Good afternoon. I'm Sam Darkatsh, and on behalf of Raymond James, we'd like to welcome you to the MSC Industrial Supply, Industrial Direct, presentation for this afternoon. With us today from MSC is Kristen Actis-Grande, Executive Vice President, Chief Financial Officer, as well as Kristen Kukta, Senior Director of Strategy. Kristen, I think you mentioned that your prepared remarks might be, I don't know, 20-ish minutes or so, which may give us a few minutes for Q&A, but remember that the breakout session immediately follows this meeting downstairs, where we can have some more granular, Q&A. So with that, Kristen, welcome. Thank you, Sam. Hello, everyone. Appreciate the time. I'm gonna take you kind of through an array of things. We'll start, though, with sort of a general overview of who MSC Industrial is. Cautionary statement about forward-looking commentary. I'm sure you all know the drill. All right, so let me go into a little bit about who we are as a company. So MSC Industrial was founded in 1941. We're a full-scale industrial distributor. We sell all forms of MRO products, but we specialize in metalworking specifically. So about 45% of our sales are metalworking products, and about 70% of our business is sold into manufacturing environments, both light and heavy. We drive competitive differentiation through technical expertise. What that looks like is leveraging that expertise because of the products we sell, to partner with our customers to drive productivity and optimize their operations, particularly on the manufacturing side. If you think about a metalworking product being more complex, oftentimes we're standing, what we call, at the spindle with the customer, especially in a manufacturing operation, and we're able to leverage that knowledge to help the customer run their production lines more efficiently. Our relationship with the customer typically begins on the production line through metalworking products, and then we're able to expand outwards to janitorial and safety. I'm sorry. Do you see a brown lunch in your face? Yes, it is. I thought I came down and put it in. Do I get a reward? You will get a big thank you and a reward later on. Sorry, sorry. No, no, no problem. You better have some good questions for me at the end. I'm counting on it. All right, so where were we here? All right, so metalworking is how we lead in the market. That's how we drive differentiation. We offer a wide array, a variety of solutions to our customers, so we'll talk a little bit more about that further in our presentation. But about 60% of what we sell is sold through solutions to customers. So think about that as being anywhere from a vending machine, which is, you know, literal vending machine with drawers where we dispense metalworking products. We have vendor-managed inventory systems, which is a bin setup where we're supplying the inventory to our customers. Or the most sophisticated form of a solution is what we would call an In-Plant resource, which is an MSC badge associate that's at the customer's location, managing their inventory and they're ordering for them. You can see some stats here on the right. We have a strong track record of organic growth, expanding profit, and then most recently, the thing to probably highlight is a change in our corporate governance practices, where we eliminated our dual-class share structure. Happy to talk more about that at any point in the Preso. But I'm gonna jump in with a little more detail on markets before we swing back to more, more detail on the company. So I mentioned we're an MRO distributor. We specialize in metalworking. This is the space that we play in. So on the right side, you can see some information about the addressable market. Left side is the customer distribution. The takeaway here is that both are highly fragmented, so the top 50 industrial distributors in our space only make up a little more than 30% of the revenue. And then on the customer side, we have a wide variety of size of customers, and then depending on the size, that often dictates the complexity of the solution or the sale that the customer needs from us. So fragmentation plays well for us. It basically means we can service the customer wherever they are in the country, and based on whatever type of offering they need, we are able to provide it as a national distributor. All right, let's start with a little bit more specifics on financials on the balance sheet. So both a healthy balance sheet and a healthy history of cash flow generation. We've got some stats here from our most recent Q1 release. Our operating cash flow conversion at the end of our fiscal 2023, which was in August, was 200%. Cash flow conversion in Q1 was 117%. We maintain a healthy balance sheet. Our debt level right now is about $500 million or 0.94x EBITDA, which is slightly under our 1-2x target. So we have a healthy cash position and access to about $475 million on our revolving facility. So basically, about $500 million we can put to work in a variety of things, which we'll talk more about on the capital allocation side. But really in a healthy position and able to quickly take advantage of opportunities that we see, which I'm gonna discuss what those are on the capital allocation slide. So a few things I wanna highlight here, and I'm gonna back away from organic growth initiatives for a second. I'm gonna start at the top of this slide, which you'll see highlighted in green here, some wording called deprioritizing special dividend. So I mentioned the corporate governance practice changes earlier. In October, we had a vote from our majority shareholders to dissolve our Class B share structure. So we're single Class A structure now. The family that founded the company has an economic interest of around 21%. Voting rights are capped at 15%. We do have a history of doing a special dividend. We received very mixed feedback about that over the years. Some investors love it, more hate it. It's hard to model, not predictable. So one of