Welcome to the MSC reports fiscal 2026 first quarter results. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Ryan Mills, Vice President, Investor Relations and Business Development. You may begin. Thank you and good morning, everyone. Welcome to our fiscal 2026 first quarter earnings call. Martina McIsaac, President and Chief Executive Officer, and Greg Clark, Interim Chief Financial Officer, are on the call with me today. During today's call, we will refer to various financial data in the earnings presentation and operational statistics documents, both of which can be found on our Investor Relations website. Let me reference our Safe Harbor Statement found on slide two of the earnings presentation. Our comments on this call, as well as the supplemental information we are providing on the website, contain forward-looking statements within the meaning of the U.S. securities laws. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those anticipated by these statements. Information about these risks is noted in our earnings press release and other SEC filings. During this call, we may refer to certain adjusted financial results, which are non-GAAP measures. Please refer to the GAAP versus non-GAAP reconciliations in our presentation or on our website, which contain the reconciliations of the adjusted financial measures to the most directly comparable GAAP measures. I will now turn the call over to Martina. Thank you, Ryan, and good morning, everyone. As many of you know, this marks my first week as CEO of MSC. Before we dive into our fiscal first quarter performance, I would like to share some thoughts since we last spoke. First and foremost, it's an honor and privilege to serve as the fifth CEO in MSC's 80+ year history. As part of the transition over the last couple of months, I've spent time engaging with our people, our suppliers, and our customers. This time has reaffirmed our direction, and I would like to share more about those near-term priorities on our path to creating incremental value. First, we are reconnecting and growing with our core customer, and we must remain steadfast in our focus to execute on the initiatives that have restored this growth. Most of these initiatives have been in flight for less than a year, and tremendous opportunity remains ahead. In addition to our work on pricing, website, and marketing, our highest priority over the last year has been to optimize the design of our sales organization to better match resource to potential and put us closer to the core customer. At the end of the first quarter, we turned our attention to our service model. Now, applying the same principles and aligning those teams to our more efficient geographic territory design. This will lead to an improved customer experience and enables us to further optimize our cost structure in early Q2. We now look forward to driving sales excellence as we leverage our recent organizational changes and our new leadership structure that balances long-term MSC tenure with new thinking from the outside. I am particularly excited now that Jahida Nadi is on board in her role as SVP of Sales. She will continue to strengthen our sales execution in the field as Kim Shacklett moves fully into her new role as SVP Customer Experience. By decentralizing and streamlining decision-making in this new structure, we will amplify the impacts of these changes and strengthen our position to achieve our long-term vision, to enhance customer experience, and accelerate our ability to capture a greater share of wallet. To truly outperform, we must leverage our supplier community as a strong partner in these efforts as well. Over a year ago, we created a Supplier Council that we meet with regularly to share ideas and opportunities. These discussions are now evolving to the development of joint strategies to accelerate MSC's growth. For example, turning to slide four, I'm pleased to announce that in late February, we will be hosting an inaugural growth forum where approximately 1,400 MSC associates in customer-facing roles will come together with our supplier community. The event was designed in collaboration with our Supplier Council for maximum effectiveness and impact. Using data to pair sellers and suppliers in pursuit of a pipeline of customer opportunities, this highly curated three-day industry-leading event will be unlike our previous or other supplier conferences in its level of focus and partnership with our suppliers. We expect this event to be a key growth accelerator for MSC, demonstrating MSC's clear commitment to take sales execution to the next level. To enable our vision, it's clear that we must drive speed and consistency in our daily decision-making through our technology platform. Our CIO, John Reichelt, and his organization have continued making progress on the evaluation of our systems roadmap and will provide recommendations upon completion. We must also strengthen and improve financial visibility through our operating system to enhance our daily decision-making. Having the right leader will be critical in achieving this, which is why we are taking a selective approach to our search for a permanent CFO that remains a top priority. And finally, we're committed to elevating our strong differentiated culture. Our culture is a competitive advantage rooted in a highly talented and technical team that consistently puts the customer first. Building on the proud family legacy that has shaped who we are, we are raising expectations, driving more rigorous performance management, and embedding a mindset of continuous improvement to deliver even stronger results. By remaining steadfast in these key areas of focus, we will capture the tremendous potential I see ahead and position MSC to achieve higher levels of profitable growth. In short, I am more energized than ever, and I want to thank our entire team of associates for their support and endless dedication to providing the best service to our customers. Before we move to the quarter's results, I want to highlight one further element of our strong culture and our commitment to improving each and every day and share with you some highlights from our most recent ESG report released last month. First, we