Summary of Global Industrial Company (GIC) FY Conference Call Company Overview - **Company Name**: Global Industrial Company (GIC) - **Location**: Port Washington, New York - **Established**: Over 76 years ago - **Revenue**: $1.3 billion in 2024 - **Distribution Centers**: 7 (5 in the U.S. and 2 in Canada) [4][5] Core Business and Market Position - **Market Focus**: Specializes in the big and bulky segment of industrial distribution, primarily through less-than-truckload shipments and third-party carriers [4][5] - **E-commerce**: Over 60% of transactions are online, with more than 40% of revenue tied to exclusive brands [5][6] - **Customer Base**: Over 400,000 customers with less than 2% concentration from any single customer, indicating a broad market reach [8] Product Lines and Innovations - **Product Categories**: Includes new entries into healthcare and hospitality, with a focus on private label brands that represent approximately 40% of revenue [9][10] - **Growth Rate**: Achieved a compound annual growth rate (CAGR) of over 16% for private label brands over the last five years [11] - **Product Examples**: Portable power stations, bolted teardrop pallet racking, and digital wood laminate lockers [12] Financial Performance - **Revenue Growth**: Consistent growth with a 6.3% CAGR on the top line over the last five years [13] - **Operating Margin**: Gross margins in the mid-thirties, with a notable peak in 2022 due to favorable inventory positioning [14] - **Dividend Policy**: Quarterly dividends since 2016 with a CAGR of 13.1% from 2018 to 2025, totaling $650 million in dividends paid since January 2018 [23] Strategic Initiatives - **Customer-Centric Strategy**: Focus on operational excellence and tailored value propositions across various industry verticals [6][19] - **Digital Transformation**: Emphasis on enhancing e-commerce capabilities and utilizing AI and data analytics for real-time market responsiveness [15][16] - **Market Expansion**: Plans to extend beyond current focus areas and capture national accounts through increased investment in outside sales representatives [32] Supply Chain and Tariff Management - **Sourcing**: Significant portion of cost of goods sold (COGS) sourced from Southeast Asia, with ongoing efforts to diversify supply chains to mitigate tariff impacts [35][36] - **Tariff Strategy**: Proactive measures to negotiate supplier costs and maintain pricing power amidst fluctuating tariffs [38][39] Competitive Landscape - **Comparison with Competitors**: Differentiation from larger players like Grainger and Fastenal through a focus on small to medium-sized business (SMB) customers and a robust e-commerce platform [29][30] - **E-commerce Advantage**: Long-standing expertise in e-commerce, with a commitment to omnichannel approaches that enhance customer connectivity [42][43] Future Outlook - **Growth Opportunities**: Identifying potential for product assortment expansion and operational efficiencies to drive future growth [54] - **Investment Focus**: Plans to reinvest in e-commerce capabilities and explore strategic mergers and acquisitions to enhance product offerings [23][24] This summary encapsulates the key points discussed during the Global Industrial Company FY Conference Call, highlighting the company's market position, financial performance, strategic initiatives, and future outlook.

Core Viewpoint - Global Industrial (GIC) is currently viewed as a better value opportunity compared to SiteOne Landscape (SITE) based on various financial metrics and analyst outlooks [1]. Valuation Metrics - GIC has a forward P/E ratio of 15.19, significantly lower than SITE's forward P/E of 37.36, indicating that GIC may be undervalued [5]. - The PEG ratio for GIC is 0.95, while SITE's PEG ratio is 1.97, suggesting that GIC offers better value relative to its expected earnings growth [5]. - GIC's P/B ratio stands at 3.41, compared to SITE's P/B of 3.49, further supporting GIC's valuation advantage [6]. Analyst Outlook - GIC holds a Zacks Rank of 2 (Buy), indicating a positive earnings estimate revision activity, while SITE has a Zacks Rank of 4 (Sell), reflecting a less favorable analyst outlook [3]. - GIC's Value grade is B, whereas SITE's Value grade is D, highlighting GIC's stronger position in terms of value investing metrics [6].

