W.W. Grainger, Inc.

Hello and welcome to the WW Granger first quarter 2023 earnings conference call and webcast. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Kyle Bland, Vice President, Investor Relations. Please go ahead, Kyle.

Good morning. Welcome to Granger's first quarter 2023 earnings call. With me are D.J. McPherson, Chairman and CEO, and Dean Merriweather, Senior Vice President and CFO. As a reminder, some of our comments today may include forward-looking statements. Actual results may differ materially as a result of various risks and uncertainties, including those detailed in our SEC filings. Reconciliations of any non-GAAP financial measures with their corresponding GAAP measures are found in the tables at the end of this presentation and in our Q1 earnings release, both of which are available on our IR websites. This morning's call will focus on our first quarter 2023 results, which are consistent on both the reported and adjusted basis for all periods presented. We will also share results related to Monotaro. Please remember that Monotaro is a public company and follows Japanese GAAP, which differs from U.S. GAAP and is reported in our results one month in arrears. As a result, the numbers disclosed will differ somewhat from Monotaro's public statements. Now, I'll turn it over to DG.

Thanks, Kyle. Good morning, and thank you for joining us. Today, I'll provide an overview of our first quarter performance and then pass it to Dee to walk through the financials in detail. Grainger started 2023 focused on what matters most, providing our customers with the products and services they need through exceptional service. We remain closely embedded with our customers, finding ways to help them manage their inventory, reduce cost, achieve their ESG objectives, and successfully run their operations. Two weeks ago, I had the opportunity to visit with several customers in the manufacturing space in one of my favorite Midwest cities. I heard very clearly how well our teams have served them the last few years, giving us great opportunity to grow with these customers in the future. We win when we serve our customers exceptionally well, and my interactions with our teams and customers this quarter have been a great example of how we are winning each day. Many customers, especially those in the industrial space, continue to see solid end market demand for their products. However, we do see some customers with more consumer-facing exposure heading into a softer demand cycle. No matter what economic uncertainties our customers are facing, we remain committed to our overall focus of helping our customers keep their operations running and their people safe. This consistent approach and relentless focus on the customer rallies our team and fuels our results. As you can see, we again delivered a strong quarter of performance to start the year as demand remains resilient and as we continue to execute well. We are making progress on our strategic growth engines and our high-touch model as we further our merchandising efforts, continue to make smart marketing investments, expand our inventory management capabilities for customers, and build out tools to better equip our sellers. The MLS Assortment business continues to execute their strategy as they add SKUs at Zorro, expand with enterprise customers at Monotoro, and add a healthy clip of new registered users each quarter. Our momentum is further supported by our world-class supply chain and distribution network. which benefited from an uptick in product availability as supplier lead times improved. This resulted in a sharp improvement in our service metrics to near pre-pandemic levels, faster than we had anticipated at the start of the year. With this swift improvement, we were able to meaningfully decrease frictional costs within the network by reducing average shipping distance and minimizing handling costs, all while delivering a higher percentage of orders complete and next day. This improvement is a reminder of just how much unusual and extraordinary activity we did to get products to customers through the pandemic and subsequent availability challenges. The return to more normal supply chain performance is great news for our customers and our supply chain team. The progress made across all these fronts helped drive great financial results for the first quarter, where we finished with sales growth of 12.2% or 14.5% on a daily constant currency basis. Results, again, were driven by solid performance in both segments, most notably within the high-touch solution segment, which outpaced the broader MRL market by approximately 750 basis points in the U.S. Total company operating margins were 16.6%, an increase of 200 basis points over the prior year period on improved gross margin performance due primarily to the supply chain efficiencies just discussed. Combined with our strong top-line growth, we delivered EPS of $9.61 per share and a strong ROIC of 45.6%. During the quarter, we produced record operating cash flow of $454 million, with free cash flow of $356 million, and we returned a combined $229 million to Granger shareholders through dividends and share repurchases. And yesterday, we were pleased to announce a $1.86 quarterly dividend, which represents an 8% increase. This marks our 52nd year of consecutive dividend increases, a track record that we are proud of. Finally, based on the strong start to the year and continued support of trends in April, we are raising our full year 2023 guidance, which Dee will outline in just a bit. With that, I'll turn it over to Dee to take us through more detail on the quarter.