Good morning and welcome to the MSC Industrial Supply Fiscal 2022 First Quarter Earnings Conference Call. All participants will be in a listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note, today's event is being recorded. I’d now like to turn the conference over to John Chironna, Vice President of Investor Relations and Treasurer. Please go ahead, sir.

Thank you, Rocco and good morning to everyone. Erik Gershwind, our Chief Executive Officer; and Kristen Actis-Grande, our Chief Financial Officer are both on the call with me. 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 webpage. Let me reference our Safe Harbor statement under the Private Securities Litigation Reform Act of 1995, a summary of which is on slide two 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, including statements about the impact of COVID-19 on our business operations, results of operations and financial condition, expected future results, expected benefits from our investment and strategic plans and other initiatives, and expected future growth and profitability. 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 the risk factors in MD&A sections of our latest annual report on Form 10-K filed with the SEC, as well as in other SEC filings. These risk factors include our comments on the potential impact of COVID-19. These forward-looking statements are based on our current expectations and the company assumes no obligation to update these statements, except as required by applicable law. Investors are cautioned not to place undue reliance on these forward-looking statements. 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 on our website, which contain the reconciliations of the adjusted financial measures to the most directly comparable GAAP measures. I will now turn the call over to Erik.

Thank you, John. Good morning, everybody. I hope you all continue to remain safe and healthy as we enter this holiday season. We're now one quarter through our fiscal 2022 and progress on our Mission Critical journey continues. I remain encouraged by the improving execution that I see throughout the company, as we are gaining traction with each passing month. And while we are improving, we can still do better. Regarding our Mission Critical program, you'll recall that we outlined two multi-year goals at the start of our fiscal 2021. The first was to accelerate market share gains. Our stated target was to reach at least 400 basis points of growth above the IP index by the end of our fiscal 2023. The second goal was to restore returns on invested capital (ROIC) into the high teens also by the end of fiscal 2023. We would achieve the second goal by leveraging our growth, executing on gross margin initiatives, and delivering structural cost takeout of $90 million to $100 million, helping to reduce OpEx as a percentage of sales by at least 200 basis points over that time. Our fiscal first quarter demonstrated continued progress against our long-term goals. First, we sustained the recent improvement in our market share capture rate. Our 9.9% growth was once again nearly 500 basis points above the IP index. It was fueled by increasing momentum in our in-plant initiative, e-commerce investments, and our vending program. I'm equally pleased by what I see as a growing pipeline of customer wins from our new business development and government teams. Second, we generated strong operating expense leverage and reduced adjusted OpEx to sales by 70 basis points despite a headwind from COVID costs add backs. This was fueled not only by leveraging growth, but also by continued execution of our Mission Critical productivity pipeline. We delivered $10 million in savings for the quarter and remain on track for $25 million in expected savings for fiscal 2022. We're also working aggressively to increase our fiscal 2023 and beyond project pipeline. As a result, we remain on track to reach our recently increased goal of at least $100 million in total cost savings by the end of fiscal 2023. First quarter gross margins, however, came in below our expectations. While we saw continued price realization and price costs remained slightly positive, it was not enough to overcome our typical mix headwind in the quarter. We're not pleased with this outcome, and we're addressing it aggressively with countermeasures. Our first countermeasure is that we're planning for a sizable price increase early in calendar 2022 to respond to the increasing pace of inflation that we continue to see from our suppliers. Secondly, we've launched an initiative to improve price realization across our sales, category, and marketing teams in the coming months. To be clear, this effort is not just about price; it's about winning customers and doing so while capturing the value that we deliver for our customers each and every day. We're encouraged by early results, which include an improving price realization trend late in our fiscal first quarter that has sustained into December. As a result, we expect to achieve our goal of keeping gross margins roughly flat for the fiscal year, beginning with a bounce back in Q2. Turning to the external landscape, things are dynamic and fluid. On the one hand, demand remains strong. This is evidenced in IP readings, which -- while not as high as they were several months ago -- remain at mid-single digit growth levels. It's also evidenced in strong readings for sentiment surveys, such as the MBI. These demand conditions are also reflected in customer feedback where activity levels and incoming order flows are solid. Strength was seen across most segments of the industrial economy, with automotive being the largest exception. On the other hand, supply chain and labor constraints remain tight, creating ongoing challenges with scarcity of supply, inflation, and continuity of operations. We're hearing that supply and shipping constraints may ease in the coming quarters. Although we've not seen much evidence of this ourselves to date. Labor shortages remain severe. In fact, hiring and staffing, even in our own operations, is a challenge. And while these extreme conditions do create some challenges for MSC, they nonetheless provide a backdrop for significant market share capture from the 70% of the distribution market made up of local and regional distributors. MSC has brought in deep inventory, our good, better, best brand assortment, and our logistics and transportation capabilities have us well-positioned to service customers and key plants running across North America at a time when many cannot. On the inflation front, it is as extreme as I can remember. Cost increases are coming fast and furious, setting up for a robust pricing environment. Customers remain very receptive to price increases as they understand the current environment. At the same time, many of our customers are starving for productivity and other cost savings to offset inflation. This also plays well into MSC's strengths, as we're able to bring our technical expertise, our inventory management solutions, and other services to find productivity for our customers, which are fueling recent wins. While it's still early days with the presence of the Omicron variant and a related rise in COVID case counts, so far customers and suppliers are working through it. There is a different tone from the early stages of the pandemic in 2020. While we're seeing increases in the number of COVID cases in our own facilities, those who are infected are returning to work more quickly. Between the vaccine, more proactive testing, and PPE requirements, we've not experienced challenges to the degree that we did in 2020 during the earlier stages of the pandemic. Based upon what we're seeing now, we expect most portions of the industrial economy to power through this surge without massive shutdowns or material disruptions to operations. I'll now turn things over to Kristen, who will take you through the details of our performance, our financials for the quarter, and then our outlook.

