Welcome to the 2Q 2021 earnings conference call. My name is John. I'll be your operator for today's call. At this time, all participants are in listen only mode. Later, we will conduct a question and answer session. If you do have a question, press star then one on your touchtone phone. Now I'll turn the call over to Vice President, Marketing and Investor Relations, Brad Wise. Mr. Wise, you may begin. Well, good morning, welcome to NOW Inc.'s 2Q 2021 earnings conference call. We appreciate you joining us, thank you for your interest in NOW Inc. With me today is David Cherechinsky, President and Chief Executive Officer, and Mark Johnson, Senior Vice President and Chief Financial Officer. We operate primarily under the DistributionNOW and DNOW brands, you'll hear us refer to DistributionNOW and DNOW, which is our New York Stock Exchange ticker symbol, during our conversation this morning. Please note that some of the statements we make during this call, including the responses to your questions, may contain forecasts, projections, and estimates, including but not limited to comments about our outlook for the company's business. These are forward-looking statements within the meaning of the U.S. federal securities laws based on limited information as of today, which is subject to change. They are subject to risks and uncertainties, and actual results may differ materially. No one should assume that these forward-looking statements remain valid later in the quarter or later in the year. We do not undertake any obligation to publicly update or revise any forward-looking statements for any reason. In addition, this conference call contains time-sensitive information that reflects management's best judgment at the time of the live call. I refer you to the latest Forms 10-K and 10-Q that NOW Inc. has on file with the U.S. Securities and Exchange Commission for more detailed discussion of the major risk factors affecting our business. Further information, as well as supplemental financial and operating information, may be found within our earnings release on our website at ir.dnow.com or in our filings with the SEC. In an effort to provide investors with additional information relative to our results as determined by US GAAP, you'll note that we also disclose various non-GAAP financial measures, including EBITDA excluding other costs, sometimes referred to as EBITDA, net income excluding other costs, and diluted earnings per share excluding other costs. Each excludes the impact of certain other costs, and therefore have not been calculated in accordance with GAAP. A reconciliation of each of these non-GAAP financial measures to its most comparable GAAP financial measure is included in our earnings release. As of this morning, the investor relations section of our website contains a presentation covering our results and key takeaways for the quarter. A replay of today's call will be available on our site for the next 30 days. We plan to file our second quarter 2021 Form 10-Q today, and it will also be available on our website. Now, let me turn the call over to Dave. Thanks, Brad. Good morning, everyone, and thank you for joining us. The second quarter marked another strong quarter for DistributionNOW. From a top-line perspective, while global rigs in the quarter were unchanged compared to the same quarter in 2020, our revenues grew 8%. Sequentially, global rigs increased 2% and our revenues grew 11%. Gross margins on the back of 1Q21 record highs and against our expectations of a modest contraction due to increased project activity and downward pressure from Canadian breakup, gross margins again reached a new high of 21.3%. It's easier to grow revenues by conceding price. It's harder to grow the business and improve gross margins at the same time, yet we did so for a second consecutive quarter. Moreover, 2Q 2021 marks the third sequential quarterly market expansion since the 3Q 2020 bottom, where U.S. rigs had declined by two-thirds from the first quarter of 2020. The spending discipline exhibited by our customers, which limits their purchases and in turn our revenue opportunities in the short term, also moderates the extreme volatility we experience through the cycles. Customer spending restraint curbs the feast or famine shocks our industry has experienced historically, enabling better inventory management and reduced product obsolescence, inevitably resulting from the wild swings a lack of spending discipline creates. In 2020, our push was to recompose the company amid the steep decline in market activity. While we have work left to do to align our cost structure to our strategy and to the market, the focus in 2021 is prioritized around revenue retention, market share gains, end market diversification, and inorganic expansion. We believe the restraint exhibited by public operators lays the groundwork for expanded domestic rig activity for 2022, as E&P balance sheets improve this year, providing more opportunity to finance capital investment. This environment sets up well for DNOW if demand continues to recover. As part of the end market diversification strategy, we are tapping into municipal water