MSC Industrial Direct (MSM) 25 Oct 232023 Q4 Earnings call transcript

Good day, and welcome to the MSC Industrial Supply Fiscal 2023 Fourth Quarter and Full Year Conference Call. [Operator Instructions] Please note today's event is being recorded. I would now like to turn the conference over to Ryan Mills, Head of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to our fourth quarter Fiscal 2023 and full year earnings call. Executive both Kristen me on Chief Financial our today. our are Officer, the Gershwind, Officer; Actis-Grande, and Chief Erik call with

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

Slide harbor reference a summary on our is presentation. accompanying safe statement, X me the Let which of of

earnings supplemental U.S. information and call to statements. press differ website, involve this our uncertainties other as by These the on results within well on forward-looking risks these cause are comments Information the anticipated that we actual materially as about contain from our the Our providing is release SEC meaning could and filings. securities statements those statements these forward-looking in of noted risks the laws.

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

mission-critical the Good by playbook. everyone, I'll are going Ryan. X-year reflect of on performance then thanks by XXXX we're us for where chapter pivot where outlining recapping joining achievements. On you, MSC's Thank morning, our and we today's and to today. call, I'll next our mission-critical fiscal

performance initial for wrap and line outlook. on up fiscal provide we'll specifics for I'll color provide our our things Kristen environment on expectations financial will quarter open I'll the then XXXX. up, the and Finally, current questions. fiscal fourth more and

and thank we in our was our investment Gershwind to governance to the by majority and annual more a and the performance, shareholders outstanding, of of for dig certain enhances our simple makes elimination agreement attractive of for by month, continued of and transitions dual-class corporate their broadens into X/X to practices favor I support. as not This voted share voting completion announced heavily our MSC contested the Before power, investors, is standard majority reclassification election Earlier shares this it shareholders that share a like our Jacobson transactions election I'd our limiting replaces scope any for our a significant potential directors with XX% voting voting of us standard. rule shares structure. family's a

short another member the independent we'll order. underway Additionally, board with in add process selection getting

dilution Kristen move remains it our later from offset and to recent intention detail. that the will more our transaction to now Lastly, discuss in results. on on I'll

out looking points Zooming average compared on trend quarter in see index of X, fiscal and X, flat growth year-over-year basis the of the daily Slide from X,XXX our we IP outpacing index. sales XX.X%, we the to achieved at daily Average improved can Slide was you the X.X% fiscal for meaningfully over growth our which index. on IP continue year IP XXXX quarter. fourth As the above sales

with history. milestone $X the in nice time annual first a billion achieved we company sales result, a As exceeding for

to year. fiscal Moving profitability for the

effect Our customer sector gross to in mix related and down XXX XX% year-over-year, public largely the by particular, driven basis purchases. margin of points was outsized acquisitions, the headwinds of large

on by Slide points, our leverage, few a basis XX expense X basis points decline However, an minutes was only was XX basis, operating mission-critical year-over-year. I'll operating now of our XX.X% strong execution to due of the illustrating margin successful on which spend priorities. adjusted XX.X% respectively, and a and

three, numbers, performance here, rate across X annual selling product to Of categories. This what primarily includes a on basis. the or in a Solidify we CAGR. we X% which MillMax portfolio, through our you metalworking and which two, or the commonly program a our Class X-year and momentum of implants. wallet produced mission-critical technologies position, capabilities sales towards as adding new by related double-digit adjacent as many growth consumable roughly services; product Metalworking strengthened share of growth leverage regrinding One, sales, showcased CAGR focused X-year and note, our X-year QX growth recall, strengths MSC was of sustained portfolio C increasing recent And as our geared on Class consumable Metalworking. beyond tool on our fiscal And As continued on based vending we CAGR X%. such product each solutions, improved I trend; was refer expand initiatives. C compound roughly which

base grown a roughly over X-year of installed strong XX%. X-year vending implant has CAGR, produced CAGR while a XX% Our sales

As a in implant signing fourth third maintained quarterly during quarter strong fiscal achieved signings our a the reminder, record and we quarter. rate

enabled a strong remain on target. And was digital our pleased targets $XXX roughly sales Looking quarters. and four, X. X-year also even orders we period, period. sector our prior high at average despite X-year above a points strong meet plenty e-commerce. E-commerce and exceeding growth over both the this ahead particular solutions; our strong X roughly basis point be with on cost grew allowing CAGR forward, over return savings, capital. trend we growth X% of million over across starting and greater of expect of the our on drove invested sales sales that improved XX% signings to like point CAGR, a and see the to focus X% X,XXX-plus COVID-XX-driven a Fiscal public XX.X%. adjusted Slide our XXX continued meet returns, our on our program, IP includes sales is 'XX over which for the basis case core I'm goal us improvement. in compound Progress to room was helped efforts. of with focus end with diversified in due large XX% of expense high-teens daily the found the performance in growth moment. program. XXX customers, of growth can ROIC X.X% This with driven basis markets all fiscal This the which particular as long-term occurred sector associated point our target the of XXX all or of produce public a their Execution in I'd in with a at percentage a 'XX thank associates And the customers a on came to in us operating for initiatives 'XX exceed in for to of on X-year the touch I'll and Public of which without was execution by Five, than sector. over mission-critical and especially demand. Recent reduction index particularly to sector fiscal public a

and However, here, to We MSC we're heights. not to continuously take aspire satisfied. stopping not improve to new and we're