Thank you, Erik. I'll begin on slide four of our presentation, where you can see key metrics for the fiscal first quarter on a reported basis. Slide five reflects the adjusted results, which will be my primary focus this morning. As Erik mentioned, our first quarter sales were up 9.9% versus the same quarter last year and came in at $849 million. Our non-safety and non-janitorial product lines grew 15%. Sales of safety and janitorial products declined roughly 12%. As we mentioned last quarter, we expect the tough safety and janitorial comparisons to continue for the first half before beginning to ease in our fiscal third quarter. Looking at our sales by customer type, government sales declined roughly 28% due to the difficult janitorial and safety comps. Both national accounts and core customers maintained their mid-teens growth rates. We're seeing strong execution in growth initiatives with vending, in-plant, and MSCdirect.com each growing more than 100 basis points as a percentage of total company sales versus the prior year. Gross margin for fiscal Q1 was 41.6%, down 40 basis points from our fourth quarter of fiscal 2021 and 30 basis points from last year's fiscal Q1. As Erik mentioned, in addition to a significant price increase in early calendar 2022, we are taking countermeasures to offset increasing inflation. For example, we've instilled more rigor around price execution and discount management. We are renegotiating contract pricing mid-cycle and not waiting for renewals. We've shortened the duration that quotes remain valid and we are using data-driven algorithms to find customers alternative products. As a result of all this, we expect gross margins to bounce back beginning in our second quarter and expect to hold the annual gross margin roughly flat with fiscal 2021. Operating expenses in the first quarter were $256.6 million or 30.2% of sales versus $238.7 million or 30.9% of sales in the prior year. This represents a 70 basis point reduction in OpEx to sales. It’s worth noting that our fiscal quarter operating expenses include just over $5 million of expense add-back from prior year COVID cost containment measures, as well as $2.5 million of vaccine incentive costs in the current year. We incurred approximately $5.3 million of restructuring and other related charges in the quarter compared to $4.3 million in the prior year quarter. This year's charges related to further optimization of headcount to align with our strategy. Our operating margin was 10.7% compared to 7% in the same period last year. Excluding the restructuring and other related costs and the impairment charge from the prior year, our adjusted operating margin was 11.3% versus an adjusted 11% in the prior year. Earnings per share were $1.18 as compared to $0.69 in the same prior year period. Adjusted for the restructuring and other charges as well as the prior year's impairment charge, adjusted earnings per share were $1.25 as compared to adjusted earnings per share of $1.11 in the prior year period, an increase of 12.6%. Approximately $0.02 was attributable to the benefit on the provision for income taxes associated with increased stock option exercise activity during the quarter. As can be seen in our insider transaction filings, this was in large part due to Erik exercising and holding options during the quarter, which increased his total shareholding. Turning to the balance sheet and moving ahead to slide seven. Our free cash flow was $43 million in the first quarter as compared to $95 million in the prior year. The largest contributors to the decline were the use of working capital to support our sales lift. As of the end of the fiscal first quarter, we were carrying $623 million of inventory, just about flat with last quarter. We're actively managing inventory levels to support our customers as sales continue accelerating and in light of ongoing supply chain disruptions. Our capital expenditures were $15 million in the first quarter and our first quarter cash flow conversion, or operating cash flow divided by net income, was 87%. We expect our operating cash flow conversion for fiscal 2022 to come in around 100%. Our total debt at the end of the fiscal first quarter was $753 million, reflecting a $23 million decrease from our fourth quarter. As for the composition of our debt, $209 million was on our revolving credit facility, about $203 million was under our uncommitted facilities, and approximately $350 million was long-term fixed-rate borrowing. Cash and cash equivalents were $63 million, resulting in net debt of $700 million at the end of the quarter, down from $746 million at the end of the fourth quarter. Let me now provide an update on our Mission Critical productivity goals. You may recall that last quarter we increased our cost savings goal through fiscal 2023 to a minimum of $100 million versus fiscal 2019. As you can see on slide eight, our cumulative savings through fiscal 2021 were $60 million, and we also invested roughly $22 million over that same period. For fiscal 2022, we expect additional gross savings of $25 million and additional investments of $15 million. We've made excellent progress towards this goal, as we have achieved $10 million of gross savings in the first quarter and invested $7 million. We remain on target to hit at least $100 million of cost savings by fiscal 2023. Before I turn it back to Erik, let me share a few comments on our fiscal second quarter and beyond. We expect our strong sales growth to continue. For Q2, please keep in mind that our fiscal December has two more selling days than last year due to the timing of the Christmas and New Year’s holidays. These two days come with very low sales, so they will likely suppress ADS growth by 300 to 400 basis points. Overall, we expect total growth to remain strong. As I stated earlier, we expect gross margins to rebound nicely. Operating expenses will likely increase sequentially, as is typical for our fiscal second quarter. Based on those expectations, our incremental margin in Q2 is expected to come in slightly above Q1 levels. Looking past our fiscal second quarter and to the full year, we feel confident in hitting our annual incremental margin target of 20%. In addition, as of now, we are trending towards the higher end of our annual operating margin framework. Given recent momentum, it’s also possible that ADS growth could reach double-digit levels. If that were the case, adjusted operating margins would likely rise above the top end of that range. I'll turn it back over to Erik.