and mining customers while targeting growing markets like carbon capture, renewables, and hydrogen tied to a shift in capital investment towards the energy transition movement. We are designing for the future, fueled by a strong balance sheet. We are leveraging technology, application know-how, and streamlined supply chain and technical process workflow to enhance our solutions and drive incremental sales of the products we offer to achieve levels of differentiation in the market. We are focused on delivering value to our customers and applying inventive solutions while diversifying our end markets. Now to a regional look. In the U.S., revenue was up $44 million sequentially, or 17%. U.S. energy revenue increased sequentially due to increases in drilling and completions activity. We expanded sales with E&P operators, driven by growth in spending by some of our largest customers, and due to rigs being added by private operators. Notably, revenue gains with private E&Ps outpaced sequential rig additions for public companies, as most publicly traded operators held to their capital discipline. In the Rockies area, we expanded our relationship with an independent energy company who uses CO2 captured from industrial resources that would have otherwise been vented into the atmosphere. In the DJ Basin, we expanded PVF market share with a regional independent on new facility construction projects, and in the Bakken, we provided PVF for several new tank battery builds for an Oklahoma-based independent oil producer. Other key wins included growing sales with a large regional operator in West Texas, providing PVF material for multiple projects and maintenance on a variety of facilities centered around tank batteries. In the Northeast, we delivered line pipe orders to regional gas utility customers, as well as PVF for wellhead hookups to gas operators in the Ohio Valley region. In the midstream sector, we provided valve solutions for a large regional petroleum products pipeline, leveraging a new valve supplier partnership targeting midstream liquids applications. In South Texas, we saw sequential growth from public and private E&Ps as activity ramped up producing orders for PVF for tank batteries and flow lines, while midstream companies acquired line pipe for gathering lines and actuated valves and fittings for transmission tie-ins. In the Southeast, we secured line pipe orders from an offshore marine transportation and logistics company, as well as provided fiberglass pipe for flow lines to a Haynesville shale operator. We captured revenue gains with our large integrated supply customers. Revenue was driven by increased winterization projects in the Bakken, plant turnarounds, day-to-day business associated with drilling programs, increased level of central tank battery builds, and large line pipe orders for gathering systems. For workover rigs, our workover trailers enabled our customers to maximize inventory availability and eliminate downtime associated with stock-outs, while using our mobile app to acquire MRO products that deliver cost savings and efficiency gains for the operator. At U.S. Process Solutions, revenue expanded sequentially with increased completions activity from drilling operations and DUC drawdowns, yielding higher demand for our fabricated engineered equipment packages, in addition to pump packages for fluid handling. We are seeing an increase in customer interest and order wins for our fabricated equipment solutions. Activity in the quarter was primarily focused in oil-producing regions, while diversified end market business was captured in the midstream and municipal water markets. Key wins included 15 production separators and vessels for the Powder River Basin for a large independent E&P operator, and multiple air compressor units as operators seek to eliminate the venting of gas from direct gas compression, replacing old compressors with much lower emission compressed air systems in an effort to support their ESG initiatives relating to lowering of greenhouse gas emissions. Our investment in digital solutions is bearing fruit. Using our eSpec engineered equipment configuration and budgeting tool, we were able to successfully secure an order for 90 air compressor units from a large independent E&P operator. eSpec enabled a richer contextual discussion with the customer, providing enhanced configuration and pricing options that added value through a compressed sales order cycle. On the packaged pumping unit side, we were successful in a variety of applications, including water handling, transfer, and treatment applications for non-oil and gas markets related to waste management and industrial water treatment. In the renewable space, we provided pumping solutions to geothermal power plants and also expanded into the recreational market, where we delivered water handling equipment for snowmaking applications at ski resorts. We deployed our pumping rental fleet assets for a regional operator in the Midland Basin used to protect child wells while parent wells are drilled to mitigate subsurface communication. With increasing flows of produced water, we expect operators to continue