MSC Industrial Direct (MSM) 7 Apr 212021 Q2 Earnings call transcript

Good morning and welcome to the MSC Industrial Supply 2021 second 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 both so us technical us on continue to bear morning call with Executive with Actis-Grande, and work Most Gershwind, the Chief difficulties. Jason, of today. our are Chief Kristen Officer encounter remotely everyone. Officer if Financial to we me our and you Erik good at MSC,

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

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

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

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

I and this Thank you doing morning everybody. you finds John, and call and safe hope good healthy. well staying

of mission world on to half by company, industrial year, remarks years four have focus mission. pursuit this underpin through over stayed wanted XX and years XX measured and of inception our Since this has we wavered as not opening of second the the our fiscal our stakeholders, a enter MSC I in as ago we the to last public my morning be best the this. distributor As our our same: from company’s our concepts mission. the Two

and reinvent the secure believe The in first need to future. is relevant remain to our We order continuously in reinvention. ourselves

field digital, national one this from cataloger, storefront sales, chapters, Our regional demonstrates to from reinvention to to of distributor in a catalog history generalist direct can specialist. metalworking and different from a a marketing being distributor, captured from be to a chapters by line each defined it a MRO from those broad to

shareholders. past product returns and which serve us until associates, company retain our to concept and growth, and second Historically that suppliers, Growth produce for customers, our attract up better this for history. is lifeblood The is has market mission the great of its underpins our throughout generate share the our enabled creating capture of digits, business, into allowed virtuous produced an years, for organic thus produced the single CAGR focused were revenue back which This and with and high digits few double the continuous in a investments. reinvestment a we’ve margins in the CAGR strong cycle. these a growth revenue incremental results

of we’ve took we growth. our most reinvention on reinvention the redesigned to spot phase customer’s MSC plant from We secure from critical Our about, our repositioning the supply was this moves our and all our been complex, mission our move pivot moat other they size to floor. deepen growth readily business. changes partner to floor, and that culture plant one. the our and from of time, We move buy done the before recent supplier to we has while was the one ones more embrace This Like around faster change talked the it, to the to and inside next came impacted four business and walls distribution our chain more reengineered force sales reshaped value sharpened were fits made. proposition a one onto segmented of our centers

to reduced order in the into investments like new areas we growth did field we of our While in this, complete model. reshaping all sales

into are to a in our more our to gains. XXXX being structural to sales with start ratio, are and back industry’s time. end return extended and adjacencies more and mission value XXX them on come an profit gross growth, million our core business business more lead shows operating growth market target. share our these fiscal $XXX emerging of points and the improving a that the stronger on We’ve reinvested the goals will largest our the a growth a so. of portions We of capture company improvements, and reminder do and high the portion leads fuel to still to strengthened further back the growth. even order Market we’re further more share those reinvestment capture to and Five re-accelerate of basis out now in into our strengthen will cost aggressively. capture we to elements, fiscal over are proposition market core pool leadership leaders share critical into We’ve metalworking. million produce as by will savings we invested laid with to and History add investing which at poised and growth levers as to expense in both captured that market of of take-out the cost into of capital takeout structural inclusive goals reaching teens year, focused also two by $XX cost of strengthened the We’ve

this the We’re the early far points innings proof but in encouraging. of are so journey

to commitment evidenced hubs. these virtual the recent the announcement move You care with saw our customer to regarding goals

also putting from we’re We drive and We are largest redeploying positions cost are and from it rents that in sales our eliminated customers customer while XXX about knocking increase The year-over-year boundaries. roles virtual we represent talent. facing will customer-facing seen growth. By a care from recent to This management will moving geographic retain that our roles connection positions and network, announcement down in was and customer growth. years. local with that into back adding office, we’ve the one-to-one XXX

to able The technical makes now outlook more it wherever economic our exciting. even recruit improving resides. story talent We’re

chain and couple of the for on back supply well the of firming customers vaccine the and to we positive All up levels. significant are to help the same With address and as significant reasons. is a disruptions, a our speed picking time, suggest of At rollout indications activity steam, the such recovery positioned environment. the of continued shortages seeing signs backlogs economic building we’re leading disruption coming from these

limited who and First, the limited on struggling struggle constraints, the and market more snap-back for delivery capital local The share distributors opportunity whom share from only working will have accelerate. offerings, during product we market year been capture to a past will capture focused even due capabilities.

the regional stages earlier inflation. the commodity supply face against are scarcity tailwind exclusive and the very broad also distributors. of brand day We up disruptions benefit and made XX% all we chain product see price The assortment, next as and gross capabilities position delivery leading cycle shortages, commodities realizing MSC’s cost. of our of brands, the of should well speed and capture typically local deep in than and shortages while Second, choices and inflation margin supply an multiple us including recovery, market we a early our to

the As its improving will grow with over and this anticipate fourth what rates. gross fiscal quarter we daily ahead will margin this rates in overall non-safety average pace, some a I’ll will an growth anticipate our QX we’ll of we and our non-janitorial strong least by the growth fiscal our cycle. quarter growth at run the XXXX, which XXXX moderates in to however, see to We contribution making XXXX, in that assuming by latter We the see comparables from we current Keep mind rate; and This fueled the overall be margins in and levels investments talk business. strong our upside anomaly, to time. our should back potential economic over mute bounce their We about that at year past return expect. inflation a fiscal in which here’s bit. levels and on PPE early high third the with into gross continues sales look stages of have part should due fiscal recovery the we’re our

