Good morning, and welcome to the third quarter 2021 DistributionNOW earnings conference. My name is Brandon, and I'll be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session during which you may dial star one if you have a question. I will now turn the call over to Vice President of Digital Strategy and Investor Relations, Brad Wise, and you may begin, sir. Well, good morning. Thank you, Brandon, and welcome to NOW Inc.'s third quarter 2021 earnings conference call. We appreciate you joining us, and 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, and 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. now has on file with the U.S. Securities and Exchange Commission for a 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 or 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 U.S. 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 the site for the next 30 days. We plan to file our third 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, and good morning, everyone. I'd like to begin this call with a big thank you to the thousands of DNOW women and men around the world who successfully connect the manufacturers we support to the customers who rely on us to power the world for a sustainable future. Things are challenging on many fronts. The COVID surge, labor and material shortages, elevated transportation costs, and changing political winds, among other things. Despite these factors, we performed very well. We've seen strong demand this quarter, especially in North America. Our service to customers has been exceptional. We are leveraging our scale, modernizing our geographic footprint, and demonstrating agility as we keep the customer at the center of every dollar we invest. Our goal is to always be in an advantaged position to help our customers achieve their goals and solve their problems. While the supply chain environment is stressed, we are confident in our skills to respond to the evolving dynamics. In the face of labor and material shortages, we are providing superior service and helping our customers minimize disruptions. We are investing in inventory to seize growth as the market expands further. While we navigate tight supply chains and labor shortages quite well, these disruptions impacted revenues a bit more in the third quarter of 2021 than in the previous quarter, especially in the area of steel pipe and for products in US Process Solutions. These trends seem likely to endure in the short term. To address these, we are leaning on technology, alternative supply sources, and branch initiatives to improve productivity and order fulfillment. The degree and pace of recovery is contingent upon COVID impacts, customer budget discipline, ESG initiatives, and availability of capital, labor, and products amid the lingering supply chain bottlenecks. We have taken action in a transforming market, one where we see a bright future for DNOW and our customers. Domestically, the public E&P spending abstinence has emboldened private E&Ps to spur operations, driving nearly 80% of the U.S. rig count growth in 2021. 3Q 2021 was a really good quarter, where we achieved 10% sequential revenue growth, beating our mid-single-digit revenue guide. We achieved a record quarterly gross margin percent that drove greater than forecasted flow-throughs on relatively flat warehousing, selling, and administrative expenses. Later, I'll close with how pricing and gross margins are driving our strategy. We delivered $15 million in EBITDA or 3.4% on $439 million in revenue. For context, looking back at another recovery year, for the full year 2017, DNOW generated more than $2.6 billion in revenues, but just $7 million in EBITDA during that full year. As a point of comparison, we generated $439 million in revenues in 3Q 2021, and more than twice the EBITDA dollars on 1/6 the revenues when compared to the full year of 2017. This is a significant achievement and a major pivot, allowing for greater incrementals, a leaner supply chain, and reduced inventory risk as a byproduct of our fulfillment model modernization. In the worst downturn in history, we acted quickly and adroitly. These achievements are a testament to our employees' hard work and our management team's focus and determination in strategic execution by resizing DNOW and reshaping our strategies for current and future markets. We achieved these results despite some of our revenue engines not firing on all cylinders. For example, projects in the U.S. midstream market have remained relatively muted. International growth continues at a slow pace as the pandemic impacts the demand for oil and gas, thus keeping some OPEC+ supply off the market. A number of carbon management energy transition projects are just in the early planning stages, where DNOW possesses a number of PVF and engineered solutions which offer future revenue opportunities. As one or more of these cylinders begin to fire and activity materializes, which I am confident they will, this will be an accretive tailwind to DNOW's revenues and bottom-line results. We believe this sets us up nicely for what we expect to be a much stronger 2022. Now some comments on a regional basis. In the U.S., revenue was up $16 million sequentially. U.S. energy revenue increased sequentially due to drilling and completion