MSM - Earnings call transcript Q2 2018 | MSC Industrial Direct Co., Inc.

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Operator

Good morning and welcome to the MSC Industrial Fiscal 2018 Second Quarter Results Conference Call. All participants will be in listen-only mode. [Operator Instructions]. After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions]. is event this note being recorded. Please now John Chironna, would like Relations to to over conference the Vice Treasurer. turn and I President Investor of ahead, go sir. Please

John Chironna

Thank our conference Financial call. I’d the room our to to you, Chief are Officer. fiscal Officer; In good Erik and me welcome Jilla, Gershwind, our quarter to Executive you everyone. second XXXX with Anita, and Chief like morning Rustom

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

Let under XXXX. the me Act statement of Safe Reform reference Harbor Private Securities our Litigation

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

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

Erik Gershwind

it Good John. in quarter. quarter, create progress to our outside in the that’s the second to manufacturing joining continue MBI who’ll the XX.X. I’ll at to XX.X, thanks readings deeper reflect quarter promising second for mid-point February our the share Together, environment future. this, above our gross look at the have held third through remained with environment environment XX.X, as Adding January strong average metal backlogs XX of and future current end Customer on business on broad both to reflected to growth working the MBI and pointing brings sentiments conditions. reading March volumes the XX.X, order positive rolling months This markets. continued December But at a at guidance. first remained in XX.XX, sentiment Conditions The expansion the quarter the the the opportunities. reflected firm. financial they of for and highlighted today. provide outlook and our the encouraged sales Rustom, of results share end then above you, both expectations Thank and The above of and for show strength detail our I’m contributing to morning, inside by margins by on company. and quite a additional everybody slightly of earnings the growth top high-end over happening us in strong incremental and guidance, our per I’ll continued guidance. margins results

strength. an of yet. tax comments areas forward, impact automotive, From were the about on to going of not perspective, manufacturing seen manufacturing a market reform pickup potential continue aerospace, hear all agriculture environment as we positive end heavy have We though the of and

an that’s expected. seen pricing the environment; to Turning improvement have we

benefit positive in our pricing which saw QX. in a just of after in turned fiscal solid. been yielding a and has in quarter We benefit increase The implemented we As anticipated, the contribution the price some January lift continued in realization quarter. mid-point late increase the occurred moderate second projected and third quarter,

Looking increase. supply ahead, which bodes we anticipate future further mid-year This in of pricing. for well included price was movement, not our

sales in of line growth was discussed levels DECO January each Moving last excluding the for X.X% to December rebounded the we growth, guidance. difficult quarter, to our quarter, as February now and it mid-point at comparisons in while faced with month. stronger

was accounts CCSG both digits, a the mid-single quarter, accounts digits, growth core digits. spending and high-single Government national while the environment. maintained the government reflecting grew tight growth the in also mid-single in For in

potentially Federal up With finalized, due pent pick we the budget to now see and demand. up resume spending to expect

and its DECO well. business quite of the continues the integration Finally, double-digit growth maintained to progress

e-commerce, to overall and year as from remains and in The of were both last the same with it overall quarter, was sales from e-commerce our sales. quarter trend slightly positive the modestly XX.X%. XX.X% of a Turning quarter, consistent at increasing percentage last up

sales contributed quarter, As for sales that I’ve slightly Rounding In roughly half second X.X million, from our of e-commerce quarter, saleable solutions the vending of machines our inventory basis and sales. SKU points customers results speaking vending, for to less last our managed total mentioned before, slightly it’s net count selling. all the automated over up vending Products just growth. important XXX ended quarter. second active of through than go total e-commerce that account to sales forms note vendor our of our include

improved ahead rates. we are fiscal growth third to expecting Looking quarter, our

again. implementation Given while be a to force year should because of bit that through like will the and in will increase growing moderately an initiatives our pricing guidance an current once demand in I’d begin and This benefit coming I’m sales organic next greater headcount quarter producing fiscal environment, more. sales is high-single this combination our growth sales we as to we confident third see headcount effectiveness overtime, range, and And end, and move the sales in year. rates. of should that effectiveness digit deliver us to are the we

sales change bit wins a from to rate and positive front positive leading of several significant step seeing growth benefit as in an on due lines. people to immediate from takes expansion, force time I’m won’t be feedback also wrap and customer the Of course, including recent sales there up. those indicators new the

to company, year the related beyond. outside accelerated of the the the see over tailwinds additional balance from we of tax spending to capital potential Turning and for reforms

For all outlook these reasons, of our Rustom. for turn remains growth now to sales over things I’ll positive.