to turn on pump rental services to support the disposal capacity increases. As completions grow and saltwater disposal activity increases, the deployment of DNOW's mobile horizontal pumps will ensure the operational support that's needed when disposing of newly produced fluids. In Canada, the second quarter revenue was $51 million, a sequential decrease of $7 million, or 12% better than what we normally experience. Leveraging a new supplier relationship strengthened our value proposition in several focus areas for pipe, fittings, and flanges, or PFF, for a sourcing strategy that resulted in several key project wins. Building on the success of our sourcing initiatives, we established a new partnership on valves that increased our market competitiveness in several material types that produced wins during the quarter. This success is a direct result of strategic sourcing, where being selective and partnering with top-tier suppliers drives market share gains. During the quarter, we extended a two-year PFF agreement with a top 20 Canadian customer, expanding the agreement to now include valves. Another project win during the quarter included large actuated valves from an EPC for a major operator used in the bitumen extraction process in the oil sands market. With one of our top customers, we expanded market share in our artificial lift product line and captured a variable frequency drive automation project for our automation product line. We continue to capture market share through leveraging our service model and technical application support with EPCs, notably winning a large PFF project for an operator who we hadn't historically participated with in their day-to-day business. We renewed a key fiberglass pipe contract with a top customer and delivered flow lines and tie-ins to an oil and gas operator's mature oil asset. For international, in the second quarter, international revenue was up $2 million sequentially or 4%. Recoveries continue in Australia, Asia, and Latin America. In Australia, orders increased from a major offshore drilling company with several rigs contracted for a large domestic natural gas producer. In Singapore, we secured a notable project valve order for a refinery customer. In Asia, with the expansion of our electrical cable product line where we onboarded a new supplier, we generated new business to an industrial automation fabricator who produces assembly solutions for traditional and electric vehicles. In Latin America, we leveraged our valve solution offering for offshore producing assets from a Brazilian operator. In Europe, we were successful in extending a three year electrical MRO agreement with a large independent oil and gas company, and we secured a three year contract award for MRO material for a large gas producer in the North Sea. We won a valve and electrical project win in Europe that we'll start to deliver later this year for a state-of-the-art steam and power generation facility at an integrated refinery and petrochemical complex. This new business expands our end market diversification in the downstream sector internationally. Before I turn it over to Mark, I want to discuss a few points with regards to inflation and its impact on our business. We are seeing inflationary pressures on most of the product lines we offer, driven by a combination of tight steel and resin markets, exacerbated by tight labor markets and rising transportation costs while lead times continue to lengthen. Additionally, importers of finished goods and raw materials have been diligent in pushing through increased ocean transportation costs. Pipe prices began to increase in late 2020 and have continued to move higher. This has been caused by an increase in OCTG demand, the primary product pipe mills produce, and a tight scrap and iron ore market. Behind this, the broader steel markets have seen a rather dramatic increase in demand from all other sectors, such as the industrial and housing markets. U.S. inventories of products we provide were much higher than normal in 2020 and have come down substantially. This includes our manufacturer's raw and input material stock, as well as WIP and finished goods. The majority of our suppliers are still delivering reliably, but lead times have increased, and some gaps on certain products have become more prevalent. With that, let me hand it over to Mark. Thank you, Dave, and good morning, everyone. Total revenue for the second quarter of 2021 was $400 million, an 11% increase over the first quarter, outperforming our guided range of mid to high single-digit percentage growth. The U.S. revenue for the second quarter 2021 was $296 million, up $44 million or 17% from the first quarter on increased drilling and completions activity. Our U.S. energy centers and Process Solutions revenue were up 16% and 23% respectively, with U.S. energy centers revenue contributing approximately 80% of total U.S. revenues in the second quarter, relatively in line with the first quarter levels. Moving to the Canadian segment, Canada revenue for the second quarter of 2021 was $51 million, down $7 million or 12% from the first quarter due to seasonal breakup. International