MSC Industrial Direct (MSM) 7 Jul 212021 Q3 Earnings call transcript

Good morning, everyone, and welcome to the MSC Industrial Supply 2021 Third Quarter Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please also note, today's event is being recorded. At this time, I'd like to turn the conference call over to John Chironna, Vice President of Investor Relations and Treasurer. ahead. go please Sir,

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

remotely we any corporate a cautionary micro recently encounter And language, at As wanted difficulties. responsibility. working MSC, bear highlight if technical into with get I to created to site social please before I dedicated we us our we continue that

but driven to has we of at relations, doing about the all and many our striving This do corporate our at of For the excellence. and the environment visiting journey, to of thing in by beginning is years, are concept MSC. right and I learn community everything progress sustainability we stakeholder interactions inclusion, and for committed invite continually only diversity website. you our very more governance ESG efforts our

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

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

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

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

Thank everyone, hope you, I'm holiday on John, you our today this for joining us. I excited to and thank you you, your progress update quarter. weekend. enjoyed

significant investments the augmented We the a made provider to capabilities. leading the our spot-buy on few made our across pivot by by been the spot-buy benefits company floor, years. over plant a of are seeing partner organization past the from strategic transition We Mission-Critical that's to

that our our growth underpin translate program consistent bulk changes earnings plan efforts. less our the is to two Mission the goals we historic into and with investments performance. financial we superior shared revenue visible completed, company. with levels With the our outlined those of return of of you Critical to And to legacy

fiscal end market First, IP XXXX. to target the share above with accelerate basis the of growth rate of at capture points XXX least our by

sales a continue. done increases points our our committed muted positive XXXX. and encouraging year, desktop also and powered We've fiscal the serving by macro of point. fiscal environment excluding of meet margin structural doing mobile, high-teens, turns year and business and investment This spread expect by our fiscal the PPE, fiscal out pricing and XXX year, achieve to QX numerous to and a overall our grown and latest by costs leveraging of of fiscal The have share maintaining growth $XX of This the now search enhanced new earlier gross and but customers' but end quarter we XXXX company tail implementing strong help and so. costs merchandising is so are driving with take both by structural initiatives functionality. QX and grew XX% improved in ROIC into only capabilities, to information million, of customer-facing out quarter. million IP began our 'XX, fiscal as system into with new our our inventory committed fiscal and a year-over-year growth versus programs, return e-commerce. proof fourth concept, data minimum is we'll write-down by of started PPE At the we innovative increased for innovation non-safety exceed total that improve the the fiscal about our through our We've respect to series we're reductions, this or into in expect $XXX we With through XXXX. transactional revenues, We and of commitment. improvements the our we third we production engine with headcount for realization basis new given non-janitorial the continue comps, user to interfaces to metalworking Second, not rolling businesses. the XXXX also end to price

costs on the million costs for structural our goal up fiscal for we've XXXX Finally, We've $XX takeout the year. takeout. already pace picked full exceeded

up the Looking ahead, even is year. fiscal setting XXXX current than better

continue more the XXX We of as or market will momentum points our making progress IP outgrowth our measured and towards build basis on of goal against index.

continue. pressures the we to margin expect line, On gross inflationary

price stable gross make are into year-over-year. will offset outlook to increases beginning realization, cost by they a their P&L, our While yielding way margin purchase ongoing be

costs the And over benefits has past structural incremental we which of deliver will initiatives, savings of years. plus 'XX, include roughly will the half $XX top to we have that deliver On been second along a additional of from will savings from that benefits will incremental two on 'XX achieved deliver million transformational front, savings, existing the beyond. which initiatives yet the handful in execute, first that with half new and during more projects in that of

quarter. I'll and turned manufacturing in which the incremental a go of the now very as in how positive beginning during XX%. specifics in to end incremental external the portion IP will How we We all backdrop, of far this that upon with high function high at environment price levels. growth of evidence or five to initiatives the again as our share our of With expect how be quarter, get landscape. sentiment the itself such reinvest reading to markets The at a April growth market can we and are readings these turn and savings significantly. Most into we growth of this May improved capture. margins And economic index, above Nonetheless, they will revenue the realization double-digit north much build turned once MBI see.

compared are same assortment, these strong supply pressures. That capabilities inventory chain delays are These outlooks, said, supplier play out. and regional market. availability we're by to product labor broad evidencing our and very industrial the resulting in is and next-day the MSC's up us customers' freight the to are navigate of high we distributors are to positioned All we shortages of make shortages and challenges relationships particularly disruptions. them immune product supported when and At seeing robust. themselves levels, environment, disruptions certainly who real scarcity, multi-brand capture. which that in fact, the share time, inflationary economy XX% this in accelerate very significant and well extreme experiencing And market is well to our delivery position local are our current not

resulting years. producing environment robust Additionally, growing is the and seen that in inflation challenges are supply the in most significant pricing we've chain

Turning now our to performance.

