Thanks, everybody, for joining us. I'm Quinn Fredrickson. I cover industrial distribution here at Baird. We're very pleased to have MSC Industrial with us today. MSC is a leading distributor of industrial products used mainly for customers' maintenance, repair, and operations requirements. With us from the company, we have Erik Gershwind, CEO, who's over here at the podium, and Ryan Mills, Head of Investor Relations. I'm gonna kick it over to Erik. He's gonna start off with some overview introductory comments, and then we'll transition back here into more Q&A after that. So- Thank you, Quinn, and nice to see everybody. As Quinn mentioned, I'll be fairly brief. We just have, for those who aren't that familiar with the story, a brief overview. So MSC is a leading North American distributor of MRO supplies. We have a long history dating back to 1941, and a specialty focus on metalworking products in particular, that represent roughly 45% of company revenues. We compete across the North American MRO marketplace that is over $200 billion in size, and it's highly fragmented. And as a reference point, the top 50 distributors represent just a bit over 30% of the market, which means a lot of runway for growth, and share capture. We serve customers through a broad product offering that is at 2.4 million items right now from over 3,000 suppliers. And underpinning that are our 7,000 associates, that include roughly 2,000 that are in our field sales organization and 150 metalworking specialists. We also underpin the business with a strategically located logistics network that consists of six primary distribution centers, and those are complemented by a little under 40 regional warehouses and inventory centers, and a handful of manufacturing facilities to support some of our specialty businesses. We exceeded $4 billion in sales for the first time in company history in our fiscal 2023, which ended in the very beginning of September. And this represents an 8% CAGR, revenue CAGR, over a 20-year period, and that includes both organic and some bolt-on M&A. We've grown profitability along the way, as evidenced by an 11% CAGR in earnings per share. More recently, our shareholders overwhelmingly approved the proposal to eliminate our dual-class share structure in October, and that came along with it some other enhancements to corporate governance, which together broaden our scope of investors and make MSC a more attractive investment. It's an exciting time right now inside of the company. Our recent success has been driven by the execution of our first chapter in what we refer to as our Mission Critical program. We introduced the program in our fiscal 2020, with a focus on improving our market share capture rate and improving profitability. We demonstrated our confidence in the company by establishing three-year performance targets, and as you can see on the slide, I'm pleased to share that we met or exceeded all of the targets that we set three years ago. Our sales growth outpaced the Industrial Production Index by 570 basis points, which was driven by pretty widespread growth, with particular, strong performance from some of our solutions, such as vending and our in-plant initiative. Return on invested capital improved to 18.6% at the end of the period, and, we drove a 220 basis point reduction in our OpEx to sales ratio during that time. And while we're pleased with the success that we've had to date, we're certainly, not stopping here as we aspire to much greater heights. So I'll spend a minute here on looking at the next phase of our strategy before we get to the fireside chat. So the next phase of Mission Critical has three pillars that center the program. The first is to maintain momentum on the existing growth drivers that have enabled the market outgrowth over the past three years. Included in this is maximizing upon a significant number of large account and in-plant wins that we've seen over the period of the program, in particular, in our most recent year of fiscal 2023. The second is adding a couple of important new elements to the growth story, and that includes re-energizing our core customer base, which is made up of a large number of small to medium-sized machine and job shops across the country. We're going to accomplish this by improving our pricing effectiveness and upgrading our e-commerce platform in some very key areas. Additionally, we'll increase our presence in OEM fasteners, which is an existing platform for the company, through greater growth and a focus on cross-selling that we've built up with some other businesses inside of the company over the past several years. Lastly, we're going to drive further efficiencies across the business, and that'll come in the form of supply chain improvements as we leverage automation and other advanced analytics investments that we've made. We're making some systems investments in order to improve our Order to Cash and Procure to Pay value streams. That should be a big productivity unlock for the company, both in terms of OpEx and working capital. As we execute across these initiatives, we target for our next period of time in the next chapter of Mission Critical, at least 400 basis points of growth above the IP Index and 20% incremental margins on that growth over the cycle. As we look out, for us, this yields a clear path to achieve adjusted operating margins in the mid-teens and a return on invested capital north of 20%. That's where we're headed. I think, Quinn, with that, I will come