X let's journey in with next in So is on anchored now to our more that, which at direction describe Slide for X chapter a move detail. in mission-critical look I'll heading. The we're pillars, the

Our first pillar existing program. the I will on be impact includes drivers described. X momentum of this to And maximizing the growth just our maintain that large account

up scaling significant meaningful in their rate the account potential Over to a X new latent built 'XX, these represents past signings years, including significant run full backlog wins fiscal implant growth. agreements large revenue of we've

couple growth and to Our elements to of a add new second further our to pillar will equation our significant be performance.

growth. reenergize First, we will customer core

In larger IP customer. through customers of from words, were focused our years, penetration X customer our services. we past on growth growth part generating base, without the the initiatives our other the high-touch outperformance most largest target of Over outperformed over of core

gross improving customer, the an calls next product functions, in effort mission-critical chapter improve order core in it our effectiveness, our pricing e-commerce in investments will discovery a critical of we growth than this our think company investing average. only our acceleration for serve happen. We're platform that higher and margins core are and this make margin customers marketing growth we're tailwind capabilities upgrading will also digital making that formula, several to Not Our associated improve are we're because AI-based and as do to effectiveness. but with

focus we'll Fasteners. on our OEM Second, increase

a now to and fasteners We have businesses form X strong that foundation AIS build in solid from. tower

was and out developed that CCSG. blueprint proven cross-selling a with have We

are will business. significant potential so to the revenues, And we OEM company take though and of space. And we apply well X% OEM it scale to see currently that the sales blueprint Fastener under

begin 'XX in to and expect and the 'XX benefits proven see our implementing fiscal accrue fiscal will process throughout beyond. We

Our percentage of a third expenses pillar and will sales be to operating drive productivity ROIC. as improvements continue that increasing reducing

by During capitalizing and further sales branch we on the such expense the points years, room fruit, across productivity over as built of plenty past X momentum developing our mindset by low-hanging operating company. We bold improvement. adjusted We basis reshaping footprint. XXX see for by moves, some making ratio a reduced to

new several next these And so accomplish chapter our incorporates pillar of third improvements. the of to initiatives mission-critical

recent product chain supplier supply order-to-cash network improve line advanced and freight We before. a with not momentum attack performance will areas build improve more. We'll procure-to-pay will that way to we and done and investments leverage and we've such to in in and reviews processes on our as continuously mix profitability, optimized and efficiency, manage analytics in category portfolios, performance.

such receivable. and our working expenses as upgrade accounts and value and digital will operating reengineer We order capital, in unlock inventory streams to in core systems and procure-to-pay order-to-cash our in productivity both

beyond fiscal setup Looking an we see unfolding. 'XX, exciting

mid-teens ground longer environment achieve the This fourth initiatives, index earnings path on our above term. described and case the trends. On which in ROIC these target the margins the yields more macro was turn incremental immediate margins the the points our and range the and I'll new IP largely in and XXX more quarter. call, or As over of I XX% discuss near-term operating we adjusted current now leveling, last tone clear one we the as to cycle. the the through growth to of leverage basis XX% over a fiscal

our our sector in no at of was the in purchases deceleration daily the expected there. sales capital A a portion so this end as QX public experienced we of However, wound surprise average September. down

of softening. trend with and consumers However, effects this IP given fears. companies and of softening beyond The and sentiment news rates and macro step-down surprising is results sustained went the not survey as readings, was deal indicative higher the recessionary also further sequential interest

that our suggests acutely the September team strikes. were UAW of we by in However, the more reach sales and Conversations October extended impacted with

of While exposure, service flow on and is a sequential X% machine of clamping sequential We in into year reports sales X.X% business. This basis. we down this or that have led our September shops, shops daily a rest what headwind indirect including early QX markets our for spend steady production. some since to when of auto-related happened We've average down this evidence prior of see end a from over on temporary is job and in exposure, of received customers down industry. breaks our considerably the accounting magnified the auto many larger than direct step sales growing taking whom in

the widened, has sequential we're to strikes as automotive from September estimate strike the year, a which these estimating of net challenges over with reach October levels. first and we September continue to the sales average expect the of to headwinds the And October, our We our X% performance through in halfway are X% flat up daily UAW implies range. month, result, and low fiscal throughout these single-digit to impact Looking be temporary. to while on roughly prior quarter, sales October fiscal be

during it to distributors history fact, the the make for from of presents that restore. us there's us degree meantime, when share with to times market. up of who customers, the In our back bounce market opportunity extended majority local normal often softness conditions some a an take tells In

acknowledge things the entire turn to of to like I team. Kristen, Before efforts I'd our

first company our agility. sharpened and During inside improved the our the intensity of chapter, our increased focus, mission-critical we

those been would 'XX fiscal we in in lower like, the of are team revenue with response. than came I've has All pleased of on We now. right with the out how gates but display growth rallied

moving aggressively believe power allow environment. to through to share We that a market will are us softer we capture

signings the recent over in Vending signings and up momentum. are XX% instance, Class For were also up C prior business year which September, VMI were maintained month to signings, our largely attributable of Implant XX%.

