MSM MSC Industrial Direct Co Inc

FISCAL 2024 Q1 HIGHLIGHTS

• Net sales of $954.0 million decreased 0.4% YoY, 10 basis points better than the Industrial Production (IP) Index
• Operating income of $101.6 million, or $103.7 million adjusted to exclude share reclassification costs and restructuring and other costs¹
• Operating margin of 10.6%, or 10.9% excluding the adjustments described above¹
• Diluted EPS of $1.22 vs. $1.45 in the prior fiscal year quarter
• Adjusted diluted EPS of $1.25 vs. $1.48 in the prior fiscal year quarter¹

MELVILLE, N.Y. and DAVIDSON, N.C., Jan. 9, 2024 /PRNewswire/ -- MSC INDUSTRIAL SUPPLY CO. (NYSE: MSM), "MSC," "MSC Industrial" or the "Company," a leading North American distributor of a broad range of metalworking and maintenance, repair and operations (MRO) products and services, today reported financial results for its fiscal 2024 first quarter ended December 2, 2023.

Erik Gershwind, President and Chief Executive Officer, said, "Our fiscal first quarter results reflect strong execution in a challenging environment. Our team remained focused on executing against the pillars of our updated strategy. This focus resulted in 35% growth in the installed base of In-Plant programs, double-digit growth in the installed base of vending units, high single-digit growth in other important areas such as the Public Sector, and continued productivity savings. Our team's ability to stay nimble and focus on profitable execution gives me confidence as we progress throughout fiscal 2024."

Kristen Actis-Grande, Executive Vice President and Chief Financial Officer, added, "Average daily sales declined 0.4% year-over-year, slightly better than the Industrial Production Index, as a result of softening demand through the quarter. Though sales fell short of our expectations, I am encouraged by our strong start in gross margin performance, which stems from the operating improvements we have implemented over the last few quarters. This performance, combined with strong working capital management, resulted in favorable cash generation that allowed us to complete the repurchase of the dilution from our share reclassification in the first quarter."

Gershwind concluded, "Looking ahead, despite a slower start to the fiscal year, I am encouraged as we continue building our market position, introducing strategic investments centered on reaccelerating our core customer base and implementing operational initiatives to drive productivity and expand margins. Together, this positions us to achieve our annual revenue growth and adjusted operating margin ranges in fiscal 2024."

Balance Sheet, Liquidity and Capital Allocation

a. Strong balance sheet metrics and ample cash and liquidity
b. Strong cash flow generation expected to continue in fiscal 2024
c. Completed repurchase of dilution related to share reclassification
d. Near-term priorities include organic investment, returns to shareholders and strategic tuck-in acquisitions

• Sales outlook assumes 160 basis point headwind from non-repeating Public Sector sales
• Assumes market headwinds related to the UAW strike alleviate in early second quarter of fiscal 2024
• Same number of selling days YoY

Conference Call Information
MSC will host a conference call today at 8:30 a.m. EST to review the Company's fiscal 2024 first quarter results. The call, accompanying slides, and other operational statistics may be accessed at: https://investor.mscdirect.com. The conference call may also be accessed at 1-877-443-5575 (U.S.), 1-855-669-9657 (Canada) or 1-412-902-6618 (international).

An online archive of the broadcast will be available until January 16, 2024. The Company's reporting date for its fiscal 2024 second quarter is scheduled for March 28, 2024.

About MSC Industrial Supply Co. 
MSC Industrial Supply Co. (NYSE:MSM) is a leading North American distributor of a broad range of metalworking and maintenance, repair and operations (MRO) products and services. We help our customers drive greater productivity, profitability and growth with approximately 2.4 million products, inventory management and other supply chain solutions, and deep expertise from more than 80 years of working with customers across industries. Our experienced team of more than 7,000 associates works with our customers to help drive results for their businesses - from keeping operations running efficiently today to continuously rethinking, retooling and optimizing for a more productive tomorrow. For more information on MSC Industrial, please visit mscdirect.com.