the things that we heard loud and clear was that the special was not necessarily perceived as a good thing, and we have indicated that we're moving away from that in favor of steady increases in the ordinary dividend, debt paydown, where applicable, share repurchases, which I'll talk more about in a second, and then M&A and organic reinvestment into the company. So I'm gonna kind of like knock these off from the bottom up now that I've talked you through the special. Ordinary dividend, we do pay a healthy dividend. We increased the dividend 5% from 2023 going into 2024, which is probably about a typical amount of increase that we would target. Share repurchases, we don't have a very strong track record of doing, and that would include not consistently repurchasing the dilution from stock-based compensation. So we've committed to doing that on a more regular and predictable basis. We have been more active in the market recently on share repurchases because of a commitment to repurchase dilution from our Class B transaction into Class A. So we repurchased about 1.9 million shares between August and November to offset the dilution. And then on the M&A side, I'll hit that one before I elaborate on organic growth. We typically do about two-three deals a year, and I would characterize those as bolt-on deals of distributors that are either participating in metalworking or in fasteners. And what we're, what we're targeting in those deals is an underserved geography, an underserved end market, or particularly, technology expertise or people expertise that we think are important to the business. And when I say like a tuck-in acquisition, think $30 million-$60 million in revenue. So these are small local distributors that we're typically acquiring. And we can acquire them, get a COGS synergy quickly by putting our purchasing prices in place, and then we can get growth synergies by leveraging the full MSC catalog through those newly acquired customers. And then on the CapEx side, so talking about organic reinvestment, we've put a lot of money to work here in this category of late. I'm gonna talk to you all a little bit about an initiative that we had going called Mission Critical, which kind of outlines what we've been doing for the past three years. But what I'll highlight here is that we've made heavy investments, really in all things digital, but especially in our e-commerce website, which has unfortunately kind of lagged the peer group in of late, and we've made a lot of investment into correcting that, both from a re-platforming perspective, so the technical stuff that you don't really see or benefit from directly but is hiding behind the scenes, along with things that the customer does directly benefit from, and those changes are actually launching in our fiscal Q2, which is right now. So a lot of investment in the digital space. Let me move forward. I'll elaborate on organic growth as we go further here, but I mentioned Mission Critical. So the company, we have a fiscal year end of August. We announced in September of 2020 three-year transformation targets, and that was kind of following a period of sort of underperformance relative to the peer group. We really wanted to reenergize growth to more historic levels, focus on expanding profit, and improving return on invested capital. So when we started Mission Critical, which is kind of the name of the initiative, in September of 2020, these were the initiatives that we committed to, or sorry, the goals we committed to. On the share gain side or on the growth side, what we're targeting is 400 basis points of growth over the IP index. On the bottom here, you can see how we actually did, so we hit that quite comfortably, and that is our goal going forward. We still see a lot of opportunity in organic volume. On the return on invested capital side, our goal was to go into the high teens. We met that about a year ahead of schedule. Then on the adjusted operating expense side, we took out $100 million of gross cost savings, and we lowered OpEx as a percentage of sales by about 200 basis points. Perhaps the most important thing that we changed, which is really what underpinned a lot of these, is sort of the way that we execute inside the company. So, when I joined MSC, I would kind of characterize how we operated as a really large private company that kinda oftentimes even had a small private company kind of vibe. And some of that, of course, has to do with the fact that we have family ownership. That definitely adds a unique element to our culture, but other parts of it were just a company that had grown incredibly rapidly, but the infrastructure and the processes inside the company had not necessarily kept up with the scale. So we crossed the $4 billion mark last year, which is a lot bigger than when we were $250 million, we went public in 1995, and there's a lot of things we've worked on maturing over those three years. So, when I talk about like operating differently, one of the things I'm referring to is how we operate. So our COO and our CDIO and myself all came from companies that run an operating system, loosely modeled after DBS or the Toyota Lean operating system, and we've been working on implementing what I'll say is, a light version of that at MSC. So you're talking about taking a culture that's extremely customer-oriented and now pivoting to one that has a bit more discipline around process, but you don't wanna lose the customer orientation and sort of the things that make us uniquely different. But we've been doing that gradually, and it's helping us to execute more consistently, set more aggressive goals, and align the company around the actions that we're taking to drive out performance. I might not have a voice left by the time we're done with this one. For the next three years, I'll spend the most time on this one. Excuse me. For the next three years, kinda like what comes next? I said we did all the things we said we were gonna do. What do we do going forward? This