activity and favorable margin contributions, primarily from steel pipe inflation. The recent increase in land contracted drilling rigs was dominated by private oil and gas producers during the quarter, where DNOW is actively targeting customers and making positive inroads. We experienced broad product line sales growth across the U.S. as drilling, completions, gathering lines, and tie-ins were sold into the oil and gas producing regions. A notable portion of drilling programs are targeting well locations in proximity to facilities that have additional processing capacity, meaning a portion of our producer customers are spending lower CapEx per well site than they had historically, at least for now. Market share gains in the quarter include a major operator in the Permian, whose rigs remain flat sequentially, but revenue increased substantially from central tank battery builds. We expanded PVF sales through several EPCs for tank battery builds in the New Mexico-Delaware play. Also, during the quarter, with a focus on private operators, we executed several MSAs, which will open future growth opportunities for their Permian assets. We increased market share with PVF for facility builds for a private producer and several line pipe sales with a gas utility company. In the downstream sector, we provided PVF to several chemical processing companies for plant turnarounds and a major valve upgrade project at an inland refinery. In highlighting how customers are using our mobility-based technology solutions to drive point of sales efficiencies, we implemented a customer on-site inventory solution where customers access our DNOW app from their mobile phones to procure material. Customers can also connect with our local branch on the mobile app to place orders for pickup or delivery. Shifting to U.S. Process Solutions, revenue expanded sequentially from increased completions activity with drilling operations and DUC drawdowns yielding higher demand for our fabricated engineered equipment packages, in addition to pump packages for fluid handling. Engineered packaged units were delivered to the Permian, Eagle Ford, Rockies, Powder River, and Bakken plays. Products include a variety of ASME pressurized vessels, including heater treaters and separators and oil transfer skids. Activity in the midstream and water management markets is increasing as demand for LACT units, pipeline blending skids, and water transfer units increased during the quarter. In the downstream sector, we provided a number of pump packages in refinery applications located in the Northern Rockies and delivered a large order of valves tied to a soda ash mine project in Wyoming. On the municipal waterfront, we are seeing increased levels of quote activity for pump packages as projects in this end market begin to gain traction. On the aftermarket side, we are seeing demand pick up for our field service offerings on pumps and air compressors. Our field service work drives parts and labor sales, which deliver strong margins to our base distribution business. In Canada, third quarter revenue was $68 million, a sequential increase of $17 million or 33%, amid continued share gains and the market emerging from a seasonal breakup. Western Canadian Select heavy blend averaged CAD 57 a bbl for the quarter and is fostering bullish sentiment for increased CapEx budgets and project activity for key oil sands producers. In addition, with improved natural gas prices, the macro sets up well for more projects to drive conventional and midstream growth. Our preassembled kit packages for wellhead hookups and tie-ins led to notable gains in the quarter with many of our customers. Finally, we continue to see success with our valve and actuation product line, winning business with multiple EPCs we have targeted with a number of major E&P and midstream operators. For international, in the third quarter, revenue was up $6 million sequentially, or 11% to $59 million. International drilling activity is beginning to pick up as OPEC+ spare capacity begins to narrow as demand for energy increases. DNOW is positioned well in key areas to take advantage of increased drilling activity through a number of our drilling contractor frame agreements. Some notable international wins include delivering electrical, PPE, and MRO products on various project orders to a major oil and gas upstream operator in Iraq. In the CIS region, we were successful in receiving project orders for PPE in Kazakhstan, while obtaining notable wins for PFF with an EPC in Russia. In Indonesia, we provided valves to an EPC for a project at a downstream petrochemical facility. In Australia, wins include shutdown valves and spares for a major international oil and gas company, in addition to project awards for control valves for a major international gas producer. MacLean International delivered electrical cable for an onshore gas expansion project for an Australian-based engineering and construction firm, and an electrical cable order for solar panels to a customer in Australia. We've been busy securing future business by executing a number of key frame agreements for our electrical business that includes a three-year agreement for a major oil and gas producer operating in West Africa, and a five-year agreement with a global EPC. These