MSC Industrial Direct (MSM) 9 Jan 242024 Q1 Earnings call transcript

Good morning, and welcome to the MSC Industrial Supply Fiscal 2024 First Quarter Conference Call. [Operator Instructions] Please note that 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. quarter earnings first our to fiscal call. XXXX Welcome Officer; Actis-Grande, on our Gershwind, call our Financial Kristen Executive Chief both Erik Chief and Officer, me today. with the are

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

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

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

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

turn Erik. over call now to will I the

wishing joining new Thanks, us and happy everybody, you and begin by Ryan. Good healthy thank everyone year. today. morning, for a I'll a

strong the financial for both in up is we next before wrap more then questions. mind mission-critical first results on on XXXX, we headline today's then call open expectations and in will quarter step for comes call, the things the give environment. And look I'll On provide to first environment. on our back our which the chapter, execution As year. up of more our Kristen the and specifics color a our is I'll fiscal that challenging the execution

to and the overall base. included described began sustained October, On due in our The our reduced I'll in September. causes midway caution sequential the with now the effects UAW the rates, call, an that which ripple among we inventory was spending begin of last burn-down high softening interest environment. through demand strikes, customer

call, of Following in October was halfway an call, we time down another rate. the our softer over month, half through of our our X% back again, X% in year. last of October we prior our sequential At roughly estimated which, sales fiscal resulting experienced growth step to even growth

see As stats, op soft The year-end. into into largely carried you along the identified can stats, November, we October how the softness quarter, on X%. That can the with the the half down versus holidays in as as Which and demonstrates on at was and you month calendar ended expectation. December over into well. burn-down back op of just as were inventory see the root belt-tightening heading demand last causes our same

situation itself, holiday back soft. when due customers did December While high finished higher-than-normal our schedule, to typical to slightly resolve was most of online demand inventories. by the a were slow compounded is is UAW bring which shutdown spending goods

end metalworking-related readings, been in MBI most in readings. by surveys, has this of IP as markets and All acutely, evidenced demonstrated distributor recent

XXXX, particularly encouraging, while the is team quarter. should and has many End-user At after ground aerospace like that stronger end the We've hearing ramp the XXXX. feared. ahead calendar time, early drop the should had own our remain look demand, outlook same customers precipitous fairly calendar we and As not seen in sales the We're remained strong. calendar suppliers up customers, more that stable. to defense first from on automotive-related light, markets

customers confidence capital more addition, spending. rates In stable lower even future the or interest prospect giving for in is

view for our fiscal fiscal of XXXX and well All a this more XXXX. the into half bodes of positive of back

cost supplier has remained environment some 'XX. select into effect which increases, pricing, respect With in the We see go to calendar early stable. did

a our during along. fiscal we'll to QX price pass be these increase small As result, a taking

am team's progress our X remain in for been scenario. our Focused theme as turn any pillars, well. with I'll market to years strategic I make now initiatives sustainability within now ability control execution spanning our and pleased execution. our what's has with to our growth to the our a productivity and efforts on past progress focused

up continues, As it better this in rebound for progress to a makes environment us the when strong improves which it sets for and a operate. world macro

few governance better like Within X. release and and MSC is on world our looks progress start this a better to we Slide document, the I'll enabling tomorrow. and environmental, of this MSC's what our you XXXX commitment on next a sustainability December, just principles with reaffirmed slides, with show demonstrate Report. I'll social In the we ESG how

For customers in our providing example, sustainable services XXXX of and reached pounds over through within services. And by products regrind better environmentally XX,XXX CFCs. products XX,XXX of we've at packaging to just XXXX X,XXX recycled as carbide recycled corrugated offering. a our We're preferred also we've creating world over tons we since our our

by reduce during solutions our electricity customers Additionally, enabled the XX fiscal kilowatt-hours metalworking year. million consumption to

as MSC's corporate On practices the than did we aware, the we structure. social more But share governance that. through and our dual-class strengthened you're governance elimination front, of

support report. a our the is be can ESG of across part examples Our community our which not-for-profits country, We relations many program of in found vibrant culture.