Thank you, Kristen. Our fiscal 2022 is off to a solid start. We sustained recent top-line momentum and outgrew the IP index by nearly 500 basis points in our first quarter. Our Mission Critical productivity efforts yielded solid operating expense leverage, and gross margin was below our expectations, but countermeasures are underway, and we've already seen early returns at the end of our fiscal first quarter and into December. Looking at the external landscape, the setup remains positive. Conditions are primed for continued market share capture, and sustained profit improvement. I'd like to thank our entire team of associates for navigating these unprecedented times with hard work and focus on the customer. We'll now open up the line for questions.

Thank you. First question comes from Tommy Moll at Stephens. Please go ahead.

Good morning and thanks for taking my questions.

Good morning, Tommy.

Good morning.

Erik, I wanted to start by following up on your comments around the gross margin trends in the quarter. You called out mix and price cost as two of the drivers. Those are familiar to folks on the call today. So, my question is what was it that you saw that you didn't expect in terms of the interplay between those two? You kind of outlined for us what the going-forward measures are, but I'm just curious versus expectations. What was different?

Tommy, I think what we would have liked to have seen and said that it was below our expectations was, I think two things happen. One, we wanted to see more, but we saw a positive price. We wanted to see more. And at the same time, what I would say is that we are in a really unprecedented set of times here, costs came in faster. So you put those things together, we would have wanted to see and expected to see more positive price costs than we did. And that's exactly the adjustments we're making. I think Kristen went through them in some detail, Tommy. But sort of zooming out, what I would say is we've entered a new era here, if you will, what we're calling hyperinflation, and what became clear to us is a different playbook and set of actions are needed. So, Kristen outlined those actions, and we're encouraged because, as I referenced, we're already beginning in late Q1 into early Q2 here to start seeing that in the form of even stronger price realization.

