MSC Industrial Direct Company, Inc.

Good morning, and welcome to the MSC Industrial Supply Fiscal 2025 Second Quarter Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. For webcast listeners, we have become aware of an issue accessing the three supporting files, including the earnings presentation and the operating statistics. We are currently working on resolving the issue. Please email ryanmills at rmills at mscdirect.com to request materials. I would now like to turn the conference over to Ryan Mills, Head of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to our second quarter fiscal 2025 earnings call. Eric Gershwin, Chief Executive Officer, Martina MacIsaac, President and Chief Operating Officer, and Kristin Actis-Grande, Chief Financial Officer, are on the call with me today. During today's call, we will refer to various financial data in the earnings presentation and operational statistics documents, both of which can be found on our investor relations website. Let me reference our safe harbor statement found on slide two of the earnings presentation. Our comments on this call, as well as the supplemental information we are providing on the website, contain forward-looking statements within the meaning of the U.S. security laws. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those anticipated by these statements. Information about these risks are noted in our earnings press release and our other SEC filings. Lastly, during this call, we may refer to certain adjusted financial results, which are non-GAAP measures. Please refer to the GAAP versus non-GAAP reconciliations in our presentation or on our website, which contain the reconciliations of the adjusted financial measures to the most directly comparable GAAP measures. I'll now turn the call over to Eric.

Thank you, Ryan. Good morning, everyone, and thank you for joining us. On today's call, I'll briefly cover our fiscal second quarter performance, then offer my perspective on the state of the company and the current macro environment before turning things over to Martina and Kristen. Our fiscal second quarter results highlight that while the demand environment remains soft, we are taking measured steps towards improving execution and returning the company to growth. Average daily sales declined 4.7% year-over-year, though we were encouraged to see trends improve through the quarter, with January and February outperforming historical sequential averages. Gross and adjusted operating margins both came in towards the high end of our expectations, driven by solid execution and some favorability in supplier rebates during the quarter that Kristen will speak to in more detail. I'll begin by focusing on what is most in our control, execution. There is certainly more wood to chop, or in our case, more metal to grind, but we are making progress in improving execution along several dimensions, which I'll describe in more detail. We set out to complete a handful of important initiatives in the second quarter, and I'm pleased with how our team rose to the occasion and delivered. First, we continue to maintain momentum in our high-touch solutions. On a year-over-year basis, we improved our implant program count by 24% to 387 programs and total installed vending machines by 9% to over 28,000 machines. While growth rates in many of these customers are suppressed due to soft demand conditions, We believe that the ongoing expansion of our solutions footprint positions us to benefit with a strong volume rebound when the demand environment improves. Second, we took important steps to re-energize our core customer growth. I'll begin with the website upgrades that were completed during the latter half of our fiscal second quarter. As a reminder, these enhancements were focused on making it faster and easier for customers to do business with us, improving our product discovery platform, streamlining our customers' buying journey, and increasing personalization. The recent upgrades serve as a strong foundation that we'll build upon. We've included several slides in the presentation to highlight these changes. Starting with slide four, one of our biggest priorities was improving search or product discovery. We want the site experience to reflect the technical expertise that MSC delivers to our customers every day. Achieving this requires a search platform that is built by technical experts who understand the product, the customer's buying journey, and their native language and industry terms. And that is our objective with the new search function. Based on customer sentiment and early indicators, we're off to a good start. We're also aiming to make the search experience more visual, as we did with MSC's print catalog, The Big Book. What you see here is our newly created table view that we began rolling out across our good, better, best offerings to make it easier for customers to compare products when making a purchasing decision. Customers also want the experience to be fast and simple. We made significant improvements towards that end to our checkout experience. As you can see on slide five, our new single page checkout has reduced the average number of clicks to complete a purchase by about 50%. In conjunction with the completion of our web upgrades, we also launched our enhanced marketing efforts during the quarter which Martina will cover in more detail. And while it's still early days, we're encouraged by initial progress on several leading indicators. We're seeing increases in new customer acquisition, in mscdirect.com traffic, average daily website revenues, and improvements in several website KPIs. We also continued momentum in one of our other growth priorities, expanding the OEM product line. Average daily sales grew 4% in our fiscal second quarter, aided by a growing cross-sell pipeline. Switching to the macro environment, as you can see on slide six, the IP readings across most of our top manufacturing end markets continue to contract and weigh on our performance against the overall index. Customer sentiment and future outlook have been improving, as is evidenced by recent MBI readings, which have hovered around 50 for the past couple of months. For now, though, there remains hesitancy and caution among our customer base around future production levels due to tariff uncertainty, potentially looming inflation, and sustained high interest rates. We feel well positioned, however, to navigate this uncertain environment for a number of reasons that Martina will explain in just a second. In summary, while the near-term remains choppy, the combination of a solid long-term manufacturing outlook, improving execution, and a robust portfolio of tools to help our customers during these uncertain times leaves us feeling encouraged about our future prospects. And with that, I'll turn the call over to Martina.