already profitable margin accelerate returns. gross growth prospects most profitability, to on product discounting These as signings near-term up. All that disciplines to future With flight were stood of respect look partners. focus our and in we've well moving taken bodes include get and initiatives supplier a for several mix these this to

improvement productivity also On the all associates and are front, and plus X,XXX to our across swiftly We're reduce spending of that mindset a to headcount. we've company, moved the continual on discretionary identify act empowered such moderate embedding expense improvements.

of navigate will Kristen. environment things strengthen the actions our through growth. I'll All drive previously and discussed these ability now profitable over to turn to

the fiscal adjusted where X, morning, see basis. to metrics key Slide Thank on quarter and you, Erik, a fourth good Please and reported you turn everyone. for can both

Digging our strong our again call, cash generation. Fiscal public to of due Before the that initiatives quarter. $X.XXX quarter, was I of the fall small orders fourth greater-than-expected momentum below resulted was details normal X.X% share continued contract particularly public sector purchase growth third quarter partially in from this capital win into and sector This strong performance, margins. quarter across our fourth during dive into improved results the billion gains sales year-over-year. discussed quarter for growth

public was improvement modest more year-over-year we days. X we average year a growth experienced type, by sales Index accounts and benefit respectively. mid-single by an basis, selling by average approximately basis benefits Our low driven of digits, Industrial trend volume On points, growth, over X.X% core single actions offset basis, national sales increased XXX year-over-year basis from customers digits and and while prior fewer XX% on continued as XXX the customer significant to continuing lap sector acquisitions, a outpace daily pricing the partially of growth. By point above-market and year-over-year improved Production daily

our continued differentiators, best-in-class us Looking growth through at in slightly with vending positioned spindle and vending, needs the growth. In further improved outsized our places high to customer driven XXX-plus experts, year-over-year. continued levels. These sales value favorable ability daily signings remained XX% of implant the and by approximately expertise, offerings, the our at the customers QX breadth Within North manufacturing. product of year. and shortage with lens metalworking, company progress. high-growth represented and provide we prior year-over-year has sales address labor X% growth quarter's seeing roughly watermark competitive savings drivers, with total through our technical than XX% and last sales, continue skilled and service well with making customers experiencing we we net strong mission-critical rate end of Implant combined our and at and markets America penetrate strong In our metalworking share capturing modestly to levels line associated average a in sales improved more below

the As a points XXX portion have of roughly of these higher would XX%, for implant that sales year-over-year. sales, It's net worth percentage an both to revenue, that growth. to channels. e-commerce, public the sector down sales XX% of was experienced growth of total total total year-over-year of net basis represented public company improved excluding growth slightly different noting transacts revenue we outsized solutions mid-single-digit due improvement company sector In accounted but year-over-year. Sequentially, related company a through largely outsized

mentioning consumables, we improvement year-over-year. It's which was to including expect as XX% even sector that e-commerce through rolling teens. is basis Progress Class our we our growth capabilities, of of of representing public continued excess initiative forward, progress the growth low in and was Looking of growth on in C sales, north sales we continued in particularly wallet, small capital the worth XXX sector XX%. X is increase strong initiatives, of search points making purchases, enhanced XX%, mscdirect.com improvement the an functions. Across selling with diversification portfolio our primarily other improved out public start ADS also which in our navigation excluding share

Lastly, and chapter we programs. mentioned, our completed as Erik of the first successfully mission-critical

However, to XXXX momentum this we in expect maintain and fiscal beyond.

will currently the on. that temporary impacts Looking we speak face I'll ahead, from help market this us to later mitigate challenges

to profitability the on for quarter. Moving

XXX basis typical which XXX to in XX.X% points contract point sector sold of sector decline with public primarily by headwind year-over-year. margin was was the down public gross basis the year-over-year largely was driven discussed specific Our margins. below due previously a win, association products The mix

have 'XX. impact these fiscal in expect margin don't sales we meaningful forward, a to lower Looking

combination the driven cost working by benefits the higher drag expected, was larger inventories pricing on As more modest and through margins P&L. this a of quarter price/cost

reduction combined of rebates operating million, XX.X% operating However, approximately slight expenses was revenue as year-over-year. in operating benefits XX adjustments. Reported operating adjusted expense decline $X cost as expense in and completely due year-over-year. adjusted this other a basis were of other offset decrease were and of sales. quarter represents the $XXX to approximately adjusted basis, by This points in to The less was $X.X a an selling of items million a million sold week one of $XXX such up percentage year-over-year On expenses million. primarily goods of

by in expenses variable level difference was in by point volume, the sales. We which we programming lower driven basis as was primarily to $XXX compared in versus $X.XX a and of health share year from prior target. Reported was the adjusted adjusted have million, QX. year-over-year margin an X-year in would stated points elevated selling increased prior gross XX.X% partially increased days, in the operating of basis $X.XX offset driven decline prior business basis, investment GAAP savings total On tied Excluding the in increase was basis, line point prior operating remain higher expenses $X.XX XX.X% slightly a of XX.X% approximately bringing by adjusted declined expense with well This with to The to to in digital operating costs, of at experienced On margins costs, million basis the the partial the to above year was year-over-year. This operating as expenses reduction period. margin labor per $X freight savings fiscal improvement and percent in compared our XX XXX $X.XX an period. the care as EPS XXX expectations compared offset was primarily adjusted year. earnings year. reported mission-critical