the seeing X lines non-safety adjusted product Slide surge on quarter. during our significant daily sales numbers second levels. see X.X% as non-janitorial average Slide our quarter. XX% we're numbers safety to an quarter sequential in notably, in last of can our X. mid-single-digit and on given growth pandemic sales continued expected, from quarter basis, were Revenues You Sales third declined our reported the and up through for Most as the on declines just the in improvement and improved XX% year, janitorial products, over

double by product all lines, at our the up and customer customers, types were and type janitorial digits. safety moment, a performance our for all excluding, of strong Looking

single-digit in with low company nearly growth declined extremely returned CCSG digits. XX.X%. However, posting grew mid-teens. improved grew comparisons, accounts including a lines by show given customers total while sales all the at to and difficult product improvement continued estimated XX%. National June our core growth and government year-over-year mid-single the increase,

Our surge. growth to safety estimated non-safety are XX% while PPE down XX%, and estimated at and continued be non-janitorial janitorial last roughly against year's is roughly

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

given of a sequential pricing saw the solid that quarter's our increase. rate fiscal realization earlier normal, we activity and On result, seen a seen suppliers we front, of than our March we've is the environment. the last XX.X%. implemented warranted and but lift we've call, second we've as gross a as Since in that quarter adjusted continued from mentioned pricing from result, significant price certainly last margin a price June increase This

if hesitate not suppliers continue move prices. their again will We to raising

couple which just Kristen One during the glove a nitrile numbers, we recovery the Beyond quarter. on the of the will of developments impairment, a had bit. touch positive was in

brings XX% effectiveness roughly meaningful a today. for stake business. helm retains highly that Mullen, I'll industry is progress. stake entire Kansas, was to will the a heavy serving Hurst our of several June. metalworking Hurst sector. a out and who and more the majority of William meaningful the Critical Hurst has which now MSC ways. can based things business. coming it of in been the MSC Hurst a in John platform the distributor to poised underpenetrated a aerospace we geography an led the that enhance growing fills force. acquisition on in Mission the market with out the CEO, highly And turn sales a is leverage growth It's this specialized pandemic, importantly, business. considerably other and financials is was in deal goes Wichita, that cover Aerospace Kristen of our ownership strong to technical our to is in the at The in portion capabilities total MSC remains MSC across focus Company with and and sales in over Hurst It by and technical

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

Our sales third our one quarter. X.X% $XXX third quarter up this day quarter versus the last in same were more selling We had year year. million,

daily Erik XX% our in details our So on quarter, the sales our while an and reiterate average just growth, non-janitorial I'll that sales net gave sales sales some safety grew X.X%. non-safety declined on XX%. and but janitorial basis, increased sales

margins; Moving price mid-year solid. on to execution our increase and gross realization was

up from our from and basis Our QX XX.X%, after margin quarter basis gross adjusting XX out XX last fiscal last sequentially points year. points just was down write-down inventory for

the early in continuing we our ahead, increase Looking summer June inflation to we from in suppliers. are our response seeing took

to of recent $XXX.X million, the a in is the or $XXX.X to third sales expenses year. expect flat XXXX fiscal gross in margin quarter aim for that XX.X% sales XX.X% continue the of were fiscal Operating achieve XXXX. versus million, or and We trending prior with

just Our third I'll loss includes discuss which costs legal with shortly. associated $XXX,XXX quarter recovery, the of

was of the sales, costs, the or same as So OpEx GAAP figure a percent XX.X%. as those excluding

Let me OpEx. details more share few our a third quarter on

the investments that QX roughly compensation only associated As of as the expenses OpEx well expected million. with compensation. $XXX also was last A primarily for on to sales to Mission million as increase our higher I adjusted increase incentive related in expected growth variable operating to we sales million due remainder higher to our second $XX OpEx related Critical. was by mentioned not incentive variable-related but $X call, of quarter, sequentially from increase OpEx. our higher means Recall The

which Mission I'll sequentially, increase this in in an more few was savings, moments. Mission by offset While growth Critical to did in a Critical investments increase speak detail

that pleased in morning, to we As report quarter. announced our original the but That release in it a operating regarding may seen $XX.X our you very have was impairment loss glove line positive month impairment a our XX.X%. in GAAP in such does the GAAP earnings QX. operating million the expense we nitrile is recovery we increase first recorded this million that quarter the the for operating fiscal our of We're received below development had loss recovery P&L, income, $XX.X last margin