Rustom Jilla

And Thank DECO’s remind break you, turn in fiscal Erik. to I’d let’s we second continue quarter will now report Good impact greater first like that to morning everyone. detail. you XXXX. out to we as

sales guidance. same in and the with daily modestly than slightly better at year was the and by versus last X.X% in growth line growth expected. expectations average DECO quarter Our sales X% above that’s quarter second double-digit our mid-point of Organic increased was the

the Our quarter, high of gross margin basis points end XX the was above our guidance. XX.X% for

Notably, our quarter prior with time this also XX ago. the increases. and almost was outcome a that result our DECO, least year pricing net of four of above the gross was years guidance in and course managing gross year. was Excluding at basis the cost the and supplier the And mix margin points solid flat of first was same with margin high XX.X% end range this our customer

points operating X this million increase costs. from with million and variable XXX same XXX a the ago. expenses from volume OpEx roughly dropping We year quarter continued to our came DECO million versus to of basis from million was last in XXX About related control year. OpEx sales X

OpEx-to-sales points that’s last and was control as Excluding our spending on offset improvement a year’s increases. DECO and productivity of XX.X% XX inflationary investment cost QX, much basis and

and the latter DECO. was quarter resulted to the jobs organic growth. second operating was as of second our successfully second our year EPS $X.XX above act, guidance balance (inaudible). rate or the the X recent our margin fiscal tax outcomes. margin required the The incremental quarter expected an sheet same guidance ago, expense fiscal tax total negative impact XX% expected bring on improvement to broken leveraged sales. points This in for excluding tax the reported cuts leverage and year on Due XX.X% Our rate related mid-point quarter, we in true-up quarter in $X.XX as was the beneficial our higher in XX.X% XX.X% a above tax XX the basis of expected first second shows a the was we guided half impact taxes X% quarter and the slide EPS mid-point, and from alignment our One-time had was full actual the the items our comparable revaluation and to in of with out

$X.XX, half out leaves the second comparison, up mid-point out benefit backing this we in the of was quarter. XXX% apples-to-apples, us reported one-time of tax $X.XX; true-up an would From our above our EPS of $X.XX earnings the share, with guidance first of of range. net year-on-year strip last which All XX% EPS from per also resulted year’s roughly

as was strong will continue chose increase from the times. three operating net versus to tax sequentially balance of focus. course XX to X.X it the flat one-time Now XX advantage, net utilize items. as related balance revaluation seek competitive days, in to course an activities our quarter also area excluding the the working a turning at DSO turns of grew our during but be sheet but we was due purchases, provided to down non-cash will the roughly balance XX remained to but cash basically last inventory first million Inventory sheet, quarter, days We our year, by million Net of capital. income optimize our increase of sheet

ended million capital expenditures XXX subtracting facility million. flow million net fixed We debt, our XXX by rate XXX credit from term free revolving cash in the on debt. and was and comprised long X our provided capital were of Our quarter mainly balance second with cash of expenditures activities, million after million XX operating

cash in was unchanged We also and XX at and with equivalents ratio one-times. sequentially ended leverage cash million our

our and shown now on third which guidance see DECO. the slide of can XXXX, let’s and without X move you with So to fiscal quarter for it’s

from includes to increase by to approximately X% year XXX the This organic We expect ADS at points XX% prior growth X% period. basis versus XX% DECO. to

cost was holidays but basis XXX basis stronger we points and we growth as expect had April organic Our our to March around rate we a a about XXX preliminary result. in X.X%, points which March, much Easter in estimate us

nearly to has we points, margin the to offset basis with both mix We impact points been within be by pickup basis contribution. to XX continuing accounts minus and passed price. and margin sales base due positive expect Compared flat growth of gross last Sequentially, and the higher headwinds that’s year-over-year DECO. margin of mixed in third our an expected year, business sale, base now that expect XX government than to DECO’s budget more we be due national about with up plus gross being the from down XX price quarter be impact the gross to by offset business XX.X% or basis expect to points,

X The approval expenses inflation. quarter different milestone expenses sales the of Third numbers. sales so another spending, XXX year variable approval as to and OpEx this ratio million with Last effort. X with up ratio for the million. it’s Notably, to is five short our another was fell since be under bonus third team higher with OpEx and this last Versus the accounting just required, cost around associated XX our is operating on medical course inflation is is million, XX%, due downward an adjustments reaching guidance. XX% we bonus based this and investment should around targets under million, X was and years a mostly were year’s significantly QX been of remainder to lower sustained quarter, of DECO testament of a million salary at year’s midpoint

this we improvement ratio year-over-year Excluding to by expect OpEx time XX sales DECO, points. basis roughly another

operating to of should quarter this in translate All margin of another expansion.

after target. guidance, We years’ improvement the XX operating points QX At margin roughly quarter’s the basis headwind midpoint months operating XX.X% as our We be mid-point quarterly would XX.X% approximately to X annual solid absorbing guidance basis incremental frameworks within margin in the nine over also that’s for from XX% XX% to even that and operating XX%, on our DECO, incremental be long slide DECO. a of points excluding XX of expect you third a take margin to last with our up the we term see around line well X. first and would to our margins can expect that

a is we includes with share based the tax in rate and compensation. third said for consistent from this quarter XX.X% estimated January what small benefit Our

plus our average X. significant have EPS not diluted that And our We also do details a provided weighted or that on expect to lower our in note additional a ADS range. counts. in change in XXX% Please rates tax tax means wider note minus change range effective on share rate guidance we slide translates

XXX excluding EPS third third midpoint than to the XX% So range be benefit XXX. guidance for lower of last of after to is rates, quarter Erik. turn higher $X.XX over I’ll guidance, EPS the tax Even XXXX would now at the it fiscal year’s quarter. our

Erik Gershwind

that you, to Rustom. the now some progress conclude and Q&A. we’re I’ll move Thank making remarks about then with we’ll additional

we track with of First, strategic the remain our on execution plan.