back, and I guess we can dive into chat. Great. Thank you, Erik. Thank you, Quinn. Two ways that you can ask questions in the audience: you can email sessionfour@rwbaird.com, or just raise your hand, and I'll call on you. But to start off, can you discuss, Erik, kinda your near-term view of the end markets you serve? Auto seemed to be, for obvious reasons, the area of acute weakness in your fourth fiscal quarter and early in the first quarter. But you know, maybe with the recent news, a little bit more positive tone there now. But can you just talk about the general tone and feel of end market demand right now? Yeah, sure, Quinn. I think the timing is really good. We're about a couple weeks removed from our earnings call. What we described on our earnings call was we did see, beginning in September, I would say, through most of it. So again, our fiscal year runs September through August, and through most of our fiscal 2023, we experienced high growth rates. We did see a bit of a softening come September, and at the time, so during the call, we were about halfway through our fiscal October that it had carried through. I would say it was a combination of a couple of things. Some general softening, for sure, and then made more acute by what was going on with the UAW situation. Which for us, we service not just directly into the automotive sector, but a lot of our customers, I mentioned in the prepared remarks, focusing on our core customer base that's made up of a lot of small, medium-sized machine shops and job shops. There was a ripple effect, and we tried as best we could to size that on our earnings call. We talked about a low single-digit impact in terms of the impact to growth rate that we were seeing from those strikes. So what I would say is maybe a couple of updates since the call two weeks ago. One would be, certainly, we're seeing encouraging signs here that the strikes are relieving themselves. And it's early days, so it's hard to tell how fast things come back online, but I... You know, that, to us, is a very encouraging sign. I would say at the same time, since the call, the back half of our October was softer than we expected. So, you know, at the time, a couple weeks back, we gave an estimate of a growth rate that would look similar to September, and that's sort of where we had been running at the time. The back half was softer. So, we did see that, but, you know, I think if we look out, hard to say how fast things ramp up post-auto strikes, but that is an encouraging sign to us. Okay. Erik, you mentioned the efforts to reinvigorate core customer growth. Obviously, that's a key, you know, focus for the company here. Can you unpack for us, what exactly you're doing there, and, and also maybe give us some context around, you know, core customer margins and, you know, some of the accretion that, that comes from that outgrowth? Yeah, Quinn, I think it's one of the most exciting things about the next chapter in the company's evolution. Because if I look back at the last chapter, our last three years under our Mission Critical program, I mentioned, you know, we're pleased that we met or exceeded all of our targets, including growth above IP and profitability expansion, but we really did it. The good news is, we did it by executing on the growth initiatives we had outlined, and there were five big ones. The interesting thing, though, is we did it without getting our core customer base, which, as of the most recent quarter, is around 50% of our revenues, with the core customer underperforming the rest of the business. What's noteworthy there, as you mentioned, is our core customer base, which is made up of a lot of small and medium-sized shops, is several hundred basis points higher in gross margins than most of our business, and certainly higher than most of the areas where we've been growing, such as in-plant vending, public sector. So we're really excited about the prospects, both in terms of top line and then how that could fuel operating margin expansion. And we're really focused on a couple of big initiatives in order to re-energize growth in our core customer. One, I mentioned improved pricing effectiveness. What we have found over the years is where we touch a customer regularly with a sales force with a relationship through our sales force, our pricing is very competitive. For those customers who don't interact with us as regularly or who are new to us, what they would find on our website would be, in some cases, higher than market, and we do think that's been inhibiting us. So we have a plan in place that we're going to be adjusting that, aligning that in a roughly margin-neutral way. We're doing that through, starting now, actually, through the next couple of quarters this year. And then the second one is we're putting some heavy investment, and have put heavy investment into our e-commerce platform and our digital marketing programs. And the enhancements are gonna start hitting the market and hitting the customers very shortly. So as we look past the first half of this fiscal year into the back half of our fiscal, we're pretty excited about the prospects for growth. Can you discuss, with enhancing the pricing effectiveness, how do you make sure, you know, you're not continuing the practice of discounting on, now on top of the lower, list price once you make those changes? And how do you ensure that, I, I think you, you phrased it as you still get a deserved premium, given the value that you're bringing to those