'XX summary, we're achievements in In on in and our 'XX. this of fiscal proud ESG building momentum we're fiscal focused on

driving progress formula momentum improvements for on maintaining I'll this elements pillars performance through our mission-critical take I'll drivers, strategic each productivity further couple through next X initiatives. now to you adding we chapter: the against profit new existing these. outlined growth of a of X of growth turn and now to

Slide momentum existing drivers. on X, maintaining on growth First,

public primarily in in our consumable similar traction and despite quarter. We products, the softening demand so we continued growth growth a during C saw the business, with of high gaining sector level Class which consists a CCSG environment. did of single-digit We

see MachiningCloud reach to across are continue manufacturing to market important who ample the launch engineers made strides in to conditions, relationship, for of with our due opportunities progress configuring Despite new soft while to metalworking our North regions expand extending future leadership, various America. tooling machining jobs. Metalworking, the we formal

solutions significant our Most was performance.

the more installed achieved than we signings our year-over-year. of XX%, while grew base During quarter, growth vending XX%

of rate were as future signings and year. In-Plants, a our count XX% worth and share we grew bode numbers in noting prior year-over-year achieved by well. also well in are record to installations for It's program For low growth gains more the that than VMI compared outlook. These our indicative market teens up

of months the win. upon generation As revenue to to a solution roughly signings reminder, depending convert X the take size and the

with before the revenues occur do. costs the result, these a associated wins As

progress which new discuss are now the on our I'll Slide to on elements X growth shown formula, X.

is our customer growth. First core reenergizing

for foundational X public-facing pricing the realigning call, and On highlighted website. unlocking web the implementing the new last our our on I growth: functionality product priorities discovery

to goal to core prices market provide roughly pricing, smaller our discounting customers remaining to better With gross competitive is margin-neutral through respect while disciplines.

We the realignment, are track goal. through that XX% we're achieve of currently and the way to on

the In the end SKUs. more to such growth web We as of encouraging early of by indicators addition, non-piloted and we're seeing second our complete the plan improved favorable quarter. to of conversion fiscal balance compared portfolio levels rates

fiscal form and program new the for the also performance product of rates we're second to before we're Early will pilot what it's conversion and be in a promising and in carefully, We're are pleased respect quarter. seeing. discovery now search. market of watching deployed with the With fully indicators platform, other our end measures

AI-driven enhancements what's significant functionality is quarters as such exciting being with views schematics, as personalization. the table in More the on yet launched come customer and now analytics base to and following we self-service build new

will more the both We complete. and pricing market our the the are of year after back web improvements aggressively in half fiscal projects

with our fastener We strategy foundation plan by of to other building cross-selling CCSG. do blueprint capitalizing is that our on The to AIS Tower. OEM new proven on we've the so element growth and out

initial we're expand the our indications still early innings, share funnel and wallet These our of promising wins. in with to efforts While us allow a large significantly customers. are several of will early across build-out the

here, and now initiatives: mission-critical chain productivity. we processes. on upgrading category core accelerating our management, business third highlighted profitability priority, efficiencies improving I'll X digital improving And touch systems our through and supply

Our reviews, margin us which include gross first expectations. to exceed our category and quarter management, optimization margin and mix portfolio helped product line management efforts,

call versus fiscal down recall, may on margins gross shared XXXX's be slightly you As last for the that XX.X%. the we to year flat should

We of worst also be that QX felt the price/cost the the would QX due and most to dynamics. challenging

upside So to the come we provides XX.X%, the strong of potential for some year. at were pleased which gate out

talent fresh team many are noteworthy and of a built some getting Supply existing to and performers This strong team with from a supply chain is are has areas within the chain. outside. perspective started. a Martina MSC improvements mix new bringing just

year inventory in $XX end. a thorough improvements both of and for is percentage levels as efficiency saw more dropped We a review to come inventory we and revenues, QX, During chain end expenses, opportunities. despite as our to team terms rebate of buying absolute conducting in the in supply end-of-calendar improvements as freight anticipate million

systems on to budget. is and core respect digital with time Finally, our project the upgrade, on

around of and streams. across unlock the further value gains expect procure-to-pay We to order-to-cash productivity XXXX, the launch end sometime fiscal will which

despite all, supports remains and execution subdued in profitable our the high first growth. quarter, in at rate All growth levels fiscal future our

greater I'll performance Kristen first our in outlook to now discuss things quarter to over annual pass and detail.