Thanks, Erik. That's helpful. I wanted to follow up with a question on some end market trends. So specifically within some of the larger manufacturing end markets, auto, machinery, and aerospace come to mind. What anecdotes can you share, or where does it feel like you sit in the cycle? I mean, we're looking at manufacturing ADS; it's up well into the double digits, but it's off a low base. So, any near-term commentary you could give there on the momentum would be helpful.

Tommy, I would say, in general, we still feel like there's a way to go in the industrial recovery. Most end markets are strong. Obviously, automotive is a pretty extreme exception right now. But even there, you think about the pent-up demand that as supply constraints ease, there's still so much bound up in the system on the supply side that's constraining demand, that as those constraints relieve, we still see a ways to go. Certainly, take another end market like aerospace, where we have some exposure. The growth has been nice, but off of such a low base. We still feel like there is an awful long way to go in the recovery. So we still feel like it's pretty early.

Thanks, Erik. I'll turn it back.

And our next question today comes from David Manthey at Baird. Please go ahead.

Yeah. Thank you. Good morning. First off, question on the drivers of sales growth. You mentioned vending, in-plants, and MSCdirect.com. Given the importance of those three initiatives, is there a plan for additional quarterly quantitative disclosures around those? And if not, or at least for now, could you just give us some color around trends you're seeing there?

Hey, David, sure. Happy to do that. So, generally, definitely pleased with progress in those three particularly. I can give you a little bit more color on some metrics. So, in-plant, I think we touched on this in the fourth quarter release. In-plant reached 8% of sales in Q1 -- was up from 7% in the fiscal fourth quarter. On the vending side, we did see signing surpass pre-COVID levels this quarter, that were up pretty significantly in Q1, greater than 50%. The e-commerce metric overall was 60.4% of sales. I think as you're familiar MSCdirect.com makes up about half of that roughly, and we're seeing that grow faster than the rest of the business, particularly in the past few quarters, which does coincide nicely with the timing of the new features coming online. So, generally, pleased with progress there. We are always, of course, evaluating what kind of metrics we're putting around those and maybe more to come in future quarters on that.

Yeah. We definitely appreciate that. I think some quantitative data around vending machines and in-plants would be nice to track those separately, given I know you give some of that data in e-comm. But it would be nice to be able to track those separately. So, thanks for considering that. And then second on the countermeasures, is there a sales price to be paid for those? Meaning, do you miss out on sales when you implement those, or do you lose customers? Because I guess, I'm confused to ask the question in a different way. I'm wondering why now, and not three or six months ago? It seems like pricing and inflation has been front page news for a long time. Why react to this and why wasn't this in place a quarter or two ago?

So, David, what I would say is, I think -- let me answer your first question right out of the gate, which is, I do not think this is coming at the expense of sales. I think that what's changed is what we're hearing from customers, David, is in these inflationary times, there is a receptivity to price, understanding the inflation that's happening. There has been an even louder drumbeat around the need for productivity. So, we think that plays really well into our strengths, particularly with our technical metalworking advantage, where we can go in and help customers find cost reductions and operational improvements. Really, we think the timing is right and what we're doing is helping our team get paid for the value. Could it have happened six months ago? Sure. What I would say, though, is the environment is quite different, and the need from the customers for productivity is at a fever pitch right now.

All right. Thanks, Erik. I will follow up.

Our next question today comes from Ryan Merkel with William Blair. Please go ahead.

Hey, everyone. Next quarter.

Hey, Ryan.

Thanks, Ryan.

So, first off, I want to ask on price, any more information you can give on the early 2022 price increase, maybe just relative to history. And then, was this in response to suppliers raising prices, or are you doing something different? Are you trying to get ahead of price by putting out a bigger one early? Is this a change in strategy?

Ryan, so I would say regarding the -- I'll go in reverse order here. So, the second question first, some of both. I mean, I think by and large it's in response to just massive inflation we're seeing. Obviously, there are areas we'll try to get ahead of where we can, but for the most part, this is in response to inflation. In terms of sizing, it's a little early to give any sort of specific numbers. But to your question, if you look back at our last several increases and you look at the size of those, we've been in the 2% plus or minus range. We would expect this to be considerably larger than that.

Got it. And then, a follow-up on price again. What's sort of the capture rate? You're running a little better than 200 basis points price mix now I think. When do you see the impact of this bigger price increase, and has that changed now with the contract changes you talked about?