reaffirmed our commitment to the planet and established a new long-term goal of reducing our Scope 1 and 2 greenhouse gas emissions by 15% by 2030. We supported the recycling of over 8,000 pounds of carbide. We were recognized as being a best company to work for by several organizations across several dimensions. Lastly, we continue our strong partnership with nonprofit organizations, including American Corporate, with whom we work to provide mentorship to military members as they transition into a civilian workforce. Now, digging deeper into our Q1 results on slide six, I am pleased with our performance in the fiscal first quarter. Average daily sales came in at the midpoint of our outlook and increased 4% year-over-year. This was primarily driven by benefits from price of approximately 4.2% that was partially offset by volumes that contracted by 30 basis points. The decline in volumes was largely driven by the federal government shutdown, which negatively impacted sales by approximately 100 basis points in the quarter. This headwind was felt most in the public sector, as seen by a year-over-year decline of 5% in the quarter. Following the resolution of the shutdown, however, we have seen public sector sales resume growth in December. We were pleased to see national accounts return to growth in the quarter, but once again, underpinning our sales performance were daily sales trends in core and other customers that have now outperformed total company sales for two consecutive quarters. Core customers grew approximately 6% in Q1, buoyed by our initiatives around e-commerce, marketing, and seller optimization. Looking at the details, we experienced another quarter of year-over-year improvement in the number of customer location touches logged by field sales in fiscal 1 Q. This is having a direct impact on our sales per rep per day trend, as seen by the high single-digit improvement in this quarter. The positive trend in these two metrics, as well as in total company sales, was achieved with fewer sellers, reflecting the efficiency of our new territory design. We will now take these learnings and apply them to geographies outside the U.S. Second, benefits from our web upgrades and enhanced marketing efforts continue to be realized in the quarter. Average daily sales on the web increased mid-single digits year-over-year. This was supported by several KPIs that continued improving year-over-year during the quarter, including the conversion rates of our top channels and direct traffic to the website. With respect to marketing, our efforts continued producing benefits in the quarter, including high single-digit improvement in the daily sales of our uncovered core customers. Given this building momentum, accelerated investment in marketing will likely continue. And third, we continue expanding our solutions footprint with our installed vending base, which was up roughly 9% year-over-year, and our In-Plant programs, which were up 13% at quarter end. While In-Plant signings remain strong, our year-over-year growth in the net number of programs at quarter end moderated in comparison to recent trending. This is not due to a slowing in the opportunity funnel, but rather an increased emphasis on sharpening financial acumen in the field. As a result, we saw a number of existing In-Plant programs convert back to more cost-effective service options, better scaled to customer needs, such as traditional VMI. By working together with those customers, we were able to retain revenues at a lower cost to serve. Moving to profitability for the quarter, gross margin of 40.7% came in at the midpoint of our outlook. As a reminder, in fiscal 4 Q, gross margin was pressured by negative price cost due to greater than anticipated levels of inflation during the last two months of that quarter. This was addressed in fiscal 1Q by taking action on price in late September and early October. Given the timing of these actions, price cost and gross margin performed similar to 4Q for the month of September. That said, I am pleased with our performance with price cost and gross margin both returning to expected levels as we exited the first quarter. Reported operating margin came in at 7.9%, and adjusted operating margin of 8.4% came in at the upper range of our outlook, resulting in an incremental operating margin of 18% on an adjusted basis. Looking ahead, under a mid-single-digit growth scenario, we continue to expect adjusted incremental operating margins to be approximately 20% for the full fiscal year. Underpinning this confidence are several factors. First, we expect continued traction on our growth initiatives and hence growth above the IP Index. Second, we anticipate ongoing benefits from price, which should yield gross margin stability. And third, our productivity initiatives, including our ongoing network optimization, should continue yielding benefits, allowing us to support higher levels of revenues in the back half of the year with moderating operating expense growth. Turning to the environment, I would describe demand across the majority of our primary markets as stable. Aerospace remained strong, while some areas of softness remain in automotive and heavy truck. These mixed levels of demand are reflective in the MBI, as seen by the recent readings, which remain in contractionary territory. Looking at slide seven, however, I am encouraged to see how MSC is performing in this environment. Average daily sales outpaced the Industrial Production Index for the second consecutive quarter as a result of our improved core customer performance. Thus far, in the fiscal second quarter, average daily sales for fiscal December, which ended for MSC on January 3rd, improved approximately 2.5% year-over-year. On a sequential basis, however, the month-over-month decline of roughly 20% was worse than what we typically experience in the month. Feedback we were receiving from customers around their planned shutdown activity suggested the month would be challenging. However, in addition, Christmas and New Year's occurred on a Thursday this year, which historically is typically the most challenging day for the holidays to fall on. To put some color on this, our sales from