to focus inventory high around touch, of the deeper other also business. technical and growing ways a company. management C] technical that Metalworking, look continue mode that touch are and mode solutions all high for We our areas. are examples these of growing areas We’ll and by on areas to deepen [Class creating

the demand our inherent achieving environment are growth and the improves. we Second, leverage that’s our revenue model business in as

efforts, with turned on productivity range. are now term in gross and has positive firm achieving gross pricing performance, our incremental As target contribution price conditions margin ongoing resulting margins improved we our up, long our

As good for we’re this line environment, a effective even and coupled the growing to improvement the open potential force We’ll better. questions. future up our that the is, sales more that driving be the the has in now on focus seeing as productivity with means

Operator

from first go Please with Instructions] Sachs. Evelyn Goldman today ahead. The question [Operator comes Chow

Evelyn Chow

on First mode. better deepening touch love question, the technical high made and to I’d understand you’ve remarks your

about you you in gains. Specifically, to pricing through to more share what in to how them think your are engaging do as actions well increased have as kinds of and resilient ability read

Erik Gershwind

Evelyn, good Erik. it’s morning

for the on First of story. all covers us. you up to Thank welcome picking

customers’ of helping this talked them for we’ve plans about terms is tracks heart really of company’s being years back money. of north mode around something star, which get the as a improving number the out and strategy. more productivity for in less our the deepening to It at of and So is their

do times we that’s most one we and number deepest, metalworking that to which solve products the technical its and often manufacturing is, attempt so tools. ways; problems metal cutting of in a And in cutting their of environment

So but knowledge, to sounds easy, it of know-how takes that awful do it lot experience. an and

side space. as business suppliers experience heavily and well. the our the have sell years buy in of and side years We we of on on lean of So the on the certainly business, this

the identifying where floor So help by the and that be improve refer first within metalworking would improve places helping and speed under times. on up really anchored customer’s the customers I’d platform lead our productivity idea also sort that’s guidance of productivity, our of other this can to plant their we’re we

example so managed our take And avoid vendor the I Class using and turns where the solutions, called for C, over improve plant we’re out inventory management to really CCSG business their as headache inventory another inventory outages. customers,

driving what can Beyond we customers. take mentioned areas within same looking constantly that productivity for the we all other is, are that business where anchored by for approach I

Evelyn Chow

expense, to first gross like taking a seems helpful, talked down very to sales to margin And the incremental same great turning that’s the then line second, margin time Erick line half. it, guidance implies operating productivity drill while increasing versus you’ve actions, quarter, performance the in at EBIT on love about XQ but Got and maybe for the this obviously [head]. the

understand to we love would be away OpEx. should I relates message taking just as it to So the

Erik Gershwind

correlation. and draw around I here the gross is think Evelyn, the its the But turn we’ve a to to fair correlation made highlight between think to gross of you did performance, it’s ability to a environment. for and question one, Erik. the going Rustom had margins competitive the you’re the point do I’m strategy want the one the it which I I mode and to that deepening correct incremental OpEx. in sustain margin

turn I incremental the it on storage. with So that to Rustom will

Rustom Jilla

our impact sales we based timing incremental hiring, on begun but people growth, OpEx impact both The the the small. sales OpEx and quite have on be and in on will of F’XX

do but We to but incremental on ‘XX an OpEx they our will much this not course we of And realize XX%. of through fiscal offset to to start target guidance, sales margin too F’XX, year. effect the expect XX% of provide to in benefits by of it’s range are most have early

Operator

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

Ryan Merkel

number to quarter, much was color to years. price Erik price want think I don’t detail, just but next I was time positive up reasons basis more on points First was the it a I mix a on for you hoping what want too we’ve two this seen peer first was the in little give competitive start price XX realization And what for (inaudible) was? the realization. and

Erik Gershwind

about I’ll provide, giving so a it’s can some I for by me color little the here. I give Look about then on right, you area you’re help let increase I so talk careful be us, start sensitive Ryan how think itself a realization. and but I’ll much

So that as termed we the first a thing I’d moderate say size it is increase.

date, slightly X%. where be, was price. which any mean what we It is moved based just in opportunity you summer, color the you to thing growth think, we suppliers is moved, referenced The I is captured realization, where the to our certainly our suppliers saw it could by So best anticipate line on did was movement. the the had not down create our which in there future would think driven that would have some commodities would around to stats road. decomposition, metric (inaudible) we and With I a we from the where that above respect increases point the which increases, was increase did that’s there seen to

mix. are Now, price and correct, you it is

I’d parts to QX. are look point a moving QX what at there here. But take So you to,

government some mid-year is contribution the we pricing QX That basis in to QX in and little XX action was plus because shifted a QX. points. a that in were between the was difference took. a QX QX. that bit points mix price said, down primary influence That there XX sales minus So there Certainly basis

Ryan Merkel

Got it.

helpful. first, guess And hiring people, that’s any on have the sales then details disappointed questions, you other been that secondly, key organic mind? secondly little I And there with you what growth give mentioned, a are and you pull? then Okay, Erik can your you were and two recently, in issues what levers can

