MSC Industrial Direct Co Inc (MSM) 2023 Q2 法說會逐字稿

Good day, and welcome to the MSC Industrial Supply Company's Second Quarter 2023 Earnings Conference Call. (Operator Instructions) Please note, today's event is being recorded. I would now like to turn the conference over to John Chironna, Vice President of Investor Relations and Treasurer. Please go ahead.

美好的一天，歡迎來到 MSC Industrial Supply Company 的 2023 年第二季度收益電話會議。 （操作員說明）請注意，今天的活動正在錄製中。我現在想將會議轉交給投資者關係副總裁兼財務主管 John Chironna。請繼續。

Thank you, and good morning, everyone. Erik Gershwind, our Chief Executive Officer; and Kristen Actis-Grande, our Chief Financial Officer, are both on the call with me today.

謝謝大家，早上好。我們的首席執行官 Erik Gershwind；和我們的首席財務官 Kristen Actis-Grande 今天都在與我通話。

During today's call, we will refer to various financial and management data in the presentation slides that accompany our comments as well as our operational statistics, both of which can be found on our Investor Relations web page.

在今天的電話會議中，我們將在我們的評論以及我們的運營統計數據附帶的演示幻燈片中參考各種財務和管理數據，這兩者都可以在我們的投資者關係網頁上找到。

Let me reference our safe harbor statement, a summary of which is on Slide 2 of the accompanying 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. 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.

讓我參考我們的安全港聲明，其摘要在隨附演示文稿的幻燈片 2 上。我們對此次電話會議的評論以及我們在網站上提供的補充信息包含美國證券法含義內的前瞻性陳述。這些前瞻性陳述涉及風險和不確定性，可能導致實際結果與這些陳述預期的結果存在重大差異。有關這些風險的信息已在我們的收益新聞稿和我們提交給美國證券交易委員會的其他文件中註明。

In addition, 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.

此外，在此次電話會議中，我們可能會參考某些調整後的財務業績，這些業績是非 GAAP 衡量指標。請在我們的演示文稿或我們的網站上參考 GAAP 與非 GAAP 調節，其中包含調整後的財務措施與最直接可比的 GAAP 措施的調節。

I'll now turn the call over to Erik.

我現在將電話轉給 Erik。

Thanks, John. Good morning, everybody, and thank you for joining us. On today's call, I'll begin with some perspective on our recent performance and our longer-term outlook. I'll then provide color on the current environment. Kristen will provide more specifics on our fiscal second quarter Mission Critical accomplishments and our financial performance, and then she'll share our expectations for the back half of our fiscal year. I'll wrap things up, and then we'll open up the line for questions.

謝謝，約翰。大家早上好，感謝您加入我們。在今天的電話會議上，我將從對我們近期表現和長期前景的一些看法開始。然後我將提供當前環境的顏色。克里斯汀將提供更多關於我們第二財季關鍵任務成就和財務業績的細節，然後她將分享我們對下半財年的預期。我會總結一下，然後我們會打開問題熱線。

As we move into the back half of our fiscal 2023, there is a growing momentum inside of MSC, and it has me encouraged about our future. Let me provide you with some color so that you can see from the outside what we see on the inside.

隨著我們進入 2023 財年的後半段，MSC 內部的勢頭越來越大，這讓我對我們的未來感到鼓舞。讓我為您提供一些顏色，以便您可以從外部看到我們在內部看到的東西。

First, we continue outgrowing IP or Industrial Production by numbers in excess of our long-range targets. We're seeing the strongest contribution from the programs most closely tied to the repositioning of MSC to a Mission Critical partner on the plant floor.

首先，我們繼續以超過我們長期目標的數量增長 IP 或工業生產。我們看到與將 MSC 重新定位為車間關鍵任務合作夥伴最密切相關的計劃做出了最強大的貢獻。

In-plant, vending and vendor-managed inventory are all examples of high-touch, high-retention programs that are growing ahead of company average. I'm equally encouraged by the momentum on new account wins that we see developing through our National Accounts and our public sector teams. And while a portion of our performance above IP is price-driven, we're excited by the trajectory of these market share capture programs.

廠內、自動售貨和供應商管理的庫存都是高接觸、高保留計劃的例子，這些計劃的增長速度超過了公司平均水平。我同樣對我們通過國民賬戶和公共部門團隊看到的新客戶獲胜勢頭感到鼓舞。雖然我們在 IP 之上的部分業績是由價格驅動的，但我們對這些市場份額獲取計劃的發展軌跡感到興奮。

On the M&A front, we continue to bolster our technical and high-touch product categories. Our recent acquisitions are living up to our high expectations in their early days and are fortifying our position within metalworking and OEM fasteners, areas where we continue to see significant opportunity for long-term growth.

在併購方面，我們繼續加強我們的技術和高接觸產品類別。我們最近的收購符合我們早期的高期望，並鞏固了我們在金屬加工和 OEM 緊固件領域的地位，我們繼續在這些領域看到長期增長的重要機會。

Most recently, in January, we completed an acquisition that fits nicely into our core metalworking business. Buckeye Industrial Supply Company is a metalworking distributor located in Ohio and that serves planned production needs of manufacturing businesses in the area.

最近，在一月份，我們完成了一項非常適合我們核心金屬加工業務的收購。 Buckeye Industrial Supply Company 是一家位於俄亥俄州的金屬加工經銷商，服務於該地區製造企業的計劃生產需求。

Tru-Edge Grinding, also located in Ohio, brings us new capabilities in the way of custom tool manufacturing and regrinding. Tru-Edge, along with our existing regrinding business, represents an adjacent value-added service to our core cutting tool business, and it, therefore, creates a new growth path for us. It also supports our company's effort to drive cost savings for our customers.

同樣位於俄亥俄州的 Tru-Edge Grinding 為我們帶來了定制工具製造和修磨方面的新能力。 Tru-Edge 連同我們現有的重磨業務，代表了我們核心切削工具業務的一項相鄰增值服務，因此，它為我們開闢了一條新的增長路徑。它還支持我們公司為客戶節省成本的努力。

Second, on the gross margin line, our success over the past couple of years has come largely from achieving strong price realization during historic levels of inflation. As the market settles, we have reoriented our focus towards improved product assortment, supplier portfolio and cost position.

其次，在毛利率方面，我們過去幾年的成功很大程度上來自於在歷史通脹水平下實現強勁的價格實現。隨著市場的穩定，我們將重點重新定位於改善產品分類、供應商組合和成本狀況。

The category line reviews that we announced last quarter have kicked off with our first wave in full gear. Wave 2 has been launched as we will roll through our entire product offering over the next several months. We expect to see a slight gross margin benefit in our fiscal fourth quarter, and then more substantial savings will come in fiscal 2024.

我們上個季度宣布的品類線評論已經全面啟動第一波。第 2 波已經啟動，因為我們將在接下來的幾個月內推出我們的整個產品。我們預計第四財季的毛利率將略有提高，然後 2024 財年將節省更多資金。

Third, our productivity efforts remain in full force and continue to yield strong operating leverage in the form of lower OpEx-to-sales ratios. As we move towards the close of our 3-year targets, our Mission Critical program under the leadership of Kristen and Martina, is transitioning from a onetime program to an ongoing way of life or continual improvement.

第三，我們的生產力努力仍然全力以赴，並繼續以較低的運營支出與銷售比率的形式產生強大的運營槓桿。隨著我們接近 3 年目標的尾聲，在 Kristen 和 Martina 的領導下，我們的關鍵任務計劃正在從一次性計劃過渡到持續的生活方式或持續改進。

Beyond the numbers, there are 4 other important elements to our story. First, strategy. The repositioning of MSC into a high-touch Mission Critical partner is taking hold. Customer reception to our enhanced role is high. And this is evidenced in the growth rates of our high-touch programs and the rate of new customer wins. The plan is working.

除了數字之外，我們的故事還有 4 個其他重要元素。第一，戰略。 MSC 重新定位為高接觸度的關鍵任務合作夥伴正在站穩腳跟。客戶對我們增強作用的接受度很高。這在我們的高接觸計劃增長率和新客戶贏得率中得到了證明。該計劃正在奏效。

Second, culture. MSC has always had a strong culture, one that's grounded in respect for people and an intense focus on the customer. Our new management team is building on that strong foundation. We're adding new elements, including more aspirational target setting, a more robust execution model and more extensive collaboration across functions, in other words, thinking end-to-end about our business.

第二，文化。 MSC 一直擁有濃厚的文化，這種文化以尊重人和高度關注客戶為基礎。我們的新管理團隊正是建立在這個堅實的基礎上。我們正在添加新元素，包括更有抱負的目標設定、更強大的執行模型和更廣泛的跨職能協作，換句話說，端到端地思考我們的業務。

Third, technology. It's been nearly a year since John Hill joined us as MSC's first Chief Digital and Information Officer, and progress with our technology function is encouraging. We are enhancing our e-commerce functionality and expect to see incremental benefits in the coming quarters. We are improving our product information and customer data, making for a better customer service experience and a more efficient business. We're eliminating inefficiencies as part of Mission Critical, where older systems inhibit productivity or where improvements can unlock further value.

第三，技術。 John Hill 作為 MSC 的第一任首席數字和信息官加入我們已經將近一年了，我們在技術職能方面取得的進展令人鼓舞。我們正在增強我們的電子商務功能，並期望在未來幾個季度看到增量收益。我們正在改進我們的產品信息和客戶數據，以提供更好的客戶服務體驗和更高效的業務。作為關鍵任務的一部分，我們正在消除低效率，舊系統會抑制生產力或改進可以釋放更多價值。

And fourth, the market. We continue to operate in the marketplace with attractive dynamics that support continued growth. The North American distribution market is over $200 billion and remains highly fragmented with the top 50 distributors still holding just over 30% of the market. The opportunity for organic and inorganic share capture remains vast.

第四，市場。我們繼續在具有支持持續增長的有吸引力的動態市場中運營。北美分銷市場規模超過 2000 億美元，並且仍然高度分散，前 50 家分銷商仍佔據略高於 30% 的市場份額。獲取有機和無機份額的機會仍然很大。

In addition, MSC's concentrated manufacturing exposure sets us up well for the next decade. The reassuring trend that we've all heard about is moving from idea to action as we are seeing an increased number of new plant construction projects. And while our participation in the early stages of construction is minimal, this bodes well for growth in our end markets over time and should serve as a further growth tailwind.

此外，MSC 集中的製造業務為我們未來十年奠定了良好的基礎。我們都聽說過的令人欣慰的趨勢是從想法轉變為行動，因為我們看到越來越多的新工廠建設項目。雖然我們在建設的早期階段的參與很少，但這預示著我們的終端市場隨著時間的推移會增長，並且應該成為進一步增長的推動力。

Before turning it over to Kristen to discuss our second quarter performance, I want to spend a few moments discussing the environment. While sentiment and IP readings continue moderating, the tone on the ground is stable. Most of our customers continue to see solid order levels and demand activity.

