MSC Industrial Direct Co., Inc. (NYSE:MSM) Q1 2022 Earnings Conference Call December 22, 2021 8:30 AM ET Company Participants John Chironna - Vice President, Investor Relations and Treasurer Erik Gershwind - President and Chief Executive Officer Kristen Actis-Grande - Executive Vice President and Chief Financial Officer Conference Call Participants Tommy Moll - Stephens David Manthey - Baird Ryan Merkel - William Blair Chris Dankert - Loop Capital Michael McGinn - Wells Fargo Steve Barger - KeyBanc Capital ...

Financial Performance - Net sales for Q4 2021 increased by 98% to $8310 million compared to $7477 million in Q4 2020[6] - Gross profit for Q4 2021 was $3490 million or 420% of sales compared to $3111 million or 416% of sales in Q4 2020[6] - Adjusted operating profit for Q4 2021 was $969 million or 117% of sales compared to $841 million or 112% of sales in Q4 2020[8] - Earnings per diluted share for Q4 2021 were $118 compared to $094 in Q4 2020[6] - Adjusted earnings per diluted share for Q4 2021 were $126 compared to $109 in Q4 2020[8] - Net sales for fiscal year 2021 increased by 16% to $32432 million compared to $31924 million in fiscal year 2020[10] Strategic Initiatives - The company achieved $40 million in Mission Critical savings in fiscal year 2021 and increased expected total program savings to at least $100 million by fiscal year 2023[4] - The company is targeting at least $100 million in total program savings by the end of fiscal year 2023 versus fiscal year 2019[23] - The company reaffirms fiscal year 2022 incremental margin target of 20 percent[4] Balance Sheet and Liquidity - Free cash flow was $690 million in Q4 2021 compared to $1707 million in Q4 2020[17] - Net debt was $7455 million in Q4 2021 compared to $4941 million in Q4 2020[18]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 __________________________________ FORM 10-K __________________________________ (Mark One) x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended August 28, 2021 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______ to______ Commission File Number: 1-14130 __________________________________ MSC INDUSTRI ...

Financial Data and Key Metrics Changes - Sales for Q4 were $831 million, an increase of 11.1% year-over-year, with average daily sales (ADS) growth of 12.9% [33] - Gross margin for Q4 was 42%, down 30 basis points from Q3 but up 40 basis points from the previous year [34] - Adjusted operating margin was 11.7%, compared to 11.2% in the prior year [36] - GAAP earnings per share were $1.18, up from $0.94 in the same period last year, while adjusted earnings per share were $1.26, a 15.6% increase [37] - Free cash flow was $69 million in Q4, down from $171 million in the prior year [38] Business Line Data and Key Metrics Changes - Non-safety and non-janitorial product lines grew by 20%, while safety and janitorial products declined by approximately 14% [27] - Government sales declined nearly 30% due to difficult comparisons in janitorial and safety products [28] - The implant program accounted for just over 7% of company sales, up from 5% a year ago [19] Market Data and Key Metrics Changes - The demand environment remained strong, with most manufacturing end markets robust, although some softness was noted in automotive [25] - The Industrial Production (IP) index continues to show growth, indicating a positive market outlook [25] Company Strategy and Development Direction - The company is focused on its "Mission Critical" program, aiming to capture market share and restore return on invested capital (ROIC) to the high teens by fiscal 2023 [14] - The goal is to achieve at least 400 basis points of growth above the IP index by the end of fiscal 2023, with a target of 300 basis points for fiscal 2022 [23] - The company plans to deliver an additional $25 million in cost savings in fiscal 2022, building on the $40 million achieved in fiscal 2021 [24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for fiscal 2022, despite challenges from supply chain disruptions and inflation [23] - The company is well-positioned to navigate current challenges due to its broad product assortment and strong supplier relationships [26] - Management noted that while service levels are not yet back to pre-COVID levels, they are above most of the industry, aiding in market share capture [21] Other Important Information - The company achieved $40 million in cost savings in fiscal 2021, exceeding its original target of $25 million [18] - Inventory levels increased significantly to support customer needs amid ongoing supply chain disruptions [39] - Total debt at the end of Q4 was $786 million, reflecting a $27 million increase from the previous quarter [41] Q&A Session Summary Question: What is the outlook on price cost and inflationary cycles? - Management indicated that they are in the early stages of the inflationary cycle, with expectations for a positive price cost spread to maintain flat gross margins [61][63] Question: How will Mission Critical execution impact savings versus investments? - Management noted that savings will be narrower in the first half of the year but expected to widen in the second half [65][66] Question: What is the forecast for price inflation and pent-up demand? - Management expects continued price increases and believes pent-up demand will extend the growth runway into 2022 and possibly 2023 [80][81] Question: How does the company view free cash flow conversion? - Management acknowledged there is room to optimize free cash flow and plans to focus on balance sheet initiatives in fiscal 2022 [103] Question: What is the company's exposure to the production cycle versus MRO products? - Approximately half of revenues are from metalworking products, which are heavily leveraged to the production environment, while the rest includes MRO products [108][109]