agreements provide future opportunities to secure meaningful electrical products revenue as projects and MRO business accelerates. In Brazil, we delivered a large valve order from an EPC on an FPSO project producing for a major national oil company. We also leveraged our total valve solutions offering, including our digital valve asset management solution with an offshore Brazilian producer capturing valve orders in addition to notable wins from several offshore drilling contractors. Now I'd like to address the impact that global supply chain delays and inflation are having on our business. With our PVF product lines, we maintain a global sourcing strategy where we source from several preferred domestic and import manufacturers, which allows us the option to proactively manage our inventory availability to meet customer demand in times of supply chain disruptions. Our procurement and sourcing teams have done an excellent job ensuring high product availability during these logistical challenges. For steel pipe and some components that are assembled as part of our engineered process, production, and pump packages, we are experiencing product delays in some of our packaged offerings, pushing approximately $5 million-$10 million in 4Q 2021 orders into the new year. Moving to our DigitalNOW initiatives, in terms of our digital commerce channels, we continue to increase customer adoption, now eclipsing 44% of SAP revenue connected to our digital channels during the third quarter. We onboarded numerous B2B e-commerce customers across midstream industrial and service companies this quarter. We continue to work with our digitally integrated customers to further enhance their e-commerce experience by optimizing their product catalogs and developing customized workflow solutions through our shop.dnow.com platform. Our technical sales team and our U.S. Process Solutions business is leveraging our eSpec product configurator tool to capture revenue. During the quarter, we saw an increase of active users by 48%. Recently, we enhanced the user experience by incorporating three-dimensional imaging and the ability to view our packaged units in an augmented reality environment. This allows our customers to better visualize what the completed package would look like from a 360-degree vantage point. We are using eTrack, our asset management lifecycle tool, to improve the accuracy of customer-owned equipment counts, to enhance traceability, and reduce labor costs associated with required monthly yard reconciliations. We are using eTrack within our materials management customer engagements, enabling higher productivity and driving more value for both parties. Now I'd like to touch on a few comments related to energy transition. As we have seen during the third quarter, the elevated price of oil and gas is a result of increasing demand for energy on supply that requires continued investment to expand. For DNOW, we are a critical part of enabling our customers' ability to safely and efficiently produce and transport energy to market. The products we distribute, combined with our highly efficient supply chain services solutions, helps our customers achieve lower cost production when producing and transporting oil and gas. We are investing in expanding our solutions to help our customers reduce greenhouse gas emissions, as well as solutions around carbon capture, storage, transmission, and management. In the third quarter, we used our eSpec software to drive more meaningful conversations with customers to reduce greenhouse gas emissions, noting specific value tied to compressed air system solutions, which offer direct replacement of methane gas venting systems. In one example, we provided air compressors and dryer equipment packages to producers who are committed to reducing greenhouse gas emissions from gas pneumatic devices, replacing them with compressed air systems. This is a great example of how DNOW is able to improve our customers' ESG profile by helping them meet their emission reduction targets. Additional emission reduction solutions we offer our customers focus on upgrading pumps and pump seals to minimize leaks and greenhouse gas emissions and tankless tank battery designs. We are collaborating with producers on carbon dioxide direct air capture projects, as well as dedicated CO2 capture and transmission projects. We are excited about our core markets and equally excited about the emergence of new end markets, which enable DNOW to expand our top line into the future. With that, let me hand it over to Mark. Thank you, Dave, and good morning, everyone. Total third quarter 2021 revenue was $439 million, a 10% increase over the second quarter of 2021, outperforming our guided mid-single digit percentage growth. The U.S. revenue for the third quarter 2021 was $312 million, up $16 million from the second quarter into our highest level since before the pandemic on increased customer activity and significantly improved product margin contribution. Our U.S. Energy Centers and Process Solutions revenue channels were up 5% and 7% respectively, with U.S. Energy Centers contributing approximately 80% of total U.S. revenues in the third quarter. Moving to the Canadian segment, Canada revenue for the third quarter of 2021 was $68 million, up $17 