在將其交給克里斯汀討論我們第二季度的業績之前，我想花點時間討論一下環境。雖然情緒和 IP 讀數繼續緩和，但基調是穩定的。我們的大多數客戶繼續看到穩定的訂單水平和需求活動。

Of course, we're watching the banking situation closely to monitor any potential ripple effect on the broader industrial economy. At this time, though, our overall read on the environment remains constructive.

當然，我們正在密切關注銀行業的情況，以監測對更廣泛的工業經濟的任何潛在連鎖反應。不過目前，我們對環境的總體解讀仍然是建設性的。

With respect to pricing, the situation is pretty much the same as we reported last quarter. We continue seeing increases from our suppliers, albeit not at the rate or level of the past 2 years. As such, we're passing those along as warranted, and we continue seeing strong realization.

關於定價，情況與我們上個季度報告的情況幾乎相同。我們繼續看到我們供應商的增長，儘管沒有達到過去 2 年的速度或水平。因此，我們正在按要求傳遞這些內容，並且我們繼續看到強烈的實現。

All of this means that the need for our customers to find productivity that offsets their own cost headwinds remains as strong as ever. And this plays very nicely into our value proposition. So we remain focused on delivering that productivity for our customers.

所有這一切都意味著我們的客戶對找到能夠抵消其自身成本不利因素的生產力的需求仍然一如既往地強烈。這很好地融入了我們的價值主張。因此，我們仍然專注於為我們的客戶提供生產力。

Kristen will now take you through our quarterly performance, capital allocation priorities, balance sheet and our reaffirmed fiscal '23 guidance.

克里斯汀現在將帶您了解我們的季度業績、資本分配優先事項、資產負債表和我們重申的 23 財年指導方針。

Thank you, Erik, and good morning, everyone. Please turn to Slide 5 of our presentation, where you can see key metrics for the fiscal second quarter on a reported basis. Slide 6 reflects the adjusted results, which will be my primary focus this morning.

謝謝你，埃里克，大家早上好。請轉到我們演示文稿的幻燈片 5，您可以在其中查看報告基礎上第二財季的關鍵指標。幻燈片 6 反映了調整後的結果，這將是我今天早上的主要關注點。

Our second quarter marked another quarter of strong execution and results. We remain on track or even ahead of schedule on our primary goals for fiscal 2023 of gaining market share, expanding adjusted operating margins and improving adjusted ROIC.

我們的第二季度標誌著又一個季度的強勁執行和結果。我們在 2023 財年的主要目標（即獲得市場份額、擴大調整後的營業利潤率和改善調整後的 ROIC）方面保持在正軌上，甚至提前實現。

Our 5 growth levers and productivity improvements have us positioned to meet or exceed our Mission Critical goals. The execution of our growth drivers as well as price contribution and our bolt-on acquisitions continue to fuel our results.

我們的 5 個增長槓桿和生產力改進使我們能夠達到或超過我們的關鍵任務目標。我們的增長動力的執行以及價格貢獻和我們的補強收購繼續推動我們的業績。

Our revenues came in at $961.6 million, which represents average daily revenue growth of 11.5% versus the same quarter last year, well above the IP Index, which was basically flat in our fiscal second quarter. Growth from acquisitions contributed just under 4 percentage points of that increase.

我們的收入為 9.616 億美元，與去年同期相比平均每日收入增長 11.5%，遠高於第二財季基本持平的 IP 指數。收購帶來的增長貢獻了不到 4 個百分點的增長。

Looking at growth rates by customer type, public sector sales increased roughly 20%. National Accounts grew in the mid-teens, and core and other customers continue to grow high single digits. Another way to view our sales performance is through the growth drivers we initiated as part of the Mission Critical program: solidify metalworking, expand solutions, leverage the portfolio strength, grow e-commerce and diversify customers and end markets with an emphasis on the public sector.

從客戶類型的增長率來看，公共部門的銷售額增長了大約 20%。國民賬戶在十幾歲中期增長，核心客戶和其他客戶繼續以高個位數增長。查看我們銷售業績的另一種方法是通過我們作為關鍵任務計劃的一部分發起的增長動力：鞏固金屬加工、擴展解決方案、利用產品組合實力、發展電子商務以及使客戶和終端市場多樣化，重點放在公共部門.

Let me update you on each of these growth drivers. Our expertise in metalworking remains a cornerstone of our value proposition driven by the depth and breadth of our portfolio, our large network of technical metalworking experts and focus on innovation as a tool to elevate productivity while lowering costs for customers. This expertise is helping us win new customers and penetrate high-growth end markets like aerospace, commercial space and medical. These industries consume large amounts of metalworking tooling by working on intricate, complex and lightweight materials.

讓我向您介紹這些增長動力中的每一個。我們在金屬加工方面的專業知識仍然是我們價值主張的基石，這受到我們產品組合的深度和廣度、我們龐大的金屬加工技術專家網絡的驅動，並專注於將創新作為提高生產力同時降低客戶成本的工具。這種專業知識正在幫助我們贏得新客戶，並滲透到航空航天、商業空間和醫療等高增長終端市場。這些行業通過處理複雜、複雜和輕質材料來消耗大量金屬加工工具。

Our technical expertise applied in these situations is often able to yield considerable savings and throughput improvements. In a recent large-scale win in the aerospace industry, the customer told us that no other competitor was able to bring the kind of technical advice and productivity savings that MSC offered. It was the primary driver behind the win, which will ramp up over the next couple of quarters. Instances like this are becoming more and more common and are fueling our National Accounts performance.

我們在這些情況下應用的技術專長通常能夠產生可觀的節省和吞吐量提高。在最近一次航空航天業的大規模勝利中，客戶告訴我們，沒有其他競爭對手能夠提供 MSC 提供的那種技術建議和生產力節約。它是獲勝背後的主要驅動力，並將在接下來的幾個季度中逐漸增加。像這樣的例子變得越來越普遍，並且正在推動我們國民賬戶的績效。

Our solutions growth driver is anchored by our vending and in-plant programs, both of which have been delivering market share capture over the past several quarters. Vending machine revenues continued to grow mid-teens and represent 15.5% of total company sales. That compares to 15% of sales a year ago. Q2 in-plant signings remained quite strong, and in-plant customer revenues grew nearly 20% year-over-year and now represent 12.5% of total sales. Sales to customers with our solutions offerings that includes vending, VMI and in-plant represent over 56% of the company's total sales, up over 200 basis points from prior year.

我們的解決方案增長動力以我們的自動售貨和廠內計劃為基礎，這兩個計劃在過去幾個季度中一直在提供市場份額。自動售貨機收入繼續增長十幾歲，占公司總銷售額的 15.5%。相比之下，一年前佔銷售額的 15%。第二季度的廠內簽約仍然相當強勁，廠內客戶收入同比增長近 20%，目前佔總銷售額的 12.5%。通過我們的解決方案產品（包括自動售貨、VMI 和廠內服務）向客戶銷售的銷售額占公司總銷售額的 56% 以上，比上一年增加了 200 多個基點。

The third priority is selling the portfolio, which is about increasing share of wallet through ancillary products, especially our Class C consumable product category. Here, we provide an outsourced vendor-managed inventory service that keeps plants running, so we also include this business as part of our overall solutions offering. Q2 growth for this business remains solid with an ADS growth rate of low teens.

第三個優先事項是出售產品組合，即通過輔助產品增加錢包份額，尤其是我們的 C 類消耗品類別。在這裡，我們提供外包的供應商管理的庫存服務來保持工廠的運行，因此我們也將這項業務作為我們整體解決方案產品的一部分。該業務的第二季度增長保持穩健，ADS 增長率較低。

Our fourth priority is digital, which includes all aspects of MSC's digital engagement with customers, suppliers and associates. E-commerce sales reached 62% as a percent of total company sales in our fiscal second quarter, up roughly 130 basis points compared to the prior year.

我們的第四個優先事項是數字化，其中包括 MSC 與客戶、供應商和合作夥伴的數字化互動的所有方面。在我們的第二財季，電子商務銷售額占公司總銷售額的百分比達到 62%，比上年增長約 130 個基點。

As Erik mentioned, John Hill and team are enhancing our e-commerce functionality, and we expect this number to continue growing over time.

正如 Erik 提到的，John Hill 和團隊正在增強我們的電子商務功能，我們預計這個數字會隨著時間的推移繼續增長。

Fifth is customer diversification through our public sector business, and I already mentioned our Q2 ADS growth of roughly 20%. Based on additional program wins, we expect momentum to continue during the back half of fiscal '23 and into fiscal 2024.

第五是通過我們的公共部門業務實現客戶多元化，我已經提到我們第二季度的 ADS 增長大約 20%。基於額外的項目勝利，我們預計在 23 財年後半期和 2024 財年將繼續保持這種勢頭。

Each of our 5 growth levers are not only powering our performance, but they are positioning MSC as a trusted productivity partner to our customers, expanding our role from solely a spot-buy supplier. Our gross margin for the fiscal second quarter was 41.3%, down 120 basis points year-over-year. The impact of acquisitions accounted for roughly 50 basis points of the dilution. The remaining 70 basis points are made up of lapping last year's large price increase, the increasing impact of costs through the numbers and mix. Sequentially, gross margin ticked down 20 basis points as expected due to a slight compression in the price cost spread and the impact from the Buckeye acquisition in our numbers.

我們的 5 個增長槓桿中的每一個都不僅為我們的業績提供動力，而且它們將 MSC 定位為我們客戶值得信賴的生產力合作夥伴，從而擴大我們從單純的現貨供應商的角色。我們第二財季的毛利率為 41.3%，同比下降 120 個基點。收購的影響約佔稀釋的 50 個基點。剩下的 70 個基點是由於去年價格大幅上漲、成本通過數量和組合的影響越來越大。隨後，由於價格成本價差略有壓縮以及 Buckeye 收購對我們數據的影響，毛利率如預期下降了 20 個基點。

Looking forward, while inflation has tempered, we are still seeing some suppliers move on price, though not at the levels of the past year. In March, we implemented a small increase of 1% to 2%, which follows our similar size increase in late January.

展望未來，雖然通貨膨脹有所緩和，但我們仍然看到一些供應商的價格有所上漲，儘管沒有達到去年的水平。 3 月份，我們實現了 1% 至 2% 的小幅增長，這是繼 1 月下旬類似的規模增長之後。

The customer cost savings and productivity gains we deliver continue to support strong realization rates. Reported operating expenses in the second quarter were $281 million versus last year's reported operating expenses of $266 million.

我們提供的客戶成本節約和生產力提升繼續支持強勁的實現率。第二季度報告的運營費用為 2.81 億美元，而去年報告的運營費用為 2.66 億美元。

Adjusted operating expenses were $280 million or 29.1% of net sales versus last year's adjusted operating expenses of $266 million or 30.8% of net sales. This yielded a 170 basis point reduction in adjusted OpEx to sales year-over-year.