us takeout range. our of We higher work million end also $XX towards cost stream expect that the is continued to structural of moving a million cost $XXX

that heads for we look translates we exciting margins should our down, second that It’s I’ll in performance. All our time fiscal quarter we to front of operating this yield capitalize can on and XXXX. on ahead executing opportunity of to expanding focused turn as now growth remain so us. healthy into an the company

write-down of aggressively I’ll of no some The comprised the second were and specifically PPE time, for large early impacted Before to secret roughly exclusive by in to obvious of primarily inventory getting PPE customers. inventory is issue the inclusive is large per in into several disposable disposable $XX the that large It’s quarter the of PPE masks. that week of selling masks. of the details, we addressing on purchases and At millions quantities the of million. our stages results, write-down our masks we is acquire which quantity moved very start pandemic

customers and large even quantity not months. the quantities only coming committing large buying buys Some also were of but at weeks these the to in time more

result, customers a we bought up we these safe in operations their could As running. ensure keep to and keep big and order

cases play through we where these in important loyal great that pandemic safe. what’s them. is We as was the anticipated. not customers support impose happened, long wanted securing found time customers game. to consumption on, in their As that to to keeping decided as agreements went that place, and long-term, knowing we were not them our Even really decided the When customers

fiscal our took was months we slowed circumstances, a has our quarter. quarter virus of surged, the even so extremely addressed exposure As write-downs the come through reflected the look not had on left last when and down extra we execution solid second on Putting time, in winter decade. inventory. and same back considerably that second fiscal at an choppy unique with meaningful if This inventory we have the set result, any Pricing in we the clearly the you environment. these a demand items the but improving inventory and aside, over were PPE

on on You our see adjusted for can down were X. sales X.X% numbers Slide Slide numbers X the Overall, quarter. and reported

most sales in declines seeing quarter. and nicely, quarter throughout our mid-single continued double teens Sales and janitorial products quarter. We’re levels second in declines safety low lines in the of our continued growing digit the for improved product and quarter digit low our non-safety the progressing non-janitorial sequential our improvement from in first to notably

government janitorial customers Looking orders, the while at safety in single improved digits. in significantly declined by core to sales low digits. single also in and customer declines and sequentially sequentially over mid-single types, year declined to accounts digits, our to continued high our CCSG national and large improved improved due finally the performance year the grow

improving industrial the remain IPI, this consistent fiscal did see lag As or through second quarter. fiscal did with negative to our still although metalworking-centric we was IP and you continued Production XXX it’s showed though improvement. Index, by Most are manufacturing our our rate early, end Slide positive. can through Notably, for trend, on our a between Recall production X, markets behaved continue Industrial markets it quarter, the end our to IP that while March so fourth basis gap continued point broader encouraged flipped recent target performance. index. spread growth the

against Safety and of last digits. on CCSG, for were down non-safety growth grew surge. XX% as the business hand, which turned did mid-single month, the Our positive the in janitorial, other PPE both and non-janitorial year’s roughly

non-safety strong expect and We our the in the fiscal growth balance non-janitorial lines product rates year. of for

XX adjusted from XX.X%, that Regarding up points first gross basis points quarter. margin write-down, down year gross gross the and XX PPE our the excluding was margin, XX.X%, sequentially due basis write-down, just GAAP margin prior versus to was but the

the took we again back in we our tailwind into margins, of nice for the response increase early half recent of March expect in generally early continue gross to Looking trending which to year. stages midyear a the price is cycle, inflation ahead, so the the

critical market wins Area, metalworking initiatives, performance of growth track seen particularly share share distributors. Statistical downturn. and regional local by have and capture with we’re from or Metropolitan our strong mission terms In market our customer MSA, pleased through this new We

We’re just primarily terms the now surface been in scratching suppressed has of because contribution spend to from now due wins metalworking revenue the customer soft the to these conditions.

the now over financials we outsized overall lift. rebound, turn mission to program. cover our should and see an on I’ll Kristen things As progress things to critical

then you review begin fiscal On can the X Slide see results. the reflects of with the of on second fiscal the initiatives. and update key for critical quarter reported mission quarter I’ll second on Erik. presentation, basis. a Thank adjusted you metrics X you Slide our of progress a

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

last gross basis XXX margins, gross of quarter compared points to XX.X%, year. margin was to second Moving of decline the a second our quarter

As primarily roughly related of million recorded PPE quarter, during $XX was we the Erik the to direct mentioned, this result primarily masks. write-down was which the

XX was first second increase gross Excluding point point the quarter this from and year prior a write-down, XX our from basis decline our quarter. sequentially margin XX%, a basis

quarter on costs strong second million our remained our quarter two first $XXX.X about we I’ll March, of of don’t of of we expect were second has million first here: add any $XXX,XXX Operating programs execution forward; month midyear pricing fiscal no in the or or going in price increase quarter. as third further the with XX% supplier solid impact the one, prepayments realization prior sales nitrile implemented glove legal the sales includes XX.X% impairments of we our continued. $XXX.X expenses This versus the year. our and has in Our two, points fiscal it impaired and had associated in quarter.

