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FISCAL THIRD QUARTER 2025 EARNINGS JULY 1, 2025
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2investor.mscdirect.com CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS Statements in this presentation 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 MSC expects, believes or anticipates 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 and profitability, 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 presentation 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, energy and labor prices, and the impact of prolonged periods of low, high or rapid inflation; competition, including the adoption by competitors of aggressive pricing strategies or sales methods; industry consolidation and other changes in the industrial distribution sector; the applicability of laws and regulations relating to our status as a supplier to the U.S. government and public sector; the credit risk of our customers; our ability to accurately forecast customer demands; interruptions in our ability to make deliveries to customers; supply chain disruptions; our ability to attract and retain sales and customer service personnel; the risk of loss of key suppliers or contractors or key brands; changes to trade policies or trade relationships, including tariff policies; risks associated with opening or expanding our customer fulfillment centers; our ability to estimate the cost of healthcare claims incurred under our self-insurance plan; interruption of operations at our headquarters or customer fulfillment centers; products liability due to the nature of the products that we sell; impairments of goodwill and other indefinite-lived intangible assets; the impact of climate change; operating and financial restrictions imposed by the terms of our material debt instruments; our ability to access additional liquidity; the significant influence that our principal shareholders will continue to have over our decisions; our ability to execute on our E-commerce strategies and maintain our digital platforms; costs associated with maintaining our information technology (“IT”) systems and complying with data privacy laws; disruptions or breaches of our IT systems or violations of data privacy laws, including such disruptions or breaches in connection with our E-commerce channels; risks related to online payment methods and other online transactions; our ability to remediate a material weakness in our internal control over financial reporting and to maintain effective internal control over financial reporting and our disclosure controls and procedures in the future; the retention of key management personnel; litigation risk due to the nature of our business; failure to comply with environmental, health, and safety laws and regulations; and our ability to comply with, and the costs associated with, social and environmental responsibility policies. 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.
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3investor.mscdirect.com FISCAL THIRD QUARTER 2025 HIGHLIGHTS Average daily sales down 0.8% YoY but above historical sequential averages with 7% QoQ improvement * Represents a non-GAAP financial measure. See appendix for non-GAAP reconciliations Improving YoY trends in Core and Other Customer average daily sales along with 8% QoQ growth Strong cash generation fiscal year-to-date of $182 million in free cash flow*, representing 129% of net income Gross margin of 41.0% up 10 bps YoY and flat sequentially primarily driven by favorable price/cost Both reported and adjusted* operating margin down 240 bps YoY primarily driven by slightly lower revenues and higher operating expenses 1 2 3 4 5 Repurchased approximately 117 thousand shares in 3Q’25 and returned approximately $181 million to shareholders fiscal year-to-date in the form of dividends and share repurchases6
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4investor.mscdirect.com PERFORMANCE AGAINST INDUSTRIAL PRODUCTION IMPROVING AS GROWTH INITIATIVES SHOW EARLY ENCOURAGING SIGNS • Data as of June 17, 2025; • Source: Federal Reserve Industry Group 3Q’25 Machinery & Equipment 1.9% Primary Metals 0.0% Fabricated Metals (1.3)% Automotive (2.5)% Aerospace 7.4% IP Index Performance YoY of MSC’s Top 5 Industries -20% -15% -10% -5% 0% 5% 10% 15% 20% 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 MSC Total Growth (3 Mo Avg) IP Growth (3 Mo Avg) MSC Total Organic Sales Growth 3-Month Average - IP Index*