調整後的運營費用為 2.8 億美元，占淨銷售額的 29.1%，而去年調整後的運營費用為 2.66 億美元，占淨銷售額的 30.8%。這導致調整後的運營支出與銷售額同比減少 170 個基點。

Our reported operating margin was 11.9% compared to 11.3% in the same period last year. Adjusted for restructuring costs, costs associated with the proposed share reclassification and acquisition-related costs, adjusted operating margin was 12.2% as compared to adjusted operating margin of 11.6% last year, a 60 basis point improvement year-over-year.

我們報告的營業利潤率為 11.9%，而去年同期為 11.3%。調整重組成本、與擬議股份重新分類相關的成本和收購相關成本後，調整後的營業利潤率為 12.2%，而去年調整後的營業利潤率為 11.6%，同比提高 60 個基點。

That improvement was driven by the continuation of our Mission Critical initiatives, which yielded additional savings of $4 million in the quarter. That puts us at $10 million for fiscal 2023 and $95 million for the program's cumulative savings.

這一改進是由我們繼續執行關鍵任務計劃推動的，該計劃在本季度額外節省了 400 萬美元。這使我們在 2023 財年達到 1000 萬美元，為該計劃累計節省 9500 萬美元。

We remain on track to achieve our goal of at least $100 million by the end of fiscal 2023. Already last quarter, our Mission Critical initiatives and the efforts of our entire team on cost containment and productivity boosted our adjusted ROIC to 18.3%. During our fiscal second quarter, we increased our adjusted ROIC to 19%, which includes the impact of the $300 million securitization facility we put in place back in December.

我們仍然有望在 2023 財年末實現至少 1 億美元的目標。上個季度，我們的關鍵任務計劃以及我們整個團隊在成本控制和生產力方面的努力將我們調整後的 ROIC 提高到 18.3%。在我們的第二財季，我們將調整後的 ROIC 提高到 19%，其中包括我們在 12 月份實施的 3 億美元證券化融資的影響。

Turning to earnings per share. Our reported EPS was $1.41 for the quarter as compared to $1.25 in the same prior year period. Adjusted for restructuring costs, costs associated with the proposed share reclassification and current year acquisition-related costs, adjusted earnings per share were $1.45 as compared to adjusted earnings per share of $1.29 in the prior year period, an increase of 12%. This continues to reflect strong execution at all levels, sales performance, gross profit and OpEx leverage.

轉向每股收益。我們報告的本季度每股收益為 1.41 美元，而去年同期為 1.25 美元。調整重組成本、與擬議股份重新分類相關的成本和本年度收購相關成本後，調整後每股收益為 1.45 美元，而去年同期調整後每股收益為 1.29 美元，增長 12%。這繼續反映出各個層面的強大執行力、銷售業績、毛利和運營支出槓桿。

Turning to the balance sheet. At the end of the fiscal second quarter, we were carrying $747 million of inventory, up $21 million from Q1 balance. The inventory build is consistent with our double-digit revenue growth, continuing inflation and calendar year-end buy opportunities. We do expect to bring inventory levels down by year-end.

轉向資產負債表。在第二財季末，我們持有 7.47 億美元的庫存，比第一季度餘額增加 2100 萬美元。庫存增加與我們兩位數的收入增長、持續的通貨膨脹和日曆年末購買機會一致。我們確實希望在年底前降低庫存水平。

Our operating cash flow conversion rate for Q2 was 429%, which includes the benefit this quarter from the $300 million sale of receivables related to the securitization program. Excluding the benefit of securitization, we are still targeting an annual conversion of roughly 100% for fiscal 2023. Our capital expenditures were $15 million in the second quarter, and we continue to expect annual CapEx spend in the range of $70 million to $80 million in fiscal 2023.

我們第二季度的運營現金流轉換率為 429%，其中包括本季度與證券化計劃相關的 3 億美元應收賬款銷售帶來的收益。不包括證券化的好處，我們的目標仍然是在 2023 財年實現大約 100% 的年度轉換。我們第二季度的資本支出為 1500 萬美元，我們繼續預計年度資本支出在 7000 萬至 8000 萬美元之間2023 財年。

You can see on Slide 7 our free cash flow is $325 million for the current quarter as compared to negative $16 million in the prior year quarter. Note that we also spent about $12.5 million buying back shares during the quarter, just over 150,000 shares at an average price of $81.76. We currently have 4.4 million shares remaining on our current repurchase authorization.

您可以在幻燈片 7 上看到，我們本季度的自由現金流為 3.25 億美元，而去年同期為負 1600 萬美元。請注意，我們在本季度還花費了大約 1250 萬美元回購股票，以 81.76 美元的平均價格回購了 150,000 多股股票。我們目前的回購授權還剩 440 萬股。

Our total debt at the end of the fiscal second quarter was $550 million, reflecting a roughly $230 million decrease from the first quarter of fiscal 2023 primarily from the benefit of the securitization facility. As for the composition of our debt, roughly 45% was floating rate debt, and the other 55% was fixed rate debt.

我們在第二財季末的總債務為 5.5 億美元，與 2023 財年第一季度相比減少了約 2.3 億美元，這主要得益於證券化機制。至於我們的債務構成，大約 45% 是浮動利率債務，另外 55% 是固定利率債務。

Cash and cash equivalents were $50 million, resulting in net debt of $500 million at the end of the quarter. Our net leverage at the end of the second quarter was 0.9.

現金和現金等價物為 5000 萬美元，導致本季度末的淨債務為 5 億美元。我們在第二季度末的淨槓桿率為 0.9。

Before I reiterate our capital allocation strategy, let me touch on the current banking environment. We recently conducted a comprehensive review of all of our main banks, those that participate in our revolving credit facility as well as those banks with whom our recent acquisitions do business with.

在重申我們的資本配置策略之前，讓我談談當前的銀行業環境。我們最近對我們所有的主要銀行、參與我們的循環信貸安排的銀行以及與我們最近的收購有業務往來的銀行進行了全面審查。

3 of the 6 main banks are designated as systematically important financial institutions such that they are more heavily regulated than regional banks. And all 6 banks have strong common equity and liquidity ratios. We continue to monitor the situation closely.

6 家主要銀行中有 3 家被指定為具有系統重要性的金融機構，因此它們比區域性銀行受到更嚴格的監管。所有 6 家銀行的普通股和流動性比率都很高。我們繼續密切關注局勢。

As a reminder, we refreshed our capital allocation strategy last quarter, which you can see on Slide 8. Our top 2 priorities remain reinvesting into the business and returning capital to shareholders through our ordinary dividend.

提醒一下，我們上個季度更新了我們的資本配置策略，您可以在幻燈片 8 中看到。我們的首要任務仍然是對業務進行再投資，並通過我們的普通股息向股東返還資本。

From there, our next 2 priorities are tuck-in acquisitions and share buybacks at the right valuation levels. We are de-prioritizing use of special dividends as we see higher return prospects in the other uses of cash.

從那裡開始，我們接下來的兩個優先事項是在正確的估值水平下進行收購和股票回購。我們正在取消特別股息的優先使用，因為我們看到其他現金用途的回報前景更高。

We continue to see buybacks as an attractive way to return capital and enhance shareholder value. In the near term, however, we will not be buying shares in the open market, while based on legal advice, we work through the share reclassification proposal. As a reminder, the special committee of our Board of Directors remains engaged on evaluating the reclassification proposal, and we cannot comment on the status of their evaluation at this time.

我們繼續將回購視為回報資本和提高股東價值的一種有吸引力的方式。然而，在短期內，我們不會在公開市場上購買股票，而根據法律建議，我們將通過股票重新分類提案。提醒一下，我們董事會的特別委員會仍在參與評估重新分類提案，我們目前無法評論他們的評估狀態。

Now let's turn to the fiscal year 2023 guidance and assumptions, which are shown on Slide 10. We are reaffirming our 2023 guidance of average daily sales growth of 5% to 9% and an adjusted operating margin between 12.7% and 13.3%.

現在讓我們轉向 2023 財年的指導和假設，如幻燈片 10 所示。我們重申 2023 年平均每日銷售額增長 5% 至 9% 以及調整後的營業利潤率在 12.7% 至 13.3% 之間的指導。

For modeling purposes, I'll provide additional color on our expectations for the back half of our fiscal year. As of now, we would characterize the environment as stable. Our growth trajectory likely tempers a bit due to higher prior year comparisons, including extra selling days last year but should remain quite solid. March is indicative of this with estimated growth between 8% to 9%.

出於建模目的，我將為我們對本財年下半年的預期提供額外的顏色。截至目前，我們會將環境描述為穩定的。由於去年比較高，包括去年額外的銷售天數，我們的增長軌跡可能會有所緩和，但應該會保持相當穩定。 3 月份表明了這一點，估計增長率在 8% 到 9% 之間。

I will note that our fiscal March, which extends through the end of this week, has a roughly 1 percentage point headwind due to the timing of Good Friday and Easter weekend, which will be a tailwind in our fiscal April. For the full year, we expect to trend somewhere between the middle and high end of our sales range.

我會注意到，由於耶穌受難日和復活節週末的時間安排，我們持續到本週末的財政三月有大約 1 個百分點的逆風，這將是我們財政四月的順風。對於全年，我們預計趨勢將介於我們的銷售範圍的中端和高端之間。

We continue to expect gross margins to be higher in the second half of the fiscal year than the first half, beginning with an expected sequential increase in Q3. This is due to several factors.

我們繼續預計本財年下半年的毛利率將高於上半年，從第三季度的預期環比增長開始。這是由於幾個因素。

First, the product cost increases in our P&L during the second quarter should be the peak for the fiscal year. Second, freight costs are moderating in the second half of our fiscal year. Third, as Erik mentioned, we have several gross margin initiatives that will be a tailwind over the remainder of the year and beyond. As of now, the benefits are modest this fiscal year and build for fiscal '24.

首先，第二季度我們損益表中的產品成本增長應該是本財年的峰值。其次，我們財年下半年的運費正在放緩。第三，正如 Erik 所提到的，我們有幾項毛利率計劃將在今年剩餘時間及以後起到推動作用。截至目前，本財年的收益不大，並為 24 財年增加。

With respect to adjusted operating expenses, we expect our typical seasonal pattern to play out and adjusted OpEx-to-sales ratio will decline sequentially in the second half. As of now, this would yield an adjusted operating margin in the middle of our range. If we can achieve a bit more gross margin improvement in the back half of the year, we can move the adjusted operating margin towards the higher end of the range.

關於調整後的運營費用，我們預計我們典型的季節性模式將會結束，調整後的運營支出與銷售額之比將在下半年連續下降。截至目前，這將在我們的範圍中間產生調整後的營業利潤率。如果我們能夠在今年下半年實現更多的毛利率改善，我們可以將調整後的營業利潤率推向該範圍的高端。

The last point I'll make is that we are not changing our full year guidance for our most recent acquisitions of Buckeye and Tru-Edge. These acquisitions add approximately 50 basis points of growth and dilute both gross margin and operating margin by an additional 10 basis points. We are proud of the growth in our business during the fiscal second quarter. And we continue to take steps to align the business for further top line and bottom line acceleration moving forward.

