Global Industrial Company

Good afternoon, ladies and gentlemen, and welcome to the Global Industrials First Quarter 2026 Earnings Call. At this time, I would like to turn the call over to Mr. Mike Smarjasi of the Plunkett Group. Please go ahead, sir.

Thank you, and welcome to the Global Industrial First Quarter 2026 Earnings Call. Today's call will include formal remarks from Anisa Chaibi, Chief Executive Officer and Tex Clark, Senior Vice President and Chief Financial Officer. Formal remarks will be followed by a question and answer session. Today's discussion may include certain forward-looking statements. It should be understood that actual results could differ materially from those projected due to a number of factors, including those described under the forward-looking statements caption and under risk factors in the company's annual report on Form 10-K, and quarterly reports on Form 10-Q. The earnings release is available on the company's website and has been filed with the SEC on a Form 8-K. This call is the property of Global Industrial Company. I will now turn the call over to Anissa.

Thank you, Mike. Good afternoon, everyone, and thank you for joining us. I was very pleased with our first quarter performance. We delivered a strong start to 2026, as we benefited from solid execution and continued momentum across the business. First quarter revenue improved 9.2% with an average daily sales growth of 7.6% and operating income improving 13.2%. We generated growth each month during the period and have seen this top line momentum carry into the second quarter. Our results benefited from price and volume, with gains across both assigned accounts and e-commerce channels, while our largest strategic accounts continued to grow at an accelerated pace. Canada once again delivered strong results. Revenue increased 24% in local currency with continued growth across the business. This marks the third consecutive quarter of double-digit top-line growth, highlighting the exceptional work of our team in Canada and reinforcing the significant potential we see in that market. From a strategic standpoint, we are making progress and are encouraged by the actions we have taken to refine our value proposition and reposition the business for growth. This includes aligning the business around the customer to better serve their needs and being more intentional and focused in our go-to-market approach. Our sales realignment into customer verticals is progressing well, allowing us to better meet our customers' needs through deeper specialization and tailored experiences. As we have previously shared, this will allow us to improve and drive more targeted engagement and broaden customer relationships. We are also pleased with the rollout of our outside sales initiative, where the team is actively developing a pipeline and uncovering new opportunities. While still in the early stages, the initial response from customers has been positive, and we're encouraged by the potential opportunities ahead. We are also continuing to expand our e-procurement and integrated e-commerce capabilities, which are helping us to deepen relationships, improve retention, and position us to capture greater share of wallet over time. Our focus on continuously enhancing our digital experience has improved our customer engagement and satisfaction. It has enabled us to highlight our broad solutions offering and has allowed us to build direct sticky relationships with our customers' procurement teams. This is an area where Global Industrial has a strong offering, and we have seen significant growth in the number of e-procurement platform customers in the last year. In merchandising, We are advancing our MRO and consumables expansion as we broaden our assortment to better serve customer needs and support incremental revenue opportunities. We remain focused on providing the right solutions and products that help customers solve their problems and keep their operations running. This remains a meaningful opportunity for us and an important component of our long-term growth strategy. Finally, in April, I had the opportunity to join our team at the Modex Trade Show, one of the largest manufacturing and supply chain events of the year. We had a very successful show. Our booth generated strong traffic and engagement, and we saw solid lead generation across our product categories. The event allowed us to showcase our refined value proposition, the strength of our product offering, and our new alignment across our sales, marketing, and merchandising teams. I also connected with our supplier partners in discussions that reinforce the value we bring to market and the positive change taking place across the company. Overall, we are encouraged by the progress we are making. The business is performing well. Our strategic initiatives are gaining traction, and we are building a solid foundation to drive sustainable, profitable growth. Now, I will turn the call over to Tex.