Revenue and Sales Performance - The Company generated revenue of $321.0 million, a decline of 0.7% from $323.4 million in the same period last year[60]. - U.S. sales declined 0.3% for the quarter compared to the same period in 2024, while Canada sales declined 8.8% (2.5% in local currency)[64]. Profitability and Margins - Consolidated gross margin increased to 34.9%, up from 34.3% year-over-year, benefiting from proactive price management[60]. - Operating margin for Q1 2025 increased by 30 basis points compared to Q1 2024, attributed to improved gross margin and cost control measures[70]. - Net income per diluted share from continuing operations increased 2.9% to $0.35 compared to $0.34 last year[60]. - Gross margin for Q1 2025 was 34.9%, a 60 basis point improvement from 34.3% in Q1 2024, driven by price capture and freight management[67]. Expenses and Cost Management - Selling, distribution and administrative expenses (SD&A) were $93.9 million, representing 29.3% of net sales, up from 28.9% last year[61]. - Selling, distribution, and administrative expenses (SD&A) as a percentage of sales increased by approximately 40 basis points year-over-year, with total salary and related costs rising by $2.7 million[69]. - The Company continues to maintain strong cost controls within discretionary spending[54]. - The Company is focused on integrating Indoff's operations and optimizing its cost structure amid ongoing IT control remediation[54]. Cash Flow and Liquidity - Net cash provided by operating activities from continuing operations was $3.3 million in Q1 2025, down from $6.3 million in Q1 2024, primarily due to changes in working capital[77]. - Cash and cash equivalents decreased by $5.6 million from $44.6 million as of December 31, 2024, to $39.0 million as of March 31, 2025[74]. - The company had over $156 million of liquidity (cash and undrawn line of credit) in the U.S. as of March 31, 2025[85]. - The company maintains a $125.0 million secured revolving credit facility, with total availability of approximately $122.2 million as of March 31, 2025[80]. Future Outlook - The Company anticipates increased volatility in margin rates due to market inflation and tariff-related cost increases[54]. - The company anticipates capital expenditures in the range of $2.0 to $3.0 million for 2025, with no contractual commitments at this time[83]. - Regular quarterly dividends in Q1 2025 totaled approximately $10.1 million, reflecting a dividend of $0.26 per common share[79].

Financial Data and Key Metrics Changes - In Q1 2025, the company generated revenue of $321 million, a decline of less than 1% compared to the previous year, with U.S. revenue down 0.3% and Canadian revenue down 2.5% in local currency [4][12] - Gross margin increased by 60 basis points year-over-year to 34.9%, and operating income improved by 4.6% [5][16] - Operating income from continuing operations was $18.2 million, with an operating margin of 5.7% [18] Business Line Data and Key Metrics Changes - The performance of the company's largest strategic accounts improved, contributing positively to revenue growth as the quarter progressed [4][7] - The Indof business continued to see growth in new order generation, indicating strong performance in project-based segments [24] Market Data and Key Metrics Changes - The company faced challenges due to tariffs enacted in April, which disrupted the supply chain and impacted price and demand dynamics [8][10] - Despite these challenges, the company maintained a strong inventory position, which provided flexibility in price cost management [14][31] Company Strategy and Development Direction - The company aims to broaden its customer base by expanding existing account relationships and accelerating growth initiatives [7] - There is a focus on enhancing performance through account-based marketing and improving the alignment of marketing and sales [7] - The company is actively diversifying its supply chain to mitigate risks associated with tariffs, particularly those affecting imports from China [15][40] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to manage through the current environment, emphasizing a customer-centric approach and strong balance sheet [10][19] - The future demand environment remains uncertain due to macroeconomic factors and tariffs, but management is focused on executing effectively [25][63] Other Important Information - The company declared a quarterly dividend of $0.26 per share, reflecting its strong financial position [20] - Capital expenditures for 2025 are expected to be in the range of $2 million to $3 million, primarily for maintenance-related investments [18] Q&A Session Summary Question: Impact of