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MSC Industrial Direct Company, Inc. (NYSE:MSM)
Q2 2018 Earnings Conference Call
April 10, 2018, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning and welcome to the MSC Industrial Fiscal 2018 Second Quarter Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing "*0". After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press "*1" on your telephone keypad. To withdraw your question, please press "*2". Please note this event is being recorded. I would now like to turn the conference over to John Chironna, Vice President of International Relations and Treasurer. Please go ahead.

John Chironna -- Vice President of Investor Relations and Treasurer

Thank you, Anita, and good morning, everyone. I would like to welcome you to our Fiscal 2018 Second Quarter Conference Call. In the room with me are Erik Gershwind, our Chief Executive Officer, and Rustom Jilly, our Chief Financial Officer.

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 the Investor Relations section of our website.

Let me reference our Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995. 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 guidance about expected future results, expectations regarding our ability to gain market share, and expected benefits from our investment and strategic plans. 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 and the MDMA sections of our latest annual report on Form 10-K filed with the SEC, as well as in our other SEC filings. These forward-looking statements are based on our current expectations and the company assumes no obligation to update these statements. Investors are cautioned not to place undue reliance on these forward-looking statements.

In addition, during the course of 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, which contain the reconciliation of the adjusted financial measures to the most directly comparable GAAP measures.

I'll now turn the call over to Erik.

Erik Gershwind -- President and Chief Executive Officer

Thank you, John. Good morning, everybody, and thanks for joining us today. I'm quite encouraged by the progress that's happening both outside and inside of our company. Together they create a promising outlook for the future. The environment continued to show strength in the second quarter and our results reflected this, highlighted by sales growth slightly above the midpoint of guidance, gross margins above the high end of our expectations, and strong incremental margins contributing to earnings per share above the top end of our guidance.

I'll then turn it over to Rustom who will provide additional detail on our financial results and share our third quarter guidance but first I'll have a deeper look at the environment in the second quarter.

Conditions held strong through the quarter as the manufacturing environment remained firm. The MBI readings continued to reflect expansion, with December at 56.2, January at 59.1, and February at 61.3. Adding the March reading of 59.95 brings the rolling 12-month average for the MBI to 56.9, pointing to continued growth in metalworking end-markets.

Customer sentiment remained positive on both current and future opportunities. This is reflected in order volumes, backlogs, and broad sentiment on business conditions. We continue to hear positive comments about the potential impact of tax reform on the manufacturing environment going forward but we have not seen a pick-up as of yet.

From an end-market perspective, automotive, aerospace, heavy manufacturing, and agriculture were all areas of strength.

Turning to the pricing environment, we have seen an improvement, as expected. As anticipated, we implemented a moderate price increase in late January and realization has been solid. The increase occurred just after the midpoint of our fiscal second quarter, yielding some benefit in the quarter and continued benefit projected in the third quarter. We saw lift in pricing contribution, which turned positive in Q2. Looking ahead, we anticipate further supplier price movement which was not included in our mid-year increase. This bodes well for future pricing.

Moving now to sales growth, excluding DECO for the quarter, it was in line with the midpoint of our guidance. December faced difficult comparisons, as we discussed last quarter, while January and February rebounded to stronger levels at 6.4% growth in each month. For the quarter, CCSG and National Accounts both grew in the high single digits, while Core Accounts maintained growth in the mid-single digits. Government growth was also in the mid-single digits, reflecting a tight government spending environment. With the federal budget now finalized, we expect to see spending resume and potentially pick up due to pent-up demand. Finally, DECO maintained its double digit growth and the integration of the business continues to progress quite well.

Turning to e-commerce, it was 60.3% of sales in the quarter, up slightly from the same quarter last year and from last quarter, both were at 59.8%. The overall trend remains positive and consistent with e-commerce increasing modestly as a percentage of our overall sales. As I've mentioned before, it's important to note that our e-commerce sales include all forms of automated selling. Product sales that go through our Vendor Managed Inventory Solutions and our Vending Machines account for slightly less than half of total e-commerce sales.

In the second quarter, speaking of Vending, sales to Vending customers contributed roughly 240 basis points of growth.

Rounding out our results for the second quarter, our net total active saleable SKU count was at just over $1.6 million, up slightly from last quarter.

Looking ahead to our fiscal third quarter, we are expecting improved growth rates. Given the current demand and pricing environment, we should be producing high single digit organic growth rates. And while our third quarter guidance is in that range, I'd like to see a bit more.

I'm confident that we will deliver this over time because the implementation of our sales force effectiveness initiatives are coming to an end and we'll begin moderately growing sales headcount once again. This combination of greater sales effectiveness and an increase in sales headcount should benefit us as we move through the year and into next fiscal year. Of course, there won't be an immediate step change in growth rate due to sales force expansion, as the benefit from new salespeople takes a bit of time to ramp up. I'm also seeing positive leading indicators, including several significant recent customer wins, and positive feedback from those on the frontlines.

Turning to outside of the company, we see the potential for additional tailwinds from accelerated capital spending related to tax reform over the balance of the year and beyond. For all of these reasons, our outlook for sales growth remains positive. I'll now turn things over to Rustom.

Rustom Jilla -- Executive Vice President and Chief Financial Officer

Thank you, Erik. Good morning, everyone. I'd first like to remind you that we will continue to break out DECO's impact as we report fiscal 2018. And now let's turn to second quarter in greater detail.

Our average daily sales in the second quarter increased by 9.3% versus the same quarter last year and that's slightly above the midpoint of guidance. Organic growth at 5% was in line with our expectations and double digit DECO sales growth was modestly better than expected.

Our gross margin was 43.9% for the quarter, 10 basis points above the high end of our guidance. Excluding DECO, our gross margin was 44.7%, also 10 basis points above the high end of our guidance range and flat with the same quarter a year ago. Notably, this was the first time in almost four years that our gross margin was at least flat with the prior year and this solid result was the net outcome of managing pricing and, of course, customer mix and supply cost increases.

We continued to control our operating expenses, with OpEx to sales dropping 130 basis points from last year. OpEx was $239 million versus $228 million in the same quarter a year ago. About $6 million of this increase came from DECO and roughly $3 million from volume-related variable costs. Excluding DECO, OpEx to sales was 31.5% and that's a 90 basis point improvement on last year's Q2, as productivity and cost controls offset much of our investment spending and inflationary increases.