Christmas through the end of the fiscal month were down approximately 20% year-over-year and weighed heavily on the overall growth rate in fiscal December. Having said that, we were pleased to see the core customer maintained its trend of outperforming total company sales during the month. Looking ahead, with only three days into fiscal January, visibility into demand levels entering the new calendar year and the remainder of the quarter is limited. Greg will provide more detail on what this implies for our 2Q outlook. But despite this uncertainty, under a mid-single-digit growth scenario, we continue to expect adjusted incremental operating margins to be approximately 20% for the full fiscal year, supported by the momentum from the execution of our initiatives that continues to build. With that, I will now turn the call over to Greg to cover our financial results in greater detail and expectations for the fiscal second quarter. Thank you, Martina, and good morning, everyone. Please turn to slide eight, where you'll find key metrics for the fiscal first quarter on both a reported and adjusted basis. Fiscal first quarter sales of approximately $966 million came in at the midpoint of our daily sales outlook and improved 4% year-over-year. Price contributed 420 basis points to growth and was partially offset by a 30 basis point decline in volumes that can be attributed to the 100 basis point headwind related to the federal government shutdown. Sequentially, I am pleased by our modest improvement in daily sales despite the headwind during the quarter that I just mentioned. This was largely driven by benefits from price and strength in both core and national account customers. By customer type, we were pleased by the continued strength in core customer daily sales with year-over-year improvement of 6% in the quarter. National accounts improved 3%, while public sector daily sales declined 5% as a result of the federal government shutdown. On a sequential basis, average daily sales improved approximately 2% for both national accounts and core customers, while public sector daily sales declined by approximately 14%. In solutions, as Martina mentioned, we are encouraged by the continued expansion of our footprint. From a sales perspective, daily sales in vending for the first quarter were up 9% year-over-year and represented 19% of total company sales. Daily sales to customers with an In-Plant program grew by 13% and represented approximately 20% of total company net sales. Moving to profitability for the quarter, gross margins of 40.7% performed as expected and was flat compared to the prior year period. This was primarily driven by benefits from mixed due to lower public sector sales of 10 basis points that were offset by a price cost headwind. As a reminder, we took actions on the price after the first month in 1Q and exited the quarter in a better price cost position. Operating expenses in the first quarter were approximately $312 million on both a reported and adjusted basis and slightly favorable compared to the midpoint of our expectations. On an adjusted basis, operating expenses were up approximately $8 million year-over-year, primarily driven by the combination of higher personnel-related costs and depreciation and amortization being partially offset by productivity. Adjusted operating expenses as a percentage of sales improved 40 basis points compared to the prior year due to the increase in sales. Sequentially, adjusted operating expenses increased approximately $7 million and were primarily due to the same drivers of the year-over-year increase. Reported operating margin for the quarter was 7.9% compared to 7.8% in the prior year. On an adjusted basis, operating margin of 8.4% was slightly above the midpoint of our outlook and compared favorably to 8% in the prior year. We delivered GAAP EPS of $0.93 compared to $0.83 in the prior year. On an adjusted basis, we delivered EPS of $0.99 compared to $0.86 in the prior year and improvement of 15%. Turning to slide nine to review our balance sheet and free cash flow performance. We continue to maintain a healthy balance sheet with net debt of approximately $491 million, representing roughly 1.2 x EBITDA. Capital expenditures are roughly $22 million, up approximately $2 million year-over-year as expected. We generated approximately $7.4 million of free cash flow in the quarter, representing approximately 14% of net income. It's worth noting that inventory investment, combined with a step up in receivables and prepaid expenses, were the primary factors of the free cash flow decline year-over-year. Despite the slow start, we remain on track to achieve our expectation of 90% free cash flow conversion for the fiscal year. Lastly, in 2Q, we proactively amended our AR securitization facility and increased its capacity by $50 million- $350 million. Compared to the use of alternative sources such as our revolver, this approach is expected to lower our cost of funds by over $1 million annually. Looking at our capital allocation strategy on slide 10, our highest priorities remain organic investment to fuel growth and advancing operational efficiencies across the business. Returning capital to shareholders also remains a priority, and in fiscal 1Q, we returned approximately $62 million to shareholders in the form of dividends and share repurchases. Moving to our expectations for the fiscal quarter on slide 11, we anticipate average daily sales growth of 3.5%-5.5% compared to the prior year. Sequentially, we expect daily sales to decline approximately 4%-6% compared to the fiscal first quarter. While the midpoint of our outlook compares favorably to our sequential performance, moving from 1Q to 2Q last year, it is below our historical performance in 2Q and driven by the following factors that I will now highlight. First, through the timing of our supplier conference that takes place during the last week of the fiscal quarter, we anticipate some revenues to shift from 2Q to 3Q and create a headwind of approximately 50 basis points. Second, and as seen in the operating stats, December sales this fiscal year were weaker than normal. This was anticipated due to the holidays, which fell on a Thursday this