Indof on the quarter - Management noted that Indof saw broader growth across larger customer segments, with no significant pull forward demand observed [24] Question: SD and A expenses sustainability - Management indicated that SD and A expenses were controlled, with a focus on maintaining cost efficiency while allowing for revenue growth [26][27] Question: Future pricing and gross margins amid tariffs - Management acknowledged the fluid situation regarding tariffs and indicated that they are monitoring it closely while managing inventory effectively [28][30] Question: Sourcing shift from China - Management confirmed that the sourcing from China has decreased from previous levels, with ongoing efforts to diversify supply chains [39][40] Question: Growth in strategic accounts - The growth in strategic accounts was attributed to both bringing on new accounts and strong performance from existing ones [47] Question: Potential for acquisitions - Management stated that M&A remains a lever for growth, with the company actively looking for strategic opportunities [65]

Core Viewpoint - Global Industrial (GIC) reported quarterly earnings of $0.35 per share, exceeding the Zacks Consensus Estimate of $0.20 per share, and showing a slight increase from $0.34 per share a year ago, representing a 75% earnings surprise [1] Financial Performance - The company posted revenues of $321 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 4.56%, although this is a decrease from year-ago revenues of $323.4 million [2] - Over the last four quarters, Global Industrial has only surpassed consensus EPS estimates once [2] Stock Performance - Global Industrial shares have declined approximately 11.1% since the beginning of the year, compared to a decline of 6% for the S&P 500 [3] - The current Zacks Rank for the stock is 4 (Sell), indicating expectations of underperformance in the near future [6] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.44 on revenues of $339.66 million, and for the current fiscal year, it is $1.48 on revenues of $1.33 billion [7] - The trend for estimate revisions ahead of the earnings release was unfavorable, which may impact future stock performance [6] Industry Context - The Industrial Services industry, to which Global Industrial belongs, is currently ranked in the bottom 43% of over 250 Zacks industries, suggesting potential challenges ahead [8]

Financial Data and Key Metrics Changes - In the first quarter, the company generated revenue of $321 million, a decline of less than 1% compared to the previous year [5][13] - Gross margin increased by 60 basis points year-over-year to 34.9%, and operating income improved by 4.6% [6][17] - Operating income from continuing operations was $18.2 million, with an operating margin of 5.7% [19] Business Line Data and Key Metrics Changes - U.S. revenue decreased by 0.3%, while Canadian revenue was down 2.5% in local currency, approximately 9% in U.S. dollars due to negative exchange rate headwinds [13][14] - The company experienced improved revenue performance as the quarter progressed, particularly in March [14][25] Market Data and Key Metrics Changes - The company noted a soft start in January due to the timing of the New Year's holiday, but sales momentum improved towards the end of the quarter [5][14] - Price actions taken in the second half of 2024 had a slightly positive impact on revenue, reflecting modest pricing adjustments in response to increased ocean transit costs [15] Company Strategy and Development Direction - The company aims to broaden its customer base by expanding existing account relationships and accelerating growth initiatives [8][12] - A new CRM implementation is expected to enhance customer visibility and support growth initiatives [10] - The company is actively managing supplier relationships and logistics to mitigate the impact of tariffs on its business [11][16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strong balance sheet and customer-centric culture to navigate current challenges [11][19] - The company anticipates increased volatility in margin rates due to market inflation and tariff-related cost increases [18] - Management is closely monitoring the tariff situation and adjusting pricing strategies accordingly [30][32] Other Important Information - The company declared a quarterly dividend of $0.26 per share of common stock [20] - Capital expenditures for 2025 are expected to be in the range of $2 million to $3 million, primarily for maintenance-related investments [19] Q&A Session Summary Question: Impact of Indof on the quarter - Management noted that Indof continued to see growth in the first quarter, with no significant pull forward