Our fiscal second quarter operating margin was 12.8% or 13.2% excluding DECO. The latter was a 90 basis point improvement on the comparable 12.3% reported in the same quarter a year ago, as we successfully leveraged our higher sales. This leverage resulted in incremental margins of 32% in the second quarter on 5% organic growth.

Due to the recent Tax Cuts and Jobs Act, our total tax expense was negative for the fiscal second quarter, as expected and guided. We had broken out the expected impact of taxes in our second quarter guidance and Slide 5 shows the actual outcomes. The one-time beneficial impact on our EPS from the reevaluation of tax-related balance sheet items was $0.04 above our guidance midpoint and the true-up required to bring our first half tax rate into alignment with the full-year expected tax rate was $0.02 above the midpoint EPS impact. All of this resulted in reported earnings of $2.06 per share. Backing out the net one-time tax benefit of roughly $0.72, our EPS was $1.34, $0.04 above the midpoint of our guidance range.

For an apples to apples, year-on-year comparison, we would also strip out the first half true-up, which leaves us with EPS of $1.04, up 12% from last year's second quarter.

Now turning to the balance sheet, our DSO was roughly 54 days, down 3 days from the first quarter, but it will continue to be an area of focus. Inventory grew during the quarter as we chose to increase our purchases, but inventory turns remained sequentially flat at 3.5 times. We utilize our strong balance sheet as a competitive advantage but we'll, of course, also seek to optimize our networking capital.

Net cash provided by operating activities was $36 million versus $21 million last year, basically due to the increase in net income, excluding, of course, the one-time non-cash reevaluation of tax-related balance sheet items. Our capital expenditures were $8 million and, after subtracting capital expenditures from net cash provided by operating activities, our free cash flow was $28 million.

We ended the second quarter was $511 million in debt, comprised mainly of the $260 million balance on our revolving credit facility and $225 million of long-term, fixed rate debt. We also ended with $32 million in cash and cash equivalents and our leverage ratio was sequentially unchanged at 1 times.

So now let's move to our guidance for the third quarter of fiscal 2018, which you can see on Slide 4 and it's shown with and without DECO. We expect ADS to increase by 10% to 12% versus the prior year period. This includes 6% to 8% organic growth and approximately 400 basis points from DECO. Our preliminary organic growth rate in March was about 4.4%, but we had Easter holidays in our March we estimate cost us around 200 to 300 basis points, and we expect a much stronger April as a result.

We expect third quarter gross margin to be 43.8%, plus or minus 20 basis points, and that's down 50 basis points year-over-year due to the impact of DECO. Sequentially, we expect gross margin to be nearly flat with the positive impact of price offset by mix, both within the base business and from DECO's higher sales contribution.

Compared to last year, we expect our base business gross margin to be up about 30 basis points, with mix headwinds due to continuing National Accounts growth and an expected pick-up in Government sales now that the budget has been passed being more than offset by price.

Third quarter operating expenses should be around $245 million, with an OpEx to sales ratio of just under 30% at the midpoint of guidance. Notably it's been five years since this ratio was under 30% so reaching this milestone is a testament to a sustained team effort. Versus last year's third quarter, our OpEx is up $17 million, with DECO accounting for around $6 million, variable expenses associated with higher sales another $5 million, and the bonus accrual another $4 million. Last year's Q3 bonus accrual was significantly lower, as we first shored up our targets and downward adjustments were required. And, of course, this year is different based on the numbers. The remainder is mostly due to investment spending, medical cost inflation, and salary inflation. Excluding DECO, we expect another year-over-year OpEx to sales ratio improvement, this time by roughly 60 basis points.

All of this should translate into another quarter of operating margin expansion. We expect the third quarter's operating margin to be approximately 14.1% at the midpoint of guidance, a 40 basis point improvement over last year's 13.7%, and that's even after absorbing a roughly 50 basis point headwind from DECO.

At the midpoint of our Q3 operating margin guidance, excluding DECO, we expect solid quarterly incremental margins that will take our incremental margin for the first nine months up to around 24%, well within our 20% to 30% long-term target. We would also be in line with our annual operating frameworks that you can see on Slides 6 and 7.

Our estimated tax rate for the third quarter is 29.5%, consistent with what we said in January, and this includes a small benefit from share-based compensation. We also do not expect a significant change in our weighted average diluted share count. And note that we have provided additional details on tax rates on Slide 5.

Please note that our lower effective tax rate means a plus or minus 1% change in our ADS range, translates into a wider EPS guidance range. So for our fiscal 2018 third quarter EPS guidance, the range is $1.37 to $1.43. Even after excluding the $0.17 benefit of lower tax rates, EPS at the midpoint of guidance would be 13% higher than last year's third quarter.

I'll now turn it over to Erik.

Erik Gershwind -- President and Chief Executive Officer

Thank you, Rustom. I'll conclude now with some additional remarks about the progress that we're making and then we'll move to Q&A. First, we remain on track with the execution of our strategic plan. We continue to focus on growing areas that are technical and high-touch, creating a deeper moat around our business. Metalworking, Class C, and Inventory Management Solutions are all examples of these areas. We'll also look for ways to deepen that moat by growing other technical and high-touch areas of the company.

Second, we are achieving the leverage that's inherent in our business model as the demand environment and our revenue growth improve. As pricing conditions firm up, our price contribution has turned positive, resulting in improved gross margin performance. And with gross margins and our ongoing productivity efforts, we're now achieving our long-term incremental target range.

As good as this is, the improvement that we are seeing in the environment, coupled with our focus on driving productivity and growing a more effective sales force, means that the future has the potential to be even better.

We'll now open up the line for questions.

Questions and Answers:

Operator

We will now begin the question-and-answer session. To ask a question, you may press "*1" on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press "*2". The first question today comes from Evelyn Chow with Goldman Sachs. Please go ahead.

Evelyn Chow -- Goldman Sachs -- Analyst

Good morning, guys. First question. I'd love to understand better the remarks you've made on deepening your technical and high-touch moat. Specifically, what kinds of actions are you engaging in and how do you think about the read-through then into your ability to have move resilient pricing as well as increased share gains?

Erik Gershwind -- President and Chief Executive Officer

Evelyn, good morning. It's Erik. First of all, welcome to the story. Thank you for picking up coverage on us.