Erik Gershwind

guidance sure. over the Ryan now now the the I producing remarks, didn’t related I in next environment the think pricing of so, environment we we’re the the said implementing these were demand QX we there, them, primary hire. too was like I seeing higher. should rates. winding connected prudent the be is digit to to will And then one, the environment, as factors in organic now begin implementation it And connected the they The initiatives, the see what more. changes quarter as to is I growth are range, we sales got see of but that right the are; I’d in until headcount. that like effectiveness the we describing, been be right hire. to prepared our initiatives Yeah, that lowering business certainly wait with we’re some to as would to and would it to and think down so the the high-single point is reason between we’re implementation of and through or we’ve sales We because, they’re and of wanted and that bulk

time the moving thing to following would tell lever that’ll the we help effectiveness sales moderately as in that new from sales place. look a Rustom the and have encouraged. And there’s of long now of we biggest point gamut and from and and we drivers to up. of things, know growth people, have, but terms that things other in our lot described. of out, of we’ll you you the I proposition, other take look to wide I size composition rigor of So the that I’d that those sales then headcount that is look a that as value levers, all do we’re of on point levers, our initiatives story as a bit in terms forward, I’d they Obviously, sell wins, at and I ramp using through I’m would time, as the we’re that think as we management to obviously grow penetration biggest we’ll well we probably it around have, portfolios cover how sales account account and

Ryan Merkel

it. Got

in think then lastly And Okay, to the gross fiscal I [XXX], third margins, that’s helpful. QX. I fiscal quarter you’re if could, core on versus just in guiding [XXX]

wouldn’t expansion with So of a little some especially stable given there a you’re is why next the result, headwind, that good just seeing but pricing sequentially? be now, bit

Rustom Jilla

think come ramp and a does pickup down you right be in answered it seeing It come see we’ll mix. - down signed and has I that with government come now sales that through. that budget been the does

out, fundamentally is but XX and question Our business fundamentally up was from year. add business, so Erik year. nothing sequential, as last really points it’s as some that. price, your we’re National Accounts I up I mix more expecting well, mix. (inaudible) can it basis mean last nevertheless is know It to that more there’s I on on It’s points

Operator

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

Adam Uhlman

if could additional sales with was wondering the you people. plan on I start

I sales more X% guys? you just sequential Should you headcount mentioned (inaudible) growth. will or your of think expect in in than the measured new of moderate we that, lower something be like maybe much range Erik,

Erik Gershwind

see over balance us I the sort say start. I certainly this we’re throttle something of start, performance I up moderate start I from plus the describing be up. that performance, to could when about historically a fiscal if I to talking the new the number out upon Adam to factors; you’re X%. we think what look better and done kind throttle addition. at and is what environment that, and one, Yeah, of how The and mean or the more couple moderate based think the I we’ve the conditions of likely And more we’re like seeing out macro, But modest two, ramp would strong more of what of down than would say than that year, think you’d X%. more I to And the than

Adam Uhlman

new that And that. long takes like, a have that seller new programs up? a still timeframe, it these to year maybe sure, of me then remind I’m maybe for It it accelerated takes but would done over some would how seem for not ramp you’ve

Erik Gershwind

you’ve and as a somewhere between for typical about well, months for historically XX profitable. historically the get followed as XX reps Look us start Adam, really the know talked you range while that when we to

we’ve You’re done bunch things sales would on we of effectiveness that correct, of and my historically. wouldn’t here be looking historically ask need little we if look me growth quite forward, now as expectation a would the the that right time get and you we front, to a that as add did better, to the kind many breakeven produce did

to we’re that So to don’t think going on about the tracks I we be will to aggressive. aggressive back question how first ramp? need your be

is outlook measure And have. upon we is as what see my we of the we’ll positive. again that results So we’ll do and based kind adjust

Operator

ahead. Ryan from go with Research. question Cieslak Northcoast next comes Please The

Ryan Cieslak

expectations think? question First maybe Really from for do expectations though your really benefit margins, on relative drove only about quarter. month the one you you had price it the upside gross good even to your the is it of like looks exceeded but what increase, see, to

Rustom Jilla

didn’t more certainly and contributed. about We mix in a we government bit perhaps of think quarter I see that. sales little seeing the talked

on combination a margin of bit little a a of it’s in it’s very all was that the gross factor. But those fundamentally things, terms very, performance. second pricing, a It’s of margin was good quarter So It’s of quarter the Erik, factors usual assisted how work discounting and to? stabilization mix. stabilization want you little that. just and all gross you of a Well by reps bit terms in the

Erik Gershwind

it, that’s think Rustom. I

of have improve, things other kept the it now in and one look this do it comes tools, add mentioned the opening is, and I of productivity idea focused we’re think reasons some of to Evelyn’s as But Rustom about just on down discipline, only strategy years think ownership. back Ryan I of it, we really price the total that And and the fact and management. remarks, pricing is etcetera. customers’ last to through we’re couple it science I’d thing and able a to cost of improving lot certainly discount

business, the of it mode the So I helps. think

Ryan Cieslak

forward there do that that that of benefit, internally to pricing beneficial work doing still half can Erik but that you is get gross back that the year, you in things are the say going tailwind meaning potentially you there there’s not margin would guys that only the elements some line? maybe some are still

