Overview

Global Industrial Company is a value-added distributor and source for industrial equipment and supplies in North America. The company specializes in providing maintenance, repair and operations (MRO) solutions to businesses of all sizes, as well as the public sector. Global Industrial sells products manufactured by other companies, some of which are sold under the company’s own exclusive brand names.

In April 2025, Global Industrial completed the acquisition of an equipment service provider for $4.3 million. This acquisition expanded the company’s value-added offerings in certain key equipment categories.

Operating Conditions

The industrial products distribution market in North America is highly fragmented, with multiple distribution channels. It is a capital-intensive business, requiring significant costs for warehousing, inventory management, and personnel. To supplement its on-hand inventory, Global Industrial maintains relationships with major distributors and manufacturers, using a combination of stocked and drop-shipped products.

The primary components of Global Industrial’s operating expenses are employee-related costs, marketing expenses, and occupancy costs for its distribution and call center facilities. The company continually assesses its operations to ensure efficiency, alignment with market conditions, and responsiveness to customer needs.

Business Outlook

In the third quarter of 2025, Global Industrial generated revenue of $353.6 million, an increase of 3.3% over the same period in 2024. This was driven by strong sales to the company’s largest strategic accounts, partially offset by a reduction in sales to smaller, more transactional customers.

Gross margin increased by 160 basis points to 35.6%, benefiting from proactive price management and overall freight cost management. The company also saw a timing benefit from the flow-through of pre-tariff inventory in the period. However, management expects increased margin volatility in future periods due to the timing of on-hand inventory, inflationary pressures from tariffs, and efforts to diversify the supply chain.

Selling, distribution, and administrative (SD&A) expenses increased as a percentage of sales, primarily due to higher variable compensation and stock-based compensation costs. The company expects SD&A to be further impacted by costs related to integrating the Indoff acquisition and ongoing IT control remediation.

Overall, operating margin increased by 90 basis points in the third quarter and 100 basis points year-to-date, driven by the higher gross margin and continued cost control, offset by the increased variable compensation expenses.

Critical Accounting Policies and Estimates

Global Industrial’s significant accounting policies include revenue recognition, inventory valuation, and valuation of intangible assets acquired through business combinations. These policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates.

The company’s accounting and reporting is subject to the requirements of various authorities, including the Financial Accounting Standards Board (FASB) and the Securities and Exchange Commission (SEC). Global Industrial monitors these pronouncements and assesses their applicability to the company’s operations.

Financial Highlights

Third Quarter 2025 Financial Summary:

• Consolidated sales increased 3.3% to $353.6 million
• Consolidated gross margin increased to 35.6% from 34.0% last year
• Consolidated operating income from continuing operations increased 18.5% to $26.3 million
• Net income per diluted share from continuing operations increased 9.1% to $0.48

Year-to-Date Q3 2025 Financial Summary:

• Consolidated sales increased 2.0% to $1.03 billion
• Consolidated gross margin increased to 35.9% from 34.5% last year
• Consolidated operating income from continuing operations increased 18.2% to $78.0 million
• Net income per diluted share from continuing operations increased 13.8% to $1.48

Results of Operations

Net Sales Global Industrial’s net sales increased 3.3% in the third quarter and 2.0% year-to-date, driven by strong sales to the company’s largest strategic accounts, partially offset by a reduction in sales to smaller, more transactional customers. U.S. sales increased 2.9% in the quarter and 1.9% year-to-date, while Canadian sales increased 10.8% in the quarter and 2.8% year-to-date (12.3% and 5.7% in local currency, respectively).

Gross Margin Gross margin increased by 160 basis points in the third quarter and 140 basis points year-to-date, benefiting from price capture, improved freight management, and quality initiatives that reduced freight claims and customer returns. However, the company expects increased margin volatility in future periods due to the timing of on-hand inventory, inflationary pressures from tariffs, and efforts to diversify the supply chain.

Selling, Distribution and Administrative (SD&A) Expenses SD&A expenses as a percentage of sales increased by 70 basis points in the third quarter and 40 basis points year-to-date, primarily due to higher variable compensation and stock-based compensation costs. These increases were partially offset by strong cost control and planned modest net advertising spend.

Operating Margin Operating margin increased by 90 basis points in the third quarter and 100 basis points year-to-date, driven by the higher gross margin and continued cost control, offset by the increased variable compensation expenses.

Interest and Other Expense, Net Interest and other expense, net from continuing operations was $0.2 million in the third quarter and $0.0 million year-to-date, compared to $0.0 million and $0.3 million, respectively, in the prior year periods. The fluctuations were primarily due to changes in exchange rates.

Income Taxes The company’s effective income tax rate increased to 28.0% in the third quarter and 26.4% year-to-date, compared to 24.3% and 23.7%, respectively, in the prior year periods. The increase was due to higher taxable income and an increase in non-deductible executive compensation.

Financial Condition, Liquidity and Capital Resources

Global Industrial’s primary liquidity needs are to support working capital requirements, fund dividends, capital expenditures, inventory purchases, technological investments, and potential acquisitions. The company relies on operating cash flow and its credit facility to meet these needs.

The company’s working capital increased by $35.3 million, primarily due to increased accounts receivable, cash balances, and inventory, partially offset by higher accounts payable and accrued expenses.

Operating Activities Net cash provided by operating activities from continuing operations was $57.7 million in 2025, compared to $34.6 million in 2024. This increase was primarily due to higher net income and higher non-cash items, such as stock-based compensation, partially offset by changes in working capital accounts.

Investing Activities Net cash used in investing activities was $6.3 million in 2025, primarily for the equipment service provider acquisition and capital expenditures for distribution facilities and technology upgrades. In 2024, net cash used in investing activities was $3.1 million for similar capital expenditures.

Financing Activities Net cash used in financing activities was $28.7 million in 2025, primarily for the payment of regular quarterly dividends. In 2024, net cash used in financing activities was $27.1 million, also primarily for dividend payments.

Global Industrial maintains a $125 million secured revolving credit facility that matures in 2026. As of September 30, 2025, the company had $122.1 million of available borrowing capacity under this facility.

Material Cash Requirements Global Industrial’s material cash requirements include non-cancelable operating and finance leases for facilities and equipment, totaling $139.2 million as of September 30, 2025. The company also has purchase and other obligations, primarily for employment, consulting, and service agreements, as well as $1.6 million in outstanding standby letters of credit.

Market Risks Global Industrial is exposed to market risks related to changes in U.S. and international interest rates, as well as changes in currency exchange rates, particularly the Canadian dollar. The company may enter into foreign currency options or forward exchange contracts to limit the impact of certain currency fluctuations, but had no outstanding contracts as of September 30, 2025.

A hypothetical one percentage point change in average interest rates is not expected to have a material effect on the company’s financial position, results of operations, or cash flows.

Conclusion

Global Industrial Company delivered solid financial performance in the third quarter and first nine months of 2025, with increases in revenue, gross margin, operating income, and net income per share. The company’s focus on strategic accounts, proactive pricing and cost management, and continued cost control have contributed to these positive results.

However, the company faces potential challenges, including increased margin volatility due to factors such as tariffs, supply chain diversification, and integration costs related to the Indoff acquisition. Global Industrial remains committed to its customer-centric strategy, leveraging its industry expertise and product offerings to meet the needs of its diverse customer base.

Overall, the company appears to be in a strong financial position, with ample liquidity and the ability to fund its growth initiatives and capital requirements. Investors will likely be closely monitoring Global Industrial’s ability to navigate the evolving market conditions and maintain its operational and financial performance.