balance Slide sheet XX performance. and to our to review Turning flow cash

a approximately sheet debt representing of EBITDA. net with to healthy continue balance $XXX X.XXx We million, maintain

credit million currently $XXX have on position available and million on with liquidity strong $XX a cash revolving our approximately facility. hand We of

cash the our dilution to share to allocation and will I capital both our speak strength support and reclassification, offset balance strongly flow from forward, which strategy sheet near-term Looking intentions momentarily. generation

had full flow the $XX increase operating approximately expenditures $XX quarter for we the of year. $XXX quarter generation Additionally, and full totaled million $XXX full the generation the XXX% year, than of year-over-year. million Together, target. greater XXX% an free for approximately year, this of flow well XXX% in million strong million cash strong during resulted Capital for cash the our above and during over

capital Slide XX. allocation Moving to our priorities on

to room strategic deprioritize optionality. dividends for significant decision special Our creates

likely will on opportunities this M&A deployment investment both geared forward, towards Looking shareholders. organic further and to be

target modest dividend, seen increase. relates to will recent we increases as it As consistent the and by X% ordinary the

remain capital allocation mentioned, pecking As in our strategy. repurchases order previously I share of the will

our approximately leaving offset shares an detailed expectations for fourth million reclassification to million. intentions We approximately on The XX. for buybacks was XX, remaining share repurchased approximately the Given purposes and modeling offset dilution from of during reclassification. shares dilution. from fully current fiscal our the in additional in shares Slide XXX,XXX of 'XX as the to $X.X October We quarter the quarter XXX,XXX X.X dilution

to repurchase expect As the a remaining 'XX by shares year-end. reminder, we fiscal

Looking we approximately we offset forward, look dilution. current buyback shares to authorization. will annual stock-based have X.X minimum, compensation after remaining will completing initiative, at our And this a million on

our sales. we basis to flat up XX, outlook year-over-year expect improve normalized X%. This to approximately sales to nonrepeating average pricing our headwind an approximately point the Slide sales within year-over-year. daily a on assumptions more include initial with midpoint XXXX outlook from XXX of moving benefits Now sector fiscal Underlying public at range includes X.X%

UAW roughly index before our begin As XQ the flat, current remains to in to to related IP recent year-end. or fiscal that strike with relates calendar and outlook challenges, market the will alleviate the headwinds early it readings consistent assumes

year. business the Lastly, reminder, the amount days of as year-over-year throughout fiscal same we have a

year-over-year. of volume challenging range in in sales to XX% or basis price operating we This fiscal reflects be lower to XX to the down more the half XX up and expectations first year. margins outlook, the expect cost XX.X% Within points adjusted the of

costs of XX as gross of in $XX margin million, non-repeating full headwind to point year-over-year. a underlying portion of for for computing margin and of million of cost largely $XX assumptions expected mix points in to including are a This in and year-over-year. XX combined capabilities to year, the $XXX and public to gross rate XX.X%. growth we implementation and $XXX from offset to in other investments However, full slightly basis amortization CapEx, effect factors roughly to include an the digital made for expected sales. The these category increase gross Depreciation well million million to as million $XX $XX expect arrangements benefit flat interest negative through a XX% being a with between reflects technologies XX other review countermeasures margin items range sector of good vending. Other fall cloud these to savings, tax the million, are line expense and continued and basis margin year result the the representing down

Additionally, provide and cadence a be experienced which primarily be in low small cash than sequential to compared improvements non-repeating expected continue respect we is isn't for purchases. fiscal greater we as basis, case capital generation the detail as an to related headwind XQ rate additional historically well to now market throughout of previously I will the to discussed on $XX to public due first sector This net single-digit million challenges our expect strong approximately our 'XX. quarterly to XXX% on XXXX flow income. ADS in expectations operating quarter in year. With XQ, the some to fiscal revenues fiscal and the

daily of range quarter expect the low factors, to be in result we in single-digit up a these and sales first down sequentially the As average year-over-year. slightly

large patterns noise. That we the sector due sequential negative to beyond in quarters sequential sequentially the challenging the to price Under gross slightly of Looking in likely With fiscal the second are tick order said, with we XQ challenges quarter we the our and first respect most early second of quarter, margin, discussed first cost. the expect first to market begin the scenario, removal XQ. previously in up outpace this alleviating historical half. performance assume because expect to public stronger

reviews and category gap margin line countermeasures. that to the other should cycling of benefits ease through we and our the As inventory year, due gross move of the

That a step-up of respect QX to see same following D&A the in compensation in sequential degree the repeat itself operating to expenses, step-up expense. 'XX. incentive sequential not will fiscal and nearly will with Finally, quarters

key as progresses, to fiscal come look the on profitability a This supported discretionary the year. taking areas other like before previously outlined Erik category at we to hard clamping the in margin and will Additionally, on expense will freight that, down turn closing the over call executing the our for to and form be initiatives the soft swift reviews. response the spending, for line start year remarks including actions, in Q&A. productivity back Erik I With gross will by actions several open the of line