year, combined with feedback from customers on their planned shutdown activity for the month. That said, there are some sequential factors that we expect to work in our favor in 2Q and partially offset these headwinds. Starting with public sector, assuming headwinds related to the government shutdown in 1Q do not occur in 2Q, it will benefit daily sales by approximately 50 basis points sequentially. As a reminder, 2Q is typically the seasonal low for public sector sales, which was considered in the amount of the expected benefit. And second, we expect sequential benefits from price and momentum from our growth initiatives to continue in 2Q. Lastly, on sales, the midpoint of our range implies a year-over-year growth a little more than 5% in January and February. Under this revenue range, we expect adjusted operating margin for the quarter to be 7.3%- 7.9% or up approximately 50 basis points at the midpoint compared to the prior year, driven by the following assumptions: gross margins of 40.8% ± 20 basis points. That includes negative mix from the public sector sequentially of approximately 10 basis points. In operating expenses, the headcount actions in early 2Q that were enabled by our sales authorization work to offset the sequential headwind due to two extra months of the annual merit increase in 2Q versus 1Q. Lastly, and included in the operating expenses, are costs related to our supplier conference that won't be self-funded through supplier registration fees such as travel, which will negatively impact adjusted operating margin by approximately 10 basis points. It is worth noting that this includes incremental margins in January and February that are higher than the average implied for the quarter, following a seasonally soft December. We expect the January and February strength to sustain for the balance of the fiscal year, as the benefits from productivity and pricing is expected to support higher levels of revenues with moderating operating expense growth. All of this underpins our confidence that under a mid-single-digit growth scenario, we expect adjusted incremental operating margins to be approximately 20% for the full fiscal year. Turning to the next slide for an updated view of our expectations on certain line items for the full year: depreciation and amortization expense of $95 million-$100 million, or an increase of $5 million-$10 million year-over-year. Interest and other expense of roughly $35 million. Capital expenditures of $100 million-$110 million. A tax rate between 24.5% and 25.5%, and free cash flow conversion of approximately 90%. To assist in modeling the cadence of sales for the remainder of the fiscal year, the bottom of the slide provides historical quarter-over-quarter averages and key considerations for the second quarter and the back half of the fiscal year. And lastly, we have one extra selling day year-over-year in the fourth quarter, as shown at the bottom of the chart. And with that, we will open the line for Q&A. Certainly. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Your first question for today is from Ryan Merkel with William Blair. Hey, everyone. Good morning, and thanks for the questions. My first question is just on price, and I guess it's a two-parter. So the 4% price, I think that was a little bit more than you expected. Could you just unpack what drove that? And then how should we think about price in fiscal 2Q? Do you think you'll see more price? Hey, Ryan. This is Ryan. I'll talk about the 1Q price, and then I'll pass it over to Martina to talk about our expectations for 2Q. Now, price came in kind of how we're expecting it. If you recall, we took a price action in June, late June, and we had some carryover from that. Then we took another price action in late September, early October, to address the price-cost issues towards the end of fiscal 4Q. So you net it all together. Price came in as expected. Then, Martina, if you want to give some color on 2Q. Hi, Ryan. Thank you. So we're still seeing inflation, not the intense pace that we saw in July and August, but we're still taking pockets of inflation across the business. The strongest is seen on the metalworking side, and I think that's not a surprise for anybody who's kept track of what's happening with tungsten. So just to ground everybody, tungsten is the major input into carbide cutting tools, and its supply to be controlled by China, and we've seen price increases now that exceed 100% on tungsten. We are taking mid to high single-digit price increases from our metalworking suppliers, and we will pass that on starting in mid-January. To give you a little bit of a flavor on our exposure with tungsten, it impacts about 15% of our sales. I'll walk you through that. Metalworking is about 50% of our total sales. Within metalworking, cutting tools is a big category, not the only category. We have abrasives and machinery and accessories and fluids. There are other large categories as well, but cutting tools is a major category within metalworking. And then carbide cutting tools is a majority; it's not an overwhelming majority, but it's about half of our cutting tool business. We also have high-speed steel and cobalt and other things in there too. Our exposure is about 15%. We'll take the first price increase in January. I don't think we're done. So I think there will be more inflation passed to us on that. We're in conversations with our suppliers, so we may see another action needed later on in 2026. And then, Ryan, if you take the carryover from the late September, early October pricing actions, and then what Martina alluded to in the mid-January, late January price increases, it wouldn't be a surprise if price 2Q was a little north of 5% year-over-year and around 1.4% quarter-over-quarter, just to give you a little bit of an idea. Got it. Okay. Super helpful. Thanks for that. And then my second question is on the topic of IEEPA, and we're going to get a ruling Friday, it seems. This may be hard to answer, but can you share any thoughts on the impact if IEEPA tariffs are ruled invalid? Yeah. So we'll get the benefit from lower inventories working through the P&L. And then, of course, if the market adjusts price, we would too. So