revenue was up to $53 million, an increase of $2 million or 4% from the first quarter, primarily from increased project activity. In addition to DNOW growing revenue 11% in the quarter, our gross margins improved sequentially 50 basis points to 21.3%. This increase was primarily from inventory charges declining sequentially from $5 million in the first quarter to $1 million this quarter, partially offset by lower product margins due to product mix and increased transportation costs. Inventory charges in general vary as a product of many factors, including customer demand changes both in volume and preference, the incline or decline in the market, specification changes on available products, actions taken to adjust our business model to support current and future activity. We continue the evaluation of our products and locations to align to the changing market conditions and our customer preferences, which could impact the level of inventory charges going forward. In the second quarter of 2021, warehousing, selling, and administrative expenses, or WS&A, was within our forecasted range at $85 million or up $6 million sequentially. Half of the increase is driven by the impact of the first and second quarter acquisitions. In addition, we had a sequential WS&A headwind from the non-recurrence of the first quarter $2 million bad debt credit from the collected aged receivable. With the remaining balance of the increase primarily driven by the resumption of certain discretionary costs and the reduction in COVID-related government subsidies. The second quarter government subsidies, which totaled approximately $1.5 million, are expected to continue their phase out through the second half of the year. This marks the fourth consecutive quarter we've improved our WS&A as a percent of revenue. Considering this and other actions underway, we expect WS&A to remain relatively flat into the third quarter as we continue to streamline our organization and invest in our strategy. Operating profit was breakeven in the second quarter as we realized favorable year-over-year operating margin flow-throughs across all three segments, driven by improved gross margins and our lower cost structure. Sequentially, the U.S. delivered 23% incremental flow-throughs to operating margins and a $3 million operating loss in the second quarter. In the second quarter of 2021, the international segment reported $1 million in operating profit, or 2%, and Canada delivered $2 million in operating profit, or 4% of revenue, despite facing the customary seasonal breakup headwinds. This is a notable improvement for the Canadian segment when compared to the second quarter of 2019, a period with double the revenue, yet produced lower operating profit dollars than 2Q 2021. The GAAP net loss for the second quarter was $2 million, or a loss of $0.02 per share. On a non-GAAP basis, net income excluding other costs was nil or zero per share. Non-GAAP EBITDA, excluding other costs, was a positive $6 million or 1.5% for the second quarter of 2021. We reported $6 million of depreciation and amortization in the period and expect similar levels in the third quarter. At the onset of the pandemic, we swiftly identified and implemented initiatives focused on transforming our operating model and maximizing customer service. The results of these actions can be recognized today in our financial performance as DNOW delivered 2Q EBITDA flow-throughs year-over-year of 70%, as we delivered 8% higher revenue year-over-year while reducing WS&A over 12%. To move to the balance sheet. At the end of the second quarter, we have a net cash position of $293 million, down $81 million from March, driven by the $90 million cash payment for our second quarter acquisition we discussed on our last call. Our debt position remained at 0 and included 0 draws in the quarter. Total liquidity, which is calculated as total availability from our undrawn credit facility plus cash on hand, was $528 million as of June 30, 2021. Accounts receivable ended at $271 million, an increase of $26 million from the first quarter, inventory ended at $250 million, substantially unchanged from the first quarter, with inventory turns reaching 5 times a quarterly best. Our accounts payable ended the second quarter at $217 million. As of June 30, 2021, working capital excluding cash as a percentage of our second quarter annualized revenue was 12.3%, with some of the working capital reduction attributable to the estimated fair value of contingent consideration, which is subject to change. We do expect this working capital ratio to revert some as we intentionally add working capital to grow the business. Our focus on working capital efficiency is reflected in a new quarterly best cash conversion cycle of 71 days. The primary driver for efficiency gains over the year has been increased inventory turns that help to minimize the cash needed to fund our sequential revenue growth of 11%. Free cash flow in the period was $7 million, reflecting net cash provided by operating activities of $8 million, reduced by $1 million in capital expenditures. When looking back over the last two years, we've generated