Erik Gershwind

I there that for so balance move, mentioned Rustom it our don’t anticipate to gross dramatic up, (inaudible) we’ll headwinds, have, revenues, it pluses and not. do that say a would would know what probably of expansion, Ryan, the generally government kind Realize dilutive be the I will we’ll but minuses we pricing usual absent to pick to helpful which consider of tailwinds. be margins.

though, looking than out, those one I would So out two pricing. a headwinds. further place lot of of some out quarter further the practices we’ll put in the or call from is here next offset will The

from hearing We are more suppliers.

our saw in again for price calendar year increases. of So we mid-year account the come what took the only turn

if cycle than our with time, we mean earlier. bode summer. of late usual late could as things we next We and summer. that price be which not, to we year, are sometime right likely really hearing if more again would more fiscal heat Always from I suppliers in cadence see this our up, would move that always the for well expect would it be will, increase, that since continues reserve likely

quarter the So two. lot that we look us as next optimism beyond out of gives or a

Rustom Jilla

been and passed to to ours of lots just that, then on to going support, I has of in what were terms which focus Absent pricing the on. strong absent was continued of say said, Erik sort Sorry. increases reiterate successfully supplier a per margins on gross of of cost fact value se But stuff gross margin added providing strong service pricing. that, stabilization unless counting all you increase shouldn’t big the really in are be that sales and that like the there’s continues. and discipline and we

Ryan Cieslak

up Sure. that the That’s good now expansion. right are back to last queue. then the just margin and color. I’ll putting Really jump it. And one you incrementals good my see operating I into in appreciate guys

and is margin you Erik do this for off there, in something the You you or know profile get side or is keep term ability how the mind margin everything at about you’re on right so, guys the there. I like go your that does it back might long think in look Rustom, from I margins or peak XX%, op away still XX% you do prior At gap? direction, how to back that going bridging to point feels forward? there which limit think working about

Erik Gershwind

the back really range my to goes that we’ve Ryan, answer stated.

it could way So to that XX% we do is yes pricing our in enough blend period I normalized environment to happens, really [begin]. will that demand, that if function we the XX% normalized time, pricing how think long is, incremental. a is a Theoretically teens. When environment happens, revenue happens the of what that growth fast and range, kind high kicks about for if back of how we call of target what

As we’ve in we XX% and XX% said, you’re end toward and QX. trajectory, the that we’ve move set to pricing better high QX proof look, of range, seeing that the environment, revenue of

Operator

ahead. with The Please next Susquehanna. question comes from go Robert Barry

Robert Barry

tailwind you do that will be a to in one expect is, few the a Just things timing holiday clarify; April?

Rustom Jilla

last April to negative XXX over estimate because and our into XXX splits occurred Absolutely, March, April, the holidays in just that in roughly we year month.

Robert Barry

was negative equation? year-over-year mix then the And that the ex-DECO, flat; gross margin, a year-over-year in on so on basis

Rustom Jilla

positive. equation negative pricing was a mix that Yes, and in

Robert Barry

know And now, the there, the tariff current I okay. thoughts? but impact any commodity proposal? what positive, around are your lot on to a cost moving a it just stands just as under things are thoughts business the Price

Rustom Jilla

of tough one, point a none That’s completely fished been out. stuff at really this has this

happen. going know don’t what’s to You really

generally speculate, includes pending of at The function price the to inflation, higher course. have – production And of are that far it’s potential coming is impact a for in. distributors. some that be inflation industrial early tariffs increases too or and degree rate again, would of So a right this commodities cost matter trade too speculation, point. but impact for it’s increases costs early is we of so good seen war And one potential that of

Robert Barry

say you been doing you consistent more kind or that are those with what are the less? any And have are would you all increases competitors the or doing through, prices of putting

Erik Gershwind

to we and Rob our the about I by they’re are That is doing. distributors we’re would that to that’s when well established really in competitors. more them, pretty way the with doing all us suppliers time. than competitive behavior suppliers that for it’s move, along move Look what increases the Yeah. think what will monitor our date industry driven say

Robert Barry

just market? line So the with in

Erik Gershwind

Correct.

Operator

The BMO Capital go question Graham with Please Scott ahead. from next Markets. comes

Scott Graham

- if prior back from increase. was at transcript guys moderate the "a I pricing; increase have wording years’ you price this release expectation the last look then from levels." price quarter, two larger was questions I than considerably the hope quarter on first, the And press

maybe are much that a quarter, too into delayed three a reading net lower expected price the bit or into more increase I am So you you versus maybe little months than ago?

Erik Gershwind

is say much Scott, so into a line, increase bit. in I no. maybe The would pretty reading it

everything’s felt perspective, by three where belt suppliers doesn’t our commodities more reason of about it discussion and today, I’d the among were color is movement. is Sitting colored the three that language big, as there’s think is offer under months feel we inflation another where it our relative. and more sit we Sitting big. ago, of months I some

So to ourselves get that of by and coming. I was get increase, look, mean the I future of what thought could was to that, intended signal it what we anticipate be we think with movement ahead not ahead is decided ourselves

that are here seem is happening going perspective anticipation to As different. little it’s happen, make there like we so that sit discussions suppliers our and today, with a

only the that that’s think I thing changed.