Thank you, Anissa. First quarter revenue was $350.4 million, with average daily sales growing 7.6%, in line with our fourth quarter performance. U.S. revenue was up 8.1%, and Canada revenue improved 24.4% in local currency. We've recorded growth throughout the quarter, with gains across all sales channels. Performance benefited from price capture and volume improvement. We have now delivered volume improvement for our second consecutive quarter and continue to see strong results from our largest and most strategic customers. As of today, we've seen revenue growth in the mid to high single digits continue into the second quarter. Gross profit for the quarter was $121.9 million. Gross margin was 34.8%, an improvement of 30 basis points from the fourth quarter. Our year-over-year gross margin was slightly down by 10 basis points, reflecting the impact of incremental fuel surcharges within our outbound transportation in the back half of the quarter, as well as product mix, which was impacted by an increase in the number of large orders and projects during the quarter. Management of our margin profile remains a key area of focus. As we move through the current cycle, our goal is to manage to price-cost neutral. As a reminder, the second quarter of 2025 included a record gross margin performance of 37.1%. with approximately 150 basis points attributable to FIFO-related timing benefits. We would also note that the benefits for price appreciation are expected to begin to moderate as we lap pricing actions taken in the second quarter of 2025. We continue to closely monitor the macroeconomic and geopolitical environment, including developments in the Middle East and their impact on transportation and manufacturing costs, as well as the evolving tariff landscape and potentially new Section 301 tariffs. Our goal is to mitigate these disruptions to our business and to our customers, and we believe we are well positioned to do so as we continue to proactively manage price and other factors within our control. However, we anticipate these headwinds will impact margin performance in the spring and summer as fuel prices remain elevated. Selling general and administrative spending for the quarter was $101.3 million, an improvement of 40 basis points as a percentage of sales as compared to the first quarter last year. The increase in absolute dollars was largely due to planned marketing costs to support sales growth, as well as increased compensation and related costs due to strong performance. Operating income from continuing operations was $20.6 million, an increase of 13.2% in the first quarter, and the operating margin was 5.9%. Operating cash flow from continuing operations was $4.7 million in the quarter. Total depreciation and amortization expense in the quarter was $1.9 million, while capital expenditures were $0.8 million. We continue to expect 2026 capital expenditures in the range of $3 to $4 million, which primarily reflects maintenance-related investments and equipment within our distribution network. I will now turn to our balance sheet. As continues to be the case, we have a strong and liquid balance sheet. As of March 31st, we had $61.7 million in cash, no debt, and approximately $120 million of excess availability under our credit facility. In the first quarter, we repurchased approximately 22,000 shares of stock for a total price of $0.6 million. As for our dividend, we continue to fund our quarterly dividend and our board of directors declared a quarterly dividend of 28 cents per share of common stock. As a final comment, we will have a shift in our fiscal calendar in the second quarter of this year. The 4th of July holiday will fall on the final week of the second quarter as compared to the first week of the third quarter in 2025. This will generate a modest timing headwind for revenue in June this year. I will now turn it back over to Anissa for closing remarks.

Thank you, Tex. In conclusion, we are very pleased with our start to the year and are encouraged by the momentum we are seeing across the business. We are focused on execution and building on our targeted and intentional sales, marketing, and merchandising approach while continuing to advance the changes that we believe will help us evolve the business and drive long-term profitable growth. At the same time, we remain attentive to the broader macro environment and will continue to focus on what we can control and on mitigating the risk of the uncontrollables. We are confident in the direction we are heading and look forward to a successful 2026. I'm proud of how our team is executing during these unprecedented times. I would like to thank all of our associates for their hard work and dedication and all of you for your interest in global industrial. And now I'll ask the operator to open the call up for questions. Thank you.

We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. And at this time, we'll pause momentarily to assemble our roster. And the first question will come from Michael Francis with William Blair. Please go ahead.

Hi, everyone. Thanks for taking my questions. I wanted to start on sales and 2Q. Trends sound good so far, but I know the comps start to get tougher, particularly on price. As you allot those increases, you also have the 4th of July timing headwind. So how should we think about all of those moving pieces together?

Hi, Michael. Yeah, I'll jump – go ahead. Go ahead, Chuck.

Yeah.

Hey, Mike. Yeah, thank you. Apologies, guys. Mike, so, yeah, think about just from a pure numbers perspective. When we think about that timing benefit, obviously, as we highlighted, the last two quarters, we actually have seen both price and volume contribute into that growth term, and that's one area that we continue to expect to see that volume increase as we move into that second quarter. And, obviously, we're at right now about four weeks into the – Second quarter, and obviously, as we mentioned, growth remains consistent with what we just reported in the first quarter. That pricing timing is one that obviously doesn't impact us sequentially, but we'll just see some of that year-over-year impact is going to be lessened as we started those price increases last year, soon after the tariff announcements in early April. And then finally, just to relate to the June headwind, if we think about it, we're moving that holiday one day up. A day of a holiday equals about 1.5% to 2% of the shipping days in a quarterly period. So I think I would just think about that as a rateable shift where we'll see a little bit of headwind in June, and that will be a pickup in July just based on pure timing of the holiday.

All right. Thanks, Tex. The only thing I would add, Michael, is that what we have inherently in the business now is proactive pricing. We are watching... real time and reacting dynamically from a margin perspective to be able to read and react and to take the appropriate actions in the marketplace. So pretty confident in the team and the capabilities to do that that's been wired in in the business now.

Okay. And then on gross margin, you called out the 150-bit headwind from the non-repeat of the price cost, and you also talked about a few things, namely fuel. Just help us think about how we should think about gross margins in the 2Q as well.

Yeah, I'll jump right in on the numbers side. Yeah, perfect. On the numbers side, so yeah, you're right. So if we think about last year, as we've talked about in the past, an initial price increase In a FIFO inventory company, you're going to recognize that price capture before the FIFO costs work through. As you can imagine, we're well a year plus into these. The tariff arrangements that we're paying through, so the cost of goods is fully burdened with the tariff profile that we have in there. So that will be an ongoing review of the company. So I think that's one area. And then we also talked about the fuel. The fuel is one area that is growing up. That's an area that if we look at the national diesel averages, really that second and third week of March, we saw those starting to pick up. All of our fuel contracts are based upon standard language and standard multipliers based upon the national published average rates. And when those go up, obviously our main goal is how do we internalize that? How do we manage the cost for our customers? But at the same time, we'll pass some of that price through to our customers as need be as we really monitor that margin profile. But that really just goes into our overall pricing management and pricing strategy, too. But it is going to be that there are incremental costs that we've got to work through, and we do expect in the short term that we'll be headwinds to the margin rate. Okay.