is what we've really articulated as our future priorities. I wanna spend the most time here 'cause it really articulates how we're thinking about the future. On the right, these are kind of the goals we've committed to over the cycle. I'm gonna spend the most of the time on the left side of this slide. But 400 basis points of market outgrowth, again, we're measuring that over the Industrial Production Index. There's, like, no perfect external indicator for us, but we feel like IP, being an actual output-based index, is probably the best one that's out there. Incremental margins of 20%. We see the opportunity to bring operating margins into the high teens and ROIC greater than 20%. We have not time-fenced this, but if you kinda do that math based on where you forecast IP to be, you'd get there in anywhere from three-five years, to the mid-teens in operating margin perspective. So how are we gonna do that? On the top section here, maintaining momentum, these are the things that made us very successful over the last three years, and we're really not done with any of those. Like, they all have a long runway ahead of them still. Win in metalworking sounds kind of obvious since we're a metalworking distributor, but one of the things that we really pride ourselves on is that we're not just a distributor in terms of buying something, adding a little, little value, selling it to the customer. We've actually had quite a bit of success driving innovation into metalworking. One of the examples of that is a technology that we call MillMax, which is an easy one to use because it's illustrative of how we do that. MillMax is a tap test tool, so if you can kind of imagine, like, a production line in a manufacturing facility, the way that this works is an MSC metalworking expert is actually tapping a tiny little hammer against your cutting tool, and that hammer is spitting out tons and tons of data about how the tool is operating, how it has been operating, and how those operational metrics perform against the specs for the tool, based on what the customer is using it for. So our metalworking experts can then diagnose if the tool is being used with the wrong parameters, maybe it's being run too slow, run too fast. We can tweak those things very easily, and that increases output for the customer, reduces scrap, saves energy, requires less shifts, you name it. There are a host of opportunities for us to support them. There are more technologies like that, that we're investing in, and you might ask yourselves, like: "Okay, as a distributor, why are we more qualified to do that than someone who's actually manufacturing the cutting tools?" The reason for that is that we're brand agnostic. So we're not going to have a bias towards Kennametal or Sandvik. We're gonna recommend the tool that's most important based on the customer's application. That gives us sort of a unique advantage with the customer, in that we're not biased at all in terms of what brand is being recommended. So that's what it means to win in metalworking for us. It's really continuing to create competitive differentiation in the space as a distributor. Expanding share of wallet across the existing customer base. This is kind of a meaty topic. What I'll elaborate here, on here, is the success that we've had over the last three years has come largely in national accounts, so that would be a large and very large customer. It's a more complex sale because their operation is more complex, and they're more likely to require some sort of solution. So what we're looking to do there is really expand the number of product categories that we're offering to the customer. We're of course doing this in core and public sector too, but given the share of wallet opportunity with the largest customers, obviously this opportunity is biggest with that customer base. And we're also focusing on putting more and more expertise behind those sales as well. Maximizing the impact of large account programs. Okay, what this means, I talked a lot about national accounts and solutions jobs. So when we win a large contract, there's a lot of complexity to how that contract is actually stood up. So, envision, again, a large manufacturing plant. We may win a contract to provide spend for, you know, 10 different product categories. We have to do set-up in the system, we have to hire the people that are gonna support it, we have to design the vending system, and we have to design the bin system for that customer. So what we're looking at doing here, is how do we extract those deals faster, and how do we accelerate the time to revenue on all the product categories? And given the fact that our In-plant program has grown from basically, like, 5% to 14% of the revenue in three years, it's typically growing anywhere from high teens to 30%. There's a lot of money here, the faster we can get those deals online. Driving innovative solutions. I kind of hit on that in metalworking. There are some other angles where we're aiming to do the same thing, but I kind of, I kind of hit that one with win in metalworking. Then further penetrate attractive end markets. I'll touch on this one a bit, both in terms of what we did and what we want to do. So for the first three years of the Mission Critical program, that largely meant, like, focus on the public sector, which we've been very successful in serving. Public sector is not often a metalworking sale. There's some metalworking components of it, but the reason we've been successful there is that the deals are typically highly complex. So we're talking about large federal contracts. You really need to have a specific set of expertise to come in there and play and win, and the same things that have made us successful selling a complex item like metalworking, are leveraged quite nicely into the public sector space. So we do have a dedicated team there, and we've been very successful in growing those accounts and winning new accounts. Going forward, and my strategy leader is here, we're