Scott Graham

question in it past. is kind the we’re doing the the doing today of second pricing really versus were on way way it we My

or over supplier since with we’ve taken increase Erik, company you kind really increases. wasn’t it the maybe it Can’t too that for think see a question and cavalier I’ve seen was in the market that a days prices of pricing with while, step by, in before. of we like does But know, this, type as do price you’ve the been broaden from allow you I strike But we just guys get not gone price out? do in Can I front is suppliers guess need more? we increases pre-emptive the anymore? to

Erik Gershwind

scientific capable smart, we’ve in the our back to really is would really into around we introduced use biggest that a from more say maybe some approach would I a say I science years word and the to people difference would brought who is, discipline now Scott, pricing So company. I there’s pricing in and that the

So I more just describe it would scientific surgical. and more

now, pudding, the To realization. but I back we’re getting to think a and with do just we proof will good here pricing but off the start over in Look, we because think the to better time should I benefit the biggest get is Scott. the proof again in be will that that’s pudding. we the see see me realization, pretty be difference, we’re

there’s it of for better of in terms to with a ahead the think realization sort just manufacturers again, getting opportunities increase. pricing, of doing big, of I manufacturers. in it [difficult] of But effective the the more and what gets outside of acceptance a is think generally, pricing lot I keeping price

Scott Graham

it’s But at maybe It that’s time gross before, now has on sounds used it market? be it Again, a of cavalier like, at. basis. same to be the surgical because because I’m what but to of surgical is it more Erik, too getting the kind also less,

Erik Gershwind

should on to you��re back our you It’s had inflation, way that. I you more think to we’re sustained days, Hopefully pre-Erik I to thing movement. an a I would time, start, say the commodities MSC. going back the see biggest from, that you old if is encouraging commodities to markets. from commodities In now the of point the to at Scott, think take enormous period see go look pricing days, to

the think thing that’s biggest So point probably I to. I’d

Operator

ahead. question go Matt with Please The next from comes Duncan Stephens.

Matt Duncan

the any I’ve of would question out? February. there that call could should is if first that and something we you first month-to-month had there, Is in in weather has at last four trends what row be thinking the of think kind got Is of about to just I Easter sort comparison? sales understand the looking hit week your trying Erik. technically month-to-month So, of that impact anything a stream was North have that impacted

Erik Gershwind

the in Matt, March XXX we big saw out basis (inaudible) call as it points. big timing, Easter to the that the didn’t was you delta XXX driver,

wasn’t that couple lying there prior the were if we’re and I at in or the You be in above some we North told back I’d March you put in East. noise of where months.

We’re Northeasterners here. There was a Nor’easter coming every week.

to. So did it think have an had that impact? I

impact? So hard to but some Matt, quantify, there Probably. was

Matt Duncan

I as Okay. much. figured

try basis I price price a that toward the to in XX that inflation? Just bit price to said mix that little month-to-month thing until, next Is going be price change prior January. Erik, put inflation, characterize periods in relative there this end to of if let’s didn’t right digging pointing then didn’t a through of in, pass that if And on margin you And gross extrapolate place to want you your this would was. of more discussion, X% you terms points, the the to through range it the Is up, forward? to cracks thinking? the through mix let equation normal call X% just slip somewhere environment to ability of as the

Erik Gershwind

mix wouldn’t read especially a the moves lot. I much around wouldn’t about So too the about read go-forward, go-forward. Matt, because too I much

good ability a Your about pricing to get the question through. though, it’s one,

going? prior were times, where now that you So versus was

Matt Duncan

you? Essentially, will, price different upsetting cart any, is curious yeah, if I’m you is still transparency the if anything or this or apple is normal to

Erik Gershwind

questions. revisit the I I’m It’s building. is two so This more to with Give want the response me. in hate I The ask is Got we going far, the that you. mid-year punt this early. increase suppliers move saw increase one quarters. - Look, first commodities that me really we to you time so took. first to or to inflation

Rustom Jilla

that period in about to actually point going there, your cut inflationary now. think was I because I don’t

turned has period. it early before. still an not up, it’s in it has was from But It We’re what still picked inflationary days.

Erik Gershwind

say so see good. so happens. let’s far, would And what I

Matt Duncan

efficacy growing fair there? sales sales Is the or why thing, environments you’re past, that X%. force the you’ve heads it at that additions simple growth And Yeah, seen is And just grow like stuff you that in to the less enough. anything last grow you you’re certainly sounds answer planning. than sales we’ve don’t than the fast. on the doing faster headcount sales as that count, the there it slower been force means have is as play else In

Erik Gershwind

Matt, be the yet is we clear answer To haven’t grown Yeah. it. yes.

chosen want to be down, the clear, come not we’ve certain and is down to positions. reason it’s So I replace it’s come

initiatives. of some silly that reached so And we point. these it’s said We’ve until get we through

So down. that’s why it’s come

because always etcetera it’s with do be results to rates us, the work had grow we that achieve you’re but we’ve turn saying in - go. from see growth that it’s to never you of In moderately grow recruiting, we’ll we’re and we’re used terms on bottoming the on always of calling it’s that predict what my quite back it hard is, we headcount, how than now the Based But month that to to uncertain. that to we done, exact to is yes, The turns would going answer can it more what headcount we’re up. continue would and the and count basically order will the expectation kind in past.