I'll pass it on. Good quarter. Thanks, guys.

Thank you, Michael. Thank you. The next question will come from Anthony Lobosinski with Sidoti and Company. Please go ahead.

Good afternoon, and thanks for taking the questions. Nice quarter, certainly. So you've talked for a while a bit about seeing better results in your largest and most strategic accounts. So as we think about your core S&B accounts, can you comment what you're seeing from those accounts and Have you seen that performance gap narrow or widen, or has it been kind of more or less consistent? I'm just wondering if you could comment on that.

Yeah. Thanks, Anthony. Thanks for the question. I guess the SMB customers, we have, as I stated during our beginning of the call, was We've realigned our organization and kind of the way that we face out to the customer and our small and medium customers are very important to us as well. And what we've done is realigned across various verticals so that we can better understand and specialize and tailor that experience. We've seen some decent growth across the board. The larger accounts we call out just by the sheer size and scale, but the small accounts we're starting to build stronger relationships I alluded to the e-procurement, punch-out sites, and so forth, and we've started to gain some momentum across the board. And the more that we can do to be tethered to those customers, you know, it creates a bit of an annuity stream, and we're starting to see some momentum there as well.

Gotcha. Okay. Thanks for that. Okay. And then, you know, realize that Canada is far smaller than the core U.S. market, but, you know, certainly very strong performance there. Uh, you know, what's driving that and how sustainable do you think that is?

Yeah. Um, actually we have a fantastic team. Uh, we hired a leader, uh, right before I started and he's done a nice job of realigning their go to market. In essence, the way to think about it is Canada is a smaller microcosm of the broader global industrial business. And I would say the market dynamics there are strong for us to take share. And what he's been able to do is to, we've made the right investments, enabled them to be relatively self-sustaining. And as they've done that, they've seen that momentum and growth build. And I have a lot of confidence in that team, as you've seen me call them out a few times just in my tenure, which is a little bit over a year and a few months.

Yes. And then, so as you look to further reposition the business, are there any notable problems new products or product categories that uh you may want to enter in into i know you talked about mro but you know just overall just maybe help us understand as to like maybe the magnitude of magnitude of the the um expanded product selection that we could see at some point whether it's this year or next year uh how do we think about that and kind of the margin profile of some of these newer product categories that you you might be looking to get into

Yeah, another great question. Thank you, Anthony. You know, it is MRO. It's natural adjacent categories for what we do. We're not going to go too far afield and kind of beyond what our core business is. However, as we've started to mix in those capabilities and taking to market those types of products, we've seen incremental growth in customers where we've been able to drive greater share of wallet and penetration. And, you know, what we're starting to see is that We're going, you know, out to the customer to explain that now we carry, you know, whether it's consumables, whether it's MRO, and so forth. And what we're really looking at holistically from a merchandising perspective is making sure we have the right positioning of the products. So in essence, a good, better, best offering. Some of that will include our proprietary brands. Others will be national brands. Others will be a mix of both as we go to market. So, you know, we're in the early phases of that, but that realignment that we did coming out of last year is positioned as well, and we're starting to see that gain some traction. And the items, you know, I had shared I think late last year, possibly fourth quarter, we had partnered with some select vendor partners to get into MRO and consumables and what have you, and we've been able to sustain that. And they're still partnering with us today, providing those products to our customers via drop ship, et cetera. And then we'll be making decisions. Is that something that is sustained and executing in that manner? Is that something that we make investment and bring it into our warehouses? But that's something we're working through right now.

Gotcha. Okay. And just a quick follow-up, as far as your private label product penetration, where is it right now?

Yeah, I'll jump in and take that, Anissa. So, Anthony, this is an area that we look at, and it's fairly stable, but we've actually seen some enhanced growth through our national brands. We talked a little bit about some of the mix of large projects that we saw in the first quarter, and that's been an area of really some of our largest strategic accounts had spec projects and things on the national brands. We actually saw a faster growth rate in the first quarter on the national brand side, but this is an area that we're really balancing them because they – they complement each other very well. So it's going to be a continued push of not just trying to grow one channel or the other or one source and the other. I think we have the opportunity to make sure that we have the right product mix, but also make sure we partner with our vendor partners out there that will allow us to serve the customers the way they want to be served and to make sure we offer the products that our customers are looking for.

Gotcha. All right. Well, thank you very much and best of luck. Thank you.

And this will conclude our question and answer session, as well as our conference call for today. Thank you for attending today's presentation. You may now disconnect.