Evelyn Chow -- Goldman Sachs -- Analyst

Thank you.

Erik Gershwind -- President and Chief Executive Officer

So in terms of deepening the moat, and this is something we've talked about for a number of years as being at the heart of the company's strategy, it really tracks back to our north star, which is around improving customers' productivity and helping them get more out of their plants for less money. And so we do that in a number of ways. One of which is we attempt to solve their deepest, most technical problems. And in a metal cutting manufacturing environment, oftentimes that's metalworking products. That is, cutting tools.

So we do it with -- to do that, it sounds easy but it takes an awful lot of knowledge, know-how, and experience. So we have on the buy side of the business and certainly on the sell side of the business, years and years of experience in this space. We lean heavily on our suppliers as well. So within metalworking, that would sort of be the first platform I'd refer to under this guise of helping improving our customers' productivity.

And then we are also really anchored by the idea of identifying other places on the plant floor where we can help our customers improve their productivity and speed up lead times. And so I called out the Class C, the CCSG business, as another example where we're using inventory management solutions, vendor-managed inventory, to really take over a headache for our customers, improve their inventory turns, and avoid plant outages.

Beyond that, what I mentioned is that we're constantly looking for other areas within the business where we can take that same approach, all anchored by driving productivity for customers.

Evelyn Chow -- Goldman Sachs -- Analyst

Got it, Erik. That's very helpful. And then maybe turning to the margin line for a second, obviously great performance on the gross margin line this quarter. I'd like to drill down into operating expense. It seems like your 3Q guide implies accelerating EBIT incrementals versus the first half and you've talked about taking productivity actions while at the same time increasing sales heads. So I'd love to just understand the message we should be taking away as it relates to OpEx.

Erik Gershwind -- President and Chief Executive Officer

Evelyn, it's Erik. I'm gonna turn it to Rustom for the incremental question and the OpEx but I did want to highlight one point you made, and I think it's a fair one, which is the correlation here between the strategy that we've had around the deepening of the moat and the gross margin performance, the ability to sustain gross margins in a competitive environment. I do think you are correct to draw a correlation. So with that, I'll turn it to Rustom on the incremental story.

Rustom Jilla -- Executive Vice President and Chief Financial Officer

Sure. Hi, Evelyn. Look, the impact of the incremental sales people on our OpEx and growth. We have begun hiring but based on timing, the impact on both sales and OpEx in F '18 will be quite small. We will start to realize sales benefits in '19, F '19, but they are offset by OpEx flow-through through most of the fiscal year. And, of course, it's too early to provide '19 guidance but we do not expect this to have much of an effect on our incremental margin target range of 20% to 30%.

Evelyn Chow -- Goldman Sachs -- Analyst

Got it. Thank you, Rustom.

Operator

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

Ryan Merkel -- William Blair -- Analyst

Thanks. Good morning, everyone.

Erik Gershwind -- President and Chief Executive Officer

Hey, Ryan, how are you?

Ryan Merkel -- William Blair -- Analyst

Good. First, I want to start on price realization. Erik, I know for competitive reasons you don't want to give too much detail, but price mix was up 40 basis points this quarter. It was the first time we've seen a positive number in, I think, two years. And I was just hoping for a little more color on what the pure price realization was and what the mix headwind was.

Erik Gershwind -- President and Chief Executive Officer

Yeah, Ryan, so a little -- so let me start by giving you a little just color on the increase itself and then I'll talk about realization and hook you right into -- it's a sensitive area for us. So I'll be careful about how much I provide but I think I can give you some help here. So the first thing I'd say is we coined it as, we termed it as a moderate size increase. So just some color there would be, what that would mean is slightly above what we did in the summer, which was around 1%. The increase was based on where we saw where our suppliers moved. And where our suppliers moved was driven by commodities movement. It captured the increases we had seen to date. It did not anticipate any future increases, which certainly, I think, could create opportunity down the road.

With respect to realization, look, I think the best thing to point you to is the metric that you referenced from our op stats, which is in the growth decomposition, we have a line there that's price. Now, you are correct. It's price and mix. So there are moving parts here. But what I'd point you to, take a look at Q1 to Q2. So in Q1 that price contribution was a minus 30 basis points. That shifted to a plus 40 basis points in Q2. Certainly there is some mix influence there because government sales were a little bit down in Q2. That said, look, the primary difference between Q1 and Q2 was the mid-year pricing action that we took.

Ryan Merkel -- William Blair -- Analyst

Got it. Okay. That's helpful. And then secondly, Erik, you mentioned you were a little disappointed with organic growth recently. And I guess two questions. First, what have been the key issues in your mind? And then secondly, what details can you give on hiring sales people and are there any other levers that you can pull?

Erik Gershwind -- President and Chief Executive Officer

Yeah, sure. So, Ryan, as I said in the prepared remarks, look, I think with the environment and what we're seeing right now between the demand environment and the pricing environment, the business right now should be producing in the high single digit organic growth rates. And, look, our Q3, certainly our Q3 guide is in that range. But I would like to see it be higher. I would like to see more. The primary factors that I point to, and they are connected, are, one, the implementation, as we're winding down now over the next quarter or so, the implementation of the sales effectiveness initiatives that we've been describing. And then related to that, too, is the lowering of the sales headcount. And the reason they're connected is because, as we were implementing some of these changes and initiatives, we didn't think it was prudent to hire. We wanted to wait until we got through the bulk of them. We're there and so we will begin to hire.

So in terms of levers, I think now that we're through that, as we look out, I'm encouraged. Obviously, sales people, as you know from following our story a long time, take a bit of time to ramp up. I would tell you in terms of other levers, and there's lots of other growth drivers that we have, but the biggest thing I'd point to is the sales effectiveness initiatives that we have in place. And they cover a wide gamut of things, from how we sell our value proposition to the size and composition of the portfolios that we have, the sales management rigor that we're using around account penetration and new account wins, all of those things I would point to as probably the biggest lever that I'd look at moving forward. And then obviously we'll grow sales headcount and that'll help as well and we'll do it moderately as Rustom described.