approximately $350 million in free cash flow. We will continue our commitment to balance sheet management, make investments in good inventory, pursue strategic acquisitions, and maximize asset health to fuel the future. Our team is focused on profitable market share gains. We're actively deploying technology to augment labor content, automating and digitizing processes, and reducing infrastructure costs. We are intent on continuously developing a more agile business and increasing productivity. We continue into 2021 with optimism for the future, and we possess the talent, resources, and fortitude to grow our bottom line and create sustained value for our customers and shareholders. With that, I'll turn the call back to Dave. Thank you, Mark. Now a bit on how our DigitalNOW initiatives are impacting our business. In order to manage the scale of transactions and capture efficiencies across the procure-to-pay cycle, we offer our customers and suppliers a digital solution for catalog browsing, transacting sales orders, purchase orders, and invoices across the procure-to-pay process. Many of these processes are unique to the customer's ERP procurement system or involve the third-party middleware vendor, demonstrating the flexibility and tailored solutions our DigitalNOW platform provides our customers. During the second quarter of 2021, 43% of our SAP transactions are digital. We are leveraging technology to drive increased efficiencies across our business for our employees, customers, and our suppliers. As incremental transactions and revenue are captured and processed, they provide an increase in employee productivity and system efficiencies. We continue to increase adoption across our digital platform by adding new customers during the quarter. During our last few earnings calls, you heard us talk about eSpec and eTrack tools. As a refresher, eSpec helps customers select, configure, and create budgetary prices for 10 unique Power Service fabricated engineered equipment packages. Our tool automatically generates a real-time budgetary estimate, plus a detailed working bill of material, which is used to produce a formal quote. Last quarter, we introduced eTrack, our asset tracking that simplifies operators' asset management processes by geo-locating an asset, accessing specifications and engineered drawings, compliance certifications, and provides the ability to view maintenance and service work history information. For our customers, eTrack improves asset transfer timeliness and accuracy, while the inventory report facilitates asset audits. This simplifies our customers' inventory control process, makes cycle counting easier, and enables the tracking of assets in and out of holding yards as they become working assets. eTrack provides DNOW with a platform that enables our sales and operations teams the ability to expand and extend value to our customers within our materials management programs, improving our efficiency, expediting future service requests, and enables parts orders to expand after market sales. During the second quarter, we onboarded multiple E&P operator customers by identifying and logging hundreds of assets. Going forward, all engineered equipment packages shipped from our U.S. Process Solutions locations will be equipped with eTrack, giving customers the ability to more effectively manage their assets. By using our eTrack mobile app, customers have the ability to create service work orders and order parts through our shop.dnow.com e-commerce platform. As a final note, eTrack provides customers with a historical repository of asset record-keeping, thus leveraging technology combined with our engineered products, aftermarket service, and e-commerce platform for the life cycle of the asset. Now our view of the third quarter. Looking ahead, fundamentals in our business continue to improve with oil in the $67 range as global rig counts and completions are expected to grow. The summer months in North America usually set up the third quarter to be our most active quarter of the year. The impact on oil and gas demand due to the COVID Delta variant adds a degree of uncertainty as more stringent actions are taken to contain the spread. In the U.S., E&P companies could continue to add rigs, increase completions, and draw down DUCs. The growth in rigs, driven by private operators, expands the market for our products as we look to grow sales related to flow lines, gathering lines, and tie-ins. Demand for PVF and our fabricated and packaged engineered process solutions offerings increases as incremental production drives tank battery construction and increased saltwater disposal capacity. With the pullback in production throughout the pandemic, producers have seen midstream takeaway capacity open up, therefore delaying large capital transmission projects that would add incremental takeaway capacity. Canada emerged from breakup, and rigs are expected to grow sequentially at the current oil price. We have observed an increase in activity with several projects related to energy transition in the form of carbon capture and CO2 pipelines. We are working with our customers as they evaluate and budget