customers. How do you, how do you make sure you continue to get that? Quinn, that's a really important point, which is that MSC, we really do... Our value proposition is focused on— It's a, it's a high-touch value proposition. It's a technical value proposition that's focused on helping manufacturers and heavy industry improve their operations and generate productivity. To do that, we command a premium, and, and that's, that's going to sustain. I, I, I think the, the, the answer to your question about how do we maintain, margins when we have to bring prices down in certain cases, is that, you know, what we found is that our sales force and our inside sales team over the years, if the price that's going to be visible to a new customer when they see the website is high, there's a lack of confidence and a feeling of we need to discount. And so in some cases, the discounting is probably too much. So there's been a heavy focus while we make these adjustments on bringing in the guardrails, tightening the guardrails, if you will, on the discounting front. And, yeah, it's the early stages here, but we have a very strong project team, a daily cadence of how we're monitoring and managing the progress, so I'm pretty confident in the early days here. Maybe besides the list price changes, can you expand a little bit on what you're doing within e-commerce and digital broadly? I think you sizes $35 million in CapEx that's going to your digital core initiative. Can you unpack for us what exactly you're doing within that? Yeah, and I'll start with. Yeah, so e-commerce, I would say there's sort of two inside the company, two mantras, if you will, about what's driving all of the improvements that we're focused on, and those are frictionless and personalized. That's - we want the experience that a customer has, and I think MSC, over the years, has had a very customer-focused culture, and customers that do business with us feel those things. They feel like they get a seamless experience, and they feel like it's a really personalized, curated experience. We want it - doing that on the web, when you're dealing with millions of parts, can be a challenge. and I back to two decades ago, was one of my first roles with the company, was launching our first transactional engine, and so this has been one that's near and dear to my heart. I think those are two words that roll off the tongue easily, but are not easily accomplished when you're dealing with millions of parts. And, I'm really excited about the changes that are coming out. I've stayed real close to them, and they will be hitting the market here in the next couple of quarters, and I think our customers are gonna feel an experience that matches the kind of personalized high touch that they get when they do business with MSC every other way. Can you talk about, I think you have some new leadership, new chief information officer, John Hill, I think, joined in 2022. Can you maybe talk about his background, what he brings to the table, as you're embarking on some of these initiatives? Yeah, and I would say, Quinn, it's probably, if I look back over the past three years at the first chapter with Mission Critical, probably the unsung, the most profound difference in the company, beyond the numbers, kind of, if you're inside the company, is the tone being set from the top, and the leadership team. It's probably the best... Not probably, it's the best team that I feel like we've had, management team. John is certainly a piece of it. It's really been three big executive additions in the last few years. John Hill, who's our Chief Digital Information Officer, and really he's, you know, what he brought to the table is a proven path and an experience leading companies through digital transformation, from all aspects. He's also brought a bent towards innovation, so we have a growing innovation function inside of the group that's bringing some exciting technologies to market. We've marketed one already, MSC MillMax. There are others that are in pilot stage that are geared towards helping a manufacturing floor run better, so we're real excited by that. And then the other two additions are our CFO, who's become fairly well known now to the investment community, Kristen, who's brought with her very much an operating style CFO, who's brought a level of rigor and discipline, and implementing an operating system that the company just had not had before. And then most recently, our Chief Operating Officer, Martina McIsaac, I'm real excited about, and she's umbrelling a good portion of the of the day-to-day business, really with an eye towards accelerating organic growth and expanding margins, and she's got a strong track record from her time at Hilti of doing so. So it's a good team. That's great. Yeah. Maybe we can shift gears towards pricing and margins. You usually take a price increase in August. This year, you elected not to do that. Can you talk about maybe why that was the case? Yeah, I think a couple of things, Quinn. So first of all, we're coming off of a period of really high inflation, and that we did see, as a distributor, the best proxy for looking at what's happening in the industrial marketplace is looking at our suppliers, the manufacturers, and what they're doing with list prices. And we certainly saw the rate and pace of those slow down. So what we've done over the past several months is just try to be more selective and take spot increases as warranted, as opposed to a sizable increase. I think, you know, the