Kristen. you, our in our governance, time closed 'XX hard for entire their successfully a company history. like our $X chapter for was team thank journey of mission-critical and the Fiscal first as sales billion annual year in Thank first the I'd strengthened monumental surpassed MSC possible. making in for we to this corporate work

in of years team, to adding to for performance. Regardless Looking past control. you open momentum, growth 'XX, up X leverage we'll the we gain muscle is levers strengthen will focused our our and what we fiscal Thank questions. macro environment of further initiatives memory the executing line remain and MSC's harnessing again ahead, from the productivity the enter will on we and now our new as entire

with Baird. from [Operator David Manthey comes Instructions] First question

to 'XX margin you on can us 'XX starting color XX I'm gross as for a even. Yes. hoping margin. But We're bridge Thanks from the at we fiscal little more year-to-year. look clearly progression

contract points the basis public sector XX due non-repeating to win. said You

points. time a last XX line did we the something think I basis review like

be So next year? the believe getting down offset probably I'm XXX basis more gross are basis points there good will points you thinking of are gross that guys at the margin. leads you on to of to XXX What margin flat or

Yes.

So piece that you've category I'm the point I'd line reviews, That's I'd tailwind out on And been purifiers the a gave. cost go thing as definitely quite one second the as is of price we've experience. to not right, then on Dave. that helping got range But expectation, sure the you it. to experiencing course, there of the and the offset we'll headwind some of that's high reasonable is continue

up you're point just you a for if simplicity. say of at starting So as XX.X, XX revised to starting build let's that kind

you flattish. I get benefit the between headwind on to roughly could just cost price review and somewhere you and that be line then think your maybe spread, back category then expect XX down would would in say, your XX to let's

alluded to script of kind talking Erik countermeasures that was we to. the the in Now

there's of things of kind simple countermeasures, doing affect margin, other transactional give back I'd but the So color both goods on in terms we're via to kind the to within flattish obviously, of but that's GM kind blocks a cost also sold accounts trying lot the roughly price on in gross the of other of guidance the cost, of you building get to things rate.

business? back basis points for Shouldn't government the this we -- you're adding we're starting from XX.X but shouldn't the start from if XX.X XX

I what did. that's Yes, Yes.

XX.X go, prior good bps that how to reviews. in business, so to do the would I you back on take XX at And reviews XX.X. want then least that line for go category as you think to assume communicated on put then So from as government we've we hope depending

So than say, to I'd we're that hoping about that. obviously, $XX do better million be

then would on I to that's conservative, would you So headwind back line category being to in. that to layer And cost XX.X where depending XX that to put flat, how comes price XX in you I'm on in, XX you reviews to XX.X. get drop kind your want up to if of down

cases acquisitions, growth on sales like basis you most share including here. here, and gain, it seems overall you're that. on sales then XXX take still the in follow Okay. assuming the up can unusual if All recession right. And of points government outlook industrial We out the

to back period a base bounce case? in then of So following first question the of fiscal that you 'XX your looking slowness. a IP second, auto-related you a in terms Erik, of sales for mentioned 'XX. case? assumption is, the as down is Is And quarter flatness Are at in that second

Dave. Yes,

is what think in have and the it's roughly nonrecurring a the assuming, point to mentioned, headwind on alluded revenue through this basis are reason what X things. the public is, framework Kristen is XXX say I'd is you One there where revenues are going for a we're So The I you year. IP basically about orders. as front, flat sector through

So XXX if there's so basis for or XXX, at points of our guidance orders. midpoint you take nonrecurring the another

it's thing digits single in remarks, of Dave, points the would UAW also slow other we slower talked in I'd of about of the prepared out otherwise in low say The terms the than situation. And we're because gate is we impact. have recognition, to coming growth

than the we through we're more going to a are have half our midpoint. here. lower belt and little be under So October and October But than September halfway October, of September,

that factoring our into So is equation.

terms In factored in. back, that is bounce of not

So of release itself account that back end does calendar of not that bounce are certainly or the more could a flat the situation it what assuming And happen. big situation, to restore IP year. neutral is the that we things for before UAW any

with And our next Steve Jefferies. Volkmann today comes question from

about drivers? Any due and sort talked half you sort of issues deceleration us October. the more in half It of was UAW like other maybe the that on color you more Erik, was give non-UAW and of the to general. September sounded to me can

certainly big go chime here Yes, then you X% if But certainly, and I'll September, QX dots number, you and can even it's certainly, fill any the in Steve, a to a growth drop. August, and here. take Kristen look at in shot to QX the

from of just to things walk of where were we have one thing you a tracking couple rate think I QX, on. going growth to QX you sort

of certainly, sector orders one, non-repeating X points public were the So that. about

acquisition, to the brings about projecting down the X.X for somewhere range September X.X% were something so. that bit is range and similar those in So or timing range, Of UAW. a of for on in at we're what saying factors you basically, you're what's the X%. an for lapping we what point X%, a in down looking without XX% But There you back it's is October. low of add that, the could single-digit to