Rustom Jilla

our all as expect investments productive be add, with and productivity, would last and forward. more we’ve the the in sales made, sales we over couple that small of to years, effectiveness we about One we talked move people

Operator

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

David Manthey

looking To regions? better and share maybe weakness rate so to Midwest? range, that in there different up relative the like west off, and northeast, quarters market southeast, strength the to future on that, to lead will seems the to just be in do growth regions, at you relative grew First less. and And will what those in X% gains the X% which follow the a attribute even or what

Erik Gershwind

Yeah.

regions, in outlier. bigger capital-related down other to; we few combination the talked holdback much the two comps, outlier. thing had the organically seeing thought be under on the weighed I the government We last point is, really Dave, growth out call we realize We December. about purchases. an X% QX it rate it the going it belt so think respect DECO December Midwest number. one little to thought a biggest numbers. a a was did of would our be falls, and pull-back, an was and things turn so the on, It over a where because you’re the things in December to I’ll the it is With is

So that’s QX story growth December. the the behind rates was

be. Going they where should improve, close seeing you’re forward, getting to growth rates

expansion. my As I look remarks, going I catalysts in effectiveness embedded quite, are not there biggest now the and said think of and the be sales the sales initiatives beginning to

David Manthey

from recapturing just bow either of are prices point put to then or you’re completely suppliers without that pricing And you this timing? Okay. amount this saying your on slippage a discussion, at

Erik Gershwind

followed Not I sure it.

David Manthey

X, you same same increase effective and If the to through market that’s to the that and prices giving price X% time a magnitude? February you push raise able you’re around a have supplier the

Erik Gershwind

Yes.

David Manthey

going achieve increases And that we’re you Okay. increases then that already some price about forward, reason are New the we as able hearing year-to-date? believe have hear forward the price same larger won’t Year there that any in look that type cases. you Is of that I much to matching than we be that should

Erik Gershwind

No.

Rustom Jilla

way, the By X.X%. without Dave, Midwest DECO the is

Operator

question comes ahead. next Please Stifel. from The with McCarthy go Robert

Robert McCarthy

the me. pregnant pause. Excuse about Sorry

yada? overall? and you’re call. just a and cycles, guess to marketplace a cycle, could context yada, the seeing or inflation according stepping of are but EPS the horizon? online you differences first short on dark thing, you some constraints having seat clouds of better only a similarities this environment short are here? versus kind of leading challenges a a just conversion words, material robust not other good we what what and of In seen the environment obviously the realization been into follow-ups, (inaudible), go back material yada, the and basis, cycle obviously just covered see couple price in rebound In growth the I lot the lot a has a management familial is Erik, do the of on see pricing Just versus better evolving any inflation now and Good the as on time

Erik Gershwind

benefit about two Rob, I’ll up about distributors Similarities, and then things similarities momentum, we the as cycle from differences. pick this be and as movement, from plants talked what customers very their same time. the with I the benefit on get on door same there’s would see running things the Look, the product getting we talk that’s a keep there’s the One customers start commodities price at and when question. would deep is way as are a because focused they product and because getting paramount. busy, little to less focus money out time, make door inflation, in at

So a of lot those cycle I think for opportunity in to distributors. the me create that are similarities

Each what headwind. said would business it tougher, differences, of gets I In change know out an and a years step would terms gets call it have and we XX cycle, we’ve talked ago, I said it’s as say, I this I and harder. this competitive time, about function don’t that it, years would have ongoing competition five intensity ago,

tougher, digital gets it. look, it’s and So to there’s web harder a But - and so always competition certainly, there’s time yeah, this harder. element

You’ve results. the biggest be thing got I’d out. the call same smarter smarter produce better That’s or to to and

Robert McCarthy

I and that that really wondering, environment. news of cutting Okay. and question the to or into more anecdotal and some this call. giving on get investors this, bears the share whether mail oblique in just your you some are that of that are the questions right losing are receiving, increases terms think argument are And seeing, do that is in response you’re potentially wondering Basically just I’m having on But I came this people insight is, solid some stock price flow want we realization. the to I think basically viewer here just through on

in a in Do set share, you’re losing not us? kind the saw. level that timing But losing answer share? other and in question. the out losing of you you share areas, compare some are out certain you it call Are weakness December, think could you Just you did existential call did of is thing? you that obviously compare Now, just we government, the issues

Erik Gershwind

where But when doesn’t points perhaps growth couple just others’, it What not look of quarters growth measure over works here; as share number you years, very the one, the tell thing I share I on it is of as share. Rob, think a individual making Look, when not and right as months. you, asked rate I’m historically. - on we and much same your have great, we too is taking months, important great, dangerous the you glad we’re not which given but looks start outright. movement now, to we’ll tell we rate the do if rate not mind losing we’re think or no, I’m Yeah. glad it’s much will I growth

is The time of a effectiveness is, last the quarters, we’ve big look, head thing down, and programs, the I’d the thing executing headcount been same point sales few really bringing down. bunch to at for other

with that through growth getting to important to capture I be effective if and step share, environment. us. from look We’re and an through a sales it more And out expansion, back to with was more the turning to this force that, historically for expect MSC where and in I seeing us I used expect you’re

Operator

question go Please The next with Capital. ahead. from Mazari comes Hamzah Macquarie

Hamzah Mazari

improvement late a but thoughts to any had know as inventory there? of chain, sort your and question chain supply any provisions, had I any the and around supply for last some further room that. lower optimize Just year room you to

Erik Gershwind

by on front? specifically Hamzah, it? you can specific? inventory be the say just When you you what supply I’m mean You’re chain, more not sure speaking

Hamzah Mazari

Yeah, exactly.

