GLOBAL INDUSTRIAL Co Q1 FY2026 Earnings Call

Good afternoon, ladies and gentlemen, and welcome to the Global Industrial's First Quarter 2026 Earnings Call. At this time, I would like to turn the call over to Mr. Mike Smargiassi of the Plunket Group. Please go ahead, sir.

Thank you, and welcome to the Global Industrial first quarter 2026 earnings call. Today's call will include formal remarks from Anesa Chaibi, Chief Executive Officer; and Tex Clark, Senior Vice President and Chief Financial Officer. Formal remarks will be followed by a question-and-answer session. Today's discussion may include certain forward-looking statements. It should be understood that actual results could differ materially from those projected due to a number of factors, including those described under the forward-looking statements caption and under Risk Factors in the company's annual report on Form 10-K and quarterly reports on Form 10-Q. The earnings release is available on the company's website and has been filed with the SEC on a Form 8-K. This call is the property of Global Industrial Company. I will now turn the call over to Anesa.

Thank you, Mike. Good afternoon, everyone, and thank you for joining us. I was very pleased with our first quarter performance. We delivered a strong start to 2026 as we benefited from solid execution and continued momentum across the business. First quarter revenue improved 9.2% with an average daily sales growth of 7.6% and operating income improving 13.2%. We generated growth each month during the period and have seen this top line momentum carry into the second quarter. Our results benefited from price and volume with gains across both assigned accounts and e-commerce channels, while our largest strategic accounts continue to grow at an accelerated pace. Canada once again delivered strong results. Revenue increased 24% in local currency with continued growth across the business. This marks the third consecutive quarter of double-digit top line growth, highlighting the exceptional work of our team in Canada and reinforcing the significant potential we see in that market. From a strategic standpoint, we are making progress and are encouraged by the actions we have taken to refine our value proposition and reposition the business for growth. This includes aligning the business around the customer to better serve their needs and being more intentional and focused in our go-to-market approach. Our sales realignment into customer verticals is progressing well, allowing us to better meet our customers' needs through deeper specialization and tailored experiences. As we have previously shared, this will allow us to improve and drive more targeted engagement and broaden customer relationships. We are also pleased with the rollout of our outside sales initiative, where the team is actively developing a pipeline and uncovering new opportunities. While still in the early stages, the initial response from customers has been positive and we're encouraged by the potential opportunities ahead. We are also continuing to expand our e-procurement and integrated e-commerce capabilities, which are helping us to deepen relationships, improve retention and position us to capture greater share of wallet over time. Our focus on continuously enhancing our digital experience has improved our customer engagement and satisfaction. It has enabled us to highlight our broad solutions offering and has allowed us to build direct sticky relationships with our customers' procurement teams. This is an area where Global Industrial has a strong offering and we have seen significant growth in the number of e-procurement platform customers in the last year. In merchandising, we are advancing our MRO and consumables expansion as we broaden our assortment to better serve customer needs and support incremental revenue opportunities. We remain focused on providing the right solutions and products that help customers solve their problems and keep their operations running. This remains a meaningful opportunity for us and an important component of our long-term growth strategy. Finally, in April, I had the opportunity to join our team at the MODEX trade show, one of the largest manufacturing and supply chain events of the year. We had a very successful show. Our booth generated strong traffic and engagement and we saw solid lead generation across our product categories. The event allowed us to showcase our refined value proposition, the strength of our product offering and our new alignment across our sales, marketing and merchandising teams. I also connected with our supplier partners in discussions that reinforce the value we bring to market and the positive change taking place across the company. Overall, we are encouraged by the progress we are making. The business is performing well. Our strategic initiatives are gaining traction and we are building a solid foundation to drive sustainable profitable growth. Now I will turn the call over to Tex.