it'd kind of be opposite of how price cost rolls through our average inventory accounting method. So I'd say we'd probably take a hit initially, and then we'd get a benefit as we work through the inventory and start to receive that lower-cost inventory. So that's the way I'd think about it, Ryan. All right. Thank you. Pass it on. Your next question is from Ken Newman with KeyBanc. Hey, good morning, guys. Good morning. Morning. So maybe for my first question here, Martina, I just wanted to run through that comment around, I mean, you guys certainly kind of hammered this idea of, call it, 20% incremental margins in a mid-single-digit environment. When I run through the historical seasonality against the midpoint of that 2Q guide, it does imply the back half is growing something a little closer to low to mid-single digits. I just wanted to give you the chance to maybe clarify the intent behind that mid-single-digit comment and the opportunity to help us understand maybe the pockets of opportunity for better operating leverage of the back half versus typical seasonality. Yeah. Hey, Ken, this is Ryan. I'll give you a little bit of color and then pass it over to Martina. You're right. If you run with that seasonality, it would imply low to mid-single digits. But if you look at the annual outlook slide and the commentary due to price and continued momentum in our initiatives, we wouldn't be surprised if we outperformed historical seasonal trends quarter-over-quarter in the back half. And then when we think about the productivity front, that will continue to grow. We expect incrementals to be a little bit stronger in the back half. Just to give you a little bit of color on the confidence there, if you look at the midpoint of our outlook for 2Q, incremental margin around 18%. We talked about some increasing costs related to the supplier conference around travel and other costs. We view that as an opportunity to partner with our suppliers. We didn't feel it was the right thing to do to make them pay for that. If you back that out, it's about $1 million. Incrementals look closer to 20% on what was a challenging December in the quarter. That gives us confidence in incrementals as we move through the rest of the fiscal year. And then, Martina, I didn't know if there was anything you wanted to add. Yeah. I mean, I think we're confident in the momentum in our growth initiative. So we expect to be decoupling from our trend. Everything that we're doing is around sales execution and share capture. I think we have the right structure in place now, and now we turn to accelerated execution in the field. And what we're seeing is encouraging. So we're not declaring victory, but we do expect that higher pace of growth, particularly in our core customer. And then, as I said, we're on track with a productivity program that we started a couple of years ago in terms of our network optimization and optimizing the way we spend all of our big drivers of cost, right, where we spend freight dollars, how we optimize within our four walls. And so we're seeing the trajectory there, and it makes us pretty confident. And then the other thing I'd add too is the core customer has been growing for 2+ quarters. The MBI still signals contraction. And then if you look in the offstats, this is the second quarter that manufacturing daily sales outpaced price. So that's giving us encouragement too that the initiatives in place are working. Got it. That's really helpful color. Maybe just for my follow-up here, I'm curious if there's a way to quantify how you think about the net margin impact from the public sector sales implied in the second quarter. I know that's, I think you mentioned it's resuming back to growth after the shutdown and headwinds last quarter, but it's still against a pretty tough comp. I think that's a lower mix portion of the business. And just how do you think about that maybe normalizing out mix-wise in the back half of this year? Yeah. So in the public sector, what we said is due to the headwinds in the first quarter from the shutdown, quarter-over-quarter, mixed headwind will be about roughly 50 basis points. We don't expect to see a strong ramp in the public sector. We expect it to go back more to business as usual. And I would assume that to be the case in the back half of the fiscal year. That's how I would think about it, Ken. And then keep in mind that our outlook assumes for 2Q that there is not another federal government shutdown. I just wanted to throw that out there as well. Very helpful. Thanks. Your next question is from Tommy Moll with Stephens Inc. Good morning, and thanks for taking my questions. Good morning. Martina, in your prepared comments, you talked about some cost measures taken in early 2Q, and it was in the same breath as a mention on turning your attention to the service model. So I guess it's a two-part question here on the cost measures. What can you share there in terms of details, perhaps sizing or context? And was that meant to be linked to your comments around service, or were they more aimed at the selling organization? Thank you. Yeah. Thanks for the question. Yeah. So our whole sales optimization program has sort of been pointed at our strategic goals of accelerating organic growth and optimizing our cost to serve. And that's what I've been talking about for the past year. And we focused primarily through those efforts on our core selling role. So we optimize geographies, we balance portfolios. And like I said, we believe that we're starting to see the impact of that, right? Growth comes from more coverage and a better customer experience, and cost to serve comes from an efficient resource deployment. So that work we had completed. But as you can imagine, there's a lot of other customer-facing roles in the business. So if you think about our core customer, you're talking about anyone from a small metalworking shop with 20 people up to a complex multi-site business. And we have a lot of teams that support that business, so both in business acquisition and then in terms of service once we have customers enrolled in different programs. And so we had not touched that side of the business. And so what we have done over the