So, I'll start and then maybe let Kristen talk a little more about some of the changes that we've made. But in general, look, we measure sales capture rate or realization internally, 10 ways till Sunday. Part of what we're encouraged by in terms of the trends in November and December quite honestly is with some of the changes that we've made. In terms of the -- so the next increase happening early in calendar year, based on, again, some of these changes, we would expect to get significant realization soon thereafter, despite contracts being in place. Maybe I'll let Kristen touch -- put a little more.

Yeah. Just to reiterate, the changes we're making now, Ryan, should yield faster realization on the January increase. That would be one of the main benefits we'd expect to see from the actions we're taking now, as they would affect the January increase, something that Erik mentioned on the contract side. We're trying to move a lot faster to take price or to get price on our contracted business. So doing things like not waiting on renewals to have price discussions, shortening contract periods, and also shortening the time that price quotes remain valid for. All that work has been happening now, with very disciplined execution around how our teams are engaging with customers. The cadence in which we're engaging, the number of customers and contracts we're touching and that's yielding a benefit already. I think we mentioned this; we saw it happen towards the end of Q1 and seen in December, which gives us the confidence that the countermeasures are working.

Great. Very encouraging. Thanks, and happy holidays.

Thanks, Ryan. Thank you.

Thank you, Ryan.

And the next question today comes from Chris Dankert with Loop Capital. Please go ahead.

Hey, morning. Thanks for taking the question.

Good morning.

I guess to kind of keep pulling that thread, the efforts not waiting on renewals, shortening the times for price increases, are these efforts that weren't really available until customers were more conditioned to these price increases? Or I guess, why did it take until now to kind of move on a couple of these new initiatives for price realization?

Yeah. It definitely helps that there's a willingness and kind of more favorable macro backdrop to have these discussions. I mean, the same things that we're seeing on the degree of costs, the pace of cost increases is definitely supporting this. The other thing that the macro environment really facilitates here is that customers, especially on the manufacturing side, are really looking for productivity and this is a place where we are very well-poised to help our customers. Our whole goal is to go in there and add value in the most important components of our customers' operations. It’s a chance for us to really articulate and sell that value proposition to the customers. Erik said this a little bit in his remarks, but it's a really favorable macro backdrop for us in doing what we do best to help the customer.

Got it. That makes complete sense. And I guess, any comment on government? Obviously, comps are getting a little bit easier here. We have seen that shift positive in December. Is there any commentary on exactly when we would expect government to kind of get back into growth mode here?

Yeah. We have not seen it shift positive in December. We would expect it to be down double digits still in Q2, but then we'll see improvement sequentially through the second half.

Chris, one thing -- I'll just chime in there and add commentary is that this is strictly a case -- we feel really good about our performance in the government team. What's going on right now is strictly about comps. From a market share standpoint, we feel really good about our position in government.

Got it. Thanks so much for that, guys, and best of luck in the new quarter here.

Thanks, Chris.

Happy holidays.

And our next question today comes from Michael McGinn at Wells Fargo. Please go ahead.

Hey, good morning, everybody.

Hey, Mike. Good morning.

I guess, I'll switch to cash flow. Accounts receivable were a pretty decent outflow, which is nice to have, but inventory kind of flattish. Understanding you're not the direct read on China, but any kind of tweaks or sourcing protocols you need to make ahead of Chinese New Year to just stay as even as possible and fund the back-half growth that you're targeting.

Yeah. I'd say, Mike, there's definitely some things we do differently around the New Year to ensure kind of a steady flow of products, get around any sort of delays or disruption from the New Year. Then even from the Olympics, we're keeping an eye on that. But probably nothing too different from the playbook we would normally follow. In general, our goal here with inventory is to make sure we have a really adequate supply. We're not -- this is not the time to be skimping on inventory levels. Our whole goal here is to be able to kind of flex the balance sheet right now to serve the customer. That's kind of my comment on the inventory side. I think you mentioned AR too, definitely watching AR carefully. One of the things that you'll notice in the DSO is that we did increase versus prior year, largely due to segment mix, as our national accounts businesses recovered pretty strong, but keeping a careful eye on AR and definitely have some Mission Critical initiatives that are targeting that section of the balance sheet.

Great. And then, on SG&A, by model conversion, the lowest has been in almost a decade. I'm trying to figure this out, because there are some footnotes that say you're absorbing headcount and field associates from the recent acquisition in MSC. You also mentioned some guardrails on field service pricing. Can you kind of bucket these SG&A savings into facilities, field service level then general core OpEx facilities or anything?