million or 33% from the second quarter, as we successfully expanded our revenue in both the upstream and midstream space. Year-over-year revenue was up $26 million or 62% from the third quarter of 2020. International revenue was $59 million, an increase of $6 million or 11% from the second quarter, primarily from increased project activity. Gross margins improved sequentially 60 basis points to 21.9%. This increase was primarily from higher product margins as inventory charges remained relatively modest at $2 million in the quarter. Gross margin gains were fueled by the inflationary currents in the steel market, impacting line pipe and high steel content fittings and flanges. We also captured margin growth, albeit to a lesser extent, across our other product lines as we selectively migrate towards those products and solutions that provide the greatest value to DNOW. Inventory charges vary depending on the actions taken to adjust our business model to support current and future activity, including customer demand changes, both in volume and preference, the incline or decline in the market, and specification changes on available products. We continue to evaluate our products and locations to align to the changing market conditions, customer preferences, and our strategy, which could impact the level of charges going forward. In the third quarter of 2021, warehousing, selling and administrative expenses, or WSA, was relatively flat, up $1 million sequentially, with cost reduction initiatives not fully offsetting the waning government subsidies in the period. Third quarter government subsidies, which total less than $1 million, were down from almost $2 million in the second quarter, and we expect these benefits to continue to phase out through the fourth quarter. Considering this and other actions underway, we do expect WSA to remain relatively flat into the fourth quarter, and we are expecting modest decreases in WSA in the first quarter of 2022 as we see additional traction from our longer duration initiatives begin to bear fruit. Operating profit for the third quarter was $10 million, and we delivered favorable year-over-year operating margin flow-throughs across all three segments, driven by improved gross margins on reduced WSA. In the third quarter, we generated operating profit in all three segments, last achieved two years ago when our revenue was 70% higher. A strong indicator reflecting how well we are leveraging our lower cost base. Sequentially, the U.S. delivered 44% incremental flow-throughs to operating margins and a $4 million operating profit in the third quarter. This is a notable improvement for the U.S. segment as we continue to deliver more revenue across our cost base. In the third quarter of 2021, the international segment reported $1 million in operating profit or approximately 2% of revenue. Canada delivered $5 million in operating profit, 7% of revenue, with 18% incremental flow-throughs in Canada to operating margins as it emerged from seasonal breakup. GAAP net income for the third quarter was $5 million or $0.05 per share. On a non-GAAP basis, net income excluding other costs was $6 million or $0.05 per share. Non-GAAP EBITDA, excluding other costs, was $15 million or 3.4% for the third quarter of 2021. As noted in our improving results, we've been focused on continuously identifying and implementing initiatives to transform our operating model, increasing our value to customers and maximizing our customer service. The hard work and commitment from our employees can be seen today in our financial performance as year-over-year revenue expanded 35% on a significantly improved cost basis. We delivered 3Q EBITDA flow-throughs sequentially of 23% and 27% year-over-year. The high flow-throughs are a combination of higher product margins paired with our team continuing to create business efficiencies that enable greater revenue across our network. I will also point out, below operating profit and other expense for the quarter included approximately $1 million in expense related to the increase in the fair value of the estimated contingent consideration liability. As of the end of the third quarter, we have a net cash position of $312 million, up $19 million from the end of June. Total debt remained at zero and included zero draws in the quarter, with total liquidity, which is calculated as total availability from our undrawn credit facility of $248 million + cash on hand, equaled $560 million as of September 30, 2021. Accounts receivable were $299 million, an increase of 10% from the second quarter. Inventory was $244 million, down $6 million from the second quarter, with inventory turns now reaching 5.6 times a quarterly best. Accounts payable were $243 million, an increase of 12% from the second quarter. As of September 30, 2021, working capital excluding cash as a percentage of our third quarter annualized revenue was 10.6%. With some of the working capital reduction this year attributable to the $19 million in estimated fair value of contingent consideration, which is subject to change, and we do expect this working capital ratio to increase some as we intentionally fuel growth by adding working capital to grow the business. Our commitment to working capital efficiency is reflected in a new quarterly