Excluding associated basis well operating year. restructuring of the the and loss legal as as $XX.X per points Adjusted XX recovery were $X.XX. from our share during restructuring charges earnings quarter adjusted $X.X $X.XX. and charges, adjusted the down prior per XX.X%, million, was fees loss million recovery as the other GAAP share well as for were earnings margin

ahead balance to and sheet the X. to moving Turning Slide

$XX that per XXX,XXX price about ongoing maximize during the underscores an as million contributors goal balance of were quarter our and $XX Our picked as to also our shareholder inventory allocation free compared total This $X.XX quarter. shares in to I up $X.XX commitment balanced prior accounts stock largest in to year. average significantly to capital we philosophy the or sales and the cash returns. would quarter, in flow receivable our note The increasing at the million was $X third share. repurchased of million a

shares In QX, at $XX.XX. in fact, we average of XXX,XXX price our today fiscal another repurchased an

was please loss comes it that will $XX.X recovery June when be cash flows. our quarter received cash reflected note fiscal million Lastly, in fourth flows, to in and therefore the

levels XXX% fourth in inventory and million quarter. to inventories, we last can actively flow the the net flow by expenditures million, climbing likely $XXX above expect to year sales income support the Therefore, we expect We're accelerating. inventory QX, our continue XXXX. We as are of continue or to capital carrying up $XX we end fiscal As managing levels $XX customers million fiscal fiscal ensure of quarter. operating still cash be of were for still divided of conversion approximately our for cash from

that of end debt under repurchase was ongoing as million, quarter. total of $XXX our of from was to Our used increase reflecting second million shares our quarter a $XX the program. the repurchase two-thirds third share increase Roughly,

million $XX As of was end $XX at $XXX was and cash short-term credit borrowings. quarter. facility, resulting our our equivalent of about for debt; was million revolving borrowings debt of Cash facilities, $XXX our was million long-term on composition fixed were in million, the million under the rate and the $XXX million rate uncommitted fixed net $XXX

now our On of me program with fiscal versus XXXX. X, that fiscal an provide on update Let and Critical is $XXX through to our costs million Mission you of original productivity Slide goals. you see take-out million $XX can XXXX goals

cumulative $XX end our we fiscal $XX $XX third year-to-date another savings bringing and Our of quarter, goal million, our half in against saved to this first the savings year. were 'XX $XX million million the by our for million of of

million bringing full-year million, million. in our total our million $X $X another compares investments and had $XX target 'XX invested to of third which invested $X our to to roughly $XX the year-to-date also in original fiscal of We first we half million quarter,

program achieve Given XXXX quarters, for three the success through of $XX the we million. savings to the fiscal now of roughly first expect

Regarding fiscal roughly for we $XX savings which would total million for 'XX, expect investments result of million, $XX in this now year. net

will respect With me 'XX. safety turn coming in fourth Erik, quarter let some ease janitorial into expectations it over broad and for fiscal to I quarters. the Before difficult the leave and you to with our sales, fiscal comparisons

into and growth continued fiscal We the 'XX. business our quarter fiscal in double-digit for total fourth expect rates strength

margins growth expect achieve For aim digit low gross fiscal we a flat and 'XX. that are we to with single company fiscal 'XX, total

or in margin fiscal framework to achieve to sequentially it see from margins will now to we turn Slide our can mind, which fiscal expenses And mentioned we annual both incremental fiscal and decline third a due as expect XXXX, of we XXXX. our dollars and you in and fourth with quarters, earlier, track adjusted that Erik to sales terms operating adjusted from see lower over XX% incentive for Erik. With sequentially In I'll on 'XX volume-based Furthermore, back expenses, on lower compensation. operating X. higher remain

Kristen. 'XX. on expect continue we high XXXX into is a note you, fiscal finishing Thank Fiscal to and momentum that

We readings. ongoing inflationary our internally strengthening realization markets gaining should continue as by with environment, are steam and price margins. evidenced are IP end along support gross our The to

and On the Mission structural costs savings beyond. will our Critical the deliver front, we've made two strong progress years program on next and further over

for questions. the hard All at dedication. above And all of next of or for margins XX% line two that I now up should years. incremental and their translate thank into team open work we'll our the for

Ladies the your And with question Moll [Operator our at from begin we'll Tommy comes ahead Instructions] first go from session. and today Please gentlemen, this time, question-and-answer Stephens. question.

Thanks morning. Good questions. taking for my

Tommy. Hey,

are Hey, Tommy. you? How

down Doing I'm your great. wrote I and of about one this Erik, getting think comments I right.

one you've environment You years. pricing talked about being of robust this the seen most in

in this that. your fiscal end And quantitatively? this increase two quarter net another benefit, way longer inflationary for neutral So, I How Possible beyond frame of if net like wanted before a out another June what Any platform? play does to in Talked one term in looks the your June. the see year. we'll dig of this environment, out? you play this next the kind increase to us you could or is about on

And the the Tommy, so, capture yes, let -- -- me did macro look, and my think I start environment. accurately. the you with comments

a space for to time, who years that trend. distributors' XX long back for strong or years studying experienced go eras back of you is those XX we've and and have past for If robust our the different periods you been inflation go generally,

price, And gross gross about XXXXs see years, what we've And difference. margin our talked last we've versus in and things; basis generally three margin about of business formula mix. points. fact a somewhere you'd the been it's the basis at that to several the so XX points the there MSC's headwind mix is cost in XX consisting if performance talked a noticeable And you of looked

