W.W. Grainger, Inc.

Greetings and welcome to WW Granger's third quarter 2024 earnings conference call. 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, Kyle Bland, Vice President, Investor Relations. Thank you. You may begin.

Good morning. Welcome to Granger's third quarter 2024 earnings call. With me are D.J. McPherson, Chairman and CEO, and Dean Merriweather, Senior Vice President and CFO. As a reminder, some of the comments today may include forward-looking statements that are subject to various risks and uncertainties. Additional information regarding factors that could cause actual results to differ materially is included in the company's most recent form, AK, and other periodic reports filed with the SEC. This morning's call will focus on results for the third quarter of 2024, which are consistent on both a reported and adjusted basis. As a reminder, we have included a daily organic constant currency sales growth metric within these materials to normalize for the divestiture of our E&R industrial sales subsidiary, which was sold at the end of 2023. Definitions and a full reconciliation of this and any other non-GAAP financial measures with their corresponding GAAP measures are found in the tables at the end of this presentation and in our earnings release, both of which are available on our IR website. 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 discussed will differ from Monotaro's public statements. Now, I will turn it over to DG.

Thanks, Kyle. Good morning, and thanks for joining the call. Everything we do at Grainger starts with the Grainger Edge and with a focus on the customer. I've had the opportunity to spend a lot of time with customers the past few months, and while the demand environment remains muted, these visits have highlighted the value that we bring every day. Our strong capabilities, including digital, supply chain, and on-site support, allow us to help our customers succeed. No matter what each is facing, we are there to help them overcome challenges. Before I get into the financials, I'd like to take a moment to recognize the Grainger team for their continued work in helping those impacted by the recent hurricanes in the Southeast. Fulfilling our purpose to keep the world working means supporting our customer operations when they need us most. Our branch, keep stock, distribution center, and sales team members have gone above and beyond over the last few weeks, providing vital supplies and relief resources. And as we always have, our team will continue to work side by side with our partners to make sure that these communities what they need to navigate the road to recovery moving to the third quarter while demand remains soft the business continues to perform well as we remain focused on being the go-to mro partner for our customers those segments grew in the period and we continue to make strategic progress across the company in the high touch solution segment we're leveraging our customer and product data assets and strong supply chain capabilities to help us advance our strategic growth engines we've done great work in 2024 but I'm particularly pleased with how we're continually utilizing our vast array of proprietary data to improve our customer and team member experience. We've launched new capabilities such as analytical tools that arm our sellers with better insights and data to drive more fruitful conversations with our customers. We're also testing a generative AI model in our call centers, which helps us scale our know-how and equip our customer service agents with fast, relevant responses to help customers get what they need quickly and efficiently. These are just some early examples of how we can leverage our data to help drive share, reduce cost, and further improve our service advantage. I'm excited about the opportunities ahead in this space. Driving a great customer experience is also underpinned by our world-class supply chain, one that is built specifically to serve B2B customers and ship next day complete orders. During the quarter, we made progress on enhancing our service capabilities and expanding our distribution center network by officially beginning construction on our new Houston area DC. This, along with the continued progress at our new Pacific Northwest distribution center, will ensure we maintain our service advantage now and into the future. Within the endless assortment segment, our focus on growing share of wallet with enterprise customers at Monotaro and the changes we've made to better communicate delivery expectations of Zorro have both helped re-accelerate growth over the last couple of quarters. These businesses are on the right track for a strong finish to 2024, setting us up nicely to continue gaining share in 2025 and beyond. Now shifting to third quarter financials, total company reported sales for the quarter were up 4.3% or 4% on a daily organic constant currency basis, which normalizes for the E&R divestiture and one more selling day in the current year period. Operating margins for the total company remain healthy at 15.6%, and EPS finished the quarter up 4.7% to $9.87. Operating cash flow came in at $611 million in the quarter, which allowed us to return a total of $328 million to Grainger shareholders through dividends and share repurchases. Overall, 2024 is playing out largely as expected as the business continues to perform well and we stay focused on serving customers. With this, we are narrowing our earnings guidance ranges to close out the year, which Dee will outline in a few minutes. As we wrap up 2024, I'm confident that we will continue to execute well, meet our goals, and drive solid results for all stakeholders. Now I'll turn it over to Dee.