly Kristen ramp. a case area it’s There experts, training new sample super for of on and tools Millmax, is continue one our and pretty been kits a is our of out. mean, That’s a that. a ramp rocket been testing we’ll bit of on folks investment, we’ve pockets of a a at There for a fast it’s a Millmax.

clear, be program unique to that to you? Just is Millmax

Yes.

great. Thanks. That’s

ahead. from Our Baumann last Please question JP comes from Morgan. go Patrick

Hi, good taking morning for everyone. questions. Thanks my

Patrick. Hi

Hi.

up capex you much. I this and in to but is result SG&A question capex $XX about on talked million a Just and you quickly, expect you go time this how what year, as annually expectations and if forget by investments of said my year, well initiatives, over beyond of incrementally the as

Yes, definitely of historical program, in which we’re for range future so is capex, million, up this year our in to over ’XX, $XX of the run rates. In more the for years three ’XX end estimating a step I’d range you’re seeing million $XX increase and level but see going years. sustained probably we’re high the over as historically, for the expect as a been to top not a sustained we’ve of where next that

going of you’re is sustained saying? that XX more be what for Is level, years? to XX that So then, a those to

’XX I’d we online to XX time. going specific what at on investments detailed can dependent what we we’re guidance give a are be say closer ’XX, We for get think through on still clearer some It’s lot in prioritize pipeline, that. on the that the lower the end but to XXXX. of of how the planning as range, we the bring different you maybe working and projects that

margins, us the side invested changes the for I and assuming Got remind I you capital that are it, ROIC working with the components and debt the that or versus denominators of capital by investment, any you’re on equity that? using guess time, term target, How sales whether in don’t that of you longer much buybacks and then I of of equation, as is guess maybe know. - can the

understand trying teens of Just high that to the number. components

what would high the operating a We’ve specifically so to right about on Yes, growth things, we of the far components but going; go, capital now. our the say and as ROIC. the that touch everything table last on out I been of we table drivers to we or really, working teens and looking expense be at everything and the talking yet that are course, haven’t of gross margins sights into as side is on is did broken we’ll getting call throughout lot, opportunities opportunities, where us on something see the more for turning ’XX. getting that’s aggressively the

of me through margin Just last what expect? one from dynamics that gross time, you me. annually Remind the

we’ve we’d be dynamics strong Not we’re yet to sure to can to continue going we’re and deliver years, ’XX, expect op pricing are we like and ’XX then the but Sure, but specifically the inflation framework strong investing price-cost so look looking the is out and for heavily to margin ’XX, in commented think been XX that haven’t with seeing on guidance we be exposure very flat happen to what might for for what that and cover the realization. to BPs you down into giving, margin, analytics. driving costs

you over Is time? there still the have to deal mean, story last of that’s headwind, I with kind the been [indiscernible]. that a that though, mix

then where margin us land you’re given unknown, a But of always--mix remain fluctuating ’XX for the those the growth the specific and the the definitely in now, could rates. as unique situation and in ranges growing, fall business that which There’s growing, gross say products we’re how the of on five we’re is ’XX. but in a fast I’d that’s PPE on pressure, the those of of online. growth hearing could to comes It’s levers factor the it’s comes kind where pandemic where right, influence more ’XX, really a from where about parts lot Right where we mentioned, talk dynamics. kind range about we That of and Erik terms biggest Yes. each mix margin.

that what and of continue happening for eat and work we’re sourcing us particular, execution there mix by hearing in between you’re if hearing assumption realization seen would we’ve better of me could and dynamic on from gross things those the this a and one. Kristen, fluctuated different somewhere That’s what BPs Pat, outsized what’s you’re formula about What price-cost tell momentum. been us, little price headwind, margin gross Yes a you positive be the then maybe mix is and the talked add time, year-on-year. just this price-cost XX with side. spread looking gone If and our year encouraged we’ve mix price perspective you’re specifically and our is ordinary XX just could early, business, but over it swings. we year wild have a margin, that, to and been. we headwind thinking so our we’ve PPE is are in may determined Obviously while on headwinds is the momentum a on has has we’re create and of modest create sort looking flat, on because to PPE, that little the what at encouraged you course had where a so Ex-PPE, but continues, costs funky into which think for I and what about, if year front, erosion bit by beyond

Yes, sounds good.

luck, really of color guys. best thanks - it, appreciate for and the Okay,

Thank you.

Thanks Pat.

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

Jason. Thank you

our call Take please Before today, now XXXX. and April for XXXX set stay I’d safe. reminder fiscal date to end quarter second us the today joining that care, for you a earnings we and is everyone. quick X, thank like healthy

for The conference Thank has concluded. now you presentation. today’s attending

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