best cash conversion cycle of 62 days, marking five consecutive quarters of improvement. A primary driver for these working capital efficiency gains has been increased inventory turns, which help to minimize the cash needed to fund our sequential revenue growth. Free cash flow in the quarter was $22 million, and when looking back three years, we've generated approximately half a billion dollars, or more precisely, $486 million in free cash flow. We are committed to balance sheet management, making investments in good inventory, pursuing strategic acquisitions, and maximizing asset health to fuel the future. We celebrate the successful quarter with optimism for the future, and we possess the talent, resources, and fortitude to grow our bottom line, develop a more agile business, and create sustained value for our customers and shareholders. With that, I'll turn the call back to Dave. Thank you, Mark. Now a view on M&A and the fourth quarter. We remain focused on deploying capital to capture organic and inorganic opportunities for DNOW. Through M&A, we are targeting accretive margin businesses that provide non-commoditized solutions that fit within our strategy. We continue our active engagement with potential targets as we evaluate opportunities in our strategic areas of focus. One area of focus is on strengthening our Process Solutions product lines by adding companies which create competitive advantage, differentiation, and build barriers to entry for DNOW. Another area of focus is on businesses that help diversify our end markets to provide greater market differentiation. As you can tell, I'm excited that the company once again achieved solid results with better-than-expected sequential revenue growth of 10%, 1/3 consecutive quarter of record-breaking gross margins, and EBITDA excluding other costs of $15 million, well above expectations. Our strategic execution accelerated these results and generated $22 million in free cash flow in a period where we would have historically consumed cash. Looking near term at the fourth quarter, we typically see customer expenditures slow down due to a combination of budget exhaustion and reduced customer activity due to the holidays in November and December. This typically creates seasonal headwinds to sequential top line growth. Furthermore, shipping delays on imported products and a lack of product availability has the potential to delay revenues. Taking this into account, our view is that the revenue in the fourth quarter will be flat to down mid-single digits% sequentially as we experience seasonal headwinds that we don't expect to repeat into Q 2022. We anticipate full year 2021 EBITDA improvement over full year 2020 to be nearly $90 million, representing a fundamental shift in the capabilities of the company and its earnings potential. Again, laying the groundwork for a strong 2022. Looking ahead, we expect fundamentals in our business to continue to improve with global demand for energy improving and the supply of energy from oil and gas poised for growth after years of underinvestment. We are excited about 2022, especially as a number of industry analysts are forecasting double-digit growth in 2022 to what some have termed the beginning of a multiyear energy super cycle leading to sustained growth. Finally, I wanna close on gross margins and pricing, and really hit this point hard. We are very deliberate about high-grading our business, and by that I mean focusing on higher-margin manufacturers, businesses, product lines, locations, activities, end markets, and customers for a perpetual trek to improving product margins. Like every organization, we too have limited resources, so we must choose where we allocate our time and talent and treasures. We are picking suppliers, expecting partnership reciprocity, committing spend to them, honoring our commitments, promoting their brands, and deliberately promoting value. Focusing our inventory investment, focusing our precious human capital on higher-margin opportunities. Focusing our talent where the customer sees value, where the customer is willing to pay for the value we provide. Conversely, we're unfocusing and disfavoring lower-margin opportunities. There is no nexus in allocating precious resources, inventory, and human capital where the customer does not see value. I wanna highlight what this focus means to earnings. Product margins over the last six years on a per year basis were, from 2016 forward, 18%, 19%, 20% two years in a row as 2019 market activity declined below 2018 levels, 21% in 2020, and now 22% on a year-to-date 2021 basis. This is not accidental. This is not market-derived. In fact, many of these product margins gains were achieved in a period of deflation. This was intentional, an outcome wholly created by the women and men of DNOW, where our organization finds its place in the heart of customers where they see value, focusing our valuable resources on the right opportunities. Now couple that strategy on top of, on top of a much leaner, more streamlined business, and the result is durable earnings power greater than what we've been able to achieve in the past. With that, let's open the call for questions. Thank you, sir. We'll now begin the question and answer session. If you have a question, please dial star