So, Mike, do you mean on the Mission Critical? Like how would you break down like the $10 million, is that what you're asking?

No. I'm talking about the current rate of the FQ not the forward Mission Critical.

I'm not sure we're following.

And Mike, I'm sorry.

Where the savings is coming from in Q1?

Okay. Yeah. Yeah. Sure, sure. So, if you take just the overall -- starting off X dollars, overall OpEx went up about $18 million on an adjusted basis. It should be roughly aided that to the volume increase, COVID cost add backs of $5 million, vaccine incentive $2.5 million, the balance with some inflation we see happening because of factors like freight and higher wage inflation, which we've discussed before. The net favorable spread on Mission Critical and general productivity initiatives kind of sprinkled in. I'd say probably largely in the sales space in Q1 is where we saw the most productivity outside of Mission Critical. A lot of the projects that we run do flow through the Mission Critical pipeline. It's kind of widened to be a very broad productivity capture bucket. But there are some things that happen outside of that Mission Critical number first, and I would say it’s mostly in the sales area for the first quarter.

Okay. Appreciate the time. Thank you.

Thanks, Mike.

And the next question today comes from Steve Barger at KeyBanc Capital Markets. Please go ahead.

Hey. Thanks. Good morning.

Good morning, Steve.

Erik, you said customers are more receptive to price increases. Can you talk about any other behavior changes in terms of wanting to increase safety stock or buy ahead on common items, given supply constraints or just this inflationary mindset?

Yeah. I think -- so Steve, look, you hit on one about receptive -- everybody understands what's going on right now with inflation. I think, another behavior change we mentioned was that customers really -- I mean, there's always been a need for productivity. It's amped up because everybody's looking for ways to offset inflation. I think that would be a second. Where are you going in terms of buying ahead? We look for that. I have not seen a ton of it lately because we did -- sort of in the months leading up to the pandemic when reports were coming out of China in early 2020, we did see a surge at the time. We are not seeing the same kind of evidence that would yield -- that would lead us to believe there's a ton of buying ahead. I mean, I'm sure there's a little bit like everybody wants to keep safety stock, but not seeing it mess.

Okay. And sorry, if I missed this. But with revenue comps getting tougher as the year progresses, how are you thinking about cadence in terms of being able to post double-digit ADS versus prior quarters when you think about a tougher Q2 versus the five extra days in Q4?

Yeah. Steve, what I would say on the revenue front, look, we're encouraged by the last couple of quarters. What's happening in the macro is helpful. The industrial recovery -- as I said, we still think it has a ways to go. But what's got our attention is that two quarters in a row we’ve been nearly 500 basis points above IP. We're really focused on raising the bar quite honestly and really pushing our performance and saying, Hey, let's not be satisfied with 300 basis points or 400 basis points. That’s evidencing itself inside of the company. Kristen mentioned a few of the growth programs that are working, and we're putting our foot on the accelerator. Just when it comes to target setting and mindset and execution of growth programs, there is a tone inside the company about raising the bar on performance, given that we've had a couple of good quarters. Part of the confidence comes from the macro, part of it comes from proven growth drivers that are working, and then part of it is coming from a mindset of raising the bar on ourselves.

Since you brought up the IP, if I look at the comps for the next nine months, it's about 5.5%, you're signaling low double-digit ADS. So, does that mean you're getting -- if that's 500 basis points ahead, like you did this quarter, are you getting to that target faster? Or is there some anomaly in terms of IP versus mix and channel inventory that’s allowing you to run a little faster right now?

Got it. I think, Steve, what you're hearing from us and Kristen mentioned, look, we're not calling at this point. We're such a short-cycle business; it's hard to call something for the year. Whether we hit double-digits, we’ll see. We certainly think it's feasible. I think it's a few things. One is the industrial recovery, two is the momentum on rate of share capture and programs, and three is certainly pricing to the extent that there's a meaningful increase -- another meaningful increase coming early in the calendar year that contributes to growth. You put all that together and, yes, we think it's feasible.

Great. Thank you.

Hey, Steve, just keep in mind, the ADS change in Q2 makes the spread between the absolute and the ADS growth pretty significant for the second quarter.

Right. No. Understood.

Thank you. 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.

Thank you, Rocco. So, before we end the call, a quick reminder that our fiscal 2022 second quarter earnings date is now set for March 30th, 2022. And I'd like to thank all of you for joining us today, and we hope you enjoy a healthy and safe holiday season. Take care.

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.