| --- | --- | |-------|-------| | | | | | | | | | 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 historical fact, that address activities, events or developments that we expect, believe or anticipate will or may occur in the future, including statements about the future impact of COVID-19 on our business operations, results of ...

Financial Data and Key Metrics Changes - Revenues for Q3 were $866 million, up 3.8% year-over-year, with average daily sales increasing by 2.2% [19][20] - Non-safety and non-janitorial sales grew 21% year-over-year, while safety and janitorial sales declined over 40% [13][19] - Gross margin for Q3 was 42.3%, up 30 basis points sequentially and down 10 basis points year-over-year [20][19] - Operating expenses were $257.3 million, or 29.7% of sales, compared to $242.8 million, or 29.1% of sales in the prior year [20][21] Business Line Data and Key Metrics Changes - Non-safety and non-janitorial product lines improved from mid-single-digit declines in Q2 to 21% growth in Q3 [13][19] - Government sales declined nearly 40%, while national accounts posted a low-single-digit increase [14] - Core customers grew in the mid-teens, and CCSG grew mid-single digits [14] Market Data and Key Metrics Changes - The economic environment improved significantly, with manufacturing end markets showing positive trends [11] - Industrial production readings turned to double-digit growth in April and May, indicating robust customer outlooks [11][12] - Supply chain shortages and disruptions are causing product scarcity and inflationary pressures [11][12] Company Strategy and Development Direction - The company aims to capture market share with a target growth rate of at least 400 basis points above the industrial production index (IP) by the end of fiscal 2023 [7] - The Mission Critical program focuses on achieving a return on invested capital (ROIC) in the high teens and structural cost reductions of $90 million to $100 million by the end of fiscal 2023 [7][9] - The acquisition of a majority stake in the William Hurst Company enhances the company's capabilities in the aerospace sector, which is expected to grow significantly post-pandemic [16][17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current environment, citing strong supplier relationships and high inventory levels as advantages [12] - The company expects double-digit growth rates for total business in fiscal Q4 and continued strength into fiscal '22 [27] - Inflationary pressures are anticipated to continue, but ongoing price realization is expected to stabilize gross margins year-over-year [10][20] Other Important Information - The company reported a $20.8 million recovery related to nitrile glove impairment, positively impacting GAAP operating income [23] - Free cash flow was $3 million in Q3, down from $49 million in the prior year, primarily due to increased inventory and accounts receivable [24] - Total debt increased to $759 million, with a significant portion used for share repurchases [25] Q&A Session Summary Question: Can you elaborate on the pricing environment and potential future increases? - Management indicated that strong inflation is generally beneficial for distributors, and they expect price increases to outpace costs in the current environment [36][38] Question: What is the current strategy regarding inventory management? - The company plans to maintain high inventory levels to capture market share during times of product scarcity, reflecting a commitment to customer service [40][41] Question: Can you provide insights on the vending initiative and its growth? - Vending is gaining traction, with new account signings rebounding as the business recovers from the pandemic [44][45] Question: What is the outlook for the metalworking market? - The metalworking market is showing signs of recovery, with the company positioned to capture additional market share through investments in talent and technology [47][48] Question: Can you discuss the recent acquisition and its impact on the aerospace segment? - The acquisition of Hurst is expected to enhance the company's capabilities in the aerospace sector, which currently represents about 10% of total sales [85][86]