really focusing on where we can leverage a similar playbook against other end markets, where maybe we're present in them today, but they're not as big as they could be. Those are the obvious adjacent end market opportunities for us, and then we're looking, with a new process at where we see white space and how we move into those areas quickly and win. We've had a lot of success, not just in government, but also in aero and defense. We've always been big in there, but as the requirements from a compliance perspective are becoming more complex, we're continuing to gain even more traction and success because we're able to meet the requirements that the government has put in place, which apply to government contracts and to downstream customers that participate in aero and defense. All right, that's the top box. So what's new? There's a lot wrapped up in this one. Let's start on the left side here. So re-energizing core customers. So a core customer, what does that mean? It's about 50% of our business. Oftentimes, a good way to think about a core customer is sort of small to medium size. They may be purchasing less product categories. They're more likely to be buying metalworking from us, and they may have a solution, but it's probably a vending machine, not a full-scale In-Plant resource, for example. If you were to go peel back the performance of the company over the last three years, what you would see is that we have done tremendously well in the areas where we touch the customer the most often. So if it's a solution, if it's a national account sale, if there's more complexity to the sale, we win an overwhelmingly large amount of the time, and we retain those customers at a very, very high retention rate. Where we've been undergrowing, which has been a bit of an anchor on the growth rate, has been in our core customer base. And again, that's about half of the business. So what we need to do to correct that is a few things. You heard me talk about the digital investment before being quite significant. A lot of that digital investment is targeted in this space, so the e-commerce experience is a big part of that. And the way I would think about this, I mentioned the re-platforming, but the specific way that a customer interacts with us that we need to improve is first, the search experience. So when you sell 2.4 million SKUs, and a lot of those SKUs are technical in nature, it needs to be really easy to find what you need and make sure that you found the actual right thing for your application, and then we wanna have a seamless experience for the customer on the site. That's kind step one. Step two is really, how do we personalize that experience and allow our value proposition around technical expertise to shine through if that customer is not dealing directly with an MSC associate? So what we wanna do is package that expertise to be able to deliver it digitally to customers that we can't touch as frequently. So that's e-commerce experience. And I should add, the re-platform went live over the summer, and then we have two major production code pushes, one that just happened this past weekend, one that's coming up this weekend, and that will put the two largest bodies of work behind us. But then we do have an ongoing roadmap of enhancements that we'll roll out that, are based on feedback we've heard from our customers. The pricing model is the sort of middle bullet here under new elements to growth. So enhancing the pricing model, what that means, is basically fixing our list price structure. So, over the past 20 years, we've had a list price structure in place for pricing. You, if you're under a contracted price, you have a certain discount off that list price. What that has become over the years, is if you're not a contracted customer or if you happen to go to our site, and you're not logged in and seeing your contracted price, you're gonna see something that you probably don't think is a fair and credible price. To the extent that even if you don't buy it very often, it might look so high that you know in your gut that that's probably not a fair price. And you would be right if you're looking at the list price. So we need to simplify that. The work that we've been doing here started in late October. Of the 2.4 million SKUs that we sell, 30% of those list prices were reset for our pilot. The goals of the pilot are to maintain gross margin neutrality and ultimately to use those changes to win volume back. Through the pilot, we've seen a favorable sales performance between pilot and non-pilot SKUs, and we've been able to measure that the gross margin neutrality is holding. The last 70% of the SKUs went live last week. So all the SKUs have been touched now. The next step is the marketing campaign that wraps around the list price changes and that wraps around the e-commerce changes, and that is going to be launching in mid-March. I talked a little bit about increased personalization in the form of expertise, but there are also opportunities that we see to kind of customize the site to that customer's application. That's an opportunity that we see specific to e-commerce, but potentially also to some other ways that we engage with the customer. And the last one I'll elaborate on here, execute on cross-selling opportunities. So MSC has two fastener businesses. We have a maintenance fastener business, and we have a couple of OEM fastener businesses. Those have been acquired by the company starting in 2013. We did another acquisition in 2018, and the last one was in late 2022. There are a lot of ways you can think about growing those businesses, but we've learned what we've learned over the past year or so is that the most successful way we can grow fasteners as quickly as possible is leveraging cross-sell opportunities with existing MSC customers. So lower cost to win a customer, faster setup time, higher win rate. We're really doubling down on that approach to accelerate growth in OEM fasteners in particular. And then the last