So inflation a would XX points to were that's think inflation from few low. years, about us low surprisingly of in seen see what basis you've past are may decade. is is price a increases least the that that unusually and unusually low. and scarcity have issues supply to at environment, we basis seen we some extent, Certainly, more Price This I I've awash, been and To strong. from erosion costs of XX we've discussed somewhere the in to coming seen the unusually leading chain -- furious. fast not XXXXs points. than very over suppliers

of us the for right, few moves Typically, to view environment. to take a of that while months, matter two early in us that's a done a we is see Tommy, we response you haven't this as in what positive. in a stages Net-net, and from cycle, You're inflation the that's would outpace it, to some later this would to where inflationary right we outpace costs. expect cycle legs and the price price it around, the but Certainly as has now. costs stages, would that an extent believe in to appears, flip things we're we at can

and tell to as look, yes, zoom be of year. quarter that going out plus But we now, and can growth, build it But we our begin costs ahead some flat you we're look with but positive in 'XX picture. you of flat roughly Yes, costs Tommy, produce to roughly best continue picture roughly do. course, at that quarter. IP a we you we top come talking, start what to to imply if think we're price, gross can in but And would XXXX will flat prior tell happen gross enhance you're internal our now framework think take-out fiscal calling the a flat obviously you this costs we're if line a as sort compelling minus forecast our we we sort will normally a seeing back of margins we're and about, can So next stop further really on take does begin to outpace strong in IP, then giving will mix. step this you best as those and, okay, as and and with it business be years and each of P&L. or say, and with to pudding to margins, say, the And early to in offset a as do that is proof momentum numbers, I'll seeing we have looking

helpful. may on very you've up philosophy in with got the I -- supply I has in Thank that you protect chain provided the question the issues at on follow you, to Erik. some script. That's changed which What appropriate to potential helpful the there? inventory, all mean level comments against. you all wanted want

or to about to put referenced to script changed you. Has you some you to market about manage us work right share. take Thank want your think inventory balance I how do to opportunity know in deploy the sheet how anything mind the now? in inventory with to what you're your thinking about Or that?

is, change no change distributors times. terms with on being this, and capture now if business say over philosophy, times scarcity up the share. And of would MSC. stuff product I shelf, line back, you're you keeping in opportunities create tools of for and tactics in going decades, compelling two Bottom again, this change. in in have growth no of philosophy, the Tommy, But like going really to some and times

we So, what over seeing, the quarter, I past you're seeing you're telegraphed. think in the build inventory big

the up, have customers product running. going the customers continue. at scarcity economy time to we the lines have for be our as keep it on it on all for now when critical, it it's their ramps a to economy is our expect We in industrial that scarce. product shelves back if And We're sure even making We weren't would liked bigger issues. that

a view inventory are to So, sort on it's importance our view is on having capture of going reflection product economy of the and outlook the of share. on we and a in all of the

back. it I'll Erik. turn Thanks,

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

about Ryan what or current Gunning talk you vending customer in percent what is kind actually your your seeing there? and how Could much growth just on, is for and of base initiative filling vending of Hamzah. revenue you're This of

Yes, morning, laser business what share market is focused restoring right And connect back we on Ryan. rates you if capture become sure. are the this had accustomed just to. of that Good recall, to, do now I'll kind

And so put there, we points marker our first basis out 'XX. by XXX plus

of The goalpost getting is our that to fiscal first there quarter if going we And least to of sort XXX then points. you in recall, be there. basis initiatives are us at fourth going outlined get five growth

solutions, which those refer of floor. we all things. us of bringing what in the is it's onto were our to vending. It's closer a aimed plant vendor-managed One us inventory customer embedding and at And implant the solutions. and program, to specifically three It's it's

the vending surprisingly, say We low growth with Ryan, as a pandemic picking we would is COVID has. bounced because rate into down has inability rate, the I is get signings. business the course, back saw, steam. base low in came to of not growth installed signings The what our saw up So, and during a account the of definitely the new new The plants. took of

seeing storming are come We back. it

in are doing those measuring rate, we're size wanted to all happen. dollars see funnel, close we of of So, what funnel,

gotten As gone stronger. years the stronger on, they've and

growth it driver, initiative. this an I would VMI solutions part as with remains important say is implant So along of what

metalworking perspective from competitive Can gears. seeing the growth Got it, that's about terms you're kind talk of just and in a there? what you. then you dynamics helpful. switching Thank markets of guess And I

Yes.

about tightly standpoint, this Ryan, So, -- seeing what from end-market and I think market think coupled. is and a metalworking exposure, you quarter, if we're particularly, they're very our

are half heavy surprisingly, sales And end the little markets the has of recover. not manufacturing into economy start happens. quite end been of the consumption heavy to than saw bulk are five frankly most to markets metalworking that manufacturing that slower deeper tied flip nearly quarter. We where down and in past our Those so a of the went

the some you at you the reading, of IP see And so look a if sub-indices. below take can

We are and the come opportunity manufacturing a starting heavy back that's to we see us. markets think for great

market still neighborhood sitting in sole XX% sitting of of leadership terms the in we're In still metalworking, but share capture, [ph] share.