Ryan Merkel -- William Blair -- Analyst

Got it. Okay. That's helpful. And then just lastly, if I could, on core gross margins, you're guiding to 44.6% in the fiscal third quarter versus 44.7%, I think, in fiscal Q2. So stable is a good result, especially with the mix headwind, but just given that you're seeing some pricing now, why wouldn't there be a little bit of expansion sequentially?

Rustom Jilla -- Executive Vice President and Chief Financial Officer

I think it does come down to you answered that with mix. It does come down to we'll be seeing a pickup in government sales now that the budget has been signed and see that ramp come through. Our National Accounts business, as Erik points out, we're expecting some more business from that as well. And so it's fundamentally mix. It's fundamentally mix offsetting price. I mean, there's really nothing more I can add to that. It is up 30 basis points on last year. I know your question was sequential but note that is up on last year.

Ryan Merkel -- William Blair -- Analyst

Okay. Great. Thanks.

Erik Gershwind -- President and Chief Executive Officer

Thanks, Ryan.

Operator

The next question comes from Adam Uhlman with Cleveland Research. Please go ahead.

Adam Uhlman -- Cleveland Research Company -- Analyst

Hi, good morning.

Erik Gershwind -- President and Chief Executive Officer

Hey, Adam.

Adam Uhlman -- Cleveland Research Company -- Analyst

I was wondering if you could start with the plan on additional sales people. I think, Erik, you had just mentioned moderate headcount growth. Does that sort of expect something in the maybe sequential range of 5% or much lower than that? Will you be more measured in your additions of new sales guys?

Erik Gershwind -- President and Chief Executive Officer

Yeah. I think, Adam, I would say certainly to start. And when I say to start, I mean if I look out over the balance of this fiscal year, more moderate than that. More moderate than 5%. And I think what you'd see from us, and sort of like what we've done historically, is that the number could throttle up or throttle down based upon a couple of factors: 1) the environment and the conditions and how strong a macro, and 2) what kind of performance we're seeing out of the new additions. The better the performance the more likely we would be to ramp that up. But I think to start, we're talking about something more modest than you're describing at plus 5%.

Adam Uhlman -- Cleveland Research Company -- Analyst

Okay. And then remind me how long it takes for a new seller to ramp up? It would seem like maybe some of these new programs that you've done would have accelerated that timeframe but I'm not sure. Maybe it still takes over a year for that.

Erik Gershwind -- President and Chief Executive Officer

Yeah, look, historically, Adam, you've followed us for a while as well, you know that historically we've talked about somewhere between 12 and 18 months as the typical range for when the reps start to really get profitable. You're correct. We've done a bunch of things here on the sales effectiveness front. And if you ask me right now, looking forward, my expectation would be that the break-even time would get a little better. And that we wouldn't need to add quite as many as we did historically to produce the kind of growth that we did historically. So that tracks back to your first question about how aggressive will we be on the ramp. I don't think we're going to need to be aggressive. So my outlook is positive. And, again, what we'll do is we'll measure and adjust based upon the kind of results that we see as we add.

Adam Uhlman -- Cleveland Research Company -- Analyst

Okay. Thank you.

Operator

The next question comes from Ryan Cieslak with Northcoast Research. Please go ahead.

Ryan Cieslak -- Northcoast Research -- Analyst

Hey, good morning, everyone. Nice quarter. First question.

Erik Gershwind -- President and Chief Executive Officer

Thanks, Ryan.

Ryan Cieslak -- Northcoast Research -- Analyst

First question is on gross margins. It looks like it exceeded your expectations for the quarter. Really good to see. But even though you only had about one month of benefit maybe from the price increase, what really drove the upside relative to your expectations do you think?

Rustom Jilla -- Executive Vice President and Chief Financial Officer

I think mix certainly contributed. I mean, we had -- we talked about perhaps seeing a little bit more of government sales in the quarter and we didn't see that. So that was a little bit of a factor. But, I mean, fundamentally the second quarter was a very, very -- it was a good quarter. I mean, in terms of performance. I mean, it's a combination of all those things. It's pricing. It's gross margin stabilization in terms of the reps and discounting and how you work on that. It's just all the usual gross margin stabilization factors assisted by a little bit of mix. Erik, you want to?

Erik Gershwind -- President and Chief Executive Officer

I think that's it, Rustom. I think the only other thing I'd add, Ryan, is just, look, we have, through the last couple of years and now as things improve, kept price discipline. And Rustom mentioned it in discount management. And just back to Evelyn's opening remarks, I think one of the reasons we're able to do it, some of it is certainly pricing science and tools, etc., but a lot of it comes down to strategy and the fact that we're really focused on this idea about improving customers' productivity and total cost of ownership. The mode of the business, I think it helps.

Ryan Cieslak -- Northcoast Research -- Analyst

And, Erik, would you say that going forward that there's elements that still can work that tailwind in the back half of the year? Meaning not only do you get maybe some pricing benefit, but there's still some things that you guys are doing there internally that is potentially beneficial to the gross margin line?

Erik Gershwind -- President and Chief Executive Officer

Ryan, so what I would say for the balance of the fiscal, consider it kind of our usual pluses and minuses, headwinds, tailwinds. I don't know that, absent a pricing move, would there be dramatic expansion? Probably not. Realize that we'll have, Rustom mentioned it, we do anticipate government to pick up, which will be helpful to revenues but generally dilutive to gross margins. So a lot of the practices we'll put in place from here will offset some of those headwinds.

The one I would call out though, looking further out, further out than the next quarter or two, is pricing. We are hearing more from suppliers. So, again, our mid-year only took account for what we saw come the turn of the calendar year in price increases. We are hearing more from suppliers since that time. And if that continues as we expect it will, that would bode well for our next price increase, which would likely be in cadence with our usual cycle of late summer. Always could be earlier. I mean, if we really see things heat up, we would always reserve the right to move again this fiscal year. More likely than not, sometime late summer. So that gives us a lot of optimism as we look out beyond the next quarter or two.

Ryan Cieslak -- Northcoast Research -- Analyst

Okay. That's good. Go ahead.

Rustom Jilla -- Executive Vice President and Chief Financial Officer

Sorry. I was going to say, just to reiterate what Erik said, absent strong pricing support, in terms of lots of supplier cost increases which is then successfully passed on, absent that, I mean, the continued sort of focus of ours has been on gross margin stabilization and the discipline and the fact that we are providing value-added sales and service and stuff. All of that continues. But you really shouldn't be counting on an increase, a big increase in gross margins per se unless there's strong pricing.