我要說的最後一點是，我們不會改變我們最近收購 Buckeye 和 Tru-Edge 的全年指導方針。這些收購增加了大約 50 個基點的增長，並進一步稀釋了毛利率和營業利潤率 10 個基點。我們為第二財季的業務增長感到自豪。我們將繼續採取措施使業務保持一致，以進一步加速向前發展。

I'll now turn it back over to Erik.

我現在將其轉回給 Erik。

Thank you, Kristen. As we cross over the halfway point to fiscal 2023 and we enter the final leg of our 3-year targets, I'm excited by our company's performance. We are meeting or exceeding the targets that we set for ourselves nearly 3 years ago.

謝謝你，克里斯汀。當我們跨過 2023 財年的中點並進入 3 年目標的最後階段時，我對我們公司的業績感到興奮。我們正在達到或超過近 3 年前為自己設定的目標。

The most exciting part for me, however, is that no one on our team is satisfied. In fact, we feel as if we're just getting started. We've recently begun our strategy refresh process to create a new set of long-range targets, and we look forward to sharing those with you in a couple of quarters.

然而，對我來說最令人興奮的部分是我們團隊中沒有人感到滿意。事實上，我們覺得我們才剛剛開始。我們最近開始了我們的戰略更新過程，以創建一組新的長期目標，我們期待在幾個季度內與您分享這些目標。

In the meantime, I'd like to thank all of our associates for their hard work, dedication and strong execution for our customers.

與此同時，我要感謝我們所有的員工，感謝他們為我們的客戶所做的辛勤工作、奉獻精神和強大的執行力。

Before I open the line for Q&A, I do want to take a minute to let you know that John Chironna has decided to retire at the end of June. Kristen will keep you updated on progress in replacing John over the next few months.

在打開問答熱線之前，我想花一分鐘時間告訴大家，John Chironna 已決定在 6 月底退休。在接下來的幾個月裡，克里斯汀將讓您了解更換約翰的最新進展。

Let me spend a moment to thanking John publicly and recognizing the great job that he's done over the past decade. John has been a steady and reliable and consistent face to our investment community as well as inside the company with our associates.

讓我花點時間公開感謝約翰，並承認他在過去十年中所做的出色工作。約翰一直是我們投資界以及公司內部與我們同事的穩定、可靠和始終如一的面孔。

During a time of change and transformation, both within the company and across the industry, John provided clarity, transparency, honesty and most of all, integrity. John, on behalf of our entire team, thank you. And on a personal note, it's been a pleasure working closely with you, and I wish you all the best as you went to your next chapter in life.

在公司內部和整個行業的變革和轉型時期，約翰提供了清晰、透明、誠實，最重要的是，正直。約翰，代表我們整個團隊，謝謝你。就個人而言，很高興與您密切合作，祝您在人生的下一章中一切順利。

And we will now open up the lines for questions.

我們現在將開通提問熱線。

(Operator Instructions) Today's first question comes from Tommy Moll with Stephens.

（操作員說明）今天的第一個問題來自 Tommy Moll 和 Stephens。

I appreciate the insight you provided on the demand environment and wanted to start on the revenue or ADS guidance that you've provided here. So if I'm doing the math correctly, even at the higher end of the range if you look at the dollars per day, it implies something below the $16 million run rate that you've achieved the last few months. So I'm just curious if there's something you're seeing in the macro in the back half that might change to the downside, if it's a conservative outlook based on limited visibility or something else?

我感謝您提供的關於需求環境的見解，並希望從您在此處提供的收入或 ADS 指南開始。因此，如果我的計算正確，即使您查看每天的美元數，即使在該範圍的較高端，這也意味著您在過去幾個月中達到的 1600 萬美元運行率以下。所以我很好奇你是否在後半部分的宏觀中看到了一些可能會轉向下行的東西，如果它是基於有限可見性或其他原因的保守前景？

Yes, Tommy. So I think, first, broadly, let me just reiterate what you heard us kind of echo in the prepared remarks that we feel very good about what we're seeing right now in terms of the demand environment. The tone on the ground is stable. We're really confident with how we've been executing, confident in our ability to continue executing well.

是的，湯米。因此，我認為，首先，從廣義上講，讓我重申一下您在準備好的發言中聽到的我們的迴聲，即我們對目前在需求環境方面所看到的情況感到非常滿意。地面上的語氣很穩定。我們對我們的執行方式非常有信心，對我們繼續良好執行的能力充滿信心。

That being said, I think I'd be remiss if I didn't throw the word cautiously optimistic in front of that, just given all the same macro information that I'm sure you're looking at too around IP, MBI, PMI. But the good thing is that we contemplated all that within the guidance framework.

話雖這麼說，我想如果我不在前面加上謹慎樂觀這個詞，我會失職，只是給出了所有相同的宏觀信息，我相信你也在關注 IP、MBI、PMI .但好在我們在指導框架內考慮了所有這些。

So we always anticipated that the year was going to slow down. When we set that range at the beginning of the year, we assumed IP was flat to down low single digits at the start of the year with the first half positive and the second half negative. And that's still what we expect to play out, although we see the bottom end of that range probably as being less likely at this point.

所以我們一直預計這一年會放緩。當我們在年初設定該範圍時，我們假設 IP 在年初持平至低個位數，上半年為正，下半年為負。這仍然是我們期望的結果，儘管我們認為此時該範圍的底端可能不太可能。

But if you're thinking about kind of the first half into the second half, there's a few things you need to think about with respect to modeling on the top line. The first is that the benefit from price does continue to decelerate sequentially. So we lapped the biggest increase in the second quarter, but that price benefit does continue to decelerate through the second half.

但如果你正在考慮上半場到下半場的情況，那麼在頂線建模方面你需要考慮一些事情。首先是價格帶來的好處確實繼續環比減速。因此，我們在第二季度實現了最大增幅，但這種價格優勢在下半年確實繼續減速。

The second thing I would mention is similar dynamic on the acquisitions decelerating. And then, of course, we're seeing the market softening, which is one of the things that plays into the sequential ADS changes.

我要提到的第二件事是收購減速的類似動態。然後，當然，我們看到市場走軟，這是影響連續 ADS 變化的因素之一。

Maybe to put a little bit of a finer point on the modeling because there is a lot of noise like especially if you think about the fourth quarter prior year with the 53rd week, I would think about for the second half that the contribution to growth from price is between 300 to 400 basis points such that the year looks like a 400 to 500 basis point contribution from price.

也許在建模上提出一點更好的觀點，因為有很多噪音，特別是如果你考慮第 53 週的前一年第四季度，我會考慮下半年對增長的貢獻價格在 300 到 400 個基點之間，因此這一年看起來像是價格貢獻了 400 到 500 個基點。

And then on the acquisition side, I would say to think about that as 100 to 150 basis points of contribution to growth such that the year ends up being 200 to 300 basis points. And then, of course, depending how you model IP and volume or share gain assumptions, that would land you in the mid- to high end of our guidance range.

然後在收購方面，我想說的是將其視為對增長的 100 到 150 個基點的貢獻，這樣一年最終會達到 200 到 300 個基點。然後，當然，取決於您如何對 IP 和數量或份額增益假設進行建模，這將使您處於我們指導範圍的中高端。

Got it. That's helpful. Shifting gears to OpEx and the significant leverages in terms of percent of sales that you showed in the second quarter. Any additional insight you can provide on some of the company-specific initiatives there, would appreciate it.

知道了。這很有幫助。將齒輪轉向 OpEx 以及您在第二季度展示的銷售額百分比方面的重要槓桿作用。如果您能就公司特定的一些舉措提供任何額外的見解，我們將不勝感激。

And then in terms of the second half, if I hear you correctly, I think the way you framed it up was just percent of revenue should improve second half versus first half. Any additional insight you can provide there potentially in terms of a range of dollars per quarter on that line of your P&L or what the range on a percentage basis could be would also be appreciated.

然後就下半年而言，如果我沒聽錯的話，我認為你構建它的方式只是收入的百分比應該比上半年有所改善。您可以提供任何額外的見解，可能是在您的 P&L 線上每季度的美元範圍，或者以百分比為基礎的範圍，也將不勝感激。

Sure. Yes. So your interpretation or what you heard in the remarks, totally agree with that. It's sequentially declining. That's not atypical for us.

當然。是的。所以你的解釋或你在評論中聽到的內容，完全同意這一點。是依次遞減的。這對我們來說並不罕見。

A couple of the initiatives -- maybe let me talk about a couple of the initiatives first. So obviously, we continue to do really well with Mission Critical. That's going to continue to help us in the second half. Probably not surprisingly, we were tracking ahead of the $15 million savings target for the year.

一些舉措——也許讓我先談談一些舉措。很明顯，我們繼續在關鍵任務方面做得很好。這將在下半場繼續幫助我們。可能不足為奇的是，我們提前實現了當年 1500 萬美元的節省目標。

We've been measuring the reinvestment very cautiously, just given some of the uncertainty in the macro environment. So while we haven't given a firm number on the reinvestment guidance, I can definitely commit to at least $10 million of net savings on Mission Critical.

考慮到宏觀環境的一些不確定性，我們一直非常謹慎地衡量再投資。因此，雖然我們沒有給出再投資指導的確切數字，但我可以肯定地承諾在關鍵任務上至少節省 1000 萬美元的淨成本。

And then I think the second thing I'd mention, Tommy, to your question about the initiatives is just kind of ongoing productivity engine that we've been generating inside the company, which is really what you're seeing is kind of the spirit of the next evolution of Mission Critical, which is deploying things like lean and continuous improvement, getting a lot more organic kind of grounds-up feedback and ideating the projects and the productivity opportunities. We're really starting to see that momentum accelerate.

然後我想我要提到的第二件事，湯米，關於你關於這些舉措的問題只是我們在公司內部產生的一種持續的生產力引擎，這就是你所看到的那種精神Mission Critical 的下一步發展，它正在部署諸如精益和持續改進之類的東西，獲得更多有機的基礎反饋，並構思項目和生產力機會。我們真的開始看到這種勢頭在加速。

And of course, we're talking specifically about the OpEx line. But our intention kind of post '23 is that we're using those same principles to really attack the whole P&L and balance sheet to generate opportunity.

當然，我們正在專門討論 OpEx 系列。但我們在 23 年後的意圖是，我們正在使用這些相同的原則來真正攻擊整個損益表和資產負債表以創造機會。

But then in terms of second half dollars, obviously, there's some dependency there depending on the volume number that you're modeling. But I would suggest definitely a step up in dollars for the third quarter. And then depending where you model Q4, obviously pick up your volume change, but I think Q4 is where you'll probably see a bit more productivity benefit from us than maybe what would be historically typical.