carbon capture type projects to support their net zero carbon emission goals. Internationally, there are some cause for caution as countries grapple with an acceleration in Delta variant COVID cases. Economic growth in most countries could be metered as public officials consider more stringent lockdowns that will drive less consumption of energy. As OPEC+ manages supply additions over the near term and spare capacity returns to pre-COVID levels over the next year, we see a structurally supportive macro environment depending on the pace of economic recovery. Taking this into account, our view is that revenue in the third quarter will grow in the mid-single digit percentage range sequentially. Further, we expect to see sequential 2Q to 3Q 2021 EBITDA to revenue incrementals to be at the lower end of our historical 10%-15% flow-through range, as we expect gross margin compression in 3Q as inventory and freight charges may be higher than the second quarter and projects will serve as a pricing headwind in 3Q. With regards to mergers and acquisitions, working capital discipline continues to provide flexibility as we evaluate the list of opportunities in our pipeline. After two acquisitions closed so far this year, our position remains strong, with total liquidity ending the first half at $528 million, including $293 million in cash, zero debt, which provides maneuverability in the evolving energy space. We remain focused on M&A as a lever for inorganic growth, targeting accretive margin businesses that provide non-commoditized solutions that fit within our strategy. We continue our active engagement with several potential targets and are foraging for opportunities. We are focused on strengthening our Process Solutions product lines by adding companies which expand customer appeal, create competitive advantage, differentiation, and build barriers to entry for DNOW. Furthermore, we are evaluating businesses that help diversify our end markets to provide greater market differentiation for the company. In closing, I'd like to thank our employees and acknowledge their hard work, their dedication to serving our customers and supporting our key suppliers, for making safety a priority, and for their perseverance that has enabled the bright future that lies ahead. We remain focused on generating greater operating efficiencies while enhancing our differentiated offering to customers. Our size and scale strengthen our value proposition that customers can depend on as they navigate industry consolidation, supply disruptions, and the energy transition. With that, let's open the call for questions. Thank you. And now begin the question and answer session. If you have a question, press star then one on your touchtone phone. If you wish to be removed from the queue, please press the pound sign or the hash key. If you're using a speakerphone, you may need to pick up the handset first before pressing the numbers. Once again, if you do have a question, press star then one on your touchtone phone. And our first question is from Jon Hunter from Cowen. Hey, good morning, everyone. Good morning, Jon. How are you? I'm doing well. Thank you. First question I had is just on the revenue progression into third quarter and then fourth quarter, mainly on the U.S. side. I'm curious what is embedded in your revenue expectation in the U.S. for the third quarter versus your expectation for completions. As we move into the fourth quarter, it seems like E&Ps have been relatively disciplined, in their approach to capital spending this year. I'm wondering what you're expecting in terms of a seasonal drop off or a muted seasonal drop off in the fourth quarter. Okay. In terms of the third quarter, we're basically hearing from our customers what they expect to spend in that period. We expect a seasonal incline, like we've talked about. When we look at what they're forecasting for the third quarter, we're getting into that low to mid-single digit range, for our customers generally. We think we can make some further ground with the private E&P companies. That's been a big focus for us. They tend to be adding more rigs and doing more of the completions work. That's a target area for us where we're laser focused on picking up share from traditionally higher hanging fruit for us. We tended to focus on the larger customers historically. That's where we see our revenue shaking out in the third quarter. In terms of the fourth quarter, it's hard to say. We generally see a fourth quarter slowdown, especially in the month of December. At this point, it's hard to gauge that. We've seen rigs go up, for example, for almost every week for the last 50 weeks. Slow but steady growth. We're seeing product delays, especially in the pipe area now, which could combine with the normal seasonal dip we expect because we might not have the pipe available for the fourth quarter, which is a bigger product line for us in this period. We're not guiding to the fourth quarter. There's still a lot of uncertainty with COVID and its impacts, but it could go either way. It just depends on a variety of factors. Understood. Thanks for that, Dave. Then, shifting to margins. I