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

by and demand of tailwinds second in million year-over-year mainly Fiscal more the driven year-over-year offset of the growth the with in declined half number momentum by This periods. Erik price softness lower that first modest in was as business the of quarter mission-critical same sales as drivers from well due ongoing volumes to decline experienced X.X% earlier. quarter partially The was both our acquisitions. $XXX mentioned days

the basis Foreign XX a benefit tune exchange slight was to of line also top points.

we type, public core period, continued other to to Sales further prior customers portion the sector customer year to Account year-over-year. X% compared experienced market. we improved declined that penetrate the National the customers growth as while in approximately and of By X% X%

core UAW impact the from acute to relates National the end it softness and drivers in metalworking-related the primary were and quarter end As strike Accounts markets demand step-down. base, at to customer

an improvement share vending, average QX company year-over-year net year. daily standpoint, From quarter. of prior basis roughly take total continued the In points of sales, the XX% improved sales compared to approximately and XX represented a to during we X% solutions

with improved our more in year-over-year points through the and program In-Plant total sales. of XX% growth basis continued to XXX double-digit growing Sales range than XX%

remained across rates signings quarter, in, a solutions record both Signing healthy quarterly achieved In-Plants at especially where we the rate. during

profitability for to on the quarter. Moving

year-over-year. margin XX.X% gross declined basis of Our points XX

pleased am larger off on margin XQ of of for second the said, As case drag the with price/cost year. the be which expected, gross That leveling will quarter, our half margin offset headwinds before majority which the price/cost I a was during the in the during quarter. countermeasures,

million, Reported basis, approximately On essentially during $XX year-over-year. adjusted the were flat million, $XX sales million $XXX were quarter year-over-year. expenses operating $XXX Combined being this approximately operating up with year-over-year, expenses up million an sales. XXX of adjusted was operating operating associated basis in as elevated This expenses million. our resulted driven percentage of step-up a by $XX costs in points roughly with strategic increasing roughly largely investments expenses

than of largely perspective, to associated were associated more In-Plant due upgrades costs and to were and primarily up core. higher with health initiatives investment of costs give half productivity. payroll-related support merit To realignment costs, payroll strategic payroll-related investments, by price costs our with growth, was which digital care offset and to this Outside web some

a On public $XX levels. came the million little basis, with roughly neighborhood QX out after sequentially Revenues expenses of orders, backing QX flat adjusted down very nonrecurring sequential were sector which in operating expense. operating were the with

to solutions price they web I The would expected expenses one our which operating digital million upgrades core. realignment and the support have described few did dollars. equal, not primarily being and just the by initiatives to else reason flex was QX a All down gap investments growth,

just investments back constructive a We are bit. the half year, value our their the pressing describe ability outlook will with stakeholders our in which of on I of to because for and those in fiscal for long-term confidence create

was was combined margin On year of in lower year-over-year to period. compared decline Reported adjusted previously expenses to declined XXX basis, prior volumes. an sales prior mentioned points the compared in margin XX.X% the year. operating XX.X% basis to due with primarily operating the step-up XX.X% operating The

year. year share prior per compared adjusted $X.XX $X.XX period. EPS was versus earnings prior GAAP an basis, $X.XX the the On $X.XX was in to in

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

to reclassification approximately offset We largest healthy net the share continued repurchases sheet maintain sequential with dilution debt. to X.XXx debt to quarter representing EBITDA. a balance during increase net the $XXX the of contributor was Share million, in

XXX%, resulted on cash in for achieve inventory on working This flow quarter, roughly in quarter We XXX% our made million year. greater us full our $XX conversion reductions. progress of of target during the first capital than to operating including track keeping the

Capital approximately $XX declined approximately expenditures during million of $XX year-over-year. million of to flow quarter Together, $X prior generation $XX drove in the free year. the this million million cash compared

The strength priorities our on balance supports sheet generation shown of our cash XX. allocation capital and Slide

see, As strategic dividends special to you the being for optionality, continues this decision significant our such year. made deprioritize currently can as fiscal creating investments room

M&A towards this shareholders. and and forward, with gravitate other bolt-on Looking a focus metalworking will to OEM investment on likely fasteners further organic opportunities deployment

we to will ordinary the relates moderate it dividend, As increases. target consistent and

which the repurchased an approximately for achieved reclassification, from update our Slide am repurchasing million was share X.X on This shares. all to we to Moving efforts. was the I pleased that X.X shares repurchased announce dilution shares have the approximately authorization. quarter fiscal our With remaining approximately complete, shares on buyback the million during QX. initiative XXX,XXX repurchased following X.X XX current in this by first we million

forward, stock-based aggressive. more compensation and will to to for annual offset windows opportunity Looking of look be dilution we look