但是就下半年美元而言，顯然，那裡存在一些依賴性，具體取決於您正在建模的數量。但我肯定會建議第三季度增加美元。然後根據您在第四季度建模的位置，顯然會發現您的數量變化，但我認為第四季度您可能會從我們那裡看到比歷史上典型的生產力收益更多的地方。

And our next question today comes from David Manthey with Baird.

我們今天的下一個問題來自 David Manthey 和 Baird。

First off, the Buckeye and Tru-Edge acquisition, that's 50 basis points combined, not each, right?

首先，Buckeye 和 Tru-Edge 的收購，加起來是 50 個基點，不是每個，對吧？

Correct.

正確的。

Yes. And then you mentioned reorientation of category management focus, and you talked about some benefits in the second half. Could you touch on the efforts and the benefits from that initiative?

是的。然後你提到了品類管理重點的重新定位，你在下半年談到了一些好處。您能否談談該倡議的努力和好處？

Yes.

是的。

Go ahead.

前進。

Go ahead.

前進。

Go ahead, Erik.

繼續，埃里克。

So yes, look, I think we started to tee this up on the last call, but for the last couple of years, our category folks have done a great job in a really difficult environment. And the focus has been on getting product and on staying ahead of inflation.

所以是的，看，我想我們在上次電話會議上就開始準備了，但是在過去的幾年裡，我們的類別人員在一個非常困難的環境中做得很好。重點一直放在獲得產品和保持領先於通貨膨脹。

And I think mission accomplished on both fronts. As things are settling in now, we see a great opportunity to reorient through a line review process, which is something that's sort of typical that we'll do over time, but I would say with a stepped-up emphasis on taking a hard look at product and supplier portfolio optimization and refining our purchase cost position.

我認為任務在兩個方面都完成了。隨著現在事情的解決，我們看到了一個很好的機會來通過線路審查流程重新定位，這是我們隨著時間的推移會做的典型事情，但我想說的是更加強調認真審視在產品和供應商組合優化和改進我們的採購成本狀況方面。

So we are in the midst -- sort of right in the midst of that. We're going to approach this as we've done in the past in waves. So I mentioned wave 1, we're sort of clustering our product lines, Dave. And we are right now in the midst of the negotiation process on wave 1, our first cluster, and we've kicked off wave 2.

所以我們身處其中 - 就在其中。我們將像過去一波接一波地處理這個問題。所以我提到了第 1 波，我們正在對我們的產品線進行集群，Dave。我們現在正處於第 1 波（我們的第一個集群）的談判過程中，我們已經啟動了第 2 波。

I think in terms of benefits, certainly, we mentioned gross margin will be the biggest financial beneficiary here. It will be modest. We'll -- in this fiscal year, we're looking at something in Q4, but we'll call it modest. Obviously, that will become more significant as we get to FY '24.

我認為就收益而言，當然，我們提到毛利率將是這裡最大的財務受益者。這將是謙虛的。我們將 - 在本財政年度，我們正在考慮第四季度的一些事情，但我們稱之為適度。顯然，隨著我們進入 24 財年，這將變得更加重要。

I mean, just to sort of size it for you, the last time we went through something extensive like this, it was a year or 2 years before COVID, Dave, we achieved in dollar terms, profit improvement in the neighborhood of $20 million. I'd expect this effort to be at least as great, if not greater than that given that, number one, we're a bigger company now for starters. But number two, we haven't done this in a few years, and we perhaps will take a slightly more robust and more aggressive posture as we move through the line review.

我的意思是，只是為了給你確定一下規模，上次我們經歷這樣廣泛的事情，是在 COVID 之前一年或兩年，戴夫，我們以美元計算實現了 2000 萬美元左右的利潤增長。我希望這項努力至少同樣偉大，如果不是更大的話，第一，對於初學者來說，我們現在是一家更大的公司。但第二，我們已經有幾年沒有這樣做了，在我們進行生產線審查時，我們可能會採取稍微更穩健和更積極的姿態。

So that's sort of it. The one other color I'll add, Dave, just as you think ahead beyond '23, I wouldn't take the $20-plus million and just overlay it on top of -- there'll be other puts and takes with gross margins. So we're a little early to give sort of gross margin perspective. But absent this move, we'd probably turn negative price cost. And so this is going to help us buffer that for sure. So hopefully, that's some helpful perspective.

就是這樣。我要添加的另一種顏色，戴夫，就像你在 23 年後的未來所想的那樣，我不會拿 20 多萬美元，只是把它疊加在上面——會有其他的毛利率.所以我們有點早了，給出了某種毛利率觀點。但如果不採取這一舉措，我們可能會將價格成本轉為負值。所以這肯定會幫助我們緩衝。所以希望這是一些有用的觀點。

Yes, and it does. And just to clarify, I think last quarter, you were saying that you didn't expect the typical seasonal fourth quarter downtick in gross margin. You're still tracking that given this initiative and your outlook relative to that 41.5 to 41.8 gross margin guidance?

是的，確實如此。只是為了澄清，我認為上個季度，你說你沒想到第四季度毛利率會出現典型的季節性下降。鑑於這一舉措以及您相對於 41.5 至 41.8 毛利率指導的前景，您仍在跟踪這一點嗎？

Yes. That's correct, Dave. So for Q3, as we commented on the prepared remarks, I'd expect Q2 to Q3 step up to look pretty similar to what you would see historically, so plus 30 to 40 bps. And then Q4, I would think about that being flat to maybe down 10 bps. And then for the year on the gross margin guidance range, yes, we still feel confident with that original range although I think a little bit more pressure probably towards the bottom end, given the Buckeye acquisition.

是的。沒錯，戴夫。因此，對於第三季度，正如我們對準備好的評論的評論一樣，我希望第二季度到第三季度看起來與你在歷史上看到的非常相似，所以再加上 30 到 40 個基點。然後是第 4 季度，我認為持平甚至可能下降 10 個基點。然後對於今年的毛利率指導範圍，是的，我們仍然對最初的範圍充滿信心，儘管我認為考慮到 Buckeye 的收購，底端可能面臨更大的壓力。

And our next question today comes from Chris Dankert with Loop Capital.

我們今天的下一個問題來自 Loop Capital 的 Chris Dankert。

I guess thinking about Mission Critical, as we kind of move into the next phase here, should we be thinking about it more in terms of kind of offsetting some of the investment costs that you're undertaking here? Or do we kind of stay tuned until you are kind of ready to talk about longer-term targets?

我想考慮關鍵任務，當我們進入下一階段時，我們是否應該更多地考慮抵消您在這裡承擔的一些投資成本？還是我們會繼續關注，直到您準備好談論長期目標？

Yes, Chris. So I would say stay tuned for more specific targets, which we'll give at the end of the fourth quarter. But what I would say is, obviously, the spirit of what we've been doing here over the past 2.5 years definitely continues on in the Mission Critical 2.0, but it does look a little bit different in terms of how we execute inside the company, sort of the size of projects that we're taking on and then where the benefit shows up.

是的，克里斯。所以我想說的是，請繼續關注我們將在第四季度末給出的更具體的目標。但我要說的是，很明顯，過去 2.5 年來我們在這裡所做的精神肯定會在 Mission Critical 2.0 中延續，但就我們在公司內部的執行方式而言，它看起來確實有點不同，我們正在進行的項目的規模，然後是收益出現的地方。

So largely, the cost savings on Mission Critical has been very focused on the OpEx savings in the Mission Critical 1.0 round, but we see a lot of benefit to be gained by expanding that focus to cost of goods sold, to the balance sheet. I think there's a lot of opportunity we can go after there.

因此，在很大程度上，關鍵任務的成本節省一直非常關注關鍵任務 1.0 回合中的運營支出節省，但我們看到，通過將重點擴展到銷售商品成本和資產負債表，可以獲得很多好處。我認為我們有很多機會可以去那裡。

But the broad thing I would reiterate, going back to your question, yes, the idea is really to use Mission Critical as a productivity engine on an ongoing basis that helps us to cover sort of core inflation that we see every year at a minimum and then as much as we can fund through investment, that would be the goal.

但我要重申的是，回到你的問題，是的，這個想法真的是在持續的基礎上使用關鍵任務作為生產力引擎，幫助我們至少涵蓋我們每年看到的核心通貨膨脹，並且那麼我們可以通過投資籌集盡可能多的資金，這就是目標。

And then I guess kind of thinking about the customer conversations right now, particularly around cost savings, VMI, some of the other optimization you guys can bring to customers, I know that was a really big selling point for you back in like the slowdown in 2015, 2016.

然後我想現在正在考慮客戶對話，特別是關於成本節約、VMI、你們可以為客戶帶來的其他一些優化，我知道這對你們來說是一個非常大的賣點，比如2015 年、2016 年。

Yes, maybe, Erik, you touched on this a bit in your opening comments, but maybe can we put the current conversations and kind of the cadence of these cost saving conversations of what MSC brings to the table in context of prior downturns. Are we seeing a real acceleration in those conversations? Or is it kind of what we've been seeing '22-'23 today?

是的，也許，埃里克，你在開場白中提到了這一點，但也許我們可以把當前的對話和 MSC 帶來的這些節省成本的對話的節奏放在先前經濟低迷的背景下。我們是否在這些對話中看到了真正的加速？或者這是我們今天看到的'22-'23？

Chris, so I would say the punchline is there's been an acceleration. And I think there's 2 factors I'd point to: a macro factor and a micro factor. So the macro factor is that our customers, they're experiencing unprecedented levels of inflation over the past couple of years of competitive intensity, once in a -- hopefully, once in a lifetime experience with COVID.

克里斯，所以我想說的重點是加速了。我認為我要指出兩個因素：一個宏觀因素和一個微觀因素。因此，宏觀因素是我們的客戶，他們在過去幾年的競爭激烈中經歷了前所未有的通貨膨脹水平，希望是一生一次的 COVID 體驗。

Our customers are under more pressure, I think, than I've seen in my 25 years in the business. So the drumbeat and the need for help is greater than it's been in past cycles. That's the first thing. That's the macro factor.

我認為，我們的客戶承受的壓力比我 25 年從業以來所見的還要大。因此，鼓聲和對幫助的需求比過去的周期更大。這是第一件事。這是宏觀因素。

The micro factor is, look, Chris, relative to prior cycles, we really have changed the face of MSC. So this repositioning that we've talked about to becoming a Mission Critical partner, we've always had kind of like arrows in our quiver as it relates to helping customers with productivity and cost savings, but they're much greater now.

微觀因素是，Chris，相對於之前的周期，我們確實改變了 MSC 的面貌。因此，我們已經談到要成為關鍵任務合作夥伴的這種重新定位，我們的箭袋中總是有點像箭頭，因為它與幫助客戶提高生產力和節省成本有關，但現在它們要大得多。

And in particular, I think what's happened is they've extended from the procurement side of things where we could offer productivity savings in the way of one-stop shopping in the way of process savings through inventory management. We've really extended that to savings on the plant floor.