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5investor.mscdirect.com Europe ~10% Canada < 3% Mexico < 3% USA > 50% China ~10% NAVIGATING TARIFF IMPACTS COGS BY COUNTRY OF ORIGIN MITIGATION GOALS • Confident in ability to manage impacts o Working closely with suppliers and customers o Maintaining core pricing principles o Pricing actions taken in 3Q’25 with more expected to come in 4Q’25 • Maintaining commitment to customers o Increasing transparency o Providing alternative solutions when feasible o Delivering customer productivity through cost-saving assessments MADE IN USA • Stocked and ready to ship items o ADS up LSD YoY vs. down MSD YoY in 1H’25 o ADS up HSD QoQ and above total company performance Rest of World < 25%
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6investor.mscdirect.com FISCAL THIRD QUARTER 2025 REPORTED AND ADJUSTED RESULTS * Represents a non-GAAP financial measure. See appendix for non-GAAP reconciliations. Individual amounts may not agree to the total due to rounding. • ADS decline of 0.8% primarily driven by lower volumes and a ~10 bps headwind from FX, partially offset by price of ~80 bps and a ~60 bps contribution from acquisitions • Public Sector up 2%, Core and Other Customers down 1%, and National Accounts down 2% • Customers with an In-Plant program sales up 10%, representing 19% of sales • Sales through vending machines up 8%, representing 19% of sales Net Sales (millions) • Gross margin up 10 bps YoY • YoY improvement primarily driven by favorable price/cost • Acquisitions represented a ~10 bps headwind YoY Gross Profit (millions and % of sales) • Reported operating profit in Q3’25 includes $2.7 million in restructuring and other costs, $1.2 million loss on sale of property, and $0.6 million in share reclassification litigation costs • Reported operating profit in Q3’24 includes $4.7 million in restructuring and other costs • Operating margin impacted by lower sales and higher operating expenses that were primarily driven by personnel- related costs, partially offset by gross margin improvement Operating Profit (millions and % of sales) • Q3’25 reported EPS includes $0.04 in restructuring and other costs, $0.02 from loss on sale of property, and $0.01 in share reclassification litigation costs • Q3’24 reported EPS includes $0.06 of restructuring and other costs • Lower interest and other expense contributed $0.05 to adjusted EPS* Earnings (per diluted share) 42.9% 40.7% 41.9% 40.5% $979.4 $971.1 Q3 2024 Q3 2025 $400.4 $397.7 Q3 2024 Q3 2025 40.9% 41.0% $106.8 $82.7 Q3 2024 Q3 2025 10.9% 8.5% $111.5 $87.2 Q3 2024 Q3 2025 11.4% 9.0% Reported Adjusted* $1.27 $1.02 Q3 2024 Q3 2025 $1.33 $1.08 Q3 2024 Q3 2025 Reported Adjusted*
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7investor.mscdirect.com FISCAL THIRD QUARTER 2025 BALANCE SHEET AND CASH FLOW • Strong operating cash flow conversion** of ~170% in the fiscal third quarter despite a step up in accounts receivable from higher sales and slightly higher inventories • Free cash flow conversion* of 134% in fiscal 3Q’25 and 129% fiscal YTD * Represents a non-GAAP financial measure. See appendix for non-GAAP reconciliations ** The Company defines Operating Cash Flow Conversion as Net cash provided by operating activities as a percentage of Net Inc ome. The Company’s management uses Operating Cash Flow Conversion to evaluate the Company’s operating performance, in particular how efficiently the Company turns its sales and profits into cash, and to assess the efficiency of the Company’s use of working capital. The Company believes O perating Cash Flow Conversion is useful to investors for the foregoing reasons and as a measure of the rate at which the Company converts its net income reported in accordance with GAAP to cash inflows, which helps investors assess whether the Company is generating sufficient cash flow to provide an adequate return Net Debt and Financial Leverage (millions, except ratio) • Net debt down approximately $31 million as a result of lower debt levels and higher cash on hand • Maintaining a healthy balance sheet with net debt to EBITDA currently at 1.14x* • Target net debt to EBITDA ratio between 1.0x and 2.0x* $480.2 $449.3 Q3 2024 Q3 2025 0.97x 1.14x Q3 2024 Q3 2025 Net Debt Net Debt to EBITDA* Free Cash Flow* (millions) $114.0 $76.0 Q3 2024 Q3 2025 $230.1 $182.4 YTD 2024 YTD 2025 Quarterly Year to Date