in accounts pleased and that was quarter, from to glove fraud is frozen. percent adjustments. of the sales occur. holding been fiscal XX.X%, first updates were substantial these provide suspicion improvement going impairment as to we impaired been with for we’ve costs, expenses this operating that will of which XX a year prior a operating Excluding With the expense time some bank there has have developments portion no made notified of nitrile matter, a the basis and in value to point arrest announced been our as we regard we’re resolve process The take you legal an

initiatives Execution and the related of quarter $XX.X second costs Moving approximately care I’ll QX back last critical. a customer restructuring we into that $X.X of and fiscal detail incurred virtual of restructuring of critical more in to continued mission costs. our we to model, hubs related and minute. million mission our primarily to related consulting primarily In results, million of go incurred to both on that operating year, to a to move was savings, charges, deliver our review

virtual customer All to restructuring PPE led care a operating of significantly the influenced charges GAAP of X.X%, and but the that on the that write-down to by related was basis hubs. margin

costs, $X.XX. write-down lower adjusted earnings adjusted mission XX write-down as as share and as for the this and our other $X.XX. per to progress points well from the was critical earnings charges, the due XX.X%, restructuring share our year sales. Adjusted inventory were and as restructuring well related margin basis GAAP up per other prior despite were Excluding operating on

balance and picked the the up January The moving compared in receivable $X and in to increasing our ahead to X, our as cash free in quarter to second flow was Slide February. our sales sheet Turning prior as million contributor accounts was largest and the million inventory balance year. $XX

the of end million fiscal quarter. million is inventory, $XXX $XX up quarter. of million net the last write-down were $XX we of during of carrying As inventory from the QX, This

fiscal can of inventory now inventory managing cash. to capex expect levels second to ensure be sales likely by expect will continue We the therefore the conversion, million. We for of actively divided $XX cash million our customers half, be use cash net to income, or XXX% still accelerate $XX in above as flow approximately year flow We’re our operating to ’XX. we fiscal support a for

$XXX call, fund our in dividend on last to we paid the our special debt December. As mentioned increased million we

term short Our of million about on $XX of of revolving long at were fixed our million, primarily total facility, our facilities, $XXX on $XXX Cash $XXX comprised term million was the debt fixed the net equivalents end $XXX million second and of debt uncommitted credit rate as and million a million, quarter balance the of quarter. $XXX the million of in of cash borrowings. borrowings resulting rate $XX end

pivot versus the last that’s call, roughly gross original an goals. million to ’XX. savings me takeout million quarter. now million provide $XXX On mission that of and million program $X X, productivity $X On of Let to you shared update critical our first our goals out of fiscal we Slide on see our we had and and through fiscal $X you ’XX, cost in taken $XX million invested

savings of During $XX to of this our end ’XX our second of our $XX cumulative $X for fiscal quarter, year. million, by goal against gross achieved million we million additional savings fiscal bringing the

$X QX, also target full million which bringing million, $XX our million. million We our compares to $X of year in investments total to invested $X roughly to

are progressing and well. program savings our of on plan investment also ahead very We is

target customer including branches. to that of annualized same of that between or move the XX we balance, and The in sales care On the The savings significant was, course, roughly closure gross growth $XX the slightly level during mission fiscal $X that critical this XXXX. opportunities remains million virtual an of million that for are move making in the $XX for our to related $X our such capture fiscal year. are investments expected some quarter In reach to larger to to seeing. starting more of and the million full hubs, XXXX savings approximately means fact, initiative most million anticipate results we’re net these additional be

back growth, our of through Before I me turn With let we respect described, Erik as walk back revenue ’XX. nicely over turn the Erik, non-janitorial to should it to of some see for expectations these fiscal non-safety in assuming you in total to growth quarter, quarter. positive fourth and expect for this trends our the continue, the business rates and business healthy half fiscal

still while that positive will total year, early, growth. is the we For it flat likely company to be for

to We where gross running they’ve expect remain margins the been our write-down. at excluding levels

investment. you see we margin and adjusted to our accelerate how it with track on function In terms primarily from increased can of Where of quickly presentation. within expenses, now. After all growth and account, X much revenues increased expenses, framework into Slide of which how Erik fall a see annual back on incentive adjusted our we framework operating XXXX, turn price. see that remain you taking fiscal I’ll will a be we margin to from for can sequentially volume-based tailwind expect compensation, gross step-up this operating

you Thank Kristen.

