MSC – MSC Industrial Supply Co. Reports Fiscal 2023 Third Quarter Results

Fiscal 2023 Q3 Highlights 

• Net sales of $1,054.5 million increased 10.0% YoY (11.7% on an average daily sales basis), approximately 11 percentage points above the Industrial Production (IP) index
• Operating income of $135.4 million, or $138.6 million adjusted to exclude share reclassification proposal costs and restructuring and other costs1
• Operating margin of 12.8%, or 13.1% excluding the adjustments described above1
• Diluted EPS of $1.69 vs. $1.78 in the prior fiscal year quarter
• Adjusted diluted EPS of $1.74 vs. $1.82 in the prior fiscal year quarter1

MELVILLE, NY and DAVIDSON, NC, JUNE 29, 2023 – MSC INDUSTRIAL SUPPLY CO. (NYSE: MSM), “MSC,” “MSC Industrial” or the “Company,” a leading North American distributor of a broad range of metalworking and maintenance, repair and operations (MRO) products and services, today reported financial results for its fiscal 2023 third quarter ended June 3, 2023.

Erik Gershwind, President and Chief Executive Officer, said, “Successful execution of our Mission Critical growth initiatives in the third quarter resulted in the fifth consecutive quarter of double-digit sales growth aided by robust Public Sector performance. We delivered average daily sales growth of nearly 12 percent and outperformed the IP index by double digits for the second consecutive quarter. Looking ahead and despite macro uncertainty, we expect to continue outperforming the IP index as we leverage MSC specific momentum and strengthen our market position through strategic investments.”

Kristen Actis-Grande, Executive Vice President and Chief Financial Officer, added, “Another quarter of above market sales growth provides clear evidence that MSC continues to take market share. This drove meaningful cash generation during the quarter, despite the impact on gross margin from a significant Public Sector contract win and overall customer mix. As a result of our ongoing execution, we are raising fiscal 2023 sales guidance and remain confident in future profitable growth.”

Gershwind concluded, “As we approach the finish line of our three-year Mission Critical journey, we have made significant progress on diversifying our end markets, taking market share, improving profitability, and enhancing corporate governance with the recent agreement to eliminate our dual class share structure. Combined with future benefits from our Mission Critical journey and topline momentum, we believe that we are well positioned to deliver value to all stakeholders in fiscal 2024 and beyond.”

Mission Critical Update 

We continued to make progress on each of our Mission Critical growth initiatives during the fiscal 2023 third quarter

Solidify Metalworking

• a. Over 150 metalworking and specialty sales experts driving customer productivity
• b. Technical expertise fueled new customer wins in high growth end markets like Aerospace and Medical

Leverage Portfolio Strength

• a. Class C consumable product category net sales grew low double digits year over year

Expand Solutions (Vending, In-Plant and Vendor Managed Inventory)

• a. Vending signings strong; vending machine net sales grew 10% year over year and represent 15% of total Company net sales
• b. In-Plant signings strong; In-Plant net sales grew 13% year over year and represent 13% of total Company net sales
• c. Total Solutions net sales represent 55% of total Company net sales

Grow E-Commerce

• a. E-Commerce net sales grew 8% year over year and represent 60.1% of total Company net sales
• b. Announced exclusive E-Commerce agreement with MachiningCloud

Diversify Customers and End Markets

• a. 80% net sales growth year over year driven primarily by a significant Public Sector win

Balance Sheet, Liquidity and Capital Allocation 

• a. Floating/fixed rate debt ratio now at 35/65
• b. Top two priorities remain investing in the business and returning cash to shareholders through ordinary dividends
• c. Next two priorities are share buybacks and tuck-in acquisitions

Conference Call Information 

MSC will host a conference call today at 8:30 a.m. EDT to review the Company’s fiscal 2023 third quarter results. The call, accompanying slides, and other operational statistics may be accessed at: https://investor.mscdirect.com. The conference call may also be accessed at 1-877-443-5575 (U.S.), 1-855-669-9657 (Canada) or 1-412-902-6618 (international)

An online archive of the broadcast will be available until July 13, 2023. The Company’s reporting date for fiscal 2023 fourth quarter and full year results is scheduled for October 25, 2023.

MSC INDUSTRIAL DIRECT CO., INC. Condensed Consolidated Balance Sheets (In thousands, except share data)

MSC INDUSTRIAL DIRECT CO., INC. Condensed Consolidated Statements of Income (In thousands, except per share data) (Unaudited)

MSC INDUSTRIAL DIRECT CO., INC. Condensed Consolidated Statements of Comprehensive Income (In thousands) (Unaudited)

MSC INDUSTRIAL DIRECT CO., INC. Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited)

Non-GAAP Financial Measures

To supplement MSC’s unaudited selected financial data presented consistent with accounting principles generally accepted in the United States (“GAAP”), the Company discloses certain non-GAAP financial measures, including non-GAAP gross profit, non-GAAP operating expenses, non-GAAP income from operations, non-GAAP operating margin, non-GAAP provision for income taxes, nonGAAP net income and non-GAAP diluted earnings per share, that exclude acquisition-related costs, share reclassification proposal costs, restructuring and other costs and tax effects.

These non-GAAP financial measures are not presented in accordance with GAAP or an alternative for GAAP financial measures and may be different from similar non-GAAP financial measures used by other companies. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP financial measures and should only be used to evaluate MSC’s results of operations in conjunction with the corresponding GAAP financial measures.

This press release also includes certain forward-looking information that is not presented in accordance with GAAP. The Company believes that a quantitative reconciliation of such forward-looking information to the most directly comparable financial measure calculated and presented in accordance with GAAP cannot be made available without unreasonable efforts because a reconciliation of these non-GAAP financial measures would require the Company to predict the timing and likelihood of potential future events such as restructurings, M&A activity and other infrequent or unusual gains and losses. Neither the timing or likelihood of these events, nor their probable significance, can be quantified with a reasonable degree of accuracy. Accordingly, a reconciliation of such forwardlooking information to the most directly comparable GAAP financial measure is not provided.

• Results Excluding Acquisition-Related Costs, Share Reclassification Proposal Costs and Restructuring and Other Costs

In calculating non-GAAP financial measures, we exclude acquisition-related costs, share reclassification proposal costs and restructuring and other costs, and tax effects. Management makes these adjustments to facilitate a review of the Company’s operating performance on a comparable basis between periods, for comparison with forecasts and strategic plans, for identifying and analyzing trends in the Company’s underlying business and for benchmarking performance externally against competitors. We believe that investors benefit from seeing results from the perspective of management in addition to seeing results presented in accordance with GAAP for the same reasons and purposes for which management uses such non-GAAP financial measures.

MSC INDUSTRIAL DIRECT CO., INC. Reconciliation of GAAP and Non-GAAP Financial Information Thirteen Weeks Ended June 3, 2023 (In thousands, except percentages and per share data)

MSC INDUSTRIAL DIRECT CO., INC. Reconciliation of GAAP and Non-GAAP Financial Information Thirty-Nine Weeks Ended June 3, 2023 (In thousands, except percentages and per share data)

MSC INDUSTRIAL DIRECT CO., INC. Reconciliation of GAAP and Non-GAAP Financial Information Thirteen Weeks Ended May 28, 2022 (In thousands, except percentages and per share data)

MSC INDUSTRIAL DIRECT CO., INC. Reconciliation of GAAP and Non-GAAP Financial Information Thirty-Nine Weeks Ended May 28, 2022 (In thousands, except percentages and per share data)

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MSC