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8investor.mscdirect.com CLEAR CAPITAL ALLOCATION PRIORITIES Dividends and Share Repurchases 12% 18% 7% 22% 41% ~$1.7B CAPITAL DEPLOYED (FY 2021 – FY 2024) Growth Spend Ordinary Dividends Long-Term Priorities Strategic Optionality Significant capital allocation optionality after deprioritizing special dividends; potential uses include organic growth investments, strategic M&A, debt paydown, or further deployment to shareholders Capex Ongoing investment to strengthen operations, digital capabilities, and service offerings M&A Bolt-on acquisitions with a focus on underserved regions, adjacent product categories, technologies, and high-growth end markets Share Repurchases Targeting to offset annual stock-based compensation dilution at a minimum Ordinary Dividend Targeting modest annual increases in the ordinary dividend Disciplined focus on Return on Invested Capital* and value creation * Represents a non-GAAP financial measure. See appendix for non-GAAP reconciliations
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9investor.mscdirect.com FISCAL 4Q EXPECTATIONS REFLECT EXPECTED BENEFITS FROM PRICE AND GROWTH INITIATIVES COUPLED WITH MACRO UNCERTAINTY June July Aug Sept Oct Nov Dec Jan Feb Mar Apr May June 5% (15)% 0% 4Q’24** (8)% 1Q’25 (3)% 2Q’25 (5)% (4.2)% (3.9)% ADS YoY TRENDS *Fiscal June ends July 5, 2025 **ADS in 4Q’24 include headwinds from non-repeating Public Sector orders that occurred in the prior year ***Includes expenditures associated with cloud computing arrangements ****Represents a non-GAAP financial measure. See appendix for additional information. 4Q’25 OUTLOOK 0.8% (8.0)% * (4.9)% (1.2)% ASSUMPTIONS • ADS expected to outperform historical QoQ averages at the midpoint of the outlook driven by benefits from price and growing momentum in growth initiatives • Gross margins expected to perform better than the historical seasonal decline of roughly 40 bps from 3Q to 4Q and to be approximately 40.9% 2.1% (3.1)% 3Q’25 (1)% 4Q’25 QTD 4Q’25 OUTLOOK (0.5)% to 1.5% YoY AVERAGE DAILY SALES (ADS) 8.5% to 9.0% ADJUSTED OPERATING MARGIN**** FY’25 MODELING ASSUMPTIONS $90-$95M ~$45M $100-$110M*** ~120% 24.5%-25.0% Depreciation and Amortization Interest and Other Expense Capital Expenditures Free Cash Flow Conversion**** Tax Rate (2.3)% ~0.0%
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10investor.mscdirect.com SUMMARY Average daily sales down 0.8% YoY but above historical sequential averages with 7% QoQ improvement * Represents a non-GAAP financial measure. See appendix for non-GAAP reconciliations Improving YoY trends in Core and Other Customer average daily sales along with 8% QoQ growth Strong cash generation fiscal year-to-date of $182 million in free cash flow*, representing 129% of net income Gross margin of 41.0% up 10 bps YoY and flat sequentially primarily driven by favorable price/cost Both reported and adjusted* operating margin down 240 bps YoY primarily driven by slightly lower revenues and higher operating expenses 1 2 3 4 5 Repurchased approximately 117 thousand shares in 3Q’25 and returned approximately $181 million to shareholders fiscal year-to-date in the form of dividends and share repurchases6
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APPENDIX
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12investor.mscdirect.com RECONCILIATIONS 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 return on invested capital (as defined below), 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 items such as restructuring and other costs, loss on sale of property, share reclassification litigation costs, share reclassification costs (prior year) and acquisition-related costs (prior year), and tax effects, as well as free cash flow conversion, which is a measure calculated using free cash flow, which is a non-GAAP measure. These non-GAAP financial measures are not presented in accordance with GAAP or alternatives 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 measure and should only be used to evaluate MSC’s results of operations in conjunction with the corresponding GAAP financial measure. Financial data may also include 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 measures 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, capital expenditures 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. Free Cash Flow (“FCF”) and Free Cash Flow Conversion (“FCF Conversion”) FCF is a non-GAAP financial measure. FCF is used in addition to and in conjunction with results presented in accordance with GAAP, and FCF should not be relied upon to the exclusion of GAAP financial measures. Management strongly encourages investors to review our financial statements and publicly-filed reports in their entirety and to not rely on any single financial