Financial Performance - Net sales for the thirteen weeks ended May 29, 2021, were $866.3 million, an increase of 3.1% compared to $835.0 million for the same period in 2020[16] - Gross profit for the thirteen weeks ended May 29, 2021, was $366.5 million, representing a gross margin of 42.3%, compared to $354.0 million and a gross margin of 42.4% in the prior year[16] - Net income attributable to MSC Industrial for the thirteen weeks ended May 29, 2021, was $94.4 million, or $1.68 per diluted share, compared to $77.7 million, or $1.40 per diluted share, for the same period in 2020[16] - Comprehensive income for the thirteen weeks ended May 29, 2021, was $99.3 million, compared to $74.0 million for the same period in 2020[19] - For the thirty-nine weeks ended May 29, 2021, net income was $152.06 million, a decrease of 23.7% compared to $199.12 million for the same period in 2020[26] Assets and Liabilities - Total current assets increased to $1.31 billion as of May 29, 2021, from $1.24 billion as of August 29, 2020[14] - Total liabilities rose to $1.27 billion as of May 29, 2021, compared to $1.06 billion as of August 29, 2020[14] - The company’s total assets as of May 29, 2021, were $2.42 billion, up from $2.38 billion as of August 29, 2020[14] - Total shareholders' equity attributable to MSC Industrial was $1.14 billion as of May 29, 2021, down from $1.29 billion a year earlier[23] - Cash and cash equivalents decreased to $27.43 million at the end of the period from $353.39 million at the end of the previous year[26] Operating Expenses - Operating expenses for the thirteen weeks ended May 29, 2021, were $257.3 million, an increase from $242.8 million in the same period of 2020[16] - The company reported an impairment loss of $20.8 million for the thirteen weeks ended May 29, 2021, compared to no impairment loss in the same period of the previous year[16] - The company incurred inventory write-downs of $30.09 million related to PPE during the second quarter of fiscal year 2021[32] - Total restructuring costs for the thirteen weeks ended May 29, 2021, amounted to $1,349, compared to $1,359 for the same period in 2020, while total costs for the thirty-nine weeks ended May 29, 2021, were $26,943, significantly higher than $5,871 in 2020[109] Cash Flow and Dividends - Cash provided by operating activities was $139.36 million, a decrease of 35.0% from $214.94 million in the prior year[26] - The company declared regular cash dividends of $0.75 per Class A and Class B common share, consistent with the previous year[23] - Payments of special cash dividends were $195.35 million, a decrease of 29.6% from $277.63 million in the prior year[26] Stock and Share Repurchase - The company repurchased $50.70 million of common stock during the period, compared to $3.24 million in the previous year[26] - The Company announced a new share repurchase program to purchase up to 5,000 shares, replacing the previous Repurchase Plan[102] - The Company approved a Share Repurchase Program to purchase up to 5,000 shares, replacing the previous plan authorized in 1999[124] Debt and Credit Facilities - As of May 29, 2021, the total debt of MSC Industrial Direct Co., Inc. was $756.241 million, an increase from $615.551 million as of August 29, 2020, representing a 22.8% increase[72] - Borrowings under credit facilities amounted to $505 million, a decrease from $1.01 billion in the prior year[26] - The weighted-average interest rate on borrowings under all credit facilities was 1.18% as of May 29, 2021, down from 1.42% as of August 29, 2020[81] - The Company has a $600 million committed Revolving Credit Facility, which matures on April 14, 2022[74] Market and Strategic Initiatives - The company anticipates continued growth in net sales and profitability, driven by strategic investments and market expansion initiatives[8] - The Company’s net sales by customer end-market for the thirteen weeks ended May 29, 2021, showed that 48% came from Heavy Manufacturing, up from 40% in the same period of 2020[51] - The impact of COVID-19 has led to uncertainties in future operations, with potential shortages in fuel, labor, and certain products affecting the business[32] Tax and Legal Matters - The effective tax rate for the thirty-nine-week period ended May 29, 2021, was 24.6%, a decrease from 25.0% for the same period in 2020, primarily due to higher tax benefits from stock-based compensation[118] - The company continues to pursue legal avenues for recovery of remaining prepayments related to PPE products[111]

For the quarterly period ended February 27, 2021 OR FORM 10-Q __________________________________________ (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 __________________________________________ o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from_____to _____ Commission File Number: 1-14130 ________________________ ...

| --- | --- | |-------|-------| | | | | | | | | | 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 historical fact, that address activities, events or developments that we expect, believe or anticipate will or may occur in the future, including statements about the future impact of COVID-19 on our business operations, results of ...

MSC Industrial Direct Company Inc. (NYSE:MSM) Q2 2021 Earnings Conference Call April 7, 2021 8:30 AM ET Company Participants Erik Gershwind - President, Chief Executive Officer Kristen Actis-Grande - Executive Vice President, Chief Financial Officer John Chironna - Vice President, Investor Relations, Treasurer Conference Call Participants Hamzah Mazari - Jefferies Ryan Merkel - William Blair David Manthey - Baird Tommy Moll - Stephens Adam Uhlman - Cleveland Research Patrick Baumann - JP Morgan Chris Danker ...