As momentum of outside move is half the to both and fiscal back company. building we the inside of XXXX,

to the outside, On firm. continues environment the

like questions. progress by evidence entire our are respect lines mission that structural On to the their the just the beginning while team inside, encouraged commitment investments with past getting open to is the I’d for itself. now and growth we’re cost to progress to takeout. our up thank accelerating we during started, for year, we’re We’ll and

Hamzah instructions] go first Jefferies. question from ahead. Please Mazari [Operator is from The

in your the question, Good the demand mentioned you outsized you guess pent-up you things morning, are on first that hope know a you there Is Thank that customers well. us question. for mentioned customers? in an that maybe are building I Could you’re touch more? this you’ve done you’re lift qualitative little Maybe is hearing as XXX you from you I rebound. level it’s the clearly long of a give of confidence sense the what’s a backlogs, outsized time, lift, on however you just people, fine, to confident most want whether hired come. answer to so question.

Kristen hope inflection business excitement about and Yes, sure we’re like and really is Thanks, trajectory think the point from and this morning hearing you’re feeling what the Look, me and an and at on, you’re the Hamzah. we’re here. encouragement future well. I of

some execution We’re from coming on the and is things, takeout, off cost a and outsized the much macro the we’re environment have of the the micro. confidence is to the think are vaccine from of what’s lagged we’re hearing happening coming now year. firm two and customers whole of repositioning up, picks lot lift, metalworking steam, really, the macro work and up terms particularly rollout so things past the I clearly up in in as of for - moving Hamzah, into firming The markets starting that in growth

of combine You the encouraging. inside added the what’s pretty macro looks haven’t cost thing that’s and investment. and We’ve us to say infrastructure an some allowing the that to happening same with company. Then darn equation we before, fund had takeout that I’d for stimulus

this be, ahead and by fiscal Hamzah, we largest we’d building. you to if and of what our year, I second recall that’s XXX Quantitatively, start, the While where running encouraged at beginning. board, IP, we spread and investments just had, are thought that’s a start kick It But on just were we’re the do. so quarter we’re in start bit see we IP really, as wins yet would is the as What fiscal in, we quantitatively. share was the and while under these see qualitatively to and of which increase say, the early, positive seeing. very going to build a we’ve that’s did they not fully it’s

is there seeing we and in - third is quantitative out in little healthy digit realizing turn anticipate in a to high nice haven’t would non-safety, quarter so come. starting investments in to still and even in QX a thing take terms that QX, making right business, we business, you very We more rates it’s in in put so which the ahead, non-safety, around non-janitorial corner, kicked be to look the think we’re March to our now going to look comps the non-janitorial as we’re it at the PPE Again, fiscal Just benefit, positive. lines growth that’s yet of do double product happen.

Got mean is two shut probably follow-up are a would sense Just but that? parts. safety will about the a is continue issues know of virtual question those have do or and hubs, in negative move your when you you. you that? a they strategic post for where is world? great. these to entire to vaccine, any One see little network, that My on is you around non-recurring you rough people more putting branch? hub a recurring post-vaccinated be sense are versus What more a piece, the you what locations, any any virtual hubs Then you. down talk masks virtual it’s towards many tough replace could I is can there how I virtual secondly, branch the wear you by of color hubs, impact Thank initially know

Hamzah, Sure absolutely.

would will the safety to still and we had negative, was we janitorial businesses at surge with and us. here, to say really and midst growth year. look if March, no of What the back because fiscal Let going a digits. continuing fiscal that But early which it’s huge in double right just case business were pandemic, post or quarter when be good businesses, what the we even last around pre-pandemic, is anticipate results. of comps, PPE--you beyond growth say hopefully hope the We and our them is janitorial. back third the been likely QX me pandemic end will our I and crazy the in for we to it’s the look know, tail point start in was be it corner. up of in saw What would third was safety businesses, continue going I our say we’re is the be sort QX still quarter, safety

what safety be get be think on quarter a steady of expectation once fiscal could of PPE. representative past I would would state. third fairly our we that into the be That more

on the and it only care can well question not that around individual hiring what sticky from We’ve of hubs, and home, takes into so relationships of excited this technology, around not second still--they’re where The customers smart may reinvest the day. customers, seeds we CRM you branch, our allows is open seeds virtual the sales again that people I if but years would really years to move local is were the for with working this pandemic. and growth, move, were that if system our out been planted before our that we’re say planted remotely, the locations The through speaking but system around cost integrated a about were one, a this on phone changed allows most of locations a outside, footprint did, hasn’t management are talent our we us entire customer. what sit, virtual working layers. then built actually the changed they have are. does they’re technical a sales one every and the what’s up create customers people their that is wherever ones and still same inside we connection with closed, inside of is to branch will, team, physical get the view of even XXX that of to an same technology What able to it’s are Hamzah, are branch degree had the What now is removal so one-to-one some inside,

a had encouraged. good are We going We plan in.