XX. Slide to Turning

our outlook for despite year start. the slow We are fiscal maintaining the

in daily As growth of margin to sales XX% this the entails and XX.X%. adjusted a X% X% average range to reminder, of operating

for growth first, produce color of platform strategic our fiscal I on macroeconomic year. begin conditions the year. recent X as it takes second, as fiscal our our a pricing of to meaningfully the midpoint following benefits third, as of described assumptions: in move calendar fiscal daily to would the revenues. yielding based convert cadence and earlier; depending improved the performance will is and Starting we the additional solution on through as half the expectation half size of surge new the that sales generation win; realignment improving early roughly the provide solution the to the on assumes beginning search in average XXXX, we The continued signings move revenue outlook like year. tailwind to the expected through back of such as with of the remainder the investments, Erik web back months This

expected performance gross and rate side, profitability a the was annual during margin On quarter at our higher the assumptions. our than than better

the actions line some increasing contributions We during margin be expect quarter given later upside gross fiscal pricing price/cost first small year, with second potential to easing fiscal the similar the and to headwinds, XQ. in reviews category quarter from

in As timing From it by the expenses see increases to driven modest associated to operating begin in expect strategic to relates be expect for step-up dollar ease. adjusted volumes as we to would adjusted operating there, to with being terms related expenses, merit investments increases. the with typical more costs the of we seasonal variable lift any QX

QX. would we As a result, in QX strong operating to expect see and leverage

Erik for that, With we I Q&A. back turn over for will call to line before the open closing now the remarks

and that accelerate focused investing work existing on productivity are expansion. macro on dividends, a that environment X-year in We first of levels to quarter. journey, as new performance We're into previous we is maintaining into chapter. our momentum ones demonstrated creating high next you, throughout initiatives, this execution doing mission-critical drive improve. will during conditions now challenging new particularly team's Thank I'm our and yield of margin fiscal proud will levers The carrying performance Kristen. the

our and future. Board our confident Our plan our are management people, in our team and

for I'll to close work associates X,XXX-plus by thanking up questions. line their our entire of mission. for now we'll and And our team open the hard commitment

question first comes Tommy Stephens. [Operator with Moll Instructions] from Today's

we back as go were wanted there you're on start and macro helpful But wanted both shaping some there quarter. points just to I and to year provide environment, I the see calendar is how circle improving first insight we Any X up on you demand additional into on, as get forward. the on improving can or assuming. seeing you've on context first the provided the what you

benefits investments you've point, the second half. related the the then some from And of describe in strategic

confidence that lean a to a continue the early positive slide do of move updates. have of needle when there that you in in ADS? got you today the that provided or But terms You've really lot will visibility what

Erik. it's Tommy, Hey,

So I'll both. actually take

start in saw type high really, interest prepared me to so, of past the the be and more spending in the Certainly, terms heard akin speaking months you few with rates to softness we customers, of some catching capital in since X seen that let remarks industrial product So acute call. and up with in purchase, a over that lines what capital economy got lower our on. very a in environment, the certain or the particularly going typical. evidenced we've would demand And you've things

certainly, our back The itself situation the second customers online. itself, situation, were the UAW thing, come resolved while to slow which,

closer And the what we more factor, pretty belt-tightening take end we of the environment time got in the inventory that end off. of the to then year, third more a Again, customers use the to the the and typical saw year, slow calendar typical burn. would described than as year we

So numbers. December you our that in saw

from from customers every we indicators, hear the lean what informs our team basis: And our on going on As we then look normal forward, is outlook are what and on we go sales from ground on around ground. through pretty what's community. supplier same with that us is a what much look at we on day the look interfacing hear our our who heavily macro at the we'll process and customers, our

as the calendar burn year. move is things. falls of the again, with of would suppliers. with we we into say, as from expect schedule X part down, as off hopefully the the our belt the building past the first year customer hearing at of and But down, this here that our year-end or would in sort coming and I And the particularly what that general, month the calendar stable, of ground our couple what we our is happened reps, we're a holiday And -- among interest rates One move tightening, hearing on we're base. that confidence customers

All of more look into and to like encouraging 'XX, feeds that environment. half constructive fiscal what into, our of back seems a you the year

