MSC Industrial Direct Co Reports Q3 2026 Results: Full Earnings Call Transcript

MSC Industrial Direct Co (NYSE: MSM ) released third-quarter financial results and hosted an earnings call on Wednesday. Read the complete transcript below. This content is powered APIs. 8% year-over-year growth, driven by core customer sales and national accounts improvement.

6%, surpassing forecasts, and aims to restore its operating margins to mid-teens levels. Salesforce Optimization initiatives completed, leading to improved sales per rep per day and a reduction of 225 field heads, enhancing efficiency. com showed double-digit growth, and vending and in-plant programs expanded by 7% year-over-year. 1%, with adjusted operating expenses reduced by 150 basis points as a percentage of sales.

5% sales growth in the fourth quarter, with a focus on leveraging AI and automation to improve productivity. MSC plans to maintain its gross margin within the 40%-41% range, focusing on volume growth over margin expansion. Free cash flow conversion is expected to reach approximately 95% for the fiscal year, with continued capital returns to shareholders. Full Transcript OPERATOR Good morning and welcome to the MSC Industrial Direct Co fiscal 2026 third quarter conference call.

At this time, all participants have been placed on a listen-only mode and the floor will be open for questions and comments after the presentation. Please note that this event is being recorded. I would now like to turn the conference over to Ryan Mills, VP of Investor Relations and Business Development. Please go ahead.

Ryan Mills, VP of Investor Relations and Business Development Thank you and good morning everyone. Welcome to our fiscal 2026 third quarter earnings call. Martina McIsdick, President and Chief Executive Officer, and Greg Clark, Interim 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 document, 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 US Securities 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 is 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 vs 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 will now turn the call over to Martina. Martina McIsdick, President and CEO Thank you, Ryan, and good morning everyone.

On today's call, I will briefly cover our fiscal third quarter results and will provide an update on the progress of our initiatives and the current demand environment. I will then turn the call over to Greg to provide greater detail on our fiscal 3Q performance and our outlook for the fiscal fourth quarter. 8%, underpinned by continued strength in the daily sales of our core customer and noticeable improvement in national accounts. 6% also performed better than expected, resulting in an incremental operating margin of 32% in the quarter.

Since becoming CEO earlier this year, I have spent a portion of my time getting to know our external stakeholders at conferences and roadshows. This time has been well spent as it allowed me to ensure that the high-level KPIs we're using to drive urgency and performance in the business are aligned with the way our shareholders will evaluate our results and hold us accountable to progress.

To summarize here, we are focused on sales per rep per day and sales per total headcount year-over-year, volume improvement, adjusted operating margin expansion, and adjusted incremental margin, and lastly ROIC which will improve naturally when the KPIs I just mentioned are firing on all cylinders. We are fully committed to restoring MSC Industrial Direct Co to a mid-teens operating margin, a goal which is understood and driving action across the enterprise. While we aren't hitting any home runs yet with these KPIs as of the third quarter, I am encouraged by the singles and doubles we are producing which I will now discuss in greater detail.

Starting with sales per rep per day, we are making progress on our goals. As you recall, our Salesforce Optimization initiative was completed in December with actions taken to streamline and professionalize our service organization, which in turn resulted in some noise in our 2Q. This headwind is largely behind us as evidenced by the improving ads of impacted customers and the inflection seen in national accounts during the quarter. Sales per rep per day has improved high teens year-over-year, suggesting that at this point in time we are fundamentally doing more with less.

With 225 fewer heads in the field, we're targeting the right customers and meaningfully increasing customer touches through disciplined sales execution. As you can see on slide 4, average daily sales to our core customer once again outperformed total company. With volumes beginning to improve, a portion of this improveme