Thank you, Anesa. First quarter revenue was $350.4 million with average daily sales growing 7.6%, in line with our fourth quarter performance. U.S. revenue was up 8.1% and Canada revenue improved 24.4% in local currency. We recorded growth throughout the quarter with gains across all sales channels. Performance benefited from price capture and volume improvement. We have now delivered volume improvement for our second consecutive quarter and continue to see strong results from our largest and most strategic customers. As of today, we've seen revenue growth in the mid- to high single digits continue into the second quarter. Gross profit for the quarter was $121.9 million. Gross margin was 34.8%, an improvement of 30 basis points from the fourth quarter. Our year-over-year gross margin was slightly down by 10 basis points, reflecting the impact of incremental fuel surcharges within our outbound transportation in the back half of the quarter as well as product mix, which was impacted by an increase in the number of large orders and projects during the quarter. Management of our margin profile remains a key area of focus. As we move through the current cycle, our goal is to manage to price/cost neutral. As a reminder, the second quarter of 2025 included a record gross margin performance of 37.1%, with approximately 150 basis points attributable to FIFO-related timing benefits. We would also note that the benefits from price appreciation are expected to begin to moderate as we lap pricing actions taken in the second quarter of 2025. We continue to closely monitor the macroeconomic and geopolitical environment, including developments in the Middle East and their impact on transportation and manufacturing costs as well as the evolving tariff landscape and potentially new Section 301 tariffs. Our goal is to mitigate these disruptions to our business and to our customers and we believe we are well positioned to do so as we continue to proactively manage price and other factors within our control. However, we anticipate these headwinds will impact margin performance in the spring and summer as steel prices remain elevated. Selling, general and administrative spending for the quarter was $101.3 million, an improvement of 40 basis points as a percentage of sales as compared to the first quarter last year. The increase in absolute dollars was largely due to planned marketing costs to support sales growth as well as increased compensation and related costs due to strong performance. Operating income from continuing operations was $20.6 million, an increase of 13.2% to the first quarter and operating margin was 5.9%. Operating cash flow from continuing operations was $4.7 million in the quarter. Total depreciation and amortization expense in the quarter was $1.9 million, while capital expenditures were $0.8 million. We continue to expect 2026 capital expenditures in the range of $3 million to $4 million, which primarily reflects maintenance-related investments and equipment within our distribution network. I will now turn to our balance sheet. As continues to be the case, we have a strong and liquid balance sheet. As of March 31, we had $61.7 million in cash, no debt and approximately $120 million of excess availability under our credit facility. In the first quarter, we repurchased approximately 22,000 shares of stock for a total price of $0.6 million. As for our dividend, we continue to fund our quarterly dividend and our Board of Directors declared a quarterly dividend of $0.28 per share of common stock. As a final comment, we will have a shift in our fiscal calendar in the second quarter of this year. The 4th of July holiday will fall in the final week of the second quarter as compared to the first week of the third quarter in 2025. This will generate a modest timing headwind for revenue in June this year. I will now turn it back over to Anesa for closing remarks.

Thank you, Tex. In conclusion, we are very pleased with our start to the year and are encouraged by the momentum we are seeing across the business. We are focused on execution and building on our targeted and intentional sales, marketing and merchandising approach while continuing to advance the changes that we believe will help us evolve the business and drive long-term profitable growth. At the same time, we remain attentive to the broader macro environment and we'll continue to focus on what we can control and on mitigating the risk of the uncontrollables. We are confident in the direction we are heading and look forward to a successful 2026. I'm proud of how our team is executing during these unprecedented times. I would like to thank all of our associates for their hard work and dedication and all of you for your interest in Global Industrial. And now I'll ask the operator to open the call up for questions. Thank you.

We will now begin the question-and-answer session. The first question will come from Michael Francis with William Blair.

I wanted to start on sales in 2Q. Trends sound good so far, but I know the comps start to get tougher, particularly on price as you lap those increases and you also have the 4th of July timing headwind. So how should we think about all of those moving pieces together?

Michael, I'll jump in — go ahead, Anesa.

Go ahead, Tex. Yes.

Apologies. Mike, from a pure numbers perspective, when we think about that timing benefit, as we've highlighted in the last two quarters, we have seen both price and volume contribute into that growth term and that's one area that we continue to expect to see volume increase as we move into the second quarter. We're about four weeks into the second quarter and growth remains consistent with what we reported in the first quarter. That pricing timing is one that doesn't impact us sequentially, but you'll see some of that year-over-year impact be lessened as we lap the price increases we started after the tariff announcements in early April last year. Finally, regarding the June headwind from the holiday timing: moving that holiday one day equals about 1.5% to 2% of the shipping days in a quarterly period. Think about that as a ratable shift where we'll see a little bit of headwind in June, and that will be a pickup in July based on the pure timing of the holiday.