So And I'd side, the first the demand thing be Tommy. that say yes, right. you're on would

given for start end-loaded gate. slow If the our the certainly, it's the the came of the framework at look now out way back you of year, half back we

environment initiatives, and of So the was question. some of of that some that then is is part and your that second

of With sort respect as initiatives, the prepared into remarks pieces slide. to I'd did the break we it X on in the

first that's already existing on The momentum maintaining stuff that's growth tranche the in drivers. been is motion

the from see So new get lag seen to where we what or these step-up a a -- have performance a in there months particularly mentioned, contribution. is the whether out minus vending In-Plant, And or Kristen that some revenue plus that rate the would we we we it's time meaningful start solutions somewhere call to a of of as X growth we drivers. that growth signing, the see nice time

be one confidence. the of would things that So that gives us

seeing good particularly the it's do it's doing under we're on And core about that on metrics to X experience do. it's What realignment, at our stages then web expected say and I'd feel initiatives, that directed elements to both newer pretty while still reenergizing the have belt on what enough customer. pricing the the that particularly both we the we there is foundational other growth the relatively early is and highlighted

the factors half as outlook well. of into the year So constructive certainly, for back that our

then I that second any but Kristen, opportunity give expected. sure to I correctly my helpful. first follow question, you all to quarter margins. up gross better had And what you additional on heard wanted think That's give you here, I say maybe heard I you was insight an than and to make just for

of higher. Second And quarter half quarter the similar roughly quarter terms versus then should rate. potentially be to in first second second margin

through you'd you drivers well. of all sure the out make those, we're to could as step would us be then call tight just if and like helpful So any

Sure, Tommy. Yes.

your saw first I'll the And quarter. on QX. gross definitely I'll margin to were in a where down we start with land pleased we point, basis. it break So year-over-year with

working see a largest did we expected. So as offset a we've on. being countermeasures of by That the combination headwind was sizable been that margin the gross things, price/cost from

product get So think in here improvements about line the bit things category started then QX. driving reviews efficiency our of to and we mix in benefit inventory rebates like variances, also a favorable from influencing

second to Then additional in be category for in the not And giving about online as in the year second to slight about then easing, us think year. QX, tones reviews in that's coming the -- really half. we bit for benefit addition confidence and those as half the what's and little feeling price/cost we think half, but about really -- your in a flattish; of second expecting our hearing notable more line that see the you're that's our point, the from is roughly until combination bullish QX, into gross what full that to price/cost in tones things really reflected we being margins a easing

question And Ken with Capital comes Markets. our today next Newman KeyBanc from

I quantify ADS Sorry in but the if what to missed prepared remarks, quarter. just headwind I'm curious was UAW you if the this could this

and color here think how we any second into quarter it I single-digit have a fiscal low mentioned was about on you quarter. the impact, volume think normalizing you last that

Ken. Yes,

quarter of the shared the hard UAW, that similar to first are what we what we're at kind we the auto. when but in had really to we're or we end looking know from QX we auto-related So adjacent are precisely what to at call pinpoint impact either in September, seeing did, it, directly looked markets

a the selling would shops low you at at rate And fabricated So machine and in year-over-year saw those broader the look like markets things to kind high when digits I'd we end basis. that end we growth metal, where places kind of shops the of see into. and that job size primary metals, of business, impact the sequential both a and single be relative on

there go And ahead. Okay. -- clarification just a maybe

Ken. Sorry. Go ahead,

cadence just also normalizing into -- Maybe about a little you just bit could XQ. the talk Yes. here if

Yes.

customer UAW did the we Ken. strike were originally an pleased we we So pickup we that expected, to saw inventory guidance, a in all at high XQ inventory really our we with snapback at and had related had the A we end while that, do positions lot indicated of resolved a base. the early year. see the resulting has when is understanding, burn-down didn't earlier And it than of the to the calendar

on improvement we're that's customers what from sure January from QX, how is -- but the field, start and kind ground it that of our much to our our second that immediate or So from hearing Not to contemplated the in half full suppliers calendar that QX. calendar expect we year definitely in is in guidance. of definitely improve of maybe

you're then question good how obviously, quarter. the parse where kind big at customer volume Account is, the out is much there core way this there my auto Okay. is headwind of because, of core seeing any clarification versus just is the the And to here customer National

to great is fabricated metals, a mean, do metals a of core we it. and lot and into map not I customers There's primary machinery I'd our say way see equipment. generally, what

than how think I what Accounts, end saying is in So no core I perfect feel of as that. kind about thumb rule National those to probably there's would weighted more confident but markets of