past quarter and a half is apply those principles to our service org to basically marry it up with what we've done in sales. And again, the goal is match the right amount of resource to the right potential. So we completed that work right at the end of the first quarter. And then at the beginning of 2Q, we did have a headcount benefit as a result of that optimization. So I won't share a lot more detail for competitive reasons, but we think we have the right structure in place now. And then, Tommy, just to size it, the way I would think about it is the headcount actions Martina alluded to early on in fiscal 2Q and further productivity eating away a large chunk of that $4 million quarter-over-quarter headwind from two extra months of merit. Okay. That's helpful. Thank you both. And then just sticking on the theme of profitability here, you gave helpful guidance on fiscal second quarter in terms of gross margin and OpEx. Any comments you want to offer now on seasonality for either gross margin percentage or OpEx? I mean, I guess the starting assumption might be gross margin percentage flat, maybe even a little bit improved as price cost improves post Q2 and on OpEx. I mean, unless you would point anything out, I think the starting assumption there would just be model normal variable expense associated with the sales commission as volumes fluctuate. But any additional context would be helpful. Thank you. Yeah. Tommy, good question. The way I think about it, starting with 2Q, I'll start with gross margin. Starting with 2Q, I think outlook 40.8 ± 20 basis points with one month under our belt. And in what we see looking forward in the next two months, it doesn't feel like a tough hurdle to be at the upper end of that range. As you go through the remainder of the year, that's going to be dependent on core customer acceleration and further inflation working through the P&L if we see more supplier price increases. So as a ballpark, I'd probably stay at that 40.8 ± 20 basis points with some potential upside in the back half. As we think about OpEx, to your point, I think it's a good idea to take the variable OpEx associated with the sales growth. But then the other thing to keep in mind too is we expect productivity to improve throughout the year. So what I'm alluding at is we have a 20% incremental margin target for the year, 18% in 1Q. At the midpoint of 2Q, we're at 18%. So that would imply some stronger incremental margins in the back half. And what we have line of sight to, we feel pretty comfortable in that. Thank you both. I'll turn it back. Your next question for today is from Nigel Coe with Wolfe Research. Oh, thanks. Good morning. And Martina, congratulations on the new role. Thank you. Just want to go back to December. Just, I understand the holiday timing and the impact on the customer shutdowns. But any more color on why it's so extreme? Just given it was a one-day shift from last year from Wednesday to Thursday. So just wondering if there's any more kind of color in terms of why customers decided to shut down over that period. And then have you seen sort of normal operations resuming in January so far? Yeah. Nigel, good question. The dynamics with December, first off, it wasn't a surprise with the holidays falling on a Thursday. And keep in mind our fiscal December runs through January 3rd. So we also have the impact from New Year's. The reason Thursday being the worst is customers take off Friday too for a long weekend. Just to give you an idea, the last time the holidays fell on a Thursday was back in 2014. December was down 16% month- over- month. We're down 20% roughly month-over-month and then going back to the prepared remarks, December on through the rest of the fiscal month, we were down 20%. So we really got hit hard in the back half of the month. Looking out to January, visibility is still limited. I mean, we have two days under our belt, but going back to what Martina said on our growth initiatives, the fact that core continued to grow in that challenging December and was our top grower, we expect that trend to continue, so regardless of macro conditions, we feel like there's opportunity to take shares, particularly within that core customer. Martina, I didn't know if there's anything. Yeah. I think, Nigel, the important thing that we always call out is that January 2nd day or the last Friday actually falls into our quarter. It will fall into everyone else's January because of our fiscal calendar. And that represented a headwind alone of about 100 basis points on growth. And coming into Christmas, we were actually seeing trends that made us encouraged and positive. So core is still outperforming. We believe we're still taking share. So it was a disappointing number, obviously, for December, but as Ryan said, expected because of where the holidays fell. No, that's great color. And January 3 definitely hurts you a bit more. Just a quick follow-on on gross margins. You provided some really good color there. Obviously, we've got some pretty aggressive price increases coming through in January. I'm just wondering, have you included the benefits from those price increases in your 2Q guide? I know it's in your stub portion of that price increase, but would that be in your 2Q guide? And do you anticipate maintaining gross margins on both the price and cost inflation? Yeah. Yeah. So I'll give a little color on 2Q, and then maybe I'll pass it all over to Greg to talk about price cost and gross margin of 1Q. Contemplated in our outlook is the price increase that we have for mid-January. We're not going to speculate on future pricing from our suppliers for the remainder of the quarter of the year. But our goal is to maintain price cost neutrality. And like I said earlier, see some upside to the range for 2Q. The upper half of the range and 40.8 ± 20 basis points for the back half of the year sounds like a good ballpark with some potential upside. Then Greg, I didn't know if you wanted to touch on how gross margin trended through 1Q. Yep. Thanks, Ryan. Taking a look, just looking at gross margin across quarter-over-quarter sequentially, with positive price costs and public sector-driven mix were the biggest drivers of the 30 basis