demand observed [22][24] Question: SD and A expenses sustainability - Management indicated that SD and A expenses were controlled and that they aim to manage these costs while improving revenue [27][28] Question: Future pricing and gross margins amid tariffs - Management is actively managing pricing and inventory to mitigate tariff impacts, with a focus on maintaining margins [29][30][32] Question: Sourcing shift from China - Management confirmed that the sourcing from China has decreased and they are diversifying supply chains to mitigate risks [42][43] Question: Expanding total addressable market (TAM) - Management sees opportunities to broaden their target market, particularly among enterprise customers and strategic accounts [47][48] Question: Growth in strategic accounts - Growth in strategic accounts was attributed to both acquiring new accounts and strong performance from existing ones [50] Question: Gross margin outlook - Management believes there is potential for gross margin improvement through better sourcing and pricing strategies, despite external tariff pressures [56][58] Question: Customer receptiveness to price increases - Customers have been receptive to price increases, understanding the need for adjustments due to market conditions [61][63] Question: M&A opportunities - Management indicated that M&A remains a growth lever, with active consideration of strategic opportunities [68]

Group 1 - The global industrial tariffs implemented in April have disrupted the business of Global Industrial Company [1] - These tariffs have also caused disturbances throughout the entire supply chain and affected the company's customers [1]

[Performance Highlights](index=1&type=section&id=Performance%20Highlights) For the first quarter of 2025, Global Industrial Company reported net sales of $321.0 million, a slight decrease of 0.7% year-over-year, while improving profitability with gross margin expanding to 34.9% and operating margin increasing to 5.7% Q1 2025 vs Q1 2024 Performance Summary (U.S. dollars in millions, except per share data) | Performance Summary (U.S. dollars in millions, except per share data) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net sales | $321.0 | $323.4 | | Gross profit | $112.1 | $110.9 | | Gross margin | 34.9% | 34.3% | | Operating income from continuing operations | $18.2 | $17.4 | | Operating margin | 5.7% | 5.4% | | Net income from continuing operations | $13.5 | $13.1 | | Net income per diluted share from continuing operations | $0.35 | $0.34 | - Consolidated sales decreased by **0.7%** year-over-year[7](index=7&type=chunk) - Consolidated gross margin increased from **34.3% to 34.9%**[7](index=7&type=chunk) - Consolidated operating income from continuing operations increased by **4.6%**[7](index=7&type=chunk) - Net income per diluted share from continuing operations increased by **2.9%**[7](index=7&type=chunk) [Management Commentary and Outlook](index=2&type=section&id=Management%20Commentary%20and%20Outlook) Management attributed the slight revenue decline to the New Year's holiday timing, noting improved performance in March and strong cost controls, while actively mitigating new tariff impacts - Q1 revenue of **$321 million** was down less than **1%** year-over-year, but would have increased by low single digits excluding the New Year's holiday impact[4](index=4&type=chunk) - Performance improved sequentially through the quarter, culminating in revenue growth in March, led by Indoff and the company's largest strategic accounts[4](index=4&type=chunk) - The company is actively working to mitigate the impact of tariffs enacted in April, which have caused disruption to the entire supply chain[4](index=4&type=chunk) [Financial Position and Shareholder Returns](index=2&type=section&id=Financial%20Position%20and%20Shareholder%20Returns) As of March 31, 2025, the company maintained a solid financial position with $192.5 million in working capital and $39.0 million in cash, while declaring a quarterly cash dividend of $0.26 per share Liquidity and Capital Position (as of March 31, 2025, in millions) | Metric | Value (in millions) | | :--- | :--- | | Total working capital | $192.5 | | Cash and cash equivalents | $39.0 | | Excess availability under credit facility | $120.5 | - Operating cash flow provided by continuing operations in the first quarter was **$3.3 million**[4](index=4&type=chunk) - The Board of Directors declared a cash dividend of **$0.26 per share**, payable on May 19, 2025, to shareholders of record on May 12, 2025[4](index=4&type=chunk) [Condensed Consolidated Financial Statements](index=4&type=section&id=Condensed%20Consolidated%20Financial%20Statements) The unaudited