'XX. fiscal here second My the helpful. think question X It expecting suggested, quarter. price sounds it, That's it. increase Got your here like into you're call points prior price another is in guide X I second of to

price be the change think easier any the is half to do level, back outlook Obviously, the high real how we to think will you pricing through line? side. the a year? And bit as and top contributions there price/cost price/cost about the Just as on about just little the move we

Yes.

and I for think for to that we X-point price, the contribution the in to more will range end see Ken. upper very I'd of in X- we're price say expectations that gave in feeling for that growth comfortable slight that Like bit we improvement So from of margin a year, of the within within gross one had calendar here the things action bullish discussed is on in because more being and giving that's Erik pushing a the range projection year. the confidence QX us that pricing more price/cost up the

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

Usually, that's Sorry second flattish, bit the first. bunch start kick in? thoughts be some the sequential here. I but didn't top you you quarter but of with any progresses short-term of Kristen, growth little progresses to you a year on how sales of that question kind But gave of relative how around on to initiatives the know really on a have Just annoying the kind thoughts year line. comment maybe sort to

Yes, Steve, I'll take that one.

what is about quarter, if historical stat, second our the say, December, below for at So December. I'd to look were November you X% month-over-month we which see the that ops you'll from decline, typically

the extended and down we're Erik So prepared to a particularly accelerate the things shutdowns in the by highlighted in clamping that really December. in the I'd his off slower start remarks, we in And second saw quarter. spend say it's driven

really time Historically, really comes this we last too that nice it's case. I'll how calendar we it's It point. year, given online sort at saw ramp you QX the snapback what tell I say back this think depends would QX. fast we January. early And if a we dynamic in of Like sequentially, and that, December, that saw in look early be with to then a to then But are ADS December QX down at in slightly. saw a really likely surprising

this we're then second to that particularly know what the point. comes And So like. going control exactly we tied very look the earlier forward in half, the drive, strategic at that probably variable is obviously, optimistic about the that how don't that. is quickly initiatives. What that's growth the from is the in can to And when biggest better. getting we our macro, online any we starts We're look tailwind

of to then can think Okay. second or in comfort way of there of that business the you for maybe on sort sort is have half ADS kind ballpark an that I any don't know, so get Great. you And term, that progresses? we wins longer some how basis something, the

I look and you we're pressure and when I see growth color initiative kind initiatives, opportunity our wouldn't Steve. test core internally, at initiatives to we the maybe progress existing we I'll specifically, there. what looking What of that one inflection how call size give -- the second half we our strategic basically growth can I what it of all in at

we sector So looking our largest opportunities already customers, we pressure we're that our see sales expect sales Class and like sustain. that we public at then come online. sustain where will in that what growth testing And we where the are could the B then wins think will inclusion we have,

the So then things And remarks, benefit newer Erik think of what that we all or and pressure-checking we're range list touched the core outcomes, an at in is slice from of kind web like customer of a segment inflection in price of see prepared really enhancements that on in the the we within see we'll we're the how particularly that. do looking repositioning, what the business. quickly could

that pilots things we're look assumptions went like, what proving pilots. And obviously, so into out the through would with and some those we on the

second and seeing. early still how reassured We're are we happy by pilots half. going confidence with but days, are giving us it's So in the that's what the we're

that Okay. how Fair goes. enough. We'll see

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

thread here, those repriced kind seeing what you're yet? I on guess give of question repriced early us a that been a level kind it pull sales the more versus to of SKUs of bit glimpse on those last of to that acceleration haven't too little is

the half, the second, described looking has as it's seeing rates growth and so ADS what to zooming back step-up. obviously, to math out say, you we're in and a would now when just what versus half, maybe a I back significant look, happen Kristen do on for

looking existing -- newer buckets: is which improvement; economic two I to sort them contribution now, the vending one the growth do think in at three, of is and and drivers, is ones. a you're you're X their growth; some In-Plant the at have which overlaying hitting what path of then and existing proven terms to of

really it's a And bit I want a early. SKUs and the look, we're price not It's marketing through Chris, the we others. actively market entire some to way we're say, would that because say -- for XX% we're -- offering, realignment thing hard one customers would bit it's mentioned the highlight, look, to realignment, in this I the weren't early, because prepared a it's remarks expecting I particularly the did not pricing until web through of process. say, still, on I to I really