Erik Gershwind

yes. Yeah, I is answer think the

what hit positive us. seeing Rustom and is that you’re opportunity sheet in the quarter, seeing some referring weapon having you’re to an you’re I pretty outlook And are when good, it balance If the is on this to us opportunistic buying times do inventory a increase demand. for think

opportunity turns? as kind about our balance Rustom quarter performance said, this and there to just the decision to but increase Sure, of advantage. is is more So seeing inventory what to you’re sheet our use

Hamzah Mazari

a you, a bringing since allocation share. Erik specifically, and behind year you effectiveness the and you four time, Barnes, de-lever initiatives we mentioned internal expect issues, are M&A? more Can M&A may behind Great, as some that that a sales capital you of then this headcount you. we there At did at be strong look you internal capture when and maybe was DECO. not did pause, guys word, some given down more you can same and issues, then, sales is year XXXX the did until effectiveness But

Erik Gershwind

moat always probably Erik the have Hi, talked that Yes, actually first can. competitive it’s about funnel, you and the Hamzah. context internally in the in a thing. also of We

look do funnel, to and So will stick and at metalworking we high many, look continue. and we discipline having for to made to at to we other categories touch. to that said and one so being the many product far. we And our of the that, acquisition additionally have usual strengthen other, make M&A Class we’ve look than more the strategy for look that opportunities a selection companies C, obviously continue process and that will we bring the service technical We

Operator

The Please Patrick ahead. next Baumann caller go Morgan. is JP with today

Patrick Baumann

slightly like looks Quick Rob’s still of back seeing this customer it’s mix; the market kind maybe question on actually, talk the quarter was mid-single to in what just the growing around group, company digits. and you’re average maybe Accounts It maybe at on question share average below stuff. Core or it

it do relative strong force reinvigorate the what been with because is Just the doing seen, you trying growth you’re here to well? that is really we’ve Accounts the that generally pretty MBI driving additions and readings think given National there, the have sluggishness sales

Erik Gershwind

specifically an move feel the looking hone I’d the turn QX Part rates. in growth because that’s manufacturing the we outlier, Core, February, in vocal. hone I’d on in when story so specifically It December, like was so I’d Pat, the an bulk like the did January, segment, of be at of about past, outlier. be was did to you’re Core, Yeah, December out talking to March I

mention So severely it aerospace smaller least bunch in as what what a at is different call last you segments the metals. about past manufacturing metals. a December, drop quite that have a was one includes Automotive, shops. growing we time cutting talked down of realm. would number we to and to of at nicely performing Machine we and an had fabricated actually average. as say example what out The of firearms, looking metal is, back is, refer that that’s would we one the big is, It most saw I’d equipment be It fabricated one a that building, December, call, where of be I are would example. within off last did sector includes in restored within

are about metals manufacturing in the Certainly I’d the above of at be universe, know at feel fabricated would look to one pretty (inaudible). we out. I to if So, why, good firearms, case been but The point the one that’s would call or most. That rest the lagging. be

Patrick Baumann

Got first quarter. a just on then on strong and the moderated there, to was Anything maybe really looked there? rate CCSG, it, what’s like bit what a growth versus going note

Erik Gershwind

No.

performance, We I I think outlook. still don’t. of strong wouldn’t it. good too make much

Patrick Baumann

adding it, have much margin how now but terms Got to on at we get from think how horse dead sales in the impact not might initiatives all effectiveness heads? on terms incremental of about just term, short you just getting been that maybe sales - if in the then the in force productivity and stuff, do potential of from dented a beat force

Rustom Jilla

the with continue. and forward going productivity, the like we teams, the that. smart part productivity fair service. together of deploying would tools, And several teams helping dropping. been service sales been mean, that the datamining, in productivity, has growth continues. CCSG way, that the reorienting so, been way bringing a getting been of with year our is expect last amount drive the We’ve sales service. run us We’ve legacy it all headcount MSC even by We’ve And and stuff sales you of I or and sales to and

next said it months, start over it’s plus think us. we turn corner several that of should increase the said to he as it, I productivity, heads continued Erik the combination has and but as help we the right gradually So the and

Erik Gershwind

too in sales expansion, I’d say ‘XX. to only looking terms add the And early for out, is the of thing that again, still

on So OpEx. for XXXX virtually no impact

look certainly be XX to today, Rustom guidance you impact too heads, to it believe to right, from range had with this to early it’s some out but what we in XXXX, our stated see that but XX. As that at point, give incremental hit the wouldn’t of we no incremental reason for XXXX,

Operator

to over closing now This John Relations concludes session. Vice of Investor and Treasurer, President would like conference question-and-answer I our the for turn to remarks. Chironna, any

John Chironna

again, Thanks Anita.

set months. next again, over XXth, you our we look next earnings to speaking our and to the call, everyone. you for Thanks QX July few certainly is road So either or earnings the forward on seeing

Operator

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

now disconnect. You may

MSC Industrial Direct (MSM) 10 Apr 182018 Q2 Earnings call transcript