point improvement that we saw during the quarter. These benefits were slightly offset by some adjustments that didn't go our way during the quarter. Just looking at price costs in general, at the beginning of the quarter, we saw price costs was negative and similar to 4Q levels. However, following our price actions in late September, early October, we did start to see price costs improve and exited the quarter in a much better position, which led to the 40.8% ± 20 basis points guide for Q2. Great. Thank you. Your next question for today is from Patrick Baumann with JP Morgan. Patrick, your line is live. Patrick, we can't hear you. Sorry, I was muted. Thank you for letting me know. Good morning. Good morning. Good Good morning. I just want to dive back into Nigel's question on December cadence. So you said that I think from Christmas through the end of your fiscal month, it was down 20. I'm guessing sales trends at that time of year aren't the greatest anyway on a daily basis. So curious, up until Christmas, what was the ADS growth versus that 2.5% you did for the month? Yeah. Just if you do the math, Pat, it's about 4%-5%ish, roughly. Okay. And then when you're thinking about the first quarter and the January-February number being 3% above that at the midpoint of the second quarter number, can you talk about the thinking behind that? I guess you mentioned price, but just curious how the 3% compares to history and then with limited visibility that you have, why you think that's kind of a reasonable place to be. Yeah. Good question, Pat. To your point, January and February at the midpoint up roughly 3%. That's combined January and February ADS up 3% versus 1Q. Historically, that's roughly 2%. Digging a little bit deeper, for the quarter, we talked about a 50 basis point benefit to ADS from the federal government shutdown headwinds of 1Q. We already picked up a little bit of that in December. Public sector was up mid- to high-single digits sequentially, December versus November. So what I'm getting at there is maybe for January and February, that looks more like 35 basis points-40 basis points. And then we talked about a 50 basis point headwind from the timing of our supplier conference. That's in the last week of February. We said 50 basis points, but if you isolate it for that two months, it looks more like 75 basis points. So we're in the hole 30 basis points roughly when you add those two together. What's given us confidence is the price action in mid-January that will go into effect and also the continued acceleration we see in core customers and national accounts as well. As we mentioned, December, despite a challenging December, core was still up mid-single digits. We feel confident that that could continue. Got it. And then maybe one for Martina. I guess the supplier event that you're hosting this year, what are you hoping to accomplish from it? You're bringing 1,400 associates to it and a bunch of suppliers. The volume growth that the company's delivering is still, versus the industrial production, not exciting. Can you talk about how you get that to improve and maybe if this event is meant to help start to drive that? Yeah. Thanks for the question. So since I've been at MSC, one of the things that I've really focused on is rebuilding trust with our suppliers and strengthening those relationships. And we've done a lot of things in the background that we haven't talked about with you around making ourselves easier to do business with and increasing our supplier transparency. One of the things that we did that was really important was to put this Supplier Council together because we talked straight about how to improve MSC's growth and how supplier collaboration with MSC can help us continue to outperform. They actually designed what an ideal session would look like. This is not a trade show. This is a working session, very detailed joint business planning that was designed by suppliers to be different from what they do in the industry today. We do, exactly as you say, expect to come out of that with an engagement plan in the field that will be followed up and executed on and will be a growth accelerator. It's a huge undertaking. It's a lot of upfront data-driven prep. It is a lot of people, as you said. But I think it's one way to make a big bang post all of these structural changes to aggressively go after growth in partnership with suppliers. So we're really excited about it, and we think it's worth the effort of taking all those folks out of the field for a few days. But as Ryan said, it will shift some revenue then into the third quarter. Okay. Thanks for the color. Your next question is from Chris Dankert with Loop Capital. Hi. Morning. Thanks for taking the questions. I guess just to poke at the 2Q guide a little bit more here. So if we're expecting price to be up 5% or a little bit north of that in the second quarter, obviously there's moving parts with supplier conference and whatnot. But volumes here are implied to still be flat to down a bit. Can you kind of put that in context? Is that just being cautious given the macro backdrop? Are we expecting to get positive in the back half of the year? Maybe how do we get that core volume back up, and how does that compare with what is the demand on the ground here? Yeah. Chris, so if you look at it at a year-over-year basis, keep in mind the challenging December. January and February applied roughly up 5.5% year-over-year. We said we wouldn't be surprised if price was a little north of 50 basis points. I mean, a little north of 5% year-over-year. So maybe a little bit of volume improvement. Going to the supplier conference, I would say we were probably a little conservative on the potential impact. That's three days in the last week, 1,400 customer-facing individuals at MSC being out. It could be less. It could be more. And given the fact that we don't have a lot of visibility here into the new calendar year, I would say we're a little bit cautious with our outlook and what we're implying with January and February. That's helpful context. Thank you for that. And then maybe just as we think about growth drivers, I've noticed the In-Plant sales growth is great, but the signings