other thing is we were mindful that we were entering a period where we were going to be making the list price adjustments. You know, that said, our normal cycle would also have us, early in the calendar year of 2024, take an increase, and that's usually cued off what we see from our suppliers late in the calendar year. So we're just about entering the period of time now, where we're gonna get into a window of what the next round of pricing looks like, and to the extent we see our suppliers moving in a meaningful way, that we would move. But that was the rationale behind August. Can you outline, as we think about your fiscal 2024 framework, maybe what would be some of the puts and takes as we think about the gross margin line? You have some, I think, lapping some government headwinds from this past fiscal year. But, you know, if we look back at the end of the fiscal year and you are at the higher end or outperform the range, I mean, what would be the things that you would say went well to kind of drive that outcome? Sure. And just for those not familiar with, if you didn't listen to our call, basically, we gave a framework that had an organic revenue growth number and an operating margin range. The organic growth range was premised off of a flat to slightly down IP with some market outperformance, and the range was 0%-5%. We still feel good about that. And then the operating margin range went from- 12%- 12. 8%. Thank you. Yep. 12.0%-12.8%, coming off of 12.6% in our fiscal 2023. In one of the assumptions, I think, where you were going was gross margin, Quinn. So embedded in that, we had talked about a gross margin that would be flat to slightly down versus fiscal 2023. If I look at the puts and takes, the biggest headwind coming into our fiscal 2024 is price cost, and more specifically, we are on an average costing system. And so what we find over the years, and I've been through a bunch of these cycles, in the early stages of an inflation cycle, we get price before we realize cost. We generally see margin expansion, and then in the late stages of an inflation cycle, when we've taken the price, the cost is still working its way through the system, and that's what's happening now. It's very typical, and, you know, what we said is that's the biggest headwind. In particular, it's the biggest headwind in the first half of the fiscal year. What we said was, we're kind of in the teeth of the biggest price cost headwind are Q1, Q2. It starts to work its way through and improve from there. In terms of tailwinds, I mean, there's one tailwind of roughly 50 basis points from non-repeating business that was lower margin that happened in 2023. I think more significantly, there are some levers, initiatives that we have in play, and I think if we were to see upside, to your question, it would be from those initiatives, and I'll highlight a few things. One is growth and where it comes from. So we just talked about reenergizing our core customers. To the extent that happens faster than otherwise, that would be a margin tailwind. The second thing is on our earnings call, we did mention, you know, September came out of the gates slower than we wanted. We put in place, we referred to them as gross margin countermeasures on the call. These were initiatives that were already existing in the company that got heightened focus, a more aggressive approach to them, and I think there's an opportunity that we could outperform there, certainly. And, you know, the third one I'd highlight is we talked about our category line reviews and work on category management. A lot of Martina has led a lot of reengineering of our category organization, and I think we could outperform there as well. And then the last one would be, I mentioned, if we do see suppliers moving late this year, we usually get notification between now and the end of the year that we would move again in the beginning of the year, and that would create a positive spread. So in terms of, the cadence, the line review benefits, how are we thinking about, you know, when that might start to flow through the P&L? Yeah, they come, Quinn. There's... And a lot of it is a function of how the benefits accrue. Is it to the actual purchase cost? Is it in rebate? Is it a marketing allowance? And what we're finding is it's a mix of all three, and what we'll see is it will be - so part of why we felt like the gross margin outlook, we're kind of in the teeth of it, Q1, Q2, is price cost, is that it's sort of most aggressive with cost. That works its way through, and then the line review benefits definitely are more - they'll roll through the P&L, and you'll see more of an impact in the back half of the fiscal than the first half. Okay. And the cost side of, you know, when might we be at sort of peak cost as that average cost inventory flows through? We're there now. We're there, okay. I think Q1, Q2 would be the peak, Quinn, and it should get better from there. Okay, great. Maybe we can talk about the next stage of Mission Critical. You outlined the completion of the first stage where you met or exceeded every single one of your targets. Most recent call, you did provide those new kind of longer-term targets, and one of those was a mid-teens operating margin. Can we think about some of the big drivers that help to get you there? Maybe we could start on the cost take out side, because I think you've said before, a lot of the low-hanging fruit was maybe taken out in the first stage. So how should we think about the remaining