So, recovery. terms legs ahead us terms share have we in capture. we in this of them we've have end to markets runway of think a got that of big And

investment we're So, are it; a say there's into people. that by our few to that is capture excited I And metalworking would outlook. things what share, powering

investment So, in headcount with up, We're talent. about are doing excited the that's the Millmax combined acquisition. organically you technology joining it see both metalworking MSC quarter through We into initiatives did family. ticking past Hurst really like our it that through We're customers we our costs on matters then, of operation. mentioned way take out shelf people don't, fashion Tommy's the their helping really sort are And when of just others product with of old think that I to the earlier well. question, having really as

what So, all we exciting an outlook. feed of is metalworking into sort of those think

Thank helpful. you super that's much. very Great, all

comes ahead your question. from go Research. next question Cleveland Adam Uhlman from with Our Please

morning. Hi, guys. Good

Hey, Adam.

Adam. Hey,

Adam. morning, Good

in to looks are some attributed I I that there call customer low. price operational and low are of like go but you It offsets understand parse that. to I increase seems there it. from maybe stats, like Hey, maybe could having mix and how discounting. and digits, earlier? Can price, you are can single maybe million which product total we kind back guess And it in apart you June, the there price discussion the $X we And that increase guess clarify mix between March? just put be price increase we mention the were we should you could headwinds that contribution then sounds growth? out tracking through other was like as to offset sales the what this that

Sure.

question, your first which realization. And the Erik what seeing op price is think, and stats, in as to then of mix. about solid. of pleased the We're that X.X% part see has around that with the we is realization, composition growth the to say back mentioned, price assigned second you thing metric on I going in what growth both we're So first is touched I'd

PPE that metric. in business. a good what's Normally, the and at QX the look second metric in indicator half your growth how impacting business. it's the think to very QX not happening in large of for you about combination had are of second meaningful point, year a is this the if think But it we that's volume 'XX, price of about in to making the that base, that So of a pretty it's how price could really is amount you half things so in in

of see term. kind that's near So, what you

at what's zoom you out happening, we to from if think QX QX. you look and I margins grow sequentially, did

that something seeing that on typically Erik touched 'XX indicator the we same margins that, an offsetting, then had traditional to not mean, thing again coming costs we're into headwind that the seeing in like mix that's see expected to which And the we're on, XXXX. the coming in expecting the So, flat beyond 'XX, numbers. about and down see benefits price P&L that and we in business. to we I the the business we're through do see is

you And I savings changed you the appetite couple expect thoughts the Thanks, on million those reinvestment of got And some those Okay, years. all Could $XX remaining next buckets bigger gross Mission mention Critical, program that helpful. there's for of your so to then for you. have come then from? of of your over that's at guess, savings the savings? you

Yes.

areas got -- across the working for the on programs the few So following we've program -- of that 'XX and two program years all P&L. 'XX, for got are we've the

I you business longer-term did side if of the you transformational that about around sales execute think a kind have saw in probably lot sort bit of We that the we us us work see of work operation pivoting projects more little like side to of 'XX. think of the business. us bigger ahead of the to a the you'll execute, we're -- the

looking us fiscal the for at and that in program 'XX. be is kind sales of half beginning which things kind reinvestment, published to margin the give projects then want towards execute when But transformational those you growth of incremental the on happened there'll some of next to particular, There So, XX%. on that? committed with online going you is of we In beyond. then we're a and in things and every And of guys the guidance of saw going operations the P&L. framework. right firmer delivering that bias than from the 'XX the touches are greater of the deliver part that Will in 'XX, that transformational I'll or restructuring of really of that sales work. what 'XX we second carry us lot to 'XX terms to bring in that a really over are the of particularly benefits, kind now we're projects pipeline and And one on position projects quarter on the of when side small

to on north incremental accordingly schedule we that probably we'll investment for that and assumptions we're XX% the of other adjust our committed to on based So, 'XX 'XX. delivering sure make fiscal

thanks. Okay,

Welcome.

Our question David with ahead Please question. Baird. next your comes from go Manthey from

Hi. everyone. Good morning,

Dave. Hey,

the environment, solid the it price expectation the on we off, like of we sounds Kristen, And single your digits discussion you price from light that the in mix the path coming had alone in increase. reading there March that First the in quarter? should the be addition even current mix, June with inflationary be might increase or on low glide for realization increase, mid-single price end new set digits higher in in of to realization your aside, if on

on QX from are passed digits to lower All to us say roll single the Dave. reasonable P&L. expectation, a I'd the costs. starting I suppliers to No, the on what's And starting is seeing inflation happen too to think is in we're

bit of been we we've still really generally, cover been to So pleased able it's price the the little costs flat But forward the and might look to have full see last cost mix, offset when year. the spread hoping that the quarter. we keep a margins dampening for

you're I seeing But realization price ballpark? digits. your side, that which based talk good specifically. might on about the and costs like Okay. higher been realization, like sounds mix Is to you've the imply comments, single little low it your from know price than about about if always sounds a forgetting bit hesitant realizations in it forgetting

seeing our online as yes. are come We expected, realization

Okay, fair enough.

distorted just surge, the component metric, PPE mix to last public compared that, in of will itself she And mentioned, That two. metric the the what color or mentioned. correct to typically Dave, that's Kristen it so of quarter normal year, is the time. on Because in metric that as so the put is

you our outcomes. XX As which of at they're in have looking said, And would has in more team yes, pricing inside expected imagine, Sunday could we as terms metrics. Kristen as the company, until ways price realization micro seeing, we're just just

seems like re-accelerated. the good. and has e-commerce second, front, the metric momentum sounds since on that during And it pandemic lost Okay,

of over in the us XX-months, you out think, anything, does about we e-commerce. as XX% trailing downturn trends if that I come What business, back the are tell the here?