condensed consolidated financial statements provide a comprehensive view of the company's financial health and operational results for the first quarter ended March 31, 2025 [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For Q1 2025, net sales slightly decreased to $321.0 million, but operating income from continuing operations increased to $18.2 million, resulting in net income of $13.6 million Q1 2025 Statement of Operations (in millions) | Account | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net sales | $321.0 | $323.4 | | Gross profit | $112.1 | $110.9 | | Operating income from continuing operations | $18.2 | $17.4 | | Net income from continuing operations | $13.5 | $13.1 | | Net income | $13.6 | $13.2 | | Diluted EPS from continuing operations | $0.35 | $0.34 | [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, total assets increased to $536.7 million, driven by higher accounts receivable and inventories, with shareholders' equity also rising to $287.9 million Balance Sheet Summary (in millions) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $39.0 | $44.6 | | Inventories | $178.6 | $167.1 | | Total current assets | $372.9 | $352.6 | | Total assets | $536.7 | $520.7 | | Total current liabilities | $180.4 | $168.4 | | Total liabilities | $248.8 | $239.6 | | Shareholders' equity | $287.9 | $281.1 | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) In Q1 2025, operating cash flow from continuing activities was $3.3 million, leading to a net decrease in cash of $5.6 million, with the quarter-end cash balance at $39.0 million Cash Flow Summary (in millions) | Account | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $3.4 | $6.4 | | Net cash used in investing activities | ($0.2) | ($1.3) | | Net cash used in financing activities | ($8.8) | ($9.6) | | Net decrease in cash | ($5.6) | ($4.5) | | Cash and cash equivalents – End of period | $39.0 | $29.9 |

Supply Chain and Economic Conditions - The company has experienced disruptions in global supply chains, particularly from China, which could adversely affect operations and sales due to delays in receiving imported products [44]. - Economic conditions in North America directly impact the company's consolidated results, with potential declines in sales linked to decreased customer spending and confidence [43]. - The company relies significantly on products imported from China for private brand lines, exposing it to risks associated with tariffs and trade policies [49]. - Increased shipping costs have been observed due to geopolitical conflicts, such as the Russian invasion of Ukraine, which may continue to affect international business and economic conditions [50]. - The company has faced challenges in maintaining and increasing sales volumes with existing customers, which could impact profitability [46]. - Tariffs imposed on foreign-sourced goods have led to increased procurement costs, with the company attempting to offset these through price increases and cost reductions [54]. - The company is experiencing volatility in freight and shipping costs, which could adversely affect margins if these costs cannot be passed on to customers [66]. Labor and Operational Challenges - The competitive labor market in the U.S. poses challenges for recruiting and retaining employees, potentially increasing operational costs [58]. - The company’s ability to maintain efficient distribution is critical, with disruptions at distribution centers potentially affecting inventory and timely deliveries [53]. - The company is exposed to inventory risks, including the inability to profitably resell excess or obsolete inventory, which could lower gross margins [84]. - The company has faced operational problems in implementing new IT systems, which could impact business operations and financial reporting [71]. - Increased costs from independent freight carriers may not be fully passed on to customers, resulting in lower margins for the company [67]. Financial Performance and Reporting - Consolidated sales increased by 3.3% to $1.32 billion in 2024, compared to $1.27 billion in 2023; excluding Indoff, sales declined by 0.6% [126]. - Consolidated gross margin improved to 34.3% from 34.2% in the previous year; excluding Indoff, gross margin was 36.0%, up from 35.5% [126]. - Consolidated operating income decreased by 16.6% to $80.5 million, with a decline of 18.6% to $73.9 million when excluding Indoff [126]. - Net income per diluted share from continuing operations decreased by 14.7% to $1.57 compared to $1.84 in the previous year [126]. - Selling, distribution, and administrative expenses increased to $371.5 million in 2024 from $339.3 million in 2023, reflecting a 9.5% rise [135]. - The effective income tax rate decreased to 23.9% in 2024 from 25.7% in 2023, influenced by the reversal of previously non-deductible executive stock compensation [139]. - Cash and cash equivalents increased to $44.6 million in 2024 from $34.4 million in 2023, a change of $10.2 million [141]. - Working capital increased by $28.6 million, primarily due to higher cash and inventory balances [144]. - Net cash provided by operating activities from continuing operations was $50.7 million in 2024, down from $85.3 million in 2023, primarily due to lower income and increased depreciation and amortization expenses [145]. Acquisitions and Strategic Initiatives - The acquisition of Indoff in May 2023 resulted in significant intangible assets and goodwill totaling approximately $64.3 million, with consolidated carrying amounts of goodwill and intangible assets at $65.7 million as of December 31, 2024 [88]. - The Company acquired 100% of Indoff for approximately $72.6 million in cash, enhancing its presence in the North American MRO market [116]. - A strategic acquisition was completed in Q4 2024, enhancing the company's product portfolio and expected to add $50 million in annual revenue [219]. - The company is expanding its market presence in Europe, targeting a 30% increase in market share by 2026 [219]. Internal Controls and Compliance - Material weaknesses in internal control over financial reporting have been identified, which could impair the company's ability to produce timely and accurate financial statements [80]. - Ernst & Young LLP issued an adverse report on the effectiveness of the Company's internal control over financial reporting as of December 31, 2024 [183]. - The Company identified material weaknesses in the design and operation of Information Technology General Controls (ITGCs) as of December 31, 2024, affecting both Global Industrial and Indoff businesses [179]. - The Company has made substantial progress in remediating the identified material weaknesses, including hiring additional IT compliance personnel and engaging a third-party accounting advisory firm [186]. - Management's remediation plans are ongoing, and the Company will not conclude that the material weaknesses are fully remediated until controls are fully implemented and tested [189]. Future Outlook and Growth Projections - The company provided an optimistic outlook, projecting a revenue growth of 10-12% for 2025 [219]. - Research and development expenses increased by 18% in 2024, focusing on innovative technologies [219]. - The company plans to implement cost-saving measures aimed at reducing operational expenses by 5% in 2025 [219]. - User data indicated a 20% increase in active customers, reaching a total of 1.2 million by the end of 2024 [219]. Shareholder Returns and Equity - The company declared a regular cash dividend of $0.26 per share to common stock shareholders, payable on March 17, 2025 [110]. - The Company declared dividends of $1.00 per share in 2024, up from $0.80 per share in 2023, representing a 25% increase [228]. - The company paid dividends totaling $38.4 million in 2024, compared to $30.6 million in 2023, indicating an increase of approximately 25.5% [235]. - The total equity increased to $281.1 million by December 31, 2024, up from $255.2 million in 2023, representing a growth of about 10.5% [235].

Financial Performance - Global Industrial reported quarterly earnings of $0.27 per share, missing the Zacks Consensus Estimate of $0.28 per share, and down from $0.40 per share a year ago, representing an earnings surprise of -3.57% [1] - The company posted revenues of $302.3 million for the quarter ended December 2024, missing the Zacks Consensus Estimate by 1.23%, and down from $320.1 million year-over-year [2] - Over the last four quarters, Global Industrial has not surpassed consensus EPS estimates and has topped consensus revenue estimates only once [2] Stock Performance - Global Industrial shares have declined approximately 4.1% since the beginning of the year, while the S&P 500 has gained 1.7% [3] - The current Zacks Rank for Global Industrial is 5 (Strong Sell), indicating expected underperformance in the near future [6] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.28 on revenues of $320.88 million, and for the current fiscal year, it is $1.66 on revenues of $1.37 billion [7] - The trend for estimate revisions ahead of the earnings release has been unfavorable, which may impact future stock movements [6] Industry Context - The Industrial Services industry, to which Global Industrial belongs, is currently ranked in the bottom 39% of over 250 Zacks industries, suggesting potential challenges for stock performance [8]