cost takeout product and productivity opportunities to sort of get you to that goal? Yeah, Quinn, I think the exciting thing is I see, and the company sees still a lot of runway. While we did take advantage of a lot of low-hanging fruit during the last chapter, look, we also made some pretty bold moves in terms of rethinking our branch network. We did some big things. There's still some really good opportunity, and I would sort of cluster it in a few areas. One is supply chain. For sure, I think we've done a really good job over the years optimizing our supply chain inside the walls of our DCs. I think there's an opportunity that we'll be mining in terms of better using technology around network and performance optimization, and freight management will be two big areas of focus for us within supply chain. That's one. The second is we talked about, and you mentioned digital core, which is really an upgrade to the core value streams, Order to Cash and Procure to Pay. So the behind-the-scenes stuff that happens with the company, the upgrade is intended to unlock a lot of productivity and waste that we see right there for the taking, in terms of both OpEx and working capital. And then the third one on the OpEx front is between Martina and Kristen. Both have had a lot of experience with continual improvement and mobilizing the entire organization around just a productivity mindset, and so that is in motion. So we see a lot of latent potential in just tapping into our entire associate base, which is happening now through a continual improvement initiative. So I think all three of those are geared towards productivity and cost out. I think the other exciting thing is that the margin expansion for this round of Mission Critical doesn't have to come from cost takeout alone. I think there's two other levers, gross margin, and there we have the growth, the mix, the growth in the core. And I mentioned category management. Beyond the line reviews, Martina has brought a renewed focus, and what she's done is brought category management and sales much closer together. So the ability to manage portfolio mix is higher than it's been in the past. So I think that's, that gross margin line is a second lever, and then revenue, getting the core customer growing faster. And how do we think about that improvement flowing through to ROIC? You've had some really, you know, good growth in ROIC through mission... The first stage of Mission Critical. You know, what's the opportunities to drive that higher, as we go through this next stage? Yeah, we've talked about getting the sort of the next milestone or base camp is 20%+ in return on invested capital. And part of that comes if we achieve the growth in operating profit through the margin expansion, we'll see a good chunk of that. But I would say, as I mentioned, beyond that, there's a lot of opportunity. We've just started to mine working capital opportunities around inventory and AR/AP, and you know, that's both Martina and Kristen, as part of the continual improvement effort, are heavily focused there. So I think that would be additive to ROIC opportunities. From the growth side, the 400 basis points of outgrowth versus IP, we talked about core customers, but, I mean, is there still remaining opportunity in that in-plant vending VMI side? A lot. A lot. I think that... And that was really why the first pillar of our new Mission Critical agenda, if you will, was just to maintain the momentum on, you know, really all five. But if we think about the solutions platform we have between vending and, you know, we talked about in September, even though growth was slow, but we saw just as a proof point to the fact that there's still so much runway. I mean, vending signings were up over 50% versus prior year, and that's coming off of a strong year of vending signings. The in-plant growth we're seeing, the revenue growth is strong, the signings momentum is strong. So yeah, I feel like vending, we're well along, and yet it's still growing at a nice clip, and you know, the in-plant still feels like relatively early innings to me. Maybe we can close on this. It's a little bit of a bigger picture question. You addressed it a little bit earlier when talking about the new leadership team, but it does feel kinda like a new day at MSC with the shareholder-friendly governance changes that you've made and, you know, the new leadership team that's in place. Just, Erik, how should we be thinking about or how do you think about the opportunity for improvement, and just the strength of your leadership team as we're heading into, you know, what feels like a pretty pivotal moment of change for the company? Yeah, I feel, as I mentioned before, Quinn, I feel really confident in the management team and really confident in the whole company. I think the last three years, as much as anything, was about building a muscle memory on certainly on cost takeout, on margin expansion, and on just on the idea of setting bolder, more aspirational targets and really going after them. And I think, you know, it's like one of those things like momentum, when you get the flywheel spinning, success breeds more success. And I feel very good, and that's probably, as I mentioned, along with the team, probably the biggest thing that came out of Mission Critical, the first chapter, was just building this muscle memory in the company that we're now taking with us into the next chapter of the story. Great. Well, management will be hosting a breakout session in-