Ryan Cieslak -- Northcoast Research -- Analyst

Sure. That's good color. I appreciate it. And then just my last one and I'll jump back into the queue. Really good to see the incrementals that you guys are putting up right now in operating margin expansion. I go back and I look at prior peak margins for you guys on the op margin side, 17%, 18% or so. You're still a ways off from there. Erik or Rustom, how do you think about bridging that gap? At this point, it feels like everything is working in the right direction. Is there something to keep in mind that might limit your ability to get back there? Or how do you think about the long-term margin profile going forward? Thanks.

Erik Gershwind -- President and Chief Executive Officer

Ryan, my answer really goes back to the range that we've stated. So the way I think about it is our target range in what we call normalized demand, normalized pricing environment, is 20% to 30% incrementals. I mean, theoretically, if we do that for a long enough period of time, yes, we could blend back to high-teens. When that happens, if that happens, how that happens is really a function of how fast the revenue growth kicks in and what kind of pricing environment we get. As we've said, accept the revenue trajectory and better pricing environment, we move toward the high end of that 20% to 30% range. And, look, you're seeing proof of that in Q2 and Q3.

Ryan Cieslak -- Northcoast Research -- Analyst

Okay. Fair enough. Thanks, guys.

Operator

The next question comes from Robert Barry with Susquehanna. Please go ahead.

Robert Barry -- Susquehanna International Group -- Analyst

Hey, guys, good morning.

Erik Gershwind -- President and Chief Executive Officer

Hey, Rob, how are you?

Robert Barry -- Susquehanna International Group -- Analyst

Good. Thanks. Just a few things to clarify. One is do you expect that the holiday timing will be a tailwind in April?

Rustom Jilla -- Executive Vice President and Chief Financial Officer

Absolutely. I mean, we estimate roughly 200 to 300 negative in March and that just puts over into April because last year the holidays occurred in our April month.

Robert Barry -- Susquehanna International Group -- Analyst

Yeah, makes sense. And then on the gross margin, year-over-year, ex-DECO, flat. So on the year-over-year basis, was mix a negative in that equation?

Rustom Jilla -- Executive Vice President and Chief Financial Officer

Yes. Mix was a negative in that equation and pricing a positive.

Robert Barry -- Susquehanna International Group -- Analyst

Price cost a positive. Okay. And just any thoughts on the impact to the business under the current commodity tariff proposal? I know things are moving around a lot there but just as it stands now, what are your thoughts?

Rustom Jilla -- Executive Vice President and Chief Financial Officer

So that's a tough one. At this point, I mean, no. none of this stuff has really been completely fleshed out. You don't know what's really going to happen. So the potential impact of pending tariffs, or for that matter, some degree of a trade war, is speculation, right? At this point. The price increases we have seen so far are a function of production cost increases and that includes commodities inflation, of course. And, I mean, it's too early. One potential impact of that would be higher costs coming in and, again, it's too early to speculate but inflation is generally good for industrial distributors.

Robert Barry -- Susquehanna International Group -- Analyst

Got it. And the prices increases you have been putting through, would you say that those are kind of consistent with what all the competitors are doing or are you doing any more or less?

Erik Gershwind -- President and Chief Executive Officer

Yeah. Look, for us, Rob, we monitor, of course, we monitor our competitive behavior all the time. I would say the way to think about our increases to date is they're more driven by what our suppliers are doing than competitors. That when suppliers move, that it's pretty well-established in the industry that distributors will move along with them. And that's really what we're doing.

Robert Barry -- Susquehanna International Group -- Analyst

Yeah. So just in line with the market.

Erik Gershwind -- President and Chief Executive Officer

Correct.

Robert Barry -- Susquehanna International Group -- Analyst

Great. Thank you.

Operator

The next question comes from Scott Graham with BMO Capital Markets. Please go ahead.

Scott Graham -- BMO Capital Markets -- Analyst

Hi, good morning.

Rustom Jilla -- Executive Vice President and Chief Financial Officer

Hey, Scott.

Erik Gershwind -- President and Chief Executive Officer

Hey, Scott.

Scott Graham -- BMO Capital Markets -- Analyst

I have two questions on pricing. First, if I look back at the transcript from last quarter, the hope, the expectation from you guys was "a considerably larger price increase than prior years' levels." And then the press release wording this quarter was "moderate price increase." So am I reading too much into that or are you maybe a little bit more delayed into the quarter, maybe a lower net price increase than you expected versus three months ago?

Erik Gershwind -- President and Chief Executive Officer

Scott, I would say no. The increase is pretty much in line. So maybe reading into it a bit. I think the color I'd offer is some of our language is colored by perspective. Everything's relative. Sitting where we were three months ago, it felt big. Sitting where we sit today, it doesn't feel as big. And the reason is that there's another three months under our belt of more commodities inflation and more discussion among suppliers about movement. So I think what it was intended to signal was that, look, we decided to not get ahead of ourselves with the increase. And what I mean by get ahead of ourselves is anticipate future movement that we thought could be coming. As we sit here today, there are discussions happening with suppliers that make that anticipation seem like it's going to happen. And so our perspective is a little different. I think that's the only thing that changed.

Scott Graham -- BMO Capital Markets -- Analyst

Understood. My second question on pricing is really kind of the way we're doing it today versus the way we were doing it in the past. I think, Erik, since you've taken over, we've really kind of seen the company increase prices in step with supplier price increases. But in days gone by, as you know, I've been with you guys for a while, it wasn't like this. And maybe it was too cavalier before but I guess the question is do we need to see the price increases from suppliers broaden out? Can't we get in front of that more? Can we do a pre-emptive strike type pricing? Or does the market just not allow that anymore?

Erik Gershwind -- President and Chief Executive Officer

So, Scott, look, I would say the biggest difference from now to maybe years back in our approach to pricing is -- I would say more scientific is the word I would use. We brought in some really smart, really capable people who there's a discipline and a science around pricing and we've introduced that into the company. And so I would just describe it more scientific and more surgical. I think the benefit that we get is we do see, over time, and the proof will be in the pudding because we're just getting back to pricing now, but we should see better realization. Look, I think we're off to a pretty good start here with realization. But, again, the proof will be in the pudding. To me, that's the biggest difference, Scott. I think in terms of getting ahead of pricing, look, there's lots of opportunities for pricing outside of just sort of the big, visible manufacturers. But generally doing it in keeping with the manufacturers, again, what I think it gets to is a more effective realization and a better acceptance of the price increase.

