GLOBAL INDUSTRIAL Co Q3 FY2024 earnings call

• Revenue was down each month during the quarter but up 3.4% year-over-year, with cautious customer purchasing behavior and weak demand in core SMB customer base. - Strategic account business performed well. - Gross margin improved year-over-year but declined sequentially due to ocean freight costs. - Invested in key growth initiatives like customer experience, web, and new CRM platform. - Started phased rollout of Salesforce CRM and expects to go live soon. - Held Annual Global Industrial National Trade Show in August. - Welcomed Lisa Armstrong as CMO in August to enhance go-to-market strategy.

Third quarter revenue was $342.4 million, down 3.4% compared to the year-ago period. U.S. revenue was down 3.4% and Canada revenue was down 2.9% in local currency. The enterprise business continued to perform well with solid growth. Gross profit for the quarter was $116.3 million, flat from last year. Gross margin was 34% in the quarter, up 120 basis points year-over-year but declined sequentially due to increased cost of sales, primarily from ocean freight headwinds. Revenue contribution: The overall revenue was $342.4 million, with U.S. and Canada contributing the respective local currency amounts reflecting the softness.

• Revenue is pacing down mid-single digits in the fourth quarter. - SD&A spending is expected to remain elevated in Q4, leading to negative leverage due to soft top-line results. - 2024 capital expenditures are expected in the range of $3 million to $5 million, primarily for maintenance-related investments and equipment in the distribution network. - Board declared a quarterly dividend of $0.25 per share of common stock.

• Macro environment remains challenged affecting results. - Elevated ocean freight costs impacted gross margin sequentially. - CPC inflation affected marketing spending and SD&A levels.

Q: In terms of the weakness in the core SMB customer segment, just what are you generally seeing in terms of average order value and average order frequency? Are you seeing the declines on both? Or is one outweighing the other?

A: Sure, order frequency as well as average order value (AOV) are down slightly. We're seeing some less large projects coming through as customers hold back on larger opportunities, and there's greater softness in transactional-type customers on web sales and unassigned account business.

Q: In terms of the comment about better communicating your value proposition, are you looking to do more advertising? And if so, I mean, how should we think about the financial impact of that?

A: This is Richard. We've improved our website to highlight product benefits versus competition. For advertising, we've reallocated marketing to target customers likely to deliver better retention and used data to navigate higher CPCs, reallocating to drive higher customer retention and long-term customers.

Q: As far as the growth initiatives that you referenced, which ones do you think will be the most impactful near term? And which of the initiatives will take longer term to play out?

A: Sure. Implementing Salesforce and Salesforce marketing is an initiative. That initiative is probably going to take us through the middle of next year to get Salesforce marketing up and running. Once Salesforce and Salesforce marketing are up, it will benefit sales reps with state-of-the-art tools, driving significant impact.