surprising little softening, the all of the half step given meaning back of macro envelope bit to think the us, half reasonable is half certainly on at a So isn't a down ballpark, to you're indices. yes, and going I related what's of and UAW about saying on sequential which then about

out markets slowing? that end And just of of that in sort Right. a... to non-UAW slowing or terms themes any call Is

of is bright lot is -- we MSC, what what would here auto it's would there's hard a that -- direct general a it their real have as what's shop, by machine find bigger slowing. of a for auto shop, thing to course, but is some that The issue a interrupt I portion to be business between I'm line a and you, sorry exposure. fab is of related not. call mean And what's interesting I The related. I would coded auto

broadly, that there's So would auto. codes more at look beyond tentacles you'd say But SIC if to the I strike extend softening. the direct just general

but again, You certainly aerospace, strength been like and of of readings. sentiment with I do the still have course, consistent more the some IP general pockets we've softening, what tracking think, with

Got it.

positive 'XX? in then just follow-up. And Okay. price assuming is gross that a quick you are Kristen,

in X 'XX, points price positive growth be to gross 'XX. of price Steve. in will X I'd from assume Yes, about

next question Inc. our today comes Moll from Tommy with Stephens And

say been you the I think follow-up heard having. expect volumes, of I One them Kristen, we've terms in lower. discussion you on 'XX

was make that we've right think half comment, frame sure but the got that I there. want time to I just a first

Yes, in UAW general that and kind going first you expectation what's talked the in on and with the the industrial of QX, half, early here the right, softening with UAW of alleviates Lower course, then that QX. we heard Tommy. about

broader then of about that So about second in around space, we've second in One to -- the company changes half. drive UAW those the away. remarks, pricing what coming headwind lagging making the is, changes strategy. to really in online growth I we things the we're And core we half some customer have, are as changes second our the think that of overall. intended making prepared growth seen also first the to talked rate is then of course, has goes key X the what e-commerce reenergize both kind for the and platform, half how which growth would I been And the is rate then would we're

large upside working So the in half. other initiatives that the we're of got the piece a along on that I'd growth there's We've sequential change a in that on. is -- the improvement drive bunch the of the in account that, runway those say just with inflection second had wins macro through first would we've in But provide a point past second year, we're create second that I that out year. that that 'XX the are the few half half particularly to things half to expecting.

I up on to follow also auto. helpful. wanted That's

estimate it. be indirect just can give them of to be And caution. great more If percent what just any general you you where exposures you customer of are have anecdotes just may discern you direct terms revenue? in provide more if numbers, and these could able you your just It's would it

seen ecosystem "strike impacted" sentiment just headwind that a not maybe you've but directly manifest. So that more in

Tommy. Sure, Yes.

So I first of certainly, get shops, specifically, under job XX%, range arms question, when to take we butter would mentioned, and direct a and roughly tough exposure, up machine around maybe to bread to XX%. exposure, little of our kind answer of considerably as in your shops. fab it bit but shops that the number referring MSC's Indirect were

So that's terms first the part. of in

only In provide. of the there buy And temporary who the of customer of some down we're pretty reports supply either in as sales I'd And where at expressing need. I force. to examples have we on some more are the of in then color would down auto we other are chain customers you that's basically terms spending. who about strike ground example a reports and with stay a a in regular to the sort said, what or be customer. And that production, of is, of a customer caution mean, we're direct our due just clamping talking which halts chain the the of our what are getting vending a customers are further and you are more close

the of at we're down what on like lot of our in so we're spending, the lot seeing discretionary clamping customers. a the thing described a seeing -- world MSC we almost same of And

today question next our And comes from Ken Newman KeyBanc. at

on UAW you comfort visibility And assuming I'm bit guidance much what do here. the alleviate the The to for calendar in strike have there curious the touch by Obviously, a the little obviously, in bit you year. stuff of gives coming is making just range how wide a just of you're end that this in the more assumption? year. back terms that

end, you that lower if what impact the of at a a you bit kind are little potential lasts strike than So longer of assuming anticipated? in terms

feel mean, Ken, case through had estimate it range tracking And the now. were if this for our I'd you So lower some look, towards is make see, and end. for lower October, of for I gives the Well, to September would continue, what we have right? assumptions. the to you that could end the what of say be kind we're a in We're to

Our were we some with there somewhat But of that's range in of is earlier, a focused you're itself the think like talking Dave in share visibility were this as as you it's all this limited And a capture. response, narrow what as more extended, seeing can, all we're is lift is meantime, And then look, a on lift. there doing obviously, certainly, the why suggested, at alleviates while the us, is were slightly punchline point, the larger. if the to I you if come. But bounce extent to now.

can execution was our I so encouraged in the was despite we while out September sales of control I lower so team's growth And much, encouraged gates was right strong. only the

are to signing of of over signings sort So back in Those we as move a bigger some the things over lead the environment along build new us half programs, when Kristen just vulnerable to are XX%. lead XX%. that local vending signings of will confidence a revenue gives to because coming execution up mentioned some VMI fiscal. online initiatives tough distributors of in better all in addition those agreements, is the up the which