thing I'll hit on here is the bottom item, optimizing cost to serve. So we did a lot of cost takeout over the last three years. We're by no way or no means done. There's a lot of work to do still, and this is highlighting a few areas that we're going to be targeting. The first one here is network performance and productivity. So what does that mean? If you think about the physical distribution footprint that we have, the number of CFCs that we operate, the way that we move products into those facilities, across those facilities, and out to the customer, that's what we're talking about when we say improving network performance. And if I could summarize the opportunity there, the way I would articulate it is that MSC kind of grew up as a spot-buy catalog provider. And at the time that we were growing really rapidly, winning meant you could place an order by 5:00 P.M., I think even by 8:00 P.M., and you could get it the next morning. That's not that unique anymore, as I'm sure all of you guys know, but our entire network is built around that as a competitive advantage. Well, now 60% of our sales go through a solution to the customer, which means that that is planned spend, and that really means you can serve the customer fundamentally different. And our network and our shipping systems are not built for a business that has 60% planned spend, which means that we tie up a lot of money in places that we don't necessarily have to. Portfolio optimization and product line review. So some of this is basic strengthening of the category management function, how we engage our suppliers, what incentives we drive behind that. There's a big element of this, which is mix. How do we leverage strategies to drive the most favorable mix impacts for our products through the top line? And then there's another part of this, which is the body of work, where we're literally going back and trying to negotiate cost out with our suppliers. The target is at least $20 million this year. We've been pacing well on all of those initiatives, and it's actually, in this most recent quarter, helped us to entirely offset our price cost headwind. So we see continued opportunity there. And then, at the wire here, I'll highlight procure to pay and order to cash. These are value stream works. I think kind of lean initiatives and system implementations to upgrade our technology and take out the costs associated with having people prop up poor processes. And the last thing is strategic working capital management. We think there is a lot of opportunity in working capital. We think money is tied up in AR and inventory to a greater extent than it needs to be, and we have a whole body of work that is targeting unlocking cash in those areas. So hopefully, my enthusiasm about the future of the company is shining through. I've been here for 3.5 years, so I had the privilege of setting those transformation targets in, like, my second week of work, which I don't recommend if you're finding yourself taking over as a CFO. It worked out okay, but we are not by any means done. And happy to take any questions that all of you have now or in the breakout. So we have about one or two minutes before the breakout. Any questions from the room here before we go downstairs? A question here. Can you talk about the cyclicality in terms of business? Sure. Other- Recession scenario. Yeah. So, question about cyclicality in the business and how we would do in a recessionary scenario. So, the business is relatively short cycle. We typically don't have a lot of notice to when changes are coming. There's a lot of differing opinions as to where we are in the industrial cycle right now. Our Q1 was pretty soft. It sort of seemed like the shoe that everyone was waiting to drop around the impact of sustained inflation rate, or excuse me, interest rates had kind of taken an effect. The UAW strike certainly had an effect, and then the broader destocking phenomena and extended holiday shutdowns impacted both our Q1, and then we reported in early January, so we shared that we had seen that effect continue into December. We internally, obviously, are looking very carefully at what we think the year is gonna look like. So we'll report our fiscal Q2 on March 28th. What we're telling our folks inside is the share gain opportunity is massive, regardless of what the market does, so stay focused on the playbook. I'll, I'll worry about the macro side. As to how we perform in a recession, we do think we're much better poised in that environment than we were five years ago because we've done the cost takeout work, and we've really changed how the company is executing. So we would hope that in a normalized environment, decrementals of 20% would be reasonable. I'll emphasize 24 is not a normal environment because we have an effect where we go upside down on price costs at the tail end of an inflationary cycle, has to do with how we cost our product. That gives us a unique headwind on the year, combined with investments that are in flight, specific to digital and list price repositioning, that we need to see through. Hope that answers your question. Are you still confident in a positive inflection in the back half of this year, as you had indicated earlier? We are, and I'd say especially where we have that in our control. We've been really pleased with the results from the list price pilot, pleased with the timing of the e-commerce changes. You know, it's still too early to say what the data is coming out of that, but, you know, step one is get it launched on time, and we crossed that hurdle. There are several parts of our first half to second half inflection that are driven by the macro environment and the UAW recovery. We can't control those, but there's a good portion of our second half inflection that's really through organic share gain, and we do feel very good about how those initiatives are pacing. With that, we will continue everything else in the breakout. Thank you. Thank you. Thank you, Kristen and Kristen.