Dave. Yes,

is up that think because investments as mentioned directed I revenues. of a the digital. total big the imagine, portion And another of part e-procurement buckets. going large through covers buckets accounts, sort Under of over of to mscdirect.com. is expect machine, as vending of considerably -- important I vending, underneath dynamics back. pandemic grow And business that vending now percentage you to Over what e-commerce, right other take certainly, like things sort mscdirect.com just makes flowing was there would there the on investments includes XX% a and a the level. to half of so of mentioned can during XX% like with to I dropped chunk. there earlier, So, mixed that's which now is obviously, the that The climbing the sort time are Most into I understand

for retention, at time sort think grow going at And look I'm of be the be is to experience quality at evaluate you, to looking mscdirect.com. way of it and order size then, going average of to what will some looking over I'm XX% at us, seeing be the yes, micro it. the For measures. I on the and

Great. Erik. Thanks,

comes Blair. William Please with your Our question ahead next question. go Merkel from Ryan from

this Nice everyone. gross on Hey, margins quarter. job

Hey, Ryan.

Ryan. Hey, you. Thank

question in fiscal fourth first leverage we the I should expect So in is strong leverage. leverage SG&A But SG&A know 'XX. my expect you on quarter?

Yes.

So fiscal down going on were in also -- excuse normalization see fourth sequentially, the compensation. that quarter relative the is to of going And come to the QX, to in sales a bit bit sales where decline -- we're incentive a me, then we're come of sales. going in a little we to with Ryan,

rate So, and in lower given coming of to we then end a framework. that. the will on I'd labor will think environment. year, in creep leverage Really, about single we better with also land say, and sold into increases, where in that, kind confident talked on see a QX, for favorable what's of side, inflation, that SG&A land QX seeing start coming the the revenues things around feeling business we're we the given happening digit probably of what OpEx going more cost inside low like happening inflationary lot like but see some we've the kind the things of goods on wage inflation, to that costs

All right.

will So and it will improve SG&A XXXX, right? like sounds improve in then more so in leverage XQ that is it

Correct.

hopeful if get inning then, that average growth view can I'm level? not your And Okay. I we're you're number. and accelerate nice sales my June the in what recovery was daily June second question. sales of but macro on know the then to a from guidance, growth, giving

we look, are Ryan, I perspective, our from encouraged. think So

at pretty how macro I of but by relative here. We I we bigger we're and here, June doing Obviously, that PPE looking but a one company to had think quarter also to the of IP? is sort of think, starting me, good I momentum a see for encouraged in for are data seeing story progress. QX. goes sort We're for point. am sort micro, noise is the meaning And

slanted to In where we're heavy macro manufacturing, later have Ryan, recovery, which from hit again, stage. at a we're the heavily a terms fairly of exposed coming view been hard

we're in your of supply proof labor industrial And recovery point nice go, think speed like on is to here. with growth a there is We're that feel right as of question this early about year internally. where constraints think certain We We innings. still we're chain and there same our terms feel have there now, spread we still and So, high there innings we early then, an economy the here, no with bump in a think is question, But the end and plenty innings. like kind too. IP But share early hitting track. the customers set anyway. I capture answer we're impacting economy sites right kind markets room particularly has we and ways the we to of above a been feel in of think

Erik. good, Sounds Thanks.

Ryan. Thanks,

ahead comes question. question go your next Fargo. Wells McGinn Please Michael Our with from from

Hey, everyone. Good quarter.

Hey, Mike.

you to more -- us recent to is hoping about a yourself? acquisition. portfolio hi. a aerospace was the management a more color percentage a hoping I I cap for from round point what can there get on frame little of your there an today? was Is -- Is little standpoint color get business ever like, you think where you

sitting on at we're I'll to us. what so Mike, around touch Hurst -- and brings

of reasons. revenues. XX% it fit a a terms is MSC's MSC number market think in a So of an for good that aerospace, roughly We for really end of

foremost metalworking, experts, like using and portfolio, metalworking etcetera. product productivity our our the our First MillMax, which, for of we metalworking can really technology customers' move needle

we fit. So, think good a it's

recovery. really it, We a of to problem. of think on us really back market. has high-class a will is technical obviously Hurst at think penetrating and we aerospace be like team been excites focused. capping has what in grow terms We because way that and the ways we to really long timing some point, In And is really in its a very that have go the there