moved been positive. it we’ve have I returns think quickly. through Early

customer been service of other the add primarily has inventory terms were in locations buzzer changed, think inventory our risk the and January I front bit the in not returns delivery we’re and through the I’d not realized do think, locations, February, stocking little it as our on to is probably so have early branch also so thing at a distraction positive. but move of very through we I things low. look, realistically and

so much. thanks Wonderful,

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

is Hey a we cost margin into margin. the everyone. you’ve first can be half in the increases second question guess about How on should My gross announced, think on margin, sequentially price two-parter I gross gross XXXX? price neutral and XQ, of then given fiscal

flat see expect year other fourth gross cycle. related guess least quarter, any a XX%. Hey margin, around This quarter to do major I so or of and margins I you price all this at, and There start touched expect third pricing into caution inflation caution, to QX just a QX. bounce remarks, sequential wouldn’t, seasonal full the write-down, PPE do of a ’XX in for the with levels back prepared perspective kind gross be as in in downtick Ryan. from of running but excluding just margins the QX, together the been at second half We they’ve that put Yes, contemplate our that QX on if on with should increase, the would that ’XX. as we we to be to the March. so moves to typical I’ll the tailwind annual went strength in to nice place a the

okay. it, helpful. Got That’s

half Again, stages beginning increase add a a one come Ryan, beyond Kristen case, cycle the of pretty the continued tailwind to took is, in and to like as only nailed of story down there makings be of seem fiscal piggyback, The would road does ’XX, of the other know, the for I things robust inflation. ’XX. to look I now, response ’XX you’ve are that a been for us back the think and is inflation even to just we if it us. and it think be we covering that that just early should the for the for the moves while, generally--you

from environment, that Yes, this price to you incremental need? a days Erik, of mid-XXs, I’m think and but about and since think ’XX? was about looking Kristen, that? also get so the question, getting a line we actually we should for old we is margins that’s my the I maybe out, to about leads ’XX what would incremental which second clients. in you Can margins should top know, of how consideration, maybe Then level don’t how question that’s mentioned

about I’ll it building Sure, ’XX the ’XX, themes, let but just you here. walk we’re kind heard of down thinking about about I a what’s one, lot Erik about kind these that sort structure take excited really the To of of guess and talk P&L. of me you frame of thinking we’re Ryan. how up,

we I we over a happening think the We inflection point company. outside good totally perspective, with the macro happening it’s company, what’s on, descriptor. environment used inside pretty term of gain share good, and touched a a recovery inflation looks the agree - everything what’s then healthy like to cycle, early From widening this as like stages the of kind strong got and pointing IP. also that, the Erik I inside is a we’ve

think the tailwind. then we’ve margins, stable about they’ve noise despite moving generally you possibility got because inflationary we think PPE, pricing been environment, and If into gross we’re for the in

well the taking out before years. side, done leverage few dramatically been we’re here to costs next cost our On opex differently pretty positioned and pretty MSC, fixed and at over we’ve the than we’ve

not assuming nothing--there’s that about and be ’XX all holds it’s obviously things. closed think happening what’s together, to pieces But the the headquarters and fiscal virus incremental We’re about going no a about XX% all we’ve excited from a touched might higher, need with the putting on the into Erik been ’XX. which optimistic margin as center, when expect pretty footprint, we’re distribution and we’ve we the streamlining cautions and on good we very reinvesting chunk story we’d compelling pretty and sales I been back operating starting derail to and branches, margins another growth. ’XX, are in or usual recovery the setbacks of

Very helpful, thanks.

from The next from Manthey Please Baird. ahead. question is David go

morning Hi, good everyone.

Dave. Morning

flat high shouldn’t us with and a odds cuts, on some XXXX, of lot box the First guess side drive strengthening kind and where XX.X, there? in and gross think operating that, to you to noted look towards of the to the squarely higher investments framework, off, Slide better based opex revenues stronger grid as I the I that baseline implied that we market, XXXX incremental you pricing, then the a in there, that and those show just middle factors of when margin the X of were for growth XX.X overall put relative at upside I stronger net relative the about should that the

I Dave, Yes think right. the thinking way about is that you’re

fast think top I pick single of sight potentially we’re digits things to depending box box, definitely in on low that up. back line flat how the with

when would should just so $XX carried which think year, you the this for year? million should Kristen, assume this we the you that Okay. on down, in outlined million be capex, year, $XX originally to million assume--beyond rate to forward, $XX out Then higher million you implied $XX toned we I

which and we’re for in $XX about things of I P&L investments ’XX $XX ’XX times, potentially. But which rebalance ’XX. online still capex thinking which say going P&L the at to come assume is would million I’d purposes investments Yes, to million for modeling, ’XX, Dave, between and potentially, and

two low the margin you teens relates come Okay, years? into on sort that and discussing on outlined it, as and teens with to if invested capital be Is working invested way about it similar of capital invested about assume up you capital so the over capital, back get thinking a to would recall returns the finally working high if needed and you roughly I capex. we base, to three you’re capital. higher operating next returns you a just anything capex it changes, don’t then the to you’ve

case of say this primary improvements. one in but to It to the capital briefly conservative we our make - most our been of opportunities other would I’d on do working think see assume levels we focus Yes, calls, right invested capital hasn’t touched now. be I similar

of working order things pay of there through in growth-related ’XX. more whole get investments, value thinking particularly have working procure improvements, there the the streams, really are ’XX. a but investments, and the around ’XX is the critical, once to provide we mission going getting focus that pipeline about several capital actively the that We’re to on cash, on that to yet, you and a things for that are big on with you P&L kind like in with that projects be We’ll we focused of going we haven’t way going but into when started think

you thank very Great, much.

You’re welcome, you. thank

The Moll next Stephens. Please go from from Tommy question is ahead.

Good morning and thanks for taking my questions.