one on your phone keypad. If you'd like to be removed from the queue, please dial the pound sign or the hash. If you're on a speakerphone, please pick up your handset first before dialing. Once again, if you have a question, please dial star one on your phone keypad. From Benchmark Research, we have Doug Becker. Please go ahead. Thanks. Dave, I'd like to continue on the margin commentary, just maybe a little more insight into what you see for the fourth quarter, given the multiple moving parts. Then even longer term, last quarter, you were still talking about 22% being a target. Given this quarter's results, it certainly looks like a readily achievable target. Just maybe your latest thoughts on that and margins longer term. Yeah. Good morning, Doug. Thanks for the question. Yeah, I did say 22% is the target. I didn't expect to see margin appreciation like we did in the third quarter. In fact, we guided to some compression. We have our management team. You know, I tried to make the point towards the end of my opening comments. Like any family, any business, any organization, we all have limited resources. We have to make choices. As we migrate how we fulfill customer requirements, we task our resources pointed at the higher margin activity in everything we do. We're negotiating new deals with long-term customers, suppliers, long-term manufacturers. We're trying to get the best possible price. We're trying to give them all of our business so they understand the reciprocation. We're changing how we price things. In the past, a lot of people in our company had pricing authority. We're changing that so that we can maximize the delivery of the right products to our customers at a good margin. We're doing that across the board. We're buying companies with the companies we bought this year anyway with better gross margins, better expense as it relates to revenue. We're, like I said, disfavoring those at the other end of the spectrum. While 22% is a record for us, I don't see it as a floor yet because we did enjoy the benefits of pipe pricing. In a period like this where product availability is scarce, it comes down to allocating products to customers. If we can acquire it, and as a large oil and gas distributor, we have you know a better position in terms of product acquisition. We can command a higher price for having the product in the first place. So 22% remains our target. Can we build on that? I believe we can. It is an organizational effort that we pursue value for our customers. We meet them where they see the value in DNOW. We allocate our resources to those efforts and then not to those where they don't see the value. So I think the opportunity is for greater margins in the future. In the third quarter, however, we did see a benefit from pipe, and we could talk a little bit more about that as well. Well, lots of things that are certainly showing up in the numbers. Maybe just talking a little bit more about pipe and as it relates to just the fourth quarter, would you expect a little gross margin compression in the fourth quarter, just given revenues that might be flat to slightly down? Yeah. I think that's implicit in our guide because while we've been very good at fulfilling customer requirements, things are slipping a little bit in a few key areas. Again, we're working to fill those gaps and to make sure we can maximize customer service and product availability. But in the areas of steel pipe, you know, we're tapping all of our resources around the world, import and domestic pipe sources to acquire pipe. We are seeing some slippage in terms of product availability. That could mean better margins, but lower revenues. The mix, we'd see a mix issue there where our pipe sales could go down in terms of total sales, which would have a negative impact on margins. That's one reason why we might see some gross margin compression in the fourth quarter. Secondarily, we are seeking alternate sources and, you know, for fungible goods where alternatives are available, you know, we might seek a sourcing strategy where we buy from competitors or master distributors, and we pay a little bit more for the product. We get the revenue, but we see a little bit less in terms of gross margin. To answer your question, yes, we expect a little bit of compression. I have said that for a few quarters. I've been pleasantly surprised. I gave a little color on my opening comments about how we are seeing. You know, $5 million-$10 million in projects or orders that are slipping into the new year, basically due to waiting on products to arrive. Those tend to be our higher margin product lines. So, I guess the answer is yes, we will see some compression and likely due to those reasons. I see it as a short term margin compression. To your original question, I think we can get back into that 22% range into the new year. A final one, just can't help but notice the traction you're getting within valves globally. It's an area where you're targeting some acquisitions. Just any context about the current size and how big that business might ultimately become? I think in terms of our total sales today, valves discreetly represent about 20% of our business. There's also where we do kitting, and they're part of a project, and those valves may not be considered