Welcome to the NOW Inc. fourth quarter and full year 2021 earnings conference call. My name is Cheryl, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. If you have a question, please press * then one on your touchtone phone. I will now turn the call over to Vice President, Digital Strategy and Investor Relations, Brad Wise. Mr. Wise, you may begin. Thank you, Cheryl. Good morning, and welcome to NOW Inc.'s fourth quarter and full year 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 the outlook of 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 our latest Forms 10-K and 10-Q that NOW Inc. 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 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 U.S. GAAP, you'll notice 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. In an effort to better align with management's evaluation of the company's performance and to facilitate comparison of our results to those of peer companies, beginning in the fourth quarter and full year ended December 31, 2021, EBITDA excluding other costs excludes non-cash stock-based compensation expense. Prior periods presented have been adjusted to conform with the current period presentation. Please refer to a reconciliation on each of these non-GAAP financial measures to its most comparable GAAP financial measure in the supplemental information available at the end of 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 and full year 2021. A replay of today's call will be available on the site for the next 30 days. We plan to file our 2021 Form 10-K today that will also be available on our website. Now, let me turn the call over to Dave. Thanks, Brad, and good morning, everyone. On our earnings call one year ago, as we were emerging from a year when the industry had experienced the worst market conditions, DNOW responded swiftly and resolutely to defend its bottom line and lay the groundwork for prosperity in the future. We believed then that the market and our customer spending habits had fundamentally changed, demanding decisive action to redefine our supplier, sales, and customer engagement playbook and adjust our operating model to thrive as the economy began to recover. Downturns motivate change, and I sit here this morning amazed at how the highly talented, caring, customer-focused women and men of DNOW have not just embraced but have driven it. The results of our decisions these past two years are evident, not only in the night and day improvement in financial performance, but in the competence, enthusiasm, and confidence in our team that provides superior solutions our customers crave in a supply chain stressed environment. During the first quarter of this year, we began operations at our new Permian super center in Odessa, Texas. This facility expands our position and investment in the heart of one of the busiest oil-producing regions in the U.S. With the formidable presence of our energy locations and the complementary asset strength of Odessa Pumps, FlexFlow, Power Service, and TS&M Supply Fiberglass, strong, valuable, customer-appealing names fortifying our brand in Permian. During this quarter, we plan to open a new express center in the area to support our customers as their drilling plans ramp up. This location will be primarily supported by the super center as a means to regionalize fulfillment and drive efficiencies and deepen intimacy with target customers. Now moving on to our results. Fourth quarter revenue was down 2% at $432 million at the better end of our guide provided on the last call. For the full year of 2021, revenues were $1.632 billion. Compared to the prior year, 2020 revenue grew $13 million or 0.8%, which is notable considering the strong $604 million 1Q 2020 pre-COVID print that contributed 37% of total 2020 revenue. Said another way, ignoring the first quarter of each year, for the nine months ended December 31, 2021, revenue was up nicely by $256 million or 25% from the same period a year ago. In 4Q 2021, gross margins expanded again to a record high of 23.4%, up 150 basis points sequentially. This is the fourth consecutive quarterly record for gross margins. Full year 2021 gross margins of 21.9% set a record high as well. We are in an inflationary environment and we benefit from that. This performance was the result of a careful selection process where we have cultivated relationships with reputable suppliers who make good products and respect and reward reciprocity as we do. The more purchases we can corral and allocate to our supplier partners, the more we benefit in terms of product availability, return privileges and product costs. The more our customers benefit from availability in a stressed replenishment environment. Because we are selective about which product lines, businesses, locations and suppliers we'll support and customers we'll pursue, we are able to meaningfully improve product line pricing in the overall mix of product margins as we favor the more lucrative ones and elevate prices or pass on the less lucrative ones. Now some comments on a regional basis. For U.S., energy, customer capital discipline continues to be a major driving factor on our top line performance as public operators maintain production and return cash to shareholders. As we have commented on our previous calls, the behavior of the public operators has emboldened private oil and gas producers to lead the rig count growth. During the quarter, and similarly throughout 2021, we have continued to target and grow share with private operators by providing pipe, valves and fittings for the wellhead hookups and tank battery facilities. Mutual success continues with our integrated supply chain services customers as we deliver additional value-added services that help our customers lower lifting costs and deliver on their production plans. As an example, we're seeing gains in our workover rig materials management program in support of several key E&P producers on increased maintenance CapEx activity. Fueling growth into 2022, we secured several new PBF contracts in the quarter, including a large independent producer with assets in the Permian, as well as a direct lithium extraction business supply agreement for an operation that has potential to scale from the initial phase. In the Southeast, we received orders from an independent shelf Gulf of Mexico producer, whose flow line assets were damaged from Hurricane Ida last August. We also provided PBF for several compressor station repairs, also attributed to hurricane damage. We experienced an uptick in activity, securing orders for three well pad facilities in the gas-producing Haynesville area from a large independent producer. Sequential midstream sales grew, and we