特別是，我認為發生的事情是他們已經從採購方面擴展了我們可以通過庫存管理以一站式購物的方式提供生產力節約的方式。我們已經真正將其擴展到工廠車間的節省。

And I think this is probably where we're fairly unique. And Kristen in the prepared remarks mentioned one of our recent wins where the customer said to us, nobody is doing this. It's extending the savings and the productivity from the process side to the production process where with our technical experts between metalworking and OEM fasteners and the C parts products, we're actually able to go in and help reengineer process.

我認為這可能是我們相當獨特的地方。克里斯汀在準備好的評論中提到了我們最近的一次勝利，客戶對我們說，沒有人這樣做。它將節約和生產力從流程方面擴展到生產流程，在我們的金屬加工和 OEM 緊固件以及 C 零件產品方面的技術專家的幫助下，我們實際上能夠參與並幫助重新設計流程。

We're helping save labor hours, which right now are precious. We're saving material. So I think you're seeing, number one, a step-up in customer need and expectations. And then number two, really a changing of our role.

我們正在幫助節省現在非常寶貴的工時。我們正在節省材料。所以我認為你看到的是，第一，客戶需求和期望的提升。然後是第二，真正改變我們的角色。

Got it. So it's more about share capture and not trying to read in too much to customer their need versus past. I think that makes an awful lot of sense.

知道了。因此，更多的是關於份額捕獲，而不是試圖過多地了解客戶的需求與過去的需求。我認為這很有道理。

You got it.

你說對了。

Our next question today comes from Steve Volkmann with Jefferies.

我們今天的下一個問題來自 Jefferies 的 Steve Volkmann。

Great. Congrats, John. Thanks for all your help.

偉大的。恭喜，約翰。感謝你的幫助。

Thank you, Steve.

謝謝你，史蒂夫。

Maybe just to go back to this kind of gross margin outlook, it feels like there's kind of cross currents for '24. And Kristen, I think you said that you'd see more of your line review benefits in '24. I think you said that too, Erik.

也許只是回到這種毛利率前景，感覺 24 年有一種交叉趨勢。克里斯汀，我想你說過你會在 24 年看到更多的線路審查好處。我想你也說過，埃里克。

But you'll obviously see some headwinds, I guess, on price cost. I mean, can you give us a sense, can gross margin be up in '24? Or how are you thinking about just broadly? We don't need a number yet.

但我猜你顯然會看到價格成本方面的一些不利因素。我的意思是，你能告訴我們，24 世紀的毛利率能提高嗎？或者你是如何從廣義上考慮的？我們還不需要數字。

Yes, sure. So you're spot on in that we -- because of the way we do the costing at some point here, the price/cost benefit does flip to negative. We saw our cost peak in the second quarter. So we expect fiscal '23 on price cost to be slightly positive to flat. So the implication there would be that you do go negative in fiscal '24.

是的，當然。所以你在我們身上發現了 - 由於我們在這裡的某個時候進行成本核算的方式，價格/成本收益確實變成了負值。我們在第二季度看到了成本高峰。因此，我們預計 23 財年的價格成本將略微持平。因此，這意味著您在 24 財年確實會出現負數。

The category line reviews are a critical part of what we're doing to kind of buffer that impact, of course, as Erik elaborated on a little while ago here. Obviously, the more we can do on productivity generation in cost of goods sold, the more we can offset that impact.

類別線審查是我們正在做的緩衝影響的關鍵部分，當然，正如埃里克剛才在這裡詳細闡述的那樣。顯然，我們在銷售商品成本方面對提高生產力所做的工作越多，我們就越能抵消這種影響。

And it is hard to size right now, too, Steve, just because we are seeing cost inflation continue to come in. So we'll give a more specific number in Q4, but it is -- you do need a lot more productivity to come through for us to be able to increase margin on a year-over-year basis once that price cost curve inverts. But we see a lot of opportunity in cost of goods sold, and we're going after a lot of things already. So we'll be able to put a finer point to that in the fourth quarter.

現在也很難確定規模，史蒂夫，只是因為我們看到成本通脹繼續出現。所以我們將在第四季度給出更具體的數字，但它是 - 你確實需要更多的生產力來一旦價格成本曲線反轉，我們就能實現同比增長。但我們在銷售商品成本方面看到了很多機會，而且我們已經在追求很多東西。因此，我們將能夠在第四季度更好地說明這一點。

Okay. Great. That's helpful. And then can you just go back to this quarter and give us a sense of what price and volume were?

好的。偉大的。這很有幫助。然後你能不能回到這個季度，讓我們了解一下價格和數量是多少？

Sure. Yes. So price in the quarter contributed just under 500 basis points of growth, and then volume was just under 300 basis points of growth.

當然。是的。因此，本季度價格貢獻了不到 500 個基點的增長，然後銷量增長了不到 300 個基點。

Okay. And then one final quick one from me. Kristen, you mentioned inventory maybe comes down this year. Any order of magnitude?

好的。然後是我最後一個快速的。克里斯汀，你提到今年庫存可能會下降。任何數量級？

Yes. So yes, we do expect inventory to come down. Of course, a bit of dependency there on how growth plays out in the second half. But I'd say in the 10-ish range is probably realistic, coming down about $10 million.

是的。所以是的，我們確實預計庫存會下降。當然，這有點依賴於下半年的增長情況。但我想說在 10 左右的範圍內可能是現實的，下降約 1000 萬美元。

And our next question today comes from Ryan Merkel with William Blair.

我們今天的下一個問題來自瑞恩·默克爾和威廉·布萊爾。

John, it's been a great run. Thanks so much for all the help. Wish you all the best.

約翰，這是一個偉大的運行。非常感謝所有的幫助。祝你一切順利。

Thank you, Ryan.

謝謝你，瑞安。

So my first question today is on the in-plant, which was up 20% and is now a little bit higher than 12% of sales. Can you just define what that is and how you execute to it? I imagine there's MSC people on the plant floor more often. Just talk about how you do that and kind of what the outlook is?

所以我今天的第一個問題是關於廠內的，它增長了 20%，現在略高於銷售額的 12%。你能定義它是什麼以及你如何執行它嗎？我想 MSC 人員更經常出現在工廠車間。只是談談你是如何做到的以及前景如何？

Yes, Ryan. And look, I think you hit the punch line, which is basically it's sort of the most extreme form we have around our solutions offering of being a Mission Critical partner with the customer where we're actually putting one or more full-time people inside of our customer.

是的，瑞安。看，我認為你說到重點了，這基本上是我們圍繞我們的解決方案提供的最極端形式，即成為客戶的關鍵任務合作夥伴，我們實際上將一名或多名全職人員放在裡面我們的客戶。

Typically, Ryan, this is also -- it's more than just a person. It's accompanied by inventory management system, whether that's vending or VMI. It's accompanied by a regular cadence of visits and audits from our technical folks doing plant improvement reviews.

通常情況下，Ryan，這不僅僅是一個人。它伴隨著庫存管理系統，無論是自動售貨機還是 VMI。它伴隨著我們的技術人員進行工廠改進審查的定期訪問和審計。

But the cornerstone is definitely that we're putting people in full time. What we're seeing, Ryan, is high value add for the customer, particularly now the labor shortage is still as extreme as ever. And so all of our customers, this is sort of 1 of the 2 or 3 biggest things we hear almost every customer visit. So we're helping satisfy a big need there by putting our people inside.

但基石絕對是我們讓人們全職工作。 Ryan，我們看到的是對客戶的高附加值，尤其是現在勞動力短缺仍然一如既往地嚴重。因此，我們所有的客戶，這是我們幾乎每次訪問客戶時聽到的 2 或 3 件最重要的事情之一。因此，我們通過將我們的人員安置在裡面來幫助滿足那裡的巨大需求。

And what it does, I mean, when our people are in there, they're doing everything from procurement to helping out with operations and improvement. And it's freeing up our customers' labor to focus on higher value-add activities on the manufacturing process.

它的作用，我的意思是，當我們的員工在那裡時，他們正在做從採購到幫助運營和改進的所有事情。它解放了我們客戶的勞動力，讓他們專注於製造過程中附加值更高的活動。

So the win for the customer is clear. The win for MSC has been clear. Typically, what we see, Ryan, when we put a program in place, either this will be in the case of a brand-new customer where it's part of our pitch or an existing customer where there's a share of wallet capture. And we see in the 1 to 2 years that follows program inception, and we see healthy growth rate, extremely high retention rates.

因此，客戶的勝利是顯而易見的。 MSC 的勝利顯而易見。通常情況下，Ryan，我們所看到的，當我們實施一個程序時，要么是新客戶是我們推銷的一部分，要么是現有客戶有一部分錢包捕獲。我們看到在項目啟動後的 1 到 2 年內，我們看到了健康的增長率和極高的保留率。

And you can imagine that the profitability of the program really improves as we start to leverage the fixed costs on volumes. So it has -- it's been exploding. We -- based on macro and micro factors, again, I would expect it to continue growing at a healthy clip.

你可以想像，隨著我們開始利用數量上的固定成本，該項目的盈利能力真的會提高。所以它 - 它一直在爆炸。我們——再次基於宏觀和微觀因素，我預計它會繼續以健康的速度增長。

Appreciate that. That's helpful. And then you mentioned continuous improvement will be part of the DNA. Mission Critical has gone very well. Can you just give us some examples of how you're thinking about that? And I don't know if you want to give a soft goal today, but how might that look going forward?

感謝。這很有幫助。然後你提到持續改進將成為 DNA 的一部分。關鍵任務進展順利。您能否舉例說明您是如何考慮的？我不知道你今天是否想給出一個軟目標，但未來會怎樣？

Yes, I can take that one, Ryan. So we've been doing a lot of work to improve execution up to this point in Mission Critical. But I'd say it's only recently where we really shifted to -- really trying to educate the organization on lean principles and drive continuous improvement philosophy through the company. And we're definitely in the early innings of that effort.

是的，我可以接受那個，瑞安。因此，到目前為止，我們一直在做很多工作來提高關鍵任務中的執行力。但我要說的是，直到最近我們才真正轉向——真正嘗試對組織進行精益原則教育，並在整個公司推動持續改進理念。我們肯定處於這項努力的早期階段。

One thing I'll add that I'm really energized by is having our new COO on board, who is a huge believer in these concepts, and she's going to be a great partner in helping us drive this through the organization going forward. So I would hesitate to put a number on it again at this point, but I really see it being the engine for Mission Critical 2.0, whether you're talking about targeting OpEx savings, whether you're talking about targeting cost of goods sold improvements, working capital improvements. This kind of becomes the mechanism or the motor that fuels all of that.