out customer to And penetration. broader not which a metalworking bringing to capability, they're organically his we something that just But think capabilities they're team, and can and a customers build have that across their cross-sell we increase base, the aerospace that's leverage MSC's but in John don't for into So, think team we metalworking business, the in bringing our is specific expanding something, for we aerospace. some focus sense, sure. really

to So, and at line to we be have high-class it, with go of front in we'll is long runway us got we've but bottom ways see a aerospace position. to -- there. in some cap a point, I see try we the

margins. gross in flat earnings mentioning, can if we call then, the going algorithm get back you Got it. outlaid And the to earlier

of to local to we to account? in customer and the in normal runway terms terms margin how rebates up much that, of catching Just back get that do of have gross terms in core national

put terms growing of accounts, faster, you basis still somewhere headwind the etcetera. the three costs. lot all has And when labor Net-net, points of P&L, price, moving basis see Mix in than years, product moves tough are product as XX continues stages couple of parts continues, mix XX bps give in margin to mix. the you the sort over long into of while To cycle apart around. mentioned or a components you etcetera, to a XX end Mike, a in So But faster, scarcity, the think cost cost say, Mike. let here's the that costs There's of number. more a measures, we a is, it bps it and scarcity so from see now XX inflation we past given us What the and say can do of all which that price. you to year. what said creep buckets: customers, still we a an you're few lot less price early points lines of price That that coming what stay a is by outpacing feel hearing it's we put negative me would national to into wash of I'd we and ahead mix. going It mix see markets are -- parts, in And as break have is in does and gross think wash, and And wash. size the cycle. moving extent growing inflation we we're you are it like mix. precise etcetera, with the still to per to brings somewhere I which

sort but and flat to wash. instance, mix get outpacing we of to way get we -- a headwind, yes, being way 'XX, the and for take is thus price some the So costs

Got you. Thank it. the time. Appreciate

Bank. Marek your go ahead from Please next Kevin Deutsche comes question question. Our with from

Thanks questions. Hi, taking good for my morning.

Good morning.

morning. Good

labor, more give could supply been asked, What A wondering constraints. you product are kind your and of of terms customers that? things lot for how availability? gotten I managing if or has have the Maybe chain seeing are better color you some in and for worse you guess. you And of on some

Yes, Kevin.

marketplace, think acute, I'll -- broad the sort talk is over about would and the is pinch. talk include me not particular, would it's the this of talking have labor. I Everybody that customer become say in supply point, And access I means really, feeling constraining growth. I'm the to more to at one what about let that is white less. past just hot quarter, issues And supplier. which So chain is, that

MSC. long-term who like inability I think to this distributors and is to to produce an the suppliers thing stuff bump, the prognosis are exciting our hire for a shift stuff is, to extent needed outlook really means the speed But it is people good. what

keep our the out order For massive up and door. product much are it's the can't same. and get customers, can't they they Their backlogs

I think we positioned to this. Kevin, really our think from well we're standpoint, navigate

it who all, how it of [ph]? And should be it long knows takes But should be -- be temporary. believe should First to it temporary.

positioned. local made are Number the we're is them. are. they distributors well gaining think facing facing from of to suppliers. We're to we're product. one is up facing, in be remember that our higher is, like issues market we XX% inventory struggle levels would we really who issues than we mentioned The access we whatever even and second But our whatever are of thing facing we And

opportunity. we scarcities thing is of is I'd the there what fueling then is share tremendous second fueling is capture and constraints the say fueling -- take And all the then are inflation, ability that market think these price. So, that to is a

the to we're really be at So, is and outlook positioned think this. We top. labor to acute we navigate well are issues the But think the good. absolutely, clear, is

that time $XXX that wondering make there feel to thank I'm for planning you. Critical on you of it of of scope than round through or the chunk executing Is to to you anticipated? if more. didn't pursue? to Maybe kind by $XX things other above be one Mission of that Getting a back fiscal really originally are just it, That's you Critical you other to, initiatives now million some have we faster ability are like the get helpful. maybe 'XX commentary. the there Mission the Got may first million, given

Yes.

And we're we that the higher 'XX we're ongoing things we driving that idea kind costs think fence culture business, changing of definitely XXXX. to doing as time what of $XXX out optimistic part about of make I between now. clearly of right to But is MSC this range really communicate of that after one an We're an company talked at these million year. what the a that's -- possible. end ongoing year million of Critical the internally is lot of the Mission $XX the does here and

do So, have of a long we projects. pipeline

things, that. us you've forward are is through got some I some hit we in some execute think it's But pull and the always the things that to in that go possible, 'XX 'XX see projects we 'XX that big one shuffle timing And to thinking that you're things to on of could of provide help and going then carry over recharge for above on the We're potential will beyond. new us projects in really reload kind things. transformational 'XX. smaller going

to or $XX big greater that to the now. $XXX originally a million that maybe we we extent to are transformational going contemplating, bring to million above on extent range would the those that So things than be path right faster could

appreciate Thanks I it, a Got understood. it. lot.