Scott Graham -- BMO Capital Markets -- Analyst

Right. But at the same time, Erik, it's also more surgical on a gross basis, it sounds like, less. That's kind of what I'm getting at. It's like, again, maybe it used to be too cavalier before but is it surgical because it now has to be because of the market?

Erik Gershwind -- President and Chief Executive Officer

I would say, Scott, look, I think the biggest thing to point to from, if you go back to the old days, the pre-Erik days, to now, is take a look at the commodities markets. In that period of time, you had enormous commodities movement. Hopefully we're on our way back to that. Look, it's an encouraging start. I think should you see sustained commodities inflation, you're gonna see more pricing from MSC. So I think that's probably the biggest thing I'd point to.

Scott Graham -- BMO Capital Markets -- Analyst

Understood. Thank you very much.

Operator

The next question comes from Matt Duncan with Stephens. Please go ahead.

Matt Duncan -- Stephens -- Analyst

Hey, good morning, guys.

Rustom Jilla -- Executive Vice President and Chief Financial Officer

Morning, Matt.

Erik Gershwind -- President and Chief Executive Officer

Hi, Matt.

Matt Duncan -- Stephens -- Analyst

So first question I've got is just sort of looking at the month-to-month sales trends and trying to understand if weather has had any kind of impact there, Erik. Is there anything you would call out? I think the first Nor'easter in that stream of four in a row hit the last week of what was technically your February. Is that something we should be thinking about that could have impacted that month-to-month comparison?

Erik Gershwind -- President and Chief Executive Officer

Yeah. Look, yeah, we didn't call it out because the big driver, the big delta you saw in March with the Easter timing, I think Rustom said 200 to 300 basis points. You put that back in and we're at or above where we were the prior couple of months. Look, certainly there were -- yeah, I'd be lying if I told you there wasn't some noise in March. I mean, we're Northeasterners here. There was a Nor'easter coming every week. So did that have an impact? I think it had to. So hard to quantify, Matt. But was there some impact? Probably.

Matt Duncan -- Stephens -- Analyst

Okay. Yeah, I figured as much. Just didn't want to let that slip through the cracks if there was. And the next thing up, just digging a little bit more on this price/gross margin discussion, would you characterize this environment, Erik, in terms of your ability to pass through inflation, as normal relative to prior periods of inflation? And then if I try to extrapolate the month-to-month change in that price-mix equation of 70 basis points, you didn't put through price until, you said, toward the end of January. Is that pointing to a price mix somewhere in, let's call it the 1% to 2% range going forward? Is that the right place to be thinking?

Erik Gershwind -- President and Chief Executive Officer

So I wouldn't read too much about the go-forward. Look, I think, yeah, I wouldn't read too much about the go-forward, Matt, because especially mix moves around a lot. Your question though, it's a good one, about the ability to get pricing through -- so now versus prior times. Was that where you were going?

Matt Duncan -- Stephens -- Analyst

Yeah. Essentially, yeah. I'm curious if price transparency is upsetting the apple cart, if you will. Or is anything different or does this feel normal to you?

Erik Gershwind -- President and Chief Executive Officer

Got you. Look, so far, I'm gonna ask -- I hate to punt questions. I want you to revisit this with me. Give me one or two more quarters. It's so early. The mid-year increase was really the first increase that we took that was -- this is the first time that we saw suppliers move in response to the commodities inflation building.

Rustom Jilla -- Executive Vice President and Chief Financial Officer

I was actually going to cut in there because I don't think that your point about inflation and inflationary period now. We're not still in an inflationary period. It has picked up. It has turned from what it was before. But it's still early days.

Erik Gershwind -- President and Chief Executive Officer

Yeah. Look, I would say so far, so good. And let's see what happens.

Matt Duncan -- Stephens -- Analyst

Yeah. Fair enough. And the last thing, just on the sales count, sales heads additions that you're planning. In growth environments in the past, we've certainly seen you grow the sales force faster than less than 5% and it sounds like the answer is as simple as the sales force efficacy stuff that you've been doing means you don't have to grow it that fast. Is that why you're growing headcount slower or is there anything else at play there?

Erik Gershwind -- President and Chief Executive Officer

Yeah. So, look, Matt, the answer is yes. To be clear, we haven't yet grown it. So it's come down. And I want to be clear. The reason it's come down is we've chosen not to replace certain positions. We said, it's silly until we get through some of these initiatives. We've reached that point. So that's why it's come down. In terms of what we're calling now -- and with headcount, it's always hard to predict the exact month that it turns because you can never quite count on recruiting, etc. It's always uncertain. But basically what we're saying is, hey, we're bottoming and it's gonna turn back up.

The answer is yes. And we'll see how the results go. Based on the work that we've done, my expectation would be that we will continue to grow headcount but in order to achieve the kind of growth rates that you're used to from us, that we would grow it more moderately than we had to do in the past.

Rustom Jilla -- Executive Vice President and Chief Financial Officer

One small add. With all the investments that we made, and we've talked about over the last couple of years, in sales effectiveness and productivity, we would expect our sales people to be more productive as we move forward.

Matt Duncan -- Stephens -- Analyst

Sure. Okay. Alright. Appreciate it. Thanks, guys.

Operator

The next question comes from David Manthey with Baird. Please go ahead.

David Manthey -- Robert W. Baird & Co. -- Analyst

Hey, good morning, guys.

Erik Gershwind -- President and Chief Executive Officer

Hi, Dave.

David Manthey -- Robert W. Baird & Co. -- Analyst

First off, looking at the regions, so Northeast, Southeast, and West grew just in the 4% to 5% range, which seems like a market rate or maybe even less. To what do you attribute the weakness there and the relative strength in the Midwest? Then to follow up on that, what'll be different in future quarters that will lead to better growth and share gains relative to those regions?