understand there are some headwinds in the third quarter in terms of supply chain and perhaps some inflationary cost pressures. I'm curious as we look into the fourth quarter and perhaps into 2022, if you're able to quantify how much of a headwind those types of things are to third quarter. Then, as we look into next year, what's a more normalized type gross margin level we should be thinking about once these things are past us? Okay. In the short term, the biggest influencer in gross margins for us over the last five quarters has been inventory charges. Those tend to be higher in a downturn, which we are out of, and lower in a recovery, which we're in. In the first quarter, like Mark had said, we had $5 million in inventory charges. In the second quarter, they dropped quite a bit to the first quarter. That all depends on the timing of purchases, customers' product preferences, obsolescence, damaged products, et cetera. That's the number one impact. Freight has been a big impact to the second quarter, and it probably will continue into the third. I don't expect that to be a permanent impact. I do believe as a company, we're much more thoughtful about product acquisition, about inventory risk, about having what the customer needs, but not getting too heavy into speculative purchases. I think over time and into 2022, we'd see inventory charges, which like I said, was a big part of our gross margin variability being fairly low, especially compared to 2020. Especially compared to that. One thing that's been a positive for us in the last few quarters is inventory charges coming down. I expect that to persist. Freight charges, which were high in the second quarter, I expect that to continue into the third, maybe throughout the rest of the year, but that will ease and that will, I believe, correct itself. In terms of product margins, which is the main driver for gross margins, we remain very resilient across our product lines, including pipe. Now, pipe is growing as a% of our activity, and I expect it to grow into the third quarter as we see more projects. Pipe is a lower margin product relative to valves and fittings, etc. Those are kind of the puts and takes. In terms of where we would be next year, again, not guiding to 2022, but this 20.5+ range is a good bet. Maybe it could be better than that. We continue a process, which we've done for years now, where we focus on higher margin businesses, customers, product lines, etc. That continues. The acquisitions we made this year will have margins in excess of what we normally experience. The acquisitions we do later in the year, should we be successful, will continue that pattern. High-grading gross margins is a big focus around here. Exiting low-margin products, disfavoring them is part of that process as well. I see more upside in terms of gross margins, Jonathan. Thanks for that, Dave. I'll turn it back. Okay. Our next question is from Doug Becker from Northland Capital Markets. Morning, Doug. Thanks. Just following on the line of question about gross margin. As revenue starts to approach $2 billion, the changes you're doing in terms of mix and the efficiencies, is a 22% gross margin unrealistic off of a $2 billion revenue base? Well, I don't think it's outrageous. I think it's plausible. I think there are many things that would impact that. We're at 21, and like we alluded to in our opening comments, we do expect a little downward pressure in the third quarter because of the very low inventory charges. 22 is within the realm of possibility, of course. Again, I said we're very particular about, and if you look at the trend of gross margins for DNOW over the last few years, bringing that number up. Focusing on higher margin activity, and intentionally not focusing on lower margin stuff. We need to do that because we still need to pull cost out of the business, and Mark alluded to that as well. I do think 22% is in the realm of possibility, and it's a target for us, for sure. No, that makes sense. How does that play into the M&A opportunities? Obviously, looking for margin accretive, but any particular areas of focus? Well, the companies we're looking at, of course, our most important metric is how much earnings power they have. You could have a lower gross margin business, but very strong EBITDA. We would not walk away from those possibilities. Those could be dilutive to gross margins. Accretive to EBITDA margins. Of course, yes. Got it. Yeah. All the deals we're looking at, I believe, have gross margins in excess of where we operate today. That's not the main determinant. EBITDA percentages would be the main determinant, but we're focused on higher margin products, as kind of a mainstay of organic and inorganic opportunities. Just another really strong quarter on managing working capital. Last quarter, you were talking about trying to keep net working capital as a percent of revenue closer to 15%. Came in at 12.3% this quarter. How much of that was a function of maybe delays receiving some of the inventory? Should we still be thinking about inventories growing $30 million-$40 million over the course of the year? Well, I said it in my opening