Hey Tommy.

announced, price - share really wanted last comparing just us provide be insight inflation we worse, there, quarter side. anecdotes you as on double when go inflation double What to more, increase keep the it might expected the cost forward, just sounds to for to think for a you pull observations would and there or the to I Just you any results outpace? like recently on reasonable need to just just can but same? potentially cost us maybe time you the whether frame price you cost good better, pricing Then trends with what’s with early kind or for back focus the up of back lever could helpful. about

a a supply of inventory to and handle cause North economic not happening and we’re flash, global suppliers right that think--and America chain, if you pick-up. and few businesses about still probably Yes that in expected I going Tommy, demand the faster these from even rebound what’s harder chain will to question battling many really time, we your production disruptions the have now the the think with think what capacity But I’ll say kind of and manufacturers than to lot and that’s that’s root around it’s battling the supply COVID, the Look, change the it global right makes ramp first but start happening line with they’re I chaotic, a production. up across of at last insufficient news inflation left in same be I are to seeing. why part so so cost pretty COVID, now, and months. of the what’s it’s of still At

We’re things delays weather for sourced weather and going pretty issues at the recent looking in our to at form February coming the scarcity but now, that’s in ports, What’s of to significant issues--recent, were messing things to a extensive beginning to then also significant back Texas I’m delays in of happening product and in is and globally, extensive terms suppliers of lot there’s it the the beginning inflation, seeing up. we’re move. lead

In part in increase. that terms March behind our of--so large the driver really, was

sometime would anticipate are macro, typical is, certainly would next hearing and that over if feasible need cycle, we more increase more up on the would pricing if if we moves. would back increase we would the be but meaningful I current say--and the we Tommy, I also--it’s over make move much say look it’s the summer, that would even saw a things Our heat take be inflation because with what sooner from about could continue What their healthy to before then. you time, suppliers that quickly, we could that something we do trajectory

all very that’s Erik, Thanks helpful.

Just any to be from here the side? Any should question we there just track-- the those about us to of tell forward, today company, from us of you the rollout on mindful what outside proof the going MillMax out pace observing there? pivot you to a can strategy, are of For that points us would picture the and to anecdotes call bigger customer

acceleration on did the technology, still you the to are and - market in what think cost for. I because would core still on--we is say It’s real say touch remarks. is they really it’s customers high. metric it incredibly what would the run MillMax that’s onto, coupled. should going rate be for the savings is we rate MillMax anecdotally combination is see so and on best Tommy, working comps. metalworking we the in is that, portion terms MillMax with good in of the what’s very non-safety, so I Yes because and output capture, that’s break touched few fueling going, we business adapting of look team and capture, capture. I a for as some tell early a prepared of working enabler, going Tommy, a share really which out, that when latch that metalworking our customers of I technology to producing can What well, happens of to happening output noise the non-janitorial, our seeing be didn’t terms our test point well, when to early, really--there’s the be MillMax metalworking you in really to and But the hit should because is growth look business, closely we months encouraging are going by particularly I’d market next with is driven if an what in touch share you that I some of

Great. it. Thanks Erik, we I’ll back. it appreciate turn

Tommy. you Thank

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

this on related cost Would in flesh to price to price wondering were price mean the cost missed if guys, that with a you be then March that us little but remind increase that cycle, that couple start bit how and the early stable would a have you dynamic Could Just maybe come unfold that margin positive through, Erik, good over was expected saying had increase. of I to out. big price price spread? where was, then that we you a but might to you increase quarters. the that, mentioned capture could morning. it, I next gross think to expect Hey might we’re of is waiting able be next I

be you in capturing took, What so a response Yes which roughly to be about this is in pricing took I formula lift first as here, she’s tailwind the clear, the it’s range. as for help should to To weeks we’re looks think stable was balance absolutely of expect of Adam, a we the solid. the what inflation, in we from March, early, call mentioned, from things. it year, realization fiscal I we X% tailwind absolutely you, price clear, move the heard increase I’d few it sure. expect--so move, Look, early we in tell the still Kristen

price from that that for If isolate saying, were should a so whatever get headwind not QX, builds hopefully reason from quarters putting and to we drop. you drop drops tailwind roughly QX mindful with same, to seasonal occur a pattern seasonal usual is it, are and and this more from have together sort you pricing, from usual tailwind of our the the that okay, two we’re that yes, the come. We increase, price about

Then Okay, trends about could the your through share to your of about end some going within digit to think markets, double best this demand as bigger us growth got walk wondering get by vertical we feeling if metalworking maybe ones you I’m where the you’re levels you. and that’s pace.

what some You’ve are you feeling about? concerned better got the just lagging, about the qualitatively and where easy comps, that what’s but still are verticals most you’re

while for four many should five I’m actually--I were is than of big auto auto of looking not, imagine. several happened, Yes Well, we by despite broad etc., markets, that and the markets, but us the growth to the broad that. production, of that able Adam, lagging aerospace, is still interestingly, IP, aerospace machinery and five where a of are lagging. What’s flip outpace big right yet large poster could auto were ones, IP our at to compare end imagine, you were our the encouraged IP, positive, we’re look so our equipment, auto, and saw child for say other reasons IP QX, the index underneath interesting concentrated the verticals IP we biggest to gap end when now, that is we the them to fact encouraging as those at IP, for lagging metalworking you’d what’s being are markets our end industrial