我要補充的一件事讓我真正充滿活力的是我們的新首席運營官加入，她是這些概念的堅定信徒，她將成為幫助我們推動組織向前發展的偉大合作夥伴。所以我會猶豫在這一點上再次給出一個數字，但我真的認為它是 Mission Critical 2.0 的引擎，無論你是在談論以節省運營支出為目標，還是在談論以銷售商品成本為目標的改進, 營運資金改善。這種成為為所有這些提供燃料的機製或發動機。

Early wins we've had, I'd say, a lot of the work that we've been doing to unlock working capital through the value streams right now has come this way. But again, it's really early inning. So what I'm more energized and excited by is there's ton of parts of the organization that you're not really seeing any material benefit yielding yet. So I'm really excited about this, and I think it's a big step in the future of MSC and Mission Critical 2.0 specifically.

我想說，我們已經取得了早期的勝利，我們現在一直在通過價值流釋放營運資本所做的很多工作都是通過這種方式實現的。但同樣，這真的是早局。因此，讓我更有活力和興奮的是，該組織的許多部分你還沒有真正看到任何物質利益產生。所以我對此感到非常興奮，我認為這是 MSC 和 Mission Critical 2.0 未來邁出的一大步。

Ryan, I'll just add a little color on top of -- just from the CEO's perspective on this one, it's really exciting for me to see Kristen and Martina together. And 2 things I'd highlight sort of zooming out from the strict productivity.

瑞安，我只是在上面添加一點顏色——從首席執行官的角度來看，看到克里斯汀和瑪蒂娜在一起真的很令人興奮。我要強調的兩件事是從嚴格的生產力中縮小。

One is, I mentioned this in the prepared remarks, more aspirational target setting, that I think the management team that's in place now is more comfortable setting stretch targets even if it means you miss but thinking really big. And sort of that fits into the continual improvement umbrella.

一個是，我在準備好的發言中提到了這一點，即更有抱負的目標設定，我認為現在的管理團隊更願意設定延伸目標，即使這意味著你會錯過但想得很大。這有點適合持續改進的保護傘。

The second one is a concept that I think Martina has brought with her, which is problem elimination versus problem-solving. MSC, we've had a really strong customer-focused culture for a long time. We jump through hoops when there's a problem, we solve it.

第二個是我認為 Martina 帶來的一個概念，即消除問題與解決問題。 MSC，我們長期以來一直擁有非常強大的以客戶為中心的文化。當出現問題時，我們跳過障礙，我們解決它。

But what we're trying to do now with Martina and Kristen leading it is stepping back and saying, "Wait a second, get to root cause. Why is the problem happening in the first place? And don't celebrate just solving it for the one customer, get to root cause, ask the 5 whys and figure out how you eliminate it so the problem doesn't come up the next time." I think both of those are cultural shifts happening inside the company.

但我們現在正在努力做的事情是，在 Martina 和 Kristen 的帶領下，我們退後一步說，“等一下，找到根本原因。為什麼問題首先會發生？不要僅僅因為解決問題而慶祝一個客戶，找到根本原因，問 5 個為什麼，並找出如何消除它，這樣問題就不會在下一次出現。”我認為這兩者都是公司內部發生的文化轉變。

Our next question today comes from Ken Newman from KeyBanc Capital Markets.

我們今天的下一個問題來自 KeyBanc Capital Markets 的 Ken Newman。

So a lot of my questions have already been asked on the call so far. But maybe I'll start with you talked about, Kristen, the capital allocation priorities, obviously for organic growth as well as it looks like M&A. I know you guys have been pretty active on some tuck-in acquisitions, obviously, but with all the uncertainty in the banking sector, I'm just curious if you could talk a little bit about how difficult it is to maybe drive more M&A going forward?

到目前為止，我的很多問題已經在電話中被問到了。但也許我會從你談到的開始，克里斯汀，資本配置優先事項，顯然是為了有機增長以及看起來像併購。顯然，我知道你們在一些內部收購方面非常活躍，但是鑑於銀行業的所有不確定性，我只是想知道您是否可以談談推動更多併購的難度向前？

Ken, I'm happy to take this one. Look, I think Kristen did a nice job of laying out our priorities. Well, certainly, there's -- yes, there's uncertainty in the macro and the banking, et cetera, but we feel really good about our balance sheet. It's strong now. We know that if things were to erode in the macro, the balance sheet only gets stronger. Our cash generation picks up. So we feel like we can really be on our toes here.

肯，我很高興接受這個。聽著，我認為 Kristen 很好地安排了我們的優先事項。嗯，當然，有——是的，宏觀和銀行業等方面存在不確定性，但我們對我們的資產負債表感覺非常好。現在很強了我們知道，如果宏觀經濟受到侵蝕，資產負債表只會變得更強大。我們的現金產生量增加了。所以我們覺得我們真的可以在這裡保持警惕。

Now that said, I think we're going to stay very disciplined. So when it comes to M&A, I don't think you're going to see us -- I never say never, but the bar would be really high to stray from the tuck-in approach we've been taking. So I don't think you're going to see us do anything really big. And I don't think you're going to see us do anything outside of the core areas that we've already been highlighted.

話雖如此，我認為我們將保持紀律嚴明。因此，在併購方面，我認為你不會看到我們——我從不說永遠不會，但要偏離我們一直採取的收緊方式，門檻真的很高。所以我認為你不會看到我們做任何真正大的事情。而且我認為您不會看到我們在已經強調的核心領域之外做任何事情。

But we do feel like the execution engine we have rolling now on these tuck-in acquisitions is greatly improved. Our confidence is growing. So it's absolutely one of the priorities with respect to capital allocation. So we will stay, I would say, on our toes. But we're going to also remain very disciplined with the 3 filters that we talk about, which is strategy, financial and culture.

但我們確實覺得我們現在在這些收購中所使用的執行引擎得到了極大的改進。我們的信心在增長。因此，這絕對是資本配置的優先事項之一。所以我會說，我們會保持警惕。但我們也將對我們談論的 3 個過濾器保持嚴格的紀律，即戰略、財務和文化。

Got it. And then for my follow-up, I think there's been a lot of good color on the demand outlook, and I appreciate all the comments on both the customer mix and the modeling comments as well. I guess just given some of the uncertainty that we've talked about in the prepared remarks, could we talk a little bit about what visibility you have in demands relative to the end markets that your customers are serving? Where are you seeing pockets of strength or maybe some incremental weakness relative to your expectations?

知道了。然後對於我的後續行動，我認為需求前景有很多好的色彩，我感謝所有關於客戶組合和建模評論的評論。我想只是考慮到我們在準備好的評論中談到的一些不確定性，我們能否談談您對客戶所服務的終端市場的需求的可見性？相對於您的預期，您在哪裡看到了一些優勢或一些漸進的弱點？

Yes. Sure, Ken. Look, overall, I think the tone that we want to underscore here is stable. That's probably -- yes, there's more caution. Yes, the sentiment indices are eroding. But on the ground, we're constructive on the environment right now.

是的。當然，肯。看，總的來說，我認為我們想在這裡強調的基調是穩定的。這可能是 - 是的，有更多的謹慎。是的，情緒指數正在下降。但在實地，我們現在對環境具有建設性。

So in general, our customers are busy. There is certainly -- look, there's more caution now than there was 2 quarters ago, no question, and that was -- was it exacerbated by the banking situation? Sure, but activity levels, backlogs, order flows are generally good.

所以總的來說，我們的客戶很忙。當然 - 看，現在比兩個季度前更加謹慎，毫無疑問，那是 - 銀行業的情況是否加劇了這種情況？當然可以，但活動水平、積壓訂單、訂單流通常都很好。

The pockets where we have seen softening, I would say, Ken, would be, I mean, number one, still consumer-facing industries. The other one that would be new would be heavy equipment. We did see sort of a sequential, I would say, more negative tone there.

肯，我想說的是，我們已經看到疲軟的口袋將是頭號的，仍然是面向消費者的行業。另一個新的是重型設備。我們確實看到了一種連續的，我想說，那裡有更多的負面基調。

On the flip side, though, there's areas like aerospace, like medical, where things feel good, really good. So while there's pockets of softness, I would say on the flip side, there's just as many pockets of real strength. And overall, we characterize it as stable.

但另一方面，在航空航天、醫療等領域，感覺很好，非常好。因此，雖然有一些柔軟的地方，但我想說的是，另一方面，也有很多真正的力量。總的來說，我們認為它是穩定的。

And our final question today comes from Patrick Baumann with JPMorgan.

我們今天的最後一個問題來自摩根大通的 Patrick Baumann。

I just wanted to first wish John the best in whatever he decides to do next. I mean, he's been a trusted, respective voice of the company over time and will definitely be missed. So best of luck, John.

我只是想首先祝愿 John 在接下來的決定中一切順利。我的意思是，隨著時間的推移，他一直是公司值得信賴的代表，我們肯定會想念他。祝你好運，約翰。

Thank you, Pat. Appreciate that.

謝謝你，帕特。感謝。

Yes, of course. Appreciate all your effort over the years. My questions, just the clearly continued good results on the Mission Critical initiatives as per the solution sales growth and the government sales growth, which were highlighted. And I think overall volume growth actually outpaced IP by 200, 300 basis points in the quarter, which was a nice pick up.

是的當然。感謝您多年來的所有努力。我的問題是，根據解決方案銷售增長和政府銷售增長，關鍵任務計劃明顯持續取得良好成果，這些都得到了強調。而且我認為本季度整體銷量增長實際上超過 IP 200、300 個基點，這是一個不錯的回升。

What I wanted to really focus on or ask about is the other 35% of sales that's non-solution to non-government. Just how would you characterize that bucket of sales? What are you seeing there in terms of volume growth? And then what's being done to kind of invigorate that portion of the business?

我真正想關注或詢問的是另外 35% 的銷售額，這些銷售額不是針對非政府部門的解決方案。您如何描述這一桶的銷售額？你在數量增長方面看到了什麼？那麼正在採取什麼措施來振興這部分業務？

Yes, Pat. So great question. So here's what I'd say. First of all, let me start sort of overall, we're feeling -- I'm feeling very encouraged by the trending in the business. And what we look at is what often I imagine you're looking at, which is, okay, when you strip out IP, certainly, the acquisitions are an important part of the growth engine. But when you strip out IP, you strip out acquisitions, how is the base business performing?

是的，帕特。這麼好的問題。所以這就是我要說的。首先，讓我從整體上開始，我們感覺——我對這個行業的趨勢感到非常鼓舞。我們看到的是我想像中你經常看到的東西，好吧，當你剝離知識產權時，當然，收購是增長引擎的重要組成部分。但是當你剝離 IP 和收購時，基礎業務的表現如何？

And in particular, how is the base business performing ex-price because we have certainly been in an elevated pricing environment. And what we've highlighted this morning and what's exciting to me is if you think about what MSC has become over the past few years, this entire repositioning effort. We've really pivoted the business.

特別是，基礎業務的價格表現如何，因為我們肯定處於定價較高的環境中。我們今天早上強調的，讓我興奮的是，如果你想一想 MSC 在過去幾年中的發展，以及整個重新定位的努力。我們確實改變了業務。

And if you look at the areas that they are the shining stars right now, they are the areas that we have pivoted to: the high touch, the solutions, areas like public sector, where we feel like there's a moat around the business. So the stuff that's going above company average are the portions of the business where we're technical, we're high touch, and we feel like the moat is the deepest. That has me really excited.