measure. FCF, which we reconcile to “Net cash provided by operating activities,” is cash flow from operations reduced by “Expenditures for property, plant and equipment”. We believe that FCF, although similar to cash flow from operations, is a useful additional measure since capital expenditures are a necessary component of ongoing operations. Management also views FCF, as a measure of the Company’s ability to reduce debt, add to cash balances, pay dividends, and repurchase stock. FCF has limitations due to the fact that it does not represent the residual cash flow available for discretionary expenditures. For example, FCF does not incorporate payments made on finance lease obligations or required debt service payments. In addition, different companies define FCF differently. Therefore, we believe it is important to view FCF as a complement to our entire consolidated statements of cash flows. FCF Conversion is useful to investors for the foregoing reasons and as a measure of the rate at which the Company converts its net income reported in accordance with GAAP to cash inflows, which helps investors assess whether the Company is generating sufficient cash flow to provide an adequate return.
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13investor.mscdirect.com RECONCILIATIONS Non-GAAP Financial Measures Results Excluding Restructuring and Other Costs, Loss on Sale of Property, Share Reclassification Litigation Costs, Share Reclassification Costs (prior year) and Acquisition-Related Costs (prior year) In calculating certain non-GAAP financial measures, we exclude items such as restructuring and other costs, loss on sale of property, share reclassification litigation costs, share reclassification costs (prior year) and acquisition-related costs (prior year), and tax effects. Management makes these adjustments to facilitate a review of the Company’s operating performance on a comparable basis between periods, for comparing 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. Return on Invested Capital (“ROIC”) ROIC is calculated using a non-GAAP financial measure. We calculate ROIC by dividing non-GAAP net operating profit after tax (“NOPAT”) by average invested capital, a GAAP measure. NOPAT is defined as tax effected income from operations. Average invested capital is defined as net debt plus shareholder’s equity using a trailing 13-month average. We believe that ROIC is useful to investors as a measure of performance and of the effectiveness of the use of capital in our operations. We use ROIC as one measure to monitor and evaluate operating performance. This method of determining non-GAAP ROIC may differ from other companies' methods and therefore may not be comparable to those used by other companies. ROIC should be considered in addition to, rather than as a substitute for, other information provided in accordance with GAAP. The financial measure calculated under GAAP which is most directly comparable to ROIC is considered to be the ratio of Net income to Average invested capital. See below for the calculation of ROIC and the reconciliation to the comparable GAAP measure. Net Debt to Earnings before Interest, Taxes, and Depreciation and Amortization (“EBITDA”) Net debt to EBITDA is calculated using a non-GAAP financial measure, EBITDA. The Company defines EBITDA as GAAP net income adjusted for taxes, total other expense and depreciation and amortization for the preceding 12 months. Net debt, a GAAP measure, is calculated as total debt less cash and cash equivalents. The Company presents net debt to EBITDA because it more clearly represents the operating profitability of the company and is a more accurate representation of the Company's financial position and its ability to cover its net debt obligations with results from its core operations. The Company’s management uses net debt to EBITDA to evaluate the timeframe it would take to pay back its debt if net debt and EBITDA are held constant. The Company believes net debt to EBITDA is useful to investors for the foregoing reasons and as a measure of the rate at which the Company can cover its debts, which helps investors assess whether the Company has ability to grow its debt to support future growth initiatives. This method of determining non-GAAP EBITDA may differ from other companies' methods and therefore may not be comparable to those used by other companies. EBITDA should be considered in addition to, rather than as a substitute for, other information provided in accordance with GAAP.
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THANK YOU