I’m we’re ahead would course we you’re absolutely a we safety evidences think we’re at janitorial are core up the even of detailed out look non-safety, peak what and again comps, these numbers, without lower That’s look to the build. in on end into see digits. along of distributors. double in think that within local - steam you what share March even of seeing seeing with the about be for some because encouragement those drivers track vaccine us level, in expect of non-safety but and about to and itself If mid That’s which the and if single market seem Adam, but things certainly time, in. gives How as markets. non-janitorial the comps we’re taking metalworking benefits I capture, how and positive, that and it’s digits. QX, from picking like it we growth builds, QX right, full in part rollout, out it does Over going should non-janitorial that kick March saw--so feedback went qualitative quarter we the from third quarter, As healthy customers,

Great, thanks Erik.

Thank you Adam.

Patrick from Please JP from Morgan. The comes go ahead. question next Baumann

last to yourselves business you’re you wanted surge Good or you, considering last seeing, in morning the the third year, March too point. the guys. sales safety guess, about on of being that you talk end of overcome first, April on seeing? what talked much I are being the recovery quarter, base and can down to based remember on Do down a the that that I in I grow part the you’re lot.

base Just you growing April? March as early business curious, into what’s the exited

if would PPE digits, I Yes, the overcome. honest. big not you’re at sure, be company say non-janitorial QX, is exactly to growing to tell comp What total would double so Patrick, looking you non-safety, for are dynamics I

healthy you business. go then things now, Once rate plus and QX big on it we if past comp be get biggest with We very growth for and turn you minus positive the really and we month are business, June-July-August, the accelerate, right flat the flat that or total the plus we positive, could get PPE. selling past--May or but turn will call minus for whole

process Understood. charge dictated went it through big a Then that? versus through you determine to inventory take putting just What the to on over whether just curious that the quarters. several

max or adjusted tails this our make we that that guess in in terms we accounting at quarter, to masks, on what based were saw the that, that second go the without little write-down, underlying decision maybe really extensively a about carrying was is what difficult quarter. the results, and our bit for, result at I reflect price seeing to our a than the in the write-down, disposable transparency pricing to the for really happen the account if market really how see size have cost is really we I heads inventory happening. from and or the it in of all as on take a is what or which for prompted what’s charge second is for numbers, goal exclude in an here going them sure inventory, decision reviewed to we’re results. accounting have and you a given you pretty guess product to time looking were make explanation on into what on have of our we Sure, made higher business on the of overview, to how so we it whole giving the and more a terms technical further the going event, charges infrequent market view one the unusual and what large write-down you of taking to we

plan. me have from sounds on could expenses, of bit initial helpful. upside on little back operating one Last like your half the million just That’s range in in the quarter, you it Understood. kind savings a of the mid-$XXX versus net second

mentioned Are Just expenses. into some half, to offsets? of the [indiscernible] about curious the on operating mean, number how maybe back the investments think that there you I growth savings. offsetting

curious of how think to kind number. about Just that

half think going if sequentially, levels you to think QX, we first higher about better which is, COVID those expenses, noise the see you’re with opex I significantly first second year to had opex and about the anticipating half. sequentially, increase we we’re given in but think think, if costs QX year all a savings sales between variable initiatives, like thinking half first second about half so way last Sure, to for because

two. going of reminder, one use a or higher as to variable about in variable we’re a you going see the run after normalize half XX% incentive that you, expenses, Just to of back a our and compensation second quarter But that’s adding rate as caution to give expenses. for we’re I’ll want sales

mission stepping half, also are we to the first growth half investments cost second structural the up half first same. be are mentioned, savings, half about while going cost second on highlighted to to you savings the As that critical

we operating and how to the all you together, up step of is the terms you’re QX opex half, a operating what If ratio expenses put the see about as QX, but percent in the first going we’re that’s to relative going in framework. sales adjusted that dollars margin and saw to in thinking decline of

what me, remind And [indiscernible]?

I’m couldn’t out. sorry, say that more one I that make quite time?

was operating that in What was year? the total that expenses number for framework for the

given an opex specifically haven’t number. We

half, and pointing we back hear which within for think might expense, see within gross back operating got to so scenario we’ve digit what that paths got margin why what second see to opportunity framework, few op you that operating us play you’re I adjusted a single point risk really put that out moving going you margin. is low different you that guys margin we’re flat margin is us in terms or to of to operating in as and the pieces within we’ve here guys framework, why

appreciate it. Makes Really a it, color. the Got lot. get thanks totally sense,

No problem, thanks.