Right. makes my increase that. I you following for No, some digital guess, sense. follow-up, mean, kind that did investments. these up on for of here of the I CapEx

a you the monetize quantify towards guide? start when that going CapEx through think to you decent And see I is mentioned cloud you of new how expect much that of income just the benefits contemplated to statement? Kristen, computing. those in amount do Can

Happy to Ken. that. Yes, about talk

and profitable gave. And remarks. But live. to So we to that ability range scale of I going put than kind million prepared around it would that this the contemplated digital the maybe talked once we little roughly around we color more is a being to in me really of the goes it see bit in went generation core assume initiative $XX that let the CapEx we as productivity growth into that key ongoing about.

not So system. a this is ERP full-scale

clear, we've of this over the like be years. to implemented of Just parts way kind along the

guess these too. We new already, scope And systems team PIM, finance our we're led us done Hill. more and taken got several putting CDIO before, dedicated not a on color He's then warehouse little a through So last bit implementations -- a of management John pricing, he's a for that's this. this, little this. brought web in bit I year,

year. ends it million being about $XX up this So

amount I'd of productivity then process is start on related bit to 'XX. procure benefits that the of to the just and reengineering in coming similar expect is really to little a a trickling think cash towards 'XX I system some order which in the with pay, to end the program kind online earlier what business

targeting.

then productivity small well. but material some the then generation that's maybe in the as P&L So would 'XX, hit post start when course, of And impact depreciation 'XX. to

And from comes Merkel question William with our today next Ryan Blair.

questions. Two

just -- or impact single sort indirect how including the of that? direct the are of of as you digits, XX% First Was there XX% impact of down UAW, did you in down sort the well? quantify on that low XX%,

there, in including Yes. Ryan. impact We're the indirect

-- been exposure got in direct Erik tried to markets look transportation, in the metals end we've we've was fabricated And we've change primary some seeing at mentioned, what and as in IP the that So auto. metals. auto,

through a job be there, would look shops. that's which the metals of and map primary in impact try where machine the metals perfect would we the may happening that fabricated like shops the to and to in of other gauge cleaner be that to although sort spaces So probably little when that But at aren't our bit there's some things one business. we look track, even representations

normal that we at at like look against trends we're looking are that for indices then gave. to spaces. like kind the in doing of would what sequential IP those So sales single-digit basically And looking our what number low triangulate we're

Am I ballpark maybe XX%? in where all is right auto Okay. the sort of down

we roughly with I be were yes. when seeing what did think in would analysis, we the line that

Okay.

the lapped just being Okay. and year-over-year back to cost line half reason first and like price benefits that And walk, sounds And the review be second it you headwind down then in just from you've up the half, XQ? level, then That's the roughly get year-over-year. right helpful. will correct? in Is margins gross half high second in the

you second let sector Maybe sequentially, contract because noise the from the it me Ryan, half. public Yes. win get give in the

way there might about into a lot be little with half sense. noise year-over-year roughly to sequentially comps. what off QX So because an the I then is QX. slightly it on easier if that inflection the move being QX think the would point and starting to as you're up That QX a bit level. a makes small into the about Hopefully, jump I'd think in expect again you're XX.X, going of in with QX second of

it does. Yes,

question Chris next with Capital. go ahead. Dankert comes our And Please Loop today from

And we there? then should launch just digital in kind maybe of here, revamp the of expect guidance timing? on that the Should year-end? kind any additional to just detail sales of in be still kind assuming calendar growth, contribution On msc.com any before we

improvements Chris, this the the the -- on e-commerce is so Yes, basically, and heavy lifting done.

in impact news next The is done. really So rollout the over DNA, will be the good occurring or the the mentioned P&L, of work so. quarter Kristen the is the

described but our Kristen customers of part begin we it. because would it's will some in for We're the point, when and I were guidance this out impact. a of encouraged. pretty the begin sequential What normalizing, in to is the an what of because slow, part that's basically in factored will of some customers say gates expect coming that's UAW to at piece of course, here initiatives, -- seeing situation So build

It without happen to is going of us with be we a beyond one is lens, IP a that think prior look with X-year lens. expect multiyear core exceeded engine over our getting chapter What we of time. of though this gets our back to achieved growth as e-commerce This a the the not targets gives growth kind we switch. really X-year we to confidence piece over we build and customer looking big what it's year, at think light the to us growing, is I a will excited it. this the things or

but switch, think it don't quarter. next be do light the to I I So benefits seeing we're a will think start going beyond

as on moving just of forward? very kind the XX% our that a front. about dollars of helpful. we we're target to had or the That's put -- mission-critical incremental maybe just then that And the business, should last Again, think cost margin of of fine keep away for it like seems continuous on an XX it. Got going from we point the hitting coming program, and that million out the absolute cost kind improvement $XXX eyes now that in

what's 'XX of about Yes. happening bit fixed Chris, in going fair what's incrementals on and think would and be term, XX% OpEx because price hitting then cost a it longer to I and on that's challenging to a way of cost say margins step-up. is happening terms

also maybe I and just And change with -- within gave costs I this we're yes, QX and would sequencing in for factor agree targeting midpoint a that what D&A to on the as the step-up way I mentioned on you we on so what's based infer like September and related that. But compensation. how volume QX, happened sequential October. would the in and incentive if in you OpEx that. a the prepared of also term, be productivity the then we though, kind in about longer remarks So would think OpEx of helps year sort

roughly year D&A sequencing about You stepped That the being the would And then incentive costs flat be would down as the exception your dollar fluctuations. OpEx based in offset and by volume expense. of I think through with step-up OpEx. basically compensation on and volume-related

to like merit fund typically merit our $XX increase, the leveraging year. is So that's investments? then size we're each productivity that kind around is alone what means worth, basically, of to just what some cover And our things million of

from And question Baumann today final Patrick our with comes JPMorgan.

