Global Industrial Company (GIC) Earnings

Management highlights

• Strategic Business Repositioning - The firm is transitioning to a relationship-led B2B model focused on integrating into customer purchasing workflows to improve customer retention, increase share of wallet, and drive stronger financial performance - Sales organization is structured with combined inside, field-based, national account, vertical expertise, and digital resources to align support with customer opportunity size - Sales, marketing, and merchandising teams are increasingly aligned around customer verticals to build 360-degree customer expertise and deliver more complete solutions, driving larger orders and stronger performance from strategic customers • Key Initiative Progress - GPO business has reached meaningful scale, providing access to new customers across public sector, healthcare, hospitality, and manufacturing verticals, with a natural pathway to integrated e-procurement relationships - E-procurement expansion: the firm added more than 50 new purchasing connections in H1 2026, bringing total digital connections to over 1,300 customers - Digital adoption: overall digital business represents over 60% of total transaction volume, supporting B2B customers' preferred multi-channel purchasing approach - Canadian business expansion: delivered over 30% local currency revenue growth in Q2, with sustained long-term growth potential • Technology Adoption - The firm is deploying data, automation, and artificial intelligence across the organization, with an initial focus on improving sales productivity, customer engagement, marketing insights, and decision-making speed and quality - Technology investments are disciplined, prioritizing solutions that improve customer experience and empower associates to deliver measurable returns • Financial Operational Highlights - Pricing contributed approximately 4 percentage points of Q2 revenue growth, with the remaining growth coming from volume and product mix, marking the third consecutive quarter of volume improvement - Average order value increased approximately 10%, driven primarily by a higher mix of larger orders, reflecting deeper strategic customer relationships and increased participation in large projects and GPOs - The firm received one-time IEPA tariff refunds in Q2: $21 million was recognized as a cost of sales reduction, $4 million reduced inventory carrying value, and $1 million was recorded as interest income; this one-time benefit is excluded from non-GAAP financial results - Non-GAAP gross profit was $134.3 million, with a gross margin of 34.7% (in line with historical performance, after adjusting for the one-time tariff refund and 2025 Q2 FIFO timing benefits from prior tariff-related price increases) - Selling general and administrative (SG&A) spending was $106.1 million, representing a 30 basis point improvement as a percentage of sales year-over-year; excluding variable performance-based compensation, SG&A achieved 70 basis points of leverage - Non-GAAP operating income from continuing operations was $28.2 million, with an operating margin of 7.3% - Operating cash flow from continuing operations was $41.3 million; the firm ended Q2 with $86.7 million in cash, no debt, and over $119 million in excess availability under its credit facility - The firm repurchased 160,000 shares for $4.7 million in Q2, and the board declared a quarterly dividend of $0.28 per common share

Guidance

- Revenue momentum from Q2, with high single-digit average daily sales growth, has continued at a similar rate into the third quarter of 2026 - 2026 full-year capital expenditures are expected to remain in the range of $3 million to $4 million, primarily for maintenance and distribution network equipment investments - The 2026 full-year effective tax rate is expected to be between 26% and 26.5% - Future IEPA tariff refunds are expected to be immaterial - Adjusted gross margins are projected to remain around the current 34.7% level for the remainder of 2026, consistent with the past two quarters - Management expects to continue advancing its strategic go-to-market transformation and scale its capabilities through the remainder of 2026, with the goal of establishing a stable operating cadence heading into 2027 to support continued market share gains

Segment performance

Total Q2 2026 revenue was $386.6 million, with 7.7% year-over-year growth and 9.3% year-over-year growth on an average daily basis. U.S. revenue grew 6.3% year-over-year, while Canada revenue grew 33.7% in local currency, marking the fourth consecutive quarter of double-digit growth for the Canadian segment after surpassing $100 million in annual local currency revenue in 2025. Digital business currently accounts for more than 60% of total transaction volume. GPO (Group Purchasing Organization) annualized sales are on pace to hit $100 million in 2026. Accounts managed by sales representatives grew in the low double digits, led by the firm's largest strategic accounts. The retail wholesale vertical led growth, while core industrial customers approached double-digit gains.

Risks & headwinds

- Macroeconomic volatility, including geopolitical uncertainty, volatile fuel costs, and elevated transportation expenses, creates variability in quarterly gross margin performance; portions of transportation cost inflation are absorbed by the firm when not fully passed through to customers - Shifts in product, order, and customer mix can impact gross margin, even as larger higher-volume orders add profitable growth to the overall business - Trade policy changes can create unexpected margin impacts and timing shifts - The firm's B2B go-to-market transformation is still in early stages, requiring organizational alignment and change management that takes time to fully implement and scale

Analyst Q&A

• Q: The analyst asked what core factors drove the sequential gross margin decline after excluding one-time tariff impacts, beyond the already noted higher transportation costs. /

  A: Management confirmed the largest driver was sustained transportation network inflation, including increased fuel surcharges for less-than-truckload and parcel shipping; portions of these cost increases were absorbed by the firm rather than fully passed to customers, pressuring margins. A secondary factor was order mix: an increase in larger orders, while profitable and accretive to overall business growth, carried a slightly lower margin profile that pulled down the overall quarterly gross margin. Management added these headwinds are expected to continue into Q3, and the firm will continue mitigating impacts where possible.

• Q: The analyst asked which of the firm's multiple ongoing strategic initiatives are currently driving the strongest results, and which will be most important for future growth. /

  A: Management stated the aligned shift to a vertical-focused, relationship-led go-to-market strategy, paired with expanded outside sales resources to deepen customer engagement, is the core driver of current sustained growth. Expanded product assortment, including the addition of more national brands alongside the firm's existing offerings, has also supported growth. The strategy is still in early innings, and management will continue focused on steady execution, organizational alignment, and disciplined reinvestment to scale the model going forward.

• Q: The analyst asked what is driving the firm's current strong cash balance beyond one-time tariff refunds, and what capital allocation plans management is considering, including M&A, buybacks, dividends, or special distributions. /

  A: Management explained the strong cash position also reflects strong cash conversion from consistent sales growth and solid customer receivables collections. The firm's current capital allocation strategy prioritizes internal business investment, ongoing regular share repurchases, and the continuation of the regular quarterly dividend. Management added it is actively building an M&A pipeline to evaluate opportunities that can accelerate the firm's go-to-market transformation and expansion.

• Q: The analyst asked for an update on performance of the firm's traditional SMB customer segment, alongside its noted growth in large strategic accounts. /

  A: Management confirmed the quarter delivered broad-based growth across all customer segments, including solid growth from SMB customers, with increases in e-commerce sales and new account generation across the SMB portfolio. SMB customers remain a core important target for Global Industrial, and the firm's ongoing customer-centric transformation is designed to improve service for SMBs as well as large accounts, with the firm simply prioritizing investment in higher-opportunity large strategic accounts that are delivering stronger near-term growth.