Our ahead. next Please Longbow question Dankert Research. Chris go from comes from

everyone. Morning

and avoid feel do this we call following footprint Just after realignment, to engagement how changes. Just any customer we activity, a quarter. How we the interface on customer branch exciting about increase feel? do center return closures, definitely some these these changes comments to how do

Chris, morning. Yes good

tracking you and One we’re qualitatively, is, I think carefully, very strong. feedback quantitatively imagine, are could early the as things. a couple customer returns

of sort any seeing not blip. We’re

your your big I call about--was feel? a do think avoid how we point comment, to company center

just personal that Yes, relationship. maintaining

digital Chris. You this the just hit really about that--you We relationship. answer to the one-to-one and it’s it’s people it’s the business, know, believe and answer, together,

and goes - Microsoft retained like a teams Zoom the one-to-one have management are moves, the the the loses had. of with branch time on or that company moves they’ve In the case, customer That’s same always so sometimes of and awry. the It’s they thing. each of sight the presence can we they’re think go Teams away, the relationship, all I importance connecting virtually other, relationship. this these relationships one-to-one biggest when physical this our

link that efficiently well? pretty or in of it. a there Got with that much as of transformation digital there Has bidding type to interface terms is still more and well the been the customers thing, same as

been inside we has with each the so digital to because and here enabler work Chris, in that technology other here, put I What happened make company going would place. gets time the like is this was happening communicate the to happen, say so how was move continue a ability transformation and done. the over to of It’s

make that’s an making investments We’re the some would beginning some it’s and make around A I but customers well, as inroads to certainly continue, to investments. website other this to and but enabler it’s happen. of say beyond going are few interface we’re digital been with elements.

Got it, for so the there. thanks much color

there? I days, update be any any on quick last if what that’s one still sales, kind of very, I could, details know very one, like implant but signings Just look early would implant great.

the in a well vending or it’s for pre-COVID to but a and because inability our lull the and pre-COVID coming opportunity it’s implant That annualized funnel we back program we’ll Yes, will but the for so our it’s funnel new is. filled inventory customers then instance, take look a and in look seen, total a because COVID would at very look of building beyond we wins we’ve on our up we to is say us, to and at won many would into funnel and little nicely. encouraging. revenue I vending wins--the is what if customer presentations. to other hurry, growth so set levels beyond actually when implant, funnel, levels, That do of so plants, be and both drivers, wins management basically build of inability up, time what at and look at early, Chris, example are get solutions, we a What saw out

actually plan despite year We’re on pandemic implant. this with

We’re encouraged.

stuff. much. it, good Got Thanks so

Wells Our Michael comes Please from McGinn from Fargo. last question go ahead.

morning sneaking everybody. Thanks in. for me good Hey,

Hey Mike.

just budgeted was virtual and higher, what $XX to lower? some savings I compared $XX to the wanted the go million customer verify million you from to The back - hubs, what had numbers.

same that originally we savings--that’s million. contemplated, the $XX range to $XX We budgeted million for the

also then but is would you’re year various your total what expecting lot through the walk it’s sounds $XX now million of items, savings, capex Okay, get there cost opex to this us higher, cash it and just a there the and you a exceed within SG&A, the cost-out slightly Can like to component? be?

which solutions on but mission the you’re that’s are about component There as capex are capex our carved this at there not capex, order around of around terms heavy There’s component capex think probably point. that in digital things spend It’s if investments would for projects that’s initiatives critical, the initiatives, coming capex asking. and P&L be a I online, total and of of think this haven’t we that definitely. ’XX but is in in we some a what specifically side the our out of

Okay. This level more have improve internal lot you’ve A us service. of question. Can last to taken one quarterly you through--you your high been walk vending MillMax, of a just answered. is the have earnings questions

supply TAM a an safety service Can that what you as through you’re me globally and us supplier, with TAM throughput chaotic. provider? just Can service customers addition Now through you MillMax are of prototyping a stock, as of just from environment? helping level high potentially through versus level increasing your chain just little is offerings your printing high integrated morphing full the hearing manufacturing the you XD walk manage into walk versus maybe then the

looking closer Yes think which which next-day and in a we really tail long the inside addressable generally you’re getting avenue maintenance. us. but the Mike, customer, supplier, I that represents output heart customer is moved the geared - inside at buy all do to how we delivery, up XX%, how run and of attacking a really the because meant we which what that improve basically elements bigger tail XX% customer’s things floor their of did, spend, the MillMax inside up productivity of floor. saying, all about that of services to that, metalworking their our much spend, the of up the Barnes, into you from the long better. see on repositioning speed free lead market, partner more production customers around opens helping basically acquisition the we’re Certainly production gave mission us total we’re Certainly at up do a spend, of times, the is way new customer what of to now total market the addressable make if are critical cash, their find brings we’re most that--like, closer us business the becoming where CCSG, a we opened of plant pretty is and these and it’s spot

advanced now, of--whether it’s coming help making a of tails of and terms at the XD our heads things there’s or right they ton In need additive materials, advancements. or themselves of some customers

things specialist, is think our customer. metalworking question, repositioning total MillMax answering I’m spend sure if I the that’s the to really are your I’m up the geared what like help them opened but not do, has navigate. from basically

That answers question. thank the Appreciate you. my time,

you. Thank

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

Jason. Thanks

reminder like hope healthy the spring start fiscal XXXX. for you safe joining me and end quarter you our we our XXXX Before a that call, Take quick us today set to thank to now We’d and give season. July date third X, care. let is for have a earnings

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

You now disconnect. may