Cautionary Note Regarding Forward-Looking Statements
Statements in this press release may constitute "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. All statements, other than statements of present or historical fact, that address activities, events or developments that we expect, believe or anticipate will or may occur in the future, including statements about results of operations and financial condition, expected future results, expected benefits from our investment and strategic plans and other initiatives, and expected future growth, profitability and return on invested capital, are forward-looking statements. The words "will," "may," "believes," "anticipates," "thinks," "expects," "estimates," "plans," "intends" and similar expressions are intended to identify forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those anticipated by these forward-looking statements. In addition, statements which refer to expectations, projections or other characterizations of future events or circumstances, statements involving a discussion of strategy, plans or intentions, statements about management's assumptions, projections or predictions of future events or market outlook and any other statement other than a statement of present or historical fact are forward-looking statements. The inclusion of any statement in this press release does not constitute an admission by MSC or any other person that the events or circumstances described in such statement are material. In addition, new risks may emerge from time to time and it is not possible for management to predict such risks or to assess the impact of such risks on our business or financial results. Accordingly, future results may differ materially from historical results or from those discussed or implied by these forward-looking statements. Given these risks and uncertainties, the reader should not place undue reliance on these forward-looking statements. These risks and uncertainties include, but are not limited to, the following: general economic conditions in the markets in which we operate; changing customer and product mixes; volatility in commodity and energy prices, the impact of prolonged periods of low, high or rapid inflation, and fluctuations in interest rates; competition, including the adoption by competitors of aggressive pricing strategies or sales methods; industry consolidation and other changes in the industrial distribution sector; our ability to realize the expected benefits from our investment and strategic plans; our ability to realize the expected cost savings and benefits from our restructuring activities and structural cost reductions; the retention of key management personnel; the credit risk of our customers; higher inflation and fluctuations in interest rates; the risk of customer cancellation or rescheduling of orders; difficulties in calibrating customer demand for our products, which could cause an inability to sell excess products ordered from manufacturers resulting in inventory write-downs or could conversely cause inventory shortages of such products; work stoppages, labor shortages or other disruptions, including those due to extreme weather conditions, at transportation centers, shipping ports, our headquarters or our customer fulfillment centers; disruptions or breaches of our information technology systems or violations of data privacy laws; our ability to attract, train and retain qualified sales and customer service personnel and metalworking and specialty sales specialists; the risk of loss of key suppliers or contractors or key brands or supply chain disruptions; changes to governmental trade or sanctions policies, including the impact from significant import restrictions or tariffs or moratoriums on economic activity with certain countries or regions; risks related to opening or expanding our customer fulfillment centers; our ability to estimate the cost of healthcare claims incurred under our self-insurance plan; litigation risk due to the nature of our business; risks associated with the integration of acquired businesses or other strategic transactions; financial restrictions on outstanding borrowings; our ability to maintain our credit facilities or incur additional borrowings on terms we deem attractive; the failure to comply with applicable environmental, health and safety laws and regulations and other laws applicable to our business; the outcome of government or regulatory proceedings; goodwill and other indefinite-lived intangible assets recorded as a result of our acquisitions could become impaired; our common stock price may be volatile due to factors outside of our control; the significant influence that our principal shareholders will continue to have over our decisions; and our ability to realize the desired benefits from the share reclassification. Additional information concerning these and other risks is described under "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual and Quarterly Reports on Forms 10-K and 10-Q, respectively, and in the other reports and documents that we file with the United States Securities and Exchange Commission. We expressly disclaim any obligation to update any of these forward-looking statements, except to the extent required by applicable law.

Non-GAAP Financial Measures

To supplement MSC's unaudited selected financial data presented consistent with accounting principles generally accepted in the United States ("GAAP"), the Company discloses certain non-GAAP financial measures, including non-GAAP gross profit, non-GAAP operating expenses, non-GAAP income from operations, non-GAAP operating margin, non-GAAP provision for income taxes, non-GAAP net income and non-GAAP diluted earnings per share, that exclude acquisition-related costs (prior year), share reclassification costs and restructuring and other costs, and tax effects.

These non-GAAP financial measures are not presented in accordance with GAAP or an alternative for GAAP financial measures and may be different from similar non-GAAP financial measures used by other companies. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP financial measures and should only be used to evaluate MSC's results of operations in conjunction with the corresponding GAAP financial measures.

This press release also includes certain forward-looking information that is not presented in accordance with GAAP. The Company believes that a quantitative reconciliation of such forward-looking information to the most directly comparable financial measure calculated and presented in accordance with GAAP cannot be made available without unreasonable efforts because a reconciliation of these non-GAAP financial measures would require the Company to predict the timing and likelihood of potential future events such as restructurings, M&A activity and other infrequent or unusual gains and losses. Neither the timing or likelihood of these events, nor their probable significance, can be quantified with a reasonable degree of accuracy. Accordingly, a reconciliation of such forward-looking information to the most directly comparable GAAP financial measure is not provided.

• Results Excluding Acquisition-Related Costs (prior year), Share Reclassification Costs and Restructuring and Other Costs

In calculating non-GAAP financial measures, we exclude acquisition-related costs (prior year), share reclassification costs and restructuring and other costs, and tax effects. Management makes these adjustments to facilitate a review of the Company's operating performance on a comparable basis between periods, for comparison with forecasts and strategic plans, for identifying and analyzing trends in the Company's underlying business and for benchmarking performance externally against competitors. We believe that investors benefit from seeing results from the perspective of management in addition to seeing results presented in accordance with GAAP for the same reasons and purposes for which management uses such non-GAAP financial measures.

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