And lift. so massive the expectation to a of gate wasn't see out the

the in going, margin-neutral, around the the particularly were out. be think proven was has here early ability to proving out hypothesis we which I

areas. being we're more difference. but second a just, discrepancy thing as general, to ones One give performance when would metrics the to operational SKUs difference have touched call So fact which I like in haven't, is couple it's changes and how a difference. seeing the a customers the sense a that been them. think us actually a of that the just are modest the a some conversion And that they It's web rates, in see that I versus responding

that of relatively we're small going half we results the to the still So them back in compared I seeing this anticipate once actively say we but now where year. market are the would encouraging,

pricing, I say with is on will thing, this continue is itself back building. we're because this The entire Chris, not on the expectation combined take product the discovery the other would and hinging our time web, will initiative by half

back into outlook ones plus accelerating mentioned: we're current been of assuming that we growth it's improvement that need based and have is our half to So that through we a in factors build as those 'XX. plus see these drivers X new 'XX all combination, I economy on then the move that

Got us improvement walk confidence level then know from, we're I you I the kind getting but can suppose, in on really some incremental of on that's the of of kind of touching And piece kind the opportunity maybe just in profitability here. there dollar term? mission-critical targets, just through SG&A driving the up initiatives margin target and hitting leverage away wrapped nearer it. the the of helpful. That's just kind improvement profitability

in of of mission-critical and as at in round, terms as just different -- prepared X years, remarks, target. so on for I fruit round last that terms we would into stuff. last least that say say this do X.X, the on low-hanging the productivity. productivity. we feel we led was And so for kinds capitalizing we good of did productivity some the saw we the as would It's the Chris, I hit X Yes, of in is the it's what

number category X anchors is And so one are, the management.

we So bigger the category a the objective here few portfolio feed management factors But and just management category few And management. at is over about improvements, we looking management line what mix of are category really one mentioned a tactic the and margin last excellence. reviews. hit of on kind quarters, we've optimization, in line reviews other talked into performance like improve and to all

OpEx benefit be the we of the margin QX And our timing obviously, we going so there price/cost one kind of quarter, we're I than to were negativity average based on going gross to had line line. and upon mean, is the because look, the the QX, encouraged was more but it of Most depths was telegraphed costing. see

gate out fact we could back we So track management. we we category felt it as good to did, the the and strong come that about of

think I going gross on one part. line to see So play you're the that most the margin for out

I'm people spot time is one combination just MSC's, particularly been some a of a it's the supply and area. And here fresh strength second is. a Martina arena, now of taking look, have long chain in assembled been team chain the has buy about that long the it's what supply a that excited is rates, front saw that And the given The of there. people down, efficiency. know this a bringing percent ideas. new thinking and fresh as And but had second ropes MSC X supply as points chain at sales data and And inventory quarter, freight we being expense that's improvement nice the a some then it we that the on came should, with fresh

from doing across we're look you're to the quarters see come buildings supply inside on operating everything how in is front. how think from to the I team I the mentioned us the end-to-end an at going really chain things buildings. to the more we move

would the one. that So be second

later this us procure-to-pay, streams, beyond are things how the systems is going to I and core project, value stages 'XX. which move through then system systems of order-to-cash mentioned the one digital MSC that of we this That core, third, the new launch the that project, end be the mentioned the the fiscal will really X there's there. of unlock to it's of the which just next unlock lot be And for chapter. a will in sometime around

fiscal be event. So will a that 'XX

to 'XX category and chain influence can margin For you 'XX, and gross the on OpEx the of expect back supply management half line.

And our comes Baird. David from next Manthey question with

New Happy Year.

Year, New Happy Dave.

First off, your could on for us you count head mindset give fiscal 'XX?

softening is about saw What first so us beginning essentially to that's and temper that in the you far Sure, hiring. Yes. Dave. what quarter. saw the were quarter we've we we And going from last talked

So head of if the total More increase in came you up. than look, XXX% count sales. in is

the rest up count business the in support was down, actually functions So count of and head sales. head

of And really being the in things. the in growth specifically. sales was is up and vending a signings supporting X the function One In-Plant

there have, imagine, those the is. support we can more of the more As you

of basically to And we So was growth. the front The other business the the on investment, end view the good some of as business drive second down. a select, opportunities rest thing. that was

reflective in would the right say of we're the following I we operating. now, environment is Dave, are MO which

the current fairly viewing as the of half step-down as by back our growth in the shallow year. fairly and we're for temporary evidenced So outlook