guess, I one, just quick quarter. cleanup First a from the

you in cost think I is adjustments Kristen, price offsetting COGS What exactly? fourth about rebates that quarter. said, and the something

Yes.

related and a work. So And favorability there so lot QX, then around doing to saw been we had in both vendor -- in rebates. customer that we've of item we rebates [indiscernible] other the was

to inventory seeing. kind alluded to we've than terms of on QX a capital calls benefit of provision and yield of lower of requiring composition countermeasures inventory in some working previous in think and the started work terms it that in on we've I of been

thing that So And in price combined that the QX. allowed offset items us was the cost us benefited those headwind. other to

contribution, meaningful about talk that well. 'XX. type That's as stuff a looking we're we So for it fiscal of and countermeasures to the was

can offset? What you was that quantify what -- in basis that points terms of

Yes.

the So you was if cost tied of by the had and cost was totally we QX sector contract. points, other improvements price at look XXX about basis And offset areas. public down points it impact sold XXX those goods then of in to basis

much higher today? And spread like Can past, for the for that number for Super XXX group? think to company done average you range that a by been And is Erik, margin the for remain you're of have us gross is how strategy, what core we the you making large gross more for it couple just booked I same of points. helpful. follow-up, after as wanted the changes margin customers, a if years to you're us for with could I remind maybe the But on it you the in should some my color versus in the give so confirm. recall basis customer customer is this can above what pricing this, the core it how then about XXX like given And ago, entails? might

sure. Pat, Yes,

just can the I'll the maybe touch follow give on differential, growth I'll you So the strategy. on up Kristen but punchline.

relative net where that going price our And get a customer. to as we're case price there's look of and we're marketing the customer alluded point a change We is a expertise with the And there been -- proposition always I'd our competitive. And that. first, as not be where jumping a pricing what relationship, without on is a touching we through consistently that to and not a before we have not times discounting. hoops salesperson with salesperson. this are It changing. What as direct some it's with may is not relationship, cases way where touching strategy regularly our think is I any is and high in our pricing. a bring certainly, and pricing we're intend for What value we've found, of around look, price our a has we We feel and So competitive that's competitive. that's on customer don't warranted premium to to prop. about jump-off do value a say good a very customers. to distributor pricing traditional a value to changing here We lot our list technical doing our command a

we're we better this quarters. will gate. the of competitive the flight in most isolate adjustments so lifting, structured It -- customers this we've way And just out what bringing modeled this it presenting will those SKUs is the and price. if as any, both more so basically, the be going is of terms work we're cases, and we're doing of and feel price next the coming to looking again, basically, done. The X to out is do out. The with dilution make we've minimal, of because idea a the gate is in X and work that of And in a be the to margin customer heavy identify out

feel company reenergize above Our absolutely correct, the the with be gross you of feeling been well above growth along growth. customer. And still the margin core improvements, web average this post that customer certainly drivers the are core driving we absolutely is that most the and healthily have that will adjustment, will this

excited couple half one that's to Kristen first past certainly talked your 'XX. terms some we're of points. But out challenges gets you be into first picture. exciting of the the about the not a in of reasons is get 'XX of the the estimate past basis move quarters in we back quarters, of the couple as of pretty into This ballpark of So

Yes.

of in I'll So about also kind gave. just add we're color it's a what on the talking Erik you that serve. I'll range little customers And too, of here, cost sort a said thing it's profitability terms to of -- good the other lower of

places. So in the a P&L of couple really benefits

mentioned up if earlier I you embedded the -- year. X% X% So just that's to the you to in follow guess that, to for price

If that group you price for you that, this of reduce gross group spread select customers the past? do how in in maintain same margin instances, had the the

is Yes, lot it happens. There's will be a when minus, the occurs it's and competitive discounting And a going is of Patrick. cases, -- of not in lot plus we're answer that or out of discounting discounting that, and that of a there's the list inefficient be to oftentimes the high gate. lot

disciplines better controls gate. there's while of right offset pretty customer we're because So modeling out discounting bringing suggests the another. our tight to that around this a going will one most of is that, price And the on,

gentlemen, session. for to conference Mills concludes to closing this remarks. like any I'd the our turn Ryan and question-and-answer Ladies over back

and time your morning. interest for you this Thank

person As the Bear you November. & a seeing Steven's is first X, XXXX reminder, January for conferences to call Goodbye. and in set we quarter earnings Thank joining today. forward you look at in our us for fiscal date

We Thank presentation. for call. today's conference you. you attending This today's thank concludes all

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