如果你看看他們現在是閃亮明星的領域，它們就是我們已經轉向的領域：高接觸、解決方案、公共部門等領域，我們覺得這些領域的業務有護城河。因此，高於公司平均水平的是我們技術含量高、觸覺高的業務部分，我們覺得護城河是最深的。這讓我非常興奮。

The flip side is, obviously, if there's portions that are growing higher than company average, there's other portions that have to be growing under company average. And I think that's what you're nipping at.

另一方面，顯然，如果有些部分的增長高於公司平均水平，那麼其他部分的增長必須低於公司平均水平。我認為這就是你所強調的。

And what I would say there, Pat, is the areas that are growing under company average are more of the legacy business. And by legacy business, I would mean small customers, pure spot buy commodity transactions, that would be the stuff that it's growing, but it's growing less than company average. So to me, that's encouraging, and it actually paints even more of a runway.

帕特，我要說的是，增長低於公司平均水平的領域更多是傳統業務。對於傳統業務，我的意思是小客戶，純現貨購買商品交易，這將是它正在增長的東西，但它的增長低於公司平均水平。所以對我來說，這是令人鼓舞的，它實際上描繪了更多的跑道。

And I think what Kristen and Martina and team are digging into right now is 2 levers that we see because ultimately, we're not satisfied with the growth where it's at. We want to see it get even better.

我認為 Kristen 和 Martina 以及團隊現在正在研究的是我們看到的兩個槓桿，因為最終，我們對目前的增長並不滿意。我們希望看到它變得更好。

And there's 2 levers. Number one is how do we scale the new stuff, the part of the strategy even faster, in-plants, vending, the high touch, what we're doing in public sector. Like we're gaining momentum, and we think we can scale it even faster. That's part one.

並且有 2 個槓桿。第一是我們如何擴展新的東西，戰略的一部分更快，在工廠，自動售貨機，高接觸，我們在公共部門所做的事情。就像我們正在獲得動力一樣，我們認為我們可以更快地擴展它。那是第一部分。

Part two is how do we get the things that are growing below company average, how do we get that legacy business up to -- at least to company average? And what has me encouraged there, Pat, is this is stuff like this is the legacy, the bread and butter of MSC. So I think it's absolutely doable.

第二部分是我們如何讓那些增長低於公司平均水平的東西，我們如何讓那些遺留業務達到 - 至少達到公司平均水平？帕特，我在那裡受到鼓勵的是，這是 MSC 的遺產、麵包和黃油。所以我認為這是絕對可行的。

And we've sprinkled through the comments, we -- a bunch of things that we have going right now to do so. So number one, we hit on e-commerce enhancements, and that will be a never-ending journey. But I'm really excited by the energy and the talent that John has brought to our e-commerce.

我們已經散佈了評論，我們 - 一堆我們現在要做的事情。因此，第一，我們實現了電子商務增強功能，這將是一個永無止境的旅程。但我對約翰為我們的電子商務帶來的活力和才華感到非常興奮。

So if you look at our e-commerce numbers and obviously, e-commerce has application across the board, all customer sizes, but certainly for smaller customers, the enhancements we're putting in place, we're already doing pretty well in e-com. We think we can be doing better. And so you're going to see those enhancements improve things in the coming quarters.

因此，如果您查看我們的電子商務數據，很明顯，電子商務在各個方面都有應用，所有客戶規模，但當然對於較小的客戶，我們正在實施的增強措施，我們已經在電子商務方面做得很好-com。我們認為我們可以做得更好。因此，您將在接下來的幾個季度看到這些增強功能有所改善。

Number two, the category line reviews. We talked about optimizing the portfolio of both in terms of products and suppliers. In some cases, that will mean new product additions. In other cases, it's going to mean streamlining the offering. And that is not only about cost position, it's about creating a really great shopping experience for the customer. So that's the second thing.

第二，品類線評論。我們討論了在產品和供應商方面優化產品組合。在某些情況下，這將意味著添加新產品。在其他情況下，這將意味著簡化產品。這不僅與成本定位有關，還與為客戶創造真正出色的購物體驗有關。這是第二件事。

The third one that we didn't highlight but that's there, and it's probably worth mentioning, is we have a bunch of marketing activities. So there's been sort of a regeneration of energy around marketing programs geared towards smaller customers.

第三個我們沒有強調但就在那裡，可能值得一提的是，我們有很多營銷活動。因此，圍繞面向較小客戶的營銷計劃，出現了某種形式的能量再生。

And what we're trying to tap into right now, Pat, is how we bring our value -- this high-touch technical value proposition that is so -- working so well with larger customers, how do we bring it in a cost-effective way to smaller customers. And that's where our marketing team is focused right now.

帕特，我們現在正試圖利用的是我們如何帶來我們的價值——這種高接觸技術價值主張——與更大的客戶合作得如此好，我們如何以成本來帶來它——小客戶的有效途徑。這就是我們的營銷團隊目前關注的重點。

So those are the examples of things that our goal is to reenergize. So you think about the progress we're making at the top right now with where we focused, if we can bring the water level up on the rest, it really gets exciting.

所以這些就是我們的目標是重新激發活力的例子。所以你想想我們現在在我們關注的地方取得的進展，如果我們能把水位提高到其他地方，那真的很令人興奮。

That's helpful color. Do you feel like is price a barrier at all to growth in that part of the business? Or do you feel like you're kind of in the ballpark on price for that portion of sales?

這是有用的顏色。您是否覺得價格是這部分業務增長的障礙？或者你覺得你在這部分銷售額的價格上有點接近？

So I would say this, Pat, look, I think there's always a trade-off to be made between price and volumes, and that's a conscious choice that we've made. And we have this repositioning to a Mission Critical partner.

所以我會這樣說，帕特，看，我認為價格和數量之間總是需要權衡，這是我們做出的有意識的選擇。我們將此重新定位為關鍵任務合作夥伴。

We've made a choice to pivot to a high-priced, high-value add positioning, right? So with the value we're bringing, it's going to be hard to do that and be the low-price -- low-cost, low-price player. That's not the goal.

我們已經做出了轉向高價、高附加值定位的選擇，對嗎？因此，憑藉我們帶來的價值，很難做到這一點並成為低價——低成本、低價的玩家。那不是目標。

I would say if you look at the vast majority of where our revenues are, anywhere we're touching a customer with a person, with a solution, we're competitively priced. I think what you're getting at and what is real is there are cases where we're not touching -- it's a brand-new customer or the customer is so small that we're not touching them with a person. There's going to be cases where we're higher priced than other channels. No doubt about it.

我會說，如果你看看我們收入的絕大部分，我們在任何地方與人接觸客戶，通過解決方案，我們的價格具有競爭力。我認為你的意思和真實情況是，在某些情況下我們沒有接觸——這是一個全新的客戶，或者客戶太小以至於我們沒有接觸他們。在某些情況下，我們的價格會高於其他渠道。毫無疑問。

And so yes, I think there will be some work there. I think we can take a very surgical approach to that. It's not across the board. It's not across all SKUs, all customers. So it will be surgical. But certainly, as part of the marketing efforts, we'll take a look at it.

所以是的，我認為那裡會有一些工作。我認為我們可以採取非常外科的方法來解決這個問題。這不是全面的。它並不適用於所有 SKU、所有客戶。所以這將是手術。但當然，作為營銷工作的一部分，我們會看看它。

Makes sense. And then on the cash dynamics, in the quarter, Kristen, you can help on this. So how much of the -- that free cash flow in the quarter was related to this facility? I guess, I just didn't quite understand mechanics around that. Remind me what exactly that facility is. I guess it's off balance sheet, right? And how does the cost flow through in terms of the P&L?

說得通。然後關於現金動態，在本季度，克里斯汀，你可以在這方面提供幫助。那麼，本季度的自由現金流有多少與該設施有關？我想，我只是不太了解這方面的機制。提醒我那個設施到底是什麼。我想這是資產負債表外的，對吧？成本如何根據損益表流轉？

That's correct, Pat. Yes. So the easy math that you're trying to adjust the cash flow is just that you benefited cash by $300 million from the securitization.

沒錯，帕特。是的。因此，您嘗試調整現金流量的簡單數學就是您從證券化中獲得了 3 億美元的現金收益。

I think you asked the second question about the P&L benefit or the P&L impact. So 2 things I'd point out real quick at the buzzer. You're going to see interest costs decline because of the securitization. You're going to see other costs increase. And then post the first year, the ongoing annualized benefit of that is about $800,000 to the P&L.

我想你問了第二個關於損益收益或損益影響的問題。所以我會在蜂鳴器上快速指出兩件事。由於證券化，你會看到利息成本下降。你會看到其他成本增加。然後在第一年之後，持續的年化收益約為損益 800,000 美元。

Okay. We could follow up on that off-line. And then I had to ask one last. I know that's at the buzzer. Any sense on timing of next steps with regard to the proposed share class consolidation, like what are the mileposts to watch there?

好的。我們可以在線下跟進。然後我不得不最後問一個。我知道那是蜂鳴器。關於擬議的股份類別合併的後續步驟的時間安排有什麼意義，比如那裡有哪些里程碑值得關注？

Yes. I'm sorry, Pat, I can't really comment on that. As soon as we have news to share, we obviously will, but no other information at this time.

是的。對不起，帕特，我真的不能對此發表評論。一旦我們有消息要分享，我們顯然會分享，但目前沒有其他信息。

And ladies and gentlemen, this concludes our question-and-answer session. I'd like to turn the conference back over to John Chironna for any closing remarks.

女士們，先生們，我們的問答環節到此結束。我想將會議轉回給 John Chironna，聽取任何閉幕詞。

Thank you, Rocco. Before we end the call, I'd like to thank Erik, Kristen and the entire MSC team for giving me the opportunity to continue doing what I truly love. I'd also like to thank our analysts and investors for the wonderful relationships we've forged over the last few decades. It's those relationships that have made coming to work each day a true joy.

謝謝你，羅科。在我們結束通話之前，我要感謝 Erik、Kristen 和整個 MSC 團隊給我機會繼續做我真正熱愛的事情。我還要感謝我們的分析師和投資者在過去幾十年中建立的良好關係。正是這些關係讓每天上班成為真正的快樂。

A reminder that our fiscal '23 third quarter earnings date is set for June 29. And we look forward to seeing you in person at investor conferences or on the road in the coming months. Thanks again for joining us today.

提醒一下，我們的 23 財年第三季度收益日期定在 6 月 29 日。我們期待在未來幾個月的投資者會議上或在路上見到您。再次感謝您今天加入我們。

Thank you, sir. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.

謝謝你，先生。今天的電話會議到此結束。感謝大家出席今天的演講。您現在可以斷開線路，度過美好的一天。