have tapered a little bit here. Are we more focused on the core and kind of letting the In-Plant kind of bubble up more organically? Has that been de-emphasized? Is it just timing and I'm overlooking into this? Just any context on In-Plant growth there? Yeah. I'm so glad you asked because, no, we still have focus on our largest customers. We have an incredible team customer engagement concept that we call MRO Go that builds programs for customers. And that includes placing In-Plants if that's the appropriate part of the solution. And that's aimed at the top end of our customer segment, so our largest, most complex customers, national accounts. And that is still ongoing. I think what you saw in the conversion in the first quarter, you saw the net number sort of continue to grow, but grow a little bit more slowly. And that's because at the same time that we are fully engaged in opening new programs for suppliers, we're also very engaged on challenging our own cost structure, looking at the drivers of profitability, and building that financial acumen in the field. So not every customer needs an In-Plant. We can provide outstanding service through a number of our service teams in a number of different models. And if a customer's needs are simpler, then the better thing to do is to allow that service to be provided in a simpler way. So we actually stepped down off a couple of existing In-Plant programs in cooperation with the customer as part of our cost savings program that we put in place for them and offered a different solution. So we'll continue to examine those going forward, but absolutely no slowdown in the pipeline. Absolutely no shift in emphasis. The teams that are working with those largest customers are still intact and in place. So, Chris, I would also add that the sequential growth you saw in the number of In-Plant programs, what Martina's getting at is the signings were greater than that increase. Yeah. Got it. That's a really helpful color. Thank you both so much. Your final question for today is from David Manthey with Baird. Thank you. Good morning, everyone. My question too is on the first quarter to second quarter sequentials. If I'm calculating this right, if you go to, say, a 6% ADS in the second quarter, theoretically, that would still be a sequential of like - 4%. And you're saying the - 2% is the historical average. And if you go to that 5.5% or 6%, I guess you'd be sort of factoring out the holidays and the sales meeting and all that stuff. And then on top of that, you get better government sales. You get this pricing acceleration. What I'm getting at is unless market demand is deteriorating, why wouldn't you be seeing more normal sequential trends in the second quarter versus what was already a seemingly weak first quarter? And then why wouldn't those be more normal or even higher as we move through the year if the economy gets better? Yeah. Dave, we tried messaging this at the fireside chats at recent conferences and following up with investors and the sell side. Look, December wasn't a surprise. Thursday is the worst day for the holidays to fall on. And if you go back to the slides last quarter, in the annual slide when we talk about assumptions for the quarters in the back half, what we said is the past two years, the average is down 4.5%. We're at 5% at the midpoint. Like we said, visibility is a little bit limited. Going to your point about the public sector, yeah, we'll get a little bit of a pickup there. But keep in mind that 2Q is a seasonal low for the public sector. And the expectation is it's just going to go back to business as normal. So you're not going to recoup that 100 basis points in 2Q. So as we stand here today, you saw in the macro indicators, the PMI contracted, new orders in the MBI contracted in December as well. Visibility is limited. We feel good about what we're doing from a growth initiative standpoint, but not going to get ahead of our skis and feel like we're doing a good job on just giving what we currently view the market to be and our expectations. And then also keep in mind that the supplier conference too, that's something that we alluded to as well with sales potentially getting pushed back out from 2Q to 3Q. Okay. Yeah. I know there's a lot of moving parts. We'll have to work through that. But additionally, if you're looking at incrementals sort of near term and even through the remainder of the year, here too, if essentially you're talking about mid-single digit price increases being essentially all of the growth in the near term and maybe a little bit less than that going forward, but a big chunk of the growth with price predominantly driving your revenue growth with super high read-through on that, in addition to some of these cost reduction efforts. Again, I'm not trying to push you on these numbers and get you outside your comfort zone, but why wouldn't contribution margins be higher than 20% if it's price plus cost reduction efforts? It would seem like you'd see abnormally high incrementals in that type of environment. What's the offset there that I'm missing? So if you look at what we're applying for the quarter, 18% at the midpoint, given the soft December is a five-week month, there's a lot of fixed cost associated with that. You could imagine operating leverage was pretty challenged in December. That would imply January and February look a lot better from an incremental margin standpoint than what's representative of the average for the quarter. And keep in mind, we have about $1 million in incremental expense related to travel for the supplier conference. And then you're to say in the back half, we expect incremental margins to be better than the first half. And if we were to be in a mid to high single-digit growth environment, to your point, Dave, we'd expect those incremental margins to be a lot stronger. Got it. Okay. Great. Thanks a lot. Thank you. We have reached the end of the question- and- answer session, and I will now turn the call over to Ryan Mills for closing remarks. Thank you, everybody, for attending today's call. Our next earnings call for fiscal 2Q will be on April 1st. Have a good day. Bye. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.