Erik Gershwind -- President and Chief Executive Officer

Yeah. So I think two things I'll point to. So one is, realize, Dave, the Midwest is where DECO falls so you're seeing a much bigger number. With respect to the other regions, the biggest thing in Q2 is December. December really weighed down the numbers. We talked about it on the last call because we had the December growth rate under our belt and it was organically a little over 2% and we thought it was a combination of a few things going on, the comps, the government pullback, the holdback in capital-related purchases. We thought it would be an outlier. It did turn out to be an outlier. So, look, that's the story behind the Q2 growth rates was December.

Going forward, you're seeing growth rates improve, getting close to where they should be. As I said in my remarks, not quite. And, look, I think the biggest catalysts there are going to be the sales effectiveness initiatives now embedded and the beginning of sales expansion.

David Manthey -- Robert W. Baird & Co. -- Analyst

Okay. And then just to put a bow on this pricing discussion, are you saying that you're completely recapturing prices from your suppliers at this point without slippage of either amount or timing?

Erik Gershwind -- President and Chief Executive Officer

I'm not sure I follow, Dave.

David Manthey -- Robert W. Baird & Co. -- Analyst

Just in terms of, if you have a supplier that's giving you a 3% price increase effective February 1st, you're able to raise prices and push that through to the market around the same time and the same magnitude?

Erik Gershwind -- President and Chief Executive Officer

Yes.

David Manthey -- Robert W. Baird & Co. -- Analyst

Okay. And then as we look forward, the price increases that we're hearing about are much larger than the New Year price increases in some cases. Is there any reason that we should believe that you won't be able to achieve that same type of matching going forward that you have already year-to-date?

Erik Gershwind -- President and Chief Executive Officer

No.

David Manthey -- Robert W. Baird & Co. -- Analyst

Okay. Thanks a lot, Erik.

Erik Gershwind -- President and Chief Executive Officer

Thank you, Dave.

Rustom Jilla -- Executive Vice President and Chief Financial Officer

By the way, Dave, the Midwest without DECO is 5.8%.

Operator

The next question comes from Robert McCarthy with Stifel. Please go ahead.

Robert McCarthy -- Stifel Financial Corp. -- Analyst

Good morning, everyone.

Erik Gershwind -- President and Chief Executive Officer

Rob, how are you?

Robert McCarthy -- Stifel Financial Corp. -- Analyst

Good. Sorry about the pregnant pause. Excuse me. Just a couple follow-ups. Obviously a lot has been covered on the call. I guess the first thing, just stepping back, Erik, is having seen a lot of cycles, not only in the management seat but just on a familial basis, do you see any differences this time as we go into a material inflation environment and short cycle rebound here? In the context of, obviously, the challenges of online and just the evolving marketplace overall? In other words, what are the similarities you're seeing now versus an, according to Hoyle, a kind of material inflation environment leading a better robust pricing and price realization short cycle, yada, yada, yada? Good growth and good EPS conversion. Versus what are some of the constraints or dark clouds you could see on the horizon?

Erik Gershwind -- President and Chief Executive Officer

Rob, a very good and deep question. Deep question. Look, I think in terms of similarities -- I'll start with the similarities this cycle and then talk about what I would see as differences. Look, similarities, when things pick up and there's momentum, we benefit from two things at the same time. One would be commodities movement, as we talked about distributors benefit from inflation. And at the same time, as customers get busy, there's a little less focus on price because customers are focused on getting product in the door to keep their plants running because the way they make money is getting product out the door and that's paramount. So I think, to me, those are similarities in the cycle that create a lot of opportunity for distributors.

In terms of differences, look, what I would say, and I don't know that it's a step function change this time, business gets harder. Each cycle, we talk about it, competition gets tougher. And I would have said this five years ago, I would have said it ten years ago, competitive intensity, we call it out as an ongoing headwind. So certainly, yeah, there's a digital web element to it. But, look, there's always -- competition gets tougher. And so it's harder and harder. You've got to be smarter and smarter to produce the same or better results. That's the biggest thing I'd call out.

Robert McCarthy -- Stifel Financial Corp. -- Analyst

Okay. And just in terms of just giving some insight into some viewer mail I'm receiving, I do think that the bears argument on the stock right here is basically that we are seeing -- and I want to get your response to this, just cutting through some of the more oblique questions that came on this call. Basically I think people are wondering or investors are wondering, whether you're having solid price increases and anecdotal news flow on that and realization, but really the question is are you potentially losing share in this environment. Now, you did call out the compare in December, you did call out the weakness in government, and obviously some of the other compare issues that we saw. But could you just level set us? Do you think you're losing share? Are you losing share in certain areas? Are you not losing share? Is it a timing thing? Just answer that kind of existential question.

Erik Gershwind -- President and Chief Executive Officer

Yeah. Look, Rob, I'm glad, if it's on your mind or on others' minds, I'm glad you just asked it outright. Look, no, we do not -- we're not losing share. What I will tell you, I think it works right now, given where the growth rate is, I think perhaps we're not taking as much share as we have historically. But a couple of important points here. No. 1 is, and when the growth rate looks great, we'll tell you the same thing as when the growth rate doesn't look great, which is we measure share movement over quarters and years, not months. Very dangerous to start making too much of individual months. The other thing is, the big thing I point to is, look, for the last few quarters, we've really been heads down, executing a bunch of sales effectiveness programs and at the same time bringing headcount down. We're through that. Getting through that was an important step for us. And if I look out and with a more effective sales force and with turning to expansion, I expect us to capture more share and I expect the growth to be back where you're used to seeing it historically from MSC in this environment.

Robert McCarthy -- Stifel Financial Corp. -- Analyst

Thanks for your time.

Operator

The next question comes from Hamzah Mazari with Macquarie Capital. Please go ahead.

Hamzah Mazari -- Macquarie Capital -- Analyst

Hey, good morning. Thank you. Just had a question around your supply chain and any further room to optimize that. I know late last year you had some lower inventory provisions but any thoughts as to sort of the supply chain and any room for improvement there?

Erik Gershwind -- President and Chief Executive Officer

Hamzah, just can you be more specific? When you say supply chain, can you be more -- I'm not sure what you mean by it? You speaking specifically on the inventory front?

Hamzah Mazari -- Macquarie Capital -- Analyst

Yeah, exactly.