comment. I think a small part of it's due to delays in inventory, not a big part of it. I said it before, that if you look at our experience in 2020, our EBITDA for the year, I believe, was a - $57 million for 2020, the worst year in our history. We lost $57 million in EBITDA, and our inventory charges were $54. That tells us we need to be very smart about inventory. Mark told you earlier that we had a five turn in the second quarter. We've never had a five turn, I don't believe. We're focused on making sure that we can keep those margins high, keep those turns strong. We believe we were able to fulfill customer requirements in the second quarter and didn't have pent-up goods receipts issues. We do expect that to begin to trickle into the third quarter. We are finding some of the pipe we're ordering taking longer to get here, which could have a negative impact on the second half relative to the growth we've projected in the third quarter. We may start to feel a little bit on pipe and less so on the other product categories. In terms of our working capital percent of revenue at 12%, or 12.3%, which is a working capital turn of eight, we guided that to expand a little bit. That's just the function of collecting our bills as fast as possible, working with our suppliers in terms of paying a little bit later and being good at managing inventory, which historically we've been less than good. I still think 15%-20% working capital as a percent of revenue is a good range. But work- Dave? You're back. Okay, thank you. Are we on? Yeah. It wasn't the whole Arkadin system, it was just our line. Are we out there? Yes, you're back. I think I answered that last question. Sorry, we had some technical difficulties. Did you have any other questions, Doug? Doug, if you could re-prompt if you did have further questions. Yeah, feel free to adjust whatever you need. Okay, we have Doug back. Doug did. Yes. Sorry about that. No problem. Just wanted to tie a bow on that. Is 15%-20% of revenue still a reasonable target going forward? I believe so. Okay. That's it. Thank you. You're welcome. Sorry about the technical snafu. Okay. We have next is Nathan Jones from Stifel. Yeah. Good morning. This is Adam Farley on for Nathan. Good morning, Adam, or good evening, wherever you might be. Still morning out here in Denver. Back onto the gross margins and pricing, how accepting is the market of price increases associated with inflation? Do you think higher prices have impacted demand at all? Well, here's what we're seeing so far. Our customers, like we've talked about exhaustively, are very focused on cash maximization. That includes price of goods. We are getting pushback from customers on increasing price. We are seeing that. Now, so far, we've been able to push customers to substitutes, which would enable us to capture the sale, and to keep them interested in the transaction. We are seeing some customers push back. As lead times expand, we'll see less of that resistance from customers, because they'll be more interested in getting the product than paying a few pennies more than they had historically. There is a little pressure along those lines. Okay, that makes sense. Turning over to the WS&A spend, I believe you gave us a run rate outlook for 2021, but maybe longer term, how do you expect expenses to layer back in with growth? In 2020, we were very focused on resizing the business in a market that had shrunk by 70% in five months. You talk about the metaphor, catching a falling knife, and how difficult that is. We believe we caught that knife. I said two or three quarters ago that we're going to be circumspect, we're going to be thoughtful, we're going to be careful to preserve our position in the market. When you reduce your workforce by 45%, and when you close 50 out of 250 branches, you forgo revenue opportunities. Right now, we're focused primarily on growing the business, taking market share, and making smart inorganic purchases. We are secondarily, over a period of time, realize and are focused on modernizing our branches, relying more so on central distribution, where we can push more volume across fewer people, with better flow-throughs and better WS&A. Over time, that WSA number needs to come down relative to the current level of revenues. It is not just WSA needs to come down as a percent of revenue. The absolute value needs to come down, all other things equal. In the coming quarters, we are still working on a, I call it a migration to a centralized model. I call it migration because it takes some time. We will see those numbers come down in the future, but like Mark said, we expect them, at least for the third quarter, to be about where they were in the second. Thanks for taking my questions. You're welcome. We have no further questions at the time. I'll turn the call back over to David Cherechinsky's CEO and President for closing statements. I want to thank everyone for joining us today. Apologize for the technical snafu. We look forward to seeing you in a few months, and have a great quarter. Thank you, ladies and gentlemen. That concludes today's call. Thank you for participating, and you may now disconnect.