there. You know, to me, it's a matter of the right kind of valves and the right kind of profitability for the lines we carry. We see that as you know, one of the more. It's one of the few products we carry that, where there's a high brand preference for. We have, you know, very little brand preference for pipe and fittings and flanges. For valves, there's a brand preference there. If we get the right agreements with our suppliers, and as we grow our actuation and valve service business, we can see that continue to grow. We haven't set a size to that part of the business, but we see it as a big opportunity for us to manage a fleet of various competing valves out there to do valve and actuation services and, you know, to become more and more important to our customers in that process. Got it. Thank you. Thank you, Doug. From Cowen, we have Jon Hunter, please go ahead. Morning, Jon. Hey, good morning. Thank you. Morning. I guess to round out the discussion on 2022, I mean, it seems like you'll start the year at the 22% type gross margins. You alluded earlier in the commentary for double-digit type increases in the top line, I believe. You know, some of the larger OFS companies are talking about 20% increase in E&P spending next year in North America. I'm curious if DNOW agrees with that outlook, or is there a potential upside to that if you see market share opportunities? I know you're kind of actively targeting the privates, so that could be an area of opportunity. Yeah, if you could just speak to that would be helpful. Yeah. I think what we were saying in terms of 2022, of course, we're not, you know, prepared to give guidance on 2022, but there is a lot of optimism. You know, most people are talking about 10% growth or greater. Some of the numbers get into, you know, well into the teens. You know, we're not there yet, but there's two things there. I was pretty outspoken on the opening comments about this notion of limited resources and a focus on really cherry picking the highest margin, highest EBITDA margin opportunities in terms of product line focus. That could mean we move away some for some product lines, and that could be a headwind to revenues in the new year, but a boom to earnings at the bottom line. While I believe, and again, we haven't fashioned a budget, that 10% is probably a good starting point for the new year. You know, it could be materially stronger than that. You know, many things impacting that, of course. We're bullish on 2022, and I think we should see growth in that range for sure. Thanks. Thanks, Dave. That's helpful. Following up on that, you know, the WSA is kind of flat in the fourth quarter, and then, you know, there are some opportunities to reduce that in the first quarter of 2022. You know, do you think you can whittle that down to kind of an $80 million type run rate on WSA by the end of the year? Or, you know, what kind of context should we be thinking about for, you know, your target on the WSA line in 2022? Well, let me answer the question this way because growth will impact where that WSA line goes, if we're able to land some of the acquisitions we have on the table right now. Of course, all of that's gonna impact that. We have plans in place to, as we, you know, stand up our super centers in Casper, Wyoming and Odessa, Texas, in Williston, North Dakota, you know, three major investments across the spine of the U.S. oil field, we should continue to see improvements in our cost structure. As it stands right now, we expect to pull $12 million of expense out of the business at a flat level of revenues. That would, you know, potentially bring WSA down by $3 million a quarter. Now, if our growth is, you know, much higher than 7%-10%, then that'll change that WSA number. The greater the growth you or we might project will impact that WSA number unfavorably, right? That WSA number would be a little higher if the growth were stronger than we forecast. We do have efficiency measures that we'll achieve in 2022, and they're in the $12 million-$15 million range right now. Great. Thank you for that. Last one for me is the free cash flow in the quarter was impressive. You know, I was expecting a little bit of a working capital build. You actually released a little bit. Curious as you think about 2022 and, you know, your inventory needs, how should we be thinking about working capital consumption in the fourth quarter or perhaps early in 2022? Well, the biggest thing impacting whether we produce or consume free cash flow in the fourth quarter is the timing of receipt of goods. We have, you know, tens of millions of inventory on order, as we often do. You know, like I said, we're clamoring to get some of this product lines in here faster. Those would be offsets to free cash flow in the fourth quarter. Our current modeling shows that we'll generate cash in the fourth quarter. It'll be, you know, zero to a few million dollars probably. Now, last quarter, I think we said we would consume up to $30 million-$40 million in the second half of the year. You know, it could be that we produce $30 million in the second half of the year as it turns out. In the third quarter, we turned our working capital 9x on an annualized basis, which is unheard of for an inventory-intensive, accounts receivable-intensive company. You