All right. Thanks, Tex. The only thing I would add, Michael, is that we now have proactive pricing in the business. We are watching in real time and reacting dynamically from a margin perspective to be able to read and react and to take the appropriate actions in the marketplace. I'm pretty confident in the team and the capabilities to do that. That's been wired into the business now.

Then on gross margin, you called out the 150 basis point headwind from the nonrepeat of the price cost and you also talked about a few things, namely fuel. Just help us think about how we should think about gross margins in 2Q as well.

Yes, I'll jump right in on the numbers. As we've discussed, with a FIFO inventory company, an initial price increase will cause you to recognize price capture before FIFO costs work through. We're well over a year into these tariff arrangements. The cost of goods is fully burdened with the tariff profile that we have. That's one area of ongoing review. Fuel is another area that's moving up. If you look at national diesel averages, during the second and third weeks of March we began to see them tick up. Our fuel contracts are based on standard language and standard multipliers tied to the national published averages. When those go up, our goal is to internalize and manage the cost for our customers, but we will pass some of that pricing to customers as needed while monitoring margin profile. There are incremental costs to work through and we do expect, in the short term, headwinds to the margin rate.

Good quarter.

The next question will come from Anthony Lebiedzinski with Sidoti & Company.

Nice quarter, certainly. So you've talked for a while a bit about seeing better results in your largest and most strategic accounts. So as we think about your core SMB accounts, can you comment what you're seeing from those accounts? And have you seen that performance gap narrow or widen? Or has it been kind of more or less consistent? Just wondering if you could comment on that.

Thanks, Anthony. Our small and medium business customers are very important to us. We've realigned our organization and how we face the customer, and we've realigned across various verticals so we can better understand, specialize and tailor that experience. We've seen decent growth across the board. The larger accounts stand out by sheer size and scale, but the small accounts are starting to build stronger relationships. I mentioned e-procurement and punch-out sites; we've started to gain momentum across the board. The more tethered we are to those customers, the more we create an annuity stream, and we're starting to see momentum there as well.

Got you. Okay. And then I realize that Canada is far smaller than the core U.S. market, but certainly a very strong performance there. What's driving that? And how sustainable do you think that is?

We have a fantastic team in Canada. We hired a leader right before I started, and he's done a nice job of realigning their go-to-market. Canada is a smaller microcosm of the broader Global Industrial business and the market dynamics there are strong for us to take share. We've made the right investments and enabled the team to be relatively self-sustaining. As they've done that, momentum and growth have built, and I have a lot of confidence in that team. I've called them out a few times in my tenure, which is a little over a year and a few months.

Yes. And then so as you look to further reposition the business, are there any notable new products or product categories that you may want to enter into? I know you talked about MRO, but just overall, maybe help us understand the magnitude of the expanded product selection that we could see at some point, whether it's this year or next year, how do we think about that and kind of the margin profile of some of these newer product categories that you might be looking to get into?

Another great question. The expansion is focused on natural adjacent categories to what we do — primarily MRO and consumables. We're not going far afield beyond our core business. As we mix in those capabilities and take those products to market, we've seen incremental growth where we've driven greater share of wallet and penetration. We're going to customers to explain that we now carry consumables and MRO. From a merchandising perspective, we're focused on having the right product positioning — a good, better, best offering. Some will be our proprietary brands, others national brands, and others a mix of both. We're in early phases, but the realignment we did coming out of last year has positioned us well and we're seeing traction. Late last year we partnered with select vendor partners to get into MRO and consumables, and they continue to partner with us today, providing those products via drop ship. We'll make decisions about whether to sustain that model or invest to bring some items into our warehouses; that's something we're working through now.

Got you. Okay. And just a quick follow-up. As far as your private label product penetration, where is it right now?

Anthony, this is an area we monitor and it's fairly stable. We've actually seen some enhanced growth through our national brands in the first quarter, driven by mix and some large projects where customers specified national brands. So we saw a faster growth rate in the first quarter on the national brand side. We balance private label and national brands because they complement each other well. We'll continue to push to have the right product mix and partner with vendor partners to serve customers the way they want to be served and offer the products they're looking for.

And this will conclude our question-and-answer session as well as our conference call for today. Thank you for attending today's presentation. You may now disconnect.

Thank you.