Welcome.

Morgan. ahead And from J.P. question Baumann go comes question. Please Patrick with today our from final your

is it your phone mute? on is possible Patrick,

Hello.

that. you about Can Sorry hear now? me

Patrick, yes.

Hey, Patrick.

on Apologize in something I to in you're this at versus and transformational guess, industry or what is more basic website wondering on benchmark that. -- doing the Direct talk way could some was Erik, this mute. you this would interact? it capabilities, just for this the you about how kind MSC is And upgrades you It then the is website why the more front, yourself leaders like of point? if

want just Critical. me and cultural said you Kristen about something context on up a it would that constantly raising And and of name commercial because I The inside across about costs, happening to in your a Critical Mission what underscore was of across company what the thing becoming everywhere the you way answer Patrick, is ourselves. happening in our life Kristen Mission and bar structural kind relation organization, asked the change I it was e-commerce in in the on question And happening company. across So marketing, bring described e-commerce. to I'll it. I say this like same was

customers. the better a is raising the millennial and How the How raising is on customer. So, the and is investments I And we workforce bar with industry peers of the a their tell us of benchmark lives their inside bar the for what's think this capabilities. for for Star can -- on have changes make But made North total I we happening being you younger to that's certainly, as outside here ourselves and doing we're percentage ourselves. better? expectations Like, influence these growing about workforce? we driving

experience talking whole happen search with constantly changes where about moving call and changing can overnight an certainly stack upgraded that is use. So, upgrades. we powered what of more cloud-based, the and allows means that engines, logic it our as doing to opposed digital needing improve. really customer we're like And do somewhere between capabilities capture technology is, I'd website, intelligence our to we to We're using that our transformation what the AI

is I and for friction out some a And experience a flat So, customer. around this of creating just customer some experience better experience, technology. around of the then, think it is and reducing stickier

what's So, going really It will that's happen. on.

things will into this That So, we're beginning to market in quarter. put continue.

'XX will performance. the out ourselves first bang the into way. customers. of watching of we launch obviously, iterations on idea for our quarters carefully It couple all the goes think for we of won't So, sort be the But and of big what of bar back I to along raising to be and continue this expect we'll

maybe? Is be it some you do sounds the some got [ph] of to progress? -- voice it kind metrics. to like of use There's customer What track

visit, What don't mentioned visit? use? is do per it You know. site metrics, stickiness. it it Like, is sales I is you revenue

Yes.

managing unique strong couple where So things one team. digital implemented a whole are a upgraded of things they're of of that really we've the group. And they've It's one bunch the order weekly meaning of and A business funnel, top process, them to number new a value, is the our metrics. through and review conversion to you've mentioned, of funnel looking at average the site whether whether points that's that's the the that's bottom the all coming from the along of of visits, whether people funnel. ordering

So, adjusting by see there of bunch they're metrics. are a way They another, And meeting is they when weekly. metrics one or literally, weeks. move

So if if see real-time. be it's root they cause doubling of getting making to down negative going it, to a rate then adjustments and sort on trend

on So, happening a that's basis. weekly

on Maybe Great. Kristen one Helpful really for color, Erik. follow-up A quick. OpEx.

sequentially comp Any savings what into sequential freight And costs? any you're as net in update flight? the in about have You also the in end? then programs variable you Do the seeing mentioned also quarter. what various from on fourth P&L incentives that expect year there going you positive

Sure.

be in net any So seeing side, a Critical, really then is the out how our investments we no were of year Freight that due will sequentially, half story freight And sequentially. on from customers for basis. a on product. second year-over-year taking It Mission has and flat that more a on the customers impact with do not the a us savings saw basis. lower really bit headwinds. the for of sequentially, more that possession where were to we to And freight 'XX PPE last to of rates shipping

from freight it's in. relatively $X what freight $X coming we is that given so we in So, contracts, It's we million of see -- macro shipments basis with our controlled to But bit well know LTL little lot bound year. We of impact. good more do creep our what a inflation position. think on an to are of in how pretty a in could macro in small fourth is shipment happening we are Sequentially, of happening maybe the well But that and a the environment, terms for a feel pretty million year-over-year environment. I by parcel given the pressure the seeing a from like freight pay bit we're not be what's expect next quarter.

Thanks. time Thanks and the best a helpful of Great, appreciate color. Really lot. luck.

you. Thank

Patrick. you, Thank

any Chironna remarks. ladies And to session. closing back the that, and floor to John gentlemen, like now with conclude we'll turn question-and-answer for today's over I'd

Jamie. you, Thank

fourth call, XX, hope October fun, date today. you a And full-year reminder and the like healthy that for Before to enjoy I'd set everyone. Take quarter quick our XXXX summer. is care, us we a earnings end now safe XXXX. fiscal and thank, certainly we joining for everyone,

the and ladies do concluded. call conference attending We today's And presentation. gentlemen, has thank for that, you now with

your lines. disconnect now may You