know, we sell goods to our customers on terms, and we have to invest a lot of inventory to generate the kind of sales we generate. We turned our working capital 9x. That's something that's gonna be hard to maintain. Likely we won't maintain it. But so that our working capital terms will get a little less great. But it's possible, and it's probably a good bet we'll be generating cash to some level in the fourth quarter. Could be, could be zero, but could be a little bit more than that instead of consuming cash like we had expected earlier on. Great. Thank you. I'll turn it back. Thanks, Jon. As a reminder, if you have a question, please dial star one on your phone keypad. And from Stifel, we have Nathan Jones, please go ahead. Good morning, everyone. Good morning, Nathan. Following up a little bit on the WSA commentary, Dave, you said obviously that WSA number is gonna depend on what growth is. Maybe you could give us a little bit more color on what kind of WSA you'd be looking to add back per dollar of revenue increase. You know, if you increase revenue by a dollar, do you need to add $0.10 of WSA, $0.05 of WSA? Any kind of color you can give us on that. Okay. I'll make a stab there. To me, every dollar of revenue should include no more than five cents in WSA. Again, I've said for many quarters that our expense or WSA as a percent of revenue remains too high. I've also said that once the market bottomed, that we were primarily focused on growing the business, on taking market share, on growing gross margins in a hotly contested competitive environment, and we're doing those things. I'm most urgently concerned about our position in the market and growing the business, and that could entail some additional expense. Expense as a percent of revenue in 2022 will go down. We're gonna be careful about not adding expense. I talked a moment ago about a plan to pull $12 million-$15 million of expense out of the business at current revenue levels. To answer your question directly, you know, $0.03-$0.05 for each dollar would probably be acceptable, but we also need to get our expense, you know, more in line with our targets long term. We take the $12 million-$15 million out once the super centers are stood up, and then from there, each dollar should add $0.03-$0.05 of WSA. If you're doing gross margins of, let's say, 21%, and you're adding $0.03-$0.05 back of WSA per dollar of revenue, does that mean we should be looking at kind of an upper teens incremental EBITDA margin as volume grows, adjusted for the initial $12 million-$15 million of super center savings? Historically, we have generated 10%-15% incrementals when we grow. To answer your question, those incrementals should be in the 15+ range. They should, you know, be closer to the high teens, especially in a period where we have product scarcity, which is a real boost to gross margins in the short term. Those incrementals should be in the teens and potentially in the high teens. Great. That's very helpful. One more. You've talked about the private guys really being the driving force behind the increase in drilling at the moment. What's your expectation around the public guys? I mean, I think historically private guys get in first, followed by the public guys, but the public guys have had religion forced upon them by investors when it comes to spending a lot of capital relative to previous cycles. Maybe you could comment on your expectations there as we go forward. Well, like we've seen for the last few quarters, I do think the privates will be first in and doing more of the drilling. We, you know, we would like to see that change a little bit in 2022. I don't know that it will. It probably won't. We'll still see the privates driving the drilling investments anyway. We like the bigger guys because the risk profile is different. We've historically focused on the Shell and the Chevron and the Occidental and the big companies because our risk level is different. On the smaller private companies, you know, we have to be very careful there, and we're making nice inroads there, but the risk profile is different. You know, I think everyone's gonna spend more money next year. It's hard to gauge though because especially the public companies are very disciplined, you know, to a degree we've never seen before. That'll hurt us in the short term because, you know, as oil prices are in the $80 range, we think our customers would normally spend more at this time in the cycle. It'll help us a lot in the long term, as we won't see the kind of volatility due to the sloppiness we've seen in the past. I think it'll be more privates, but we're, you know, waiting to see what our customers are gonna put in their budgets, and we'll, you know, shape our focus accordingly. Great. Thanks for taking my questions. Thanks, Nathan. Thank you. Ladies and gentlemen, we've reached the end of our time for the question and answer session. I will now turn the call over to David Cherechinsky, CEO and President, for a closing statement. Well, I'd like to thank everyone for calling in today. Thanks for taking the time. Thanks for your interest in DNOW, and I look forward to talking to everyone in early 2022. Have a good day. Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for joining. You may now disconnect.