Erik Gershwind -- President and Chief Executive Officer

Got you. Got you. Yeah. Look, I think the answer is yes. I think if you're referring to the increase in inventory this quarter, Rustom hit it, that we, when times are good, the balance sheet is a weapon for us. And I think what you're seeing is an opportunity to do some opportunistic buying and you're seeing us having pretty positive outlook on demand. So is there opportunity to increase inventory performance and turns? Sure. But what you're seeing this quarter is more about our decision to kind of, as Rustom said, use the balance sheet to our advantage.

Hamzah Mazari -- Macquarie Capital -- Analyst

Great. And then, Erik, you mentioned the sales effectiveness and bringing headcount down is behind you, maybe you can capture more share. At the same time, when we look at capital allocation and M&A specifically, you guys did a de-lever year since 2010 until you did Barnes, then there was a four-year pause, you did DECO. But given that some of this sales effectiveness and internal issues -- not issues. That may be a strong word. Internal initiatives are behind you. Can we expect some more M&A?

Rustom Jilla -- Executive Vice President and Chief Financial Officer

Hi, Hamzah. Yes, you probably can. We always have a funnel. And actually also in the context of the competitive moat that Erik talked about internally in the first thing. So we have a funnel. We continue to look at opportunities to strengthen metalworking and Class C. And additionally we will look for -- we do look for other product and service categories that stick to our strategy of being technical and high-touch. And having said that, the usual discipline that we bring to the M&A process and the selection will continue. We look at many, many more companies than, obviously, to make the one acquisition that we've made so far.

Hamzah Mazari -- Macquarie Capital -- Analyst

Great. Thank you.

Operator

The next caller today is Patrick Baumann with JP Morgan. Please go ahead.

Patrick Baumann -- JP Morgan -- Analyst

Good morning.

Erik Gershwind -- President and Chief Executive Officer

Hey, good morning.

Patrick Baumann -- JP Morgan -- Analyst

My question -- good morning. Quick question on customer mix. Just maybe talk to what you're seeing in the Core Accounts group, maybe back on Rob's question around market share and stuff. It still looks like it's growing slightly below the company average or maybe this quarter was at the average actually, mid-single digits. Just what do you think is driving the relative sluggishness there given the strong MBI readings that we've seen? And is it the growth here that you're really trying to reinvigorate with the sales force additions because National Accounts have been generally doing pretty well?

Erik Gershwind -- President and Chief Executive Officer

Yeah, Pat, so I'd hone in specifically, when you're talking about the Core, I'd specifically hone in on the manufacturing segment because that's the bulk of the Core. Again, I go back to part of the story in Q2 was December. So I'd move past -- we did feel like December was an outlier. It did turn out to be an outlier, looking at January, February, March growth rates. So what I would say is, looking past December, what you have is -- most of it is a bunch of segments that are actually performing quite nicely within the manufacturing realm. Automotive, aerospace would be an example. Machine and equipment building, that was one where we saw a big drop off in December, as we had talked about in the last call. And we saw it back to growing at least at average.

The one I'd call out that we did mention last time is what we refer to as fabricated metals. It includes a number of different metal cutting smaller shops. It includes firearms, would be one example of a sector that's severely down within fabricated metals. So if I look at the manufacturing universe, I feel pretty good about most. That would be the one I'd call out. Certainly in the case of firearms, we know why. But fabricated metals would be the one to point to that's been lagging. The rest are at or above company.

Patrick Baumann -- JP Morgan -- Analyst

Got it. And then maybe on CCSG, just looks like the growth rate moderated a bit versus what was a really strong first quarter. Anything to note there, what's going on there?

Erik Gershwind -- President and Chief Executive Officer

No. Still strong performance. Good outlook. I wouldn't make too much of it. We don't.

Patrick Baumann -- JP Morgan -- Analyst

Got it. Got it. And then not to beat a dead horse on the sales force stuff, but just in terms of how do we think about the potential impact on incremental margin, maybe just in terms of how much productivity have you been getting from sales force effectiveness initiatives that might now get dented in the short term, if at all, from adding heads?

Rustom Jilla -- Executive Vice President and Chief Financial Officer

We've been getting a fair amount of productivity and part of it is bringing the CCSG teams together with the MSC legacy teams, sales and service. We've been reorienting the way we run our sales and service. We've been deploying several tools, data mining, stuff like that. I mean, all of that continues. And that productivity, by the way, has been enabling us to drive our -- has been helping us drive sales growth in the last year or so even with sales and service headcount dropping. And going forward, you would expect the productivity to continue. So I think Erik said it and he has said it, but it's the combination of as we start to gradually increase heads as we turn the corner over the next several months and that, plus the continued productivity, should help us.

Erik Gershwind -- President and Chief Executive Officer

And the only thing I'd add is that, in terms of the sales expansion, still looking out, again, too early to say for '19. So for 2018, virtually no impact on OpEx. As you look out to 2019, certainly some impact from the incremental heads. But Rustom had hit it that it's too early to give guidance for 2019, right? But at this point, with what we see today, no reason to believe that we wouldn't be in our stated incremental range of 20% to 30%.

Patrick Baumann -- JP Morgan -- Analyst

Okay. Helpful. Thanks a lot, guys.

Operator

This concludes our question-and-answer session. I would now like to turn the conference over to John Chironna, Vice President of Investor Relations and Treasurer, for any closing remarks.

John Chironna -- Vice President of Investor Relations and Treasurer

Thanks again, Anita. So our next earnings call, our Q3 earnings, is set for July 11th. And we certainly look forward to either seeing you on the road or speaking to you over the next few months. Thanks again, everyone.

Operator

This conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Duration: 61 minutes

Call participants:

John Chironna -- Vice President of Investor Relations and Treasurer

Erik Gershwind -- President and Chief Executive Officer

Rustom Jilla -- Executive Vice President and Chief Financial Officer

Evelyn Chow -- Goldman Sachs -- Analyst

Ryan Merkel -- William Blair -- Analyst

Adam Uhlman -- Cleveland Research Company -- Analyst

Ryan Cieslak -- Northcoast Research -- Analyst

Robert Barry -- Susquehanna International Group -- Analyst

Scott Graham -- BMO Capital Markets -- Analyst

Matt Duncan -- Stephens -- Analyst

David Manthey -- Robert W. Baird & Co. -- Analyst

Robert McCarthy -- Stifel Financial Corp. -- Analyst

Hamzah Mazari -- Macquarie Capital -- Analyst

Patrick Baumann -- JP Morgan -- Analyst

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