I a head count to taking that's an not think moderating. dramatic you'll we're drop. see that so temper And to And continue approach certainly, but

were we a in playbook. if of think environment, you'd a sort different operating different see I

assume IP reestablish it. to clearly basis this could your on that thoughts growth And does can fiscal as discuss Got outgrowth related expecting through versus some you then economic XXX later you of And But year? improvement quarter? move year. the that, you your are points this you outlook also

that definitely, Dave, output behind lot some certainly some of we a share answer terms it is IP. The growth From see short yes. inventory saw in is and Dave, And change that affected see, was burn, a what's can function disproportionately in position spend to contraction, the it of market us. just things relative of compression beyond a compress Yes, And -- everything here. we don't yes. we relative

yes, by at So our the our is least short and is XXX focus answer on expectation outgrowing IP bps. still

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

pricing programs. on what reason the And you is web remember you can entails? had Just the pilot talk I just it the past in and I'm asking program realignment, some

seen out different more then X had things sales impacts had done made, You what on pilot. were broadly rolled like changes the force had the you and you than when it

sales So margins lift group. confidence just your accuracy of neutral on read control the the the the wanted check the on and versus to

Yes, Pat, sure.

goal while. So those web we're what us tell often we've discount don't structured -- is what -- where you had for a with interact I the present But program, and would all, there's is customers pricing of doing, so to that cases have first competitive. for a aren't

is to us. that the create price customer to market goal come So wants any to for a competitive

the that's objective. So

the we're through you're read good. a way XX%. accurate how the is mentioned and It's XXX% not XX% think I it's sure. I for is it, of where Look, pretty going I think

uncertainty? really of is but -- bringing project, managing to this in is course, that would there sound. rigor which that Of -- terms the still degree I the there's we're So it's certainly say we're

getting I team that a Kristen met specialists this basis. her team. Martina sits from But on -- and related some our folks a team this So combination are managing to daily outside expenses mentioned we're this. with tell -- getting in our Most can some standup expertise in who that. is and with of some of you own that help is have

transparency the is visibility, really high. the So

confidence my high. so is And

days? business off of going what these at the And web the actually printed is so percentage price

not could something low it's something publicly. we It's not we percentage, you but imagine relatively -- still competitively It's sensitive. that a share

SKU is late on In number happen SKUs did the price is of and there changes price Are SKUs, net price an the on And first was of the an terms or in it like changes? increases that equal -- decreases? after -- of timing-wise, equal XX% quarter? the the those the there negative

in first So is, what -- of a balance. say than happened little through I there halfway it And more a quarter. was our yes, would terms fiscal

-- some to have down, our there down pricing that the that higher, in inside more prices for imagine I along can went some went salespeople, would went with that the up. were went up. were you were through would jump hoops But our customers. there if say past, really So salespeople, came the than

margin-neutral to So you along get how outcome. guardrails that's with and discounting a that came some

Got it.

that Or through. Okay. you that given And also deflation like isn't then outlook seems the there coming you're where X% expect basically and seems you It are this all? could like on price pockets just on of push back X% of customers initiative increases? kind seeing maybe provide then too, isn't outlook like and you're to and tracking from categories a cost further stable there it at product much some some seems favorably, is much color it drag maintaining there pricing any

Yes.

as than now. more noteworthy would but I remarks think describe concern it's the our going we're say share in on to about because you. our anything, used in want unusual are not to stable. price Sorry environment not it. the I It's deflation did any been seeing in prepared see interrupt I relatively a event, but the it major price and products. would And history going word meaningful deflation we're there's to up not seeing I I stable. anything, mean we increase price is be to the it If

from was drag our price pricing goal the for roughly program, the the with of whole the first again, terms margin-neutral. beginning In web initiative, tranche,

coming where means saw. disciplines So that to down we we were improvements more by made, gets from any is prices that's there drag up what and buffered what discounting

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

this and for interest time you your Thank morning.

in events As call. 'XX for investor forward your March This set other our thank person seeing a XQ We you XX. months. at Again, you now look call in concludes and for to our is earnings the fiscal date time. coming conferences reminder,

and have and lines, your disconnect Ladies may you now you. wonderful day. gentlemen, a Thank