expect to see continued momentum as drilling and gathering systems increase midstream takeaway capacity utilization, driving more investment in midstream maintenance and CapEx projects. Our midstream customer spend has been more focused on natural gas and associated produced water projects, a pivot from previous quarters. In the Marcellus, Utica and Haynesville plays, we supplied well connect skid fabrication kits and launcher receiver packages for several gas producers. We supplied actuated valves on several NGL transmission line extension projects where we provide technical support on product applications and field service support for the mounting, testing, startup, and commissioning of our valves. We provided line pipe, actuator valves, and fittings and flanges for a number of gas utilities in the Midwest and Rockies. Shifting to U.S., process solutions, we observed some of our customers favoring drilling and completing infill wells that have been minimizing demand for our rotating and fabricating equipment due to existing transfer and processing capacity. However, we are starting to see increased orders as customer drilling programs shift to areas with less existing infrastructure. Some notable project wins during the quarter include pump rebuilds for a number of feedstock, process and transfer applications for a refinery in the Rockies, and we provided a mix of high alloy isolation and control valves for a Trona Mine project in southwest Wyoming. In the Powder River Basin, activity is beginning to recover as we supplied a number of three-phase separators equipped with valves and instrumentation for a large independent operator, as well as a saltwater disposal package for another E&P operator. Our instrument compressed air and dryer packages continue to experience high demand as operators replace gas pneumatic systems with compressed air systems to eliminate greenhouse gas emissions. In the Permian, we supplied a number of pipe racks, pump skids, and separators from our Tomball, Texas fabrication facility for a large operator and received a number of orders for new heater treater vessels and separators. We have been successful in expanding our hydraulic jet pump rentals, replacing ESP applications as operators gravitate to our solution, yielding improved performance on more flexible rental options. In Canada, we saw notable wins in the quarter with PBF orders for turnaround activity from a large Canadian oil sands producer, wellhead and injection packages in Southeast Saskatchewan from an Alberta-based producer, along with artificial lift products for maintenance CapEx work in Central Canada. We delivered several large actuated valve orders through an EPC for a private Alberta-based midstream operator. Our international segment experienced the most impact to revenue associated from delays in supply chain and labor availability impacts. Activity is increasing on smaller projects, which are beginning to gain traction as more rig reactivations occur in the Middle East. Furthermore, a number of the EPCs we routinely conduct business with are seeing an increase in project activity in bookings. Some notable wins in the quarter include delivering a large number of gate, globe, and check valves, power cables and accessories for a combined heat and power plant in the U.K., power cables and accessories for an upstream producer in Kazakhstan, and electrical bulks for an operator in West Africa. Also of note, we have provided pipe fittings and flanges for a project to an NOC in Oman, as well as a range of gate, globe, ball, and check valves for a gas processing facility in Kurdistan. Out of our UAE operations, we provided actuated valves to an EPC for a methanol reclamation unit for an Indian-based refinery and a triethylene glycol production project in Pakistan. We also provided valves for a produced water project in Iraq for an IOC and to an EPC for the Jurassic production facility in Kuwait. Our industry has been dealing with product inflation and impacts on product availability caused by shortages and delays in the supply chain. Our supply chain team has been focused on minimizing disruption by ensuring we have ample products available to support our customers. We leverage our global spend with suppliers to ensure we have preferred access to the volume available while balancing the risk and cost elements through a combination of domestic and import sources. Not only have we worked hard to obtain allocations, we have provided suitable alternatives to customers who increasingly depend on DNOW to find solutions that meet their requirements. This has resulted in several of our customers expanding their approved manufacturers list using DNOW's AML. We do have a bit of pipe inventory in transit, and pending timing of ultimate receipt, we may experience some challenges with pipe availability in the first half of 2022. Inflation continues for seamless pipe as both domestic and import prices were up during the quarter. Moving to our DigitalNOW initiatives, our digital revenue as a percent of total SAP revenue for the quarter was 42%. 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. We are leveraging eSpec, our digital product configurator for complex engineered equipment packages to advance our U.S. Process Solutions business. Over the past few quarters, in support of operators' need to reduce greenhouse gas emissions, this tool has helped many of our customers configure and spec air compressor and dryer equipment packages for replacement of gas pneumatic systems. Furthermore, a number of our customers' project teams use eSpec to help build and construct project bids while others are using it to size launcher and receiver packages for quoting. Finally, we have launched AccessNOW, a suite of automated inventory management and inventory control solutions for our customers. Our AccessNOW product include cameras, sensors, smart locks, bar coding, RFID, and automatic data collection solutions that enable our customers to better manage and control inventory without incurring the expense of a staffed inventory location. Now I'd like to touch on a few comments related to energy transition. In the U.S., Gulf Coast, we provided duplex stainless vane pump packages to a biodiesel refiner who converts animal fat to biodiesel, and fire water pumps for an electric truck vehicle manufacturer plant in Texas. In Canada, we won multiple orders for zero emission actuated valves through an EPC working on a carbon capture and storage project in Alberta, and from a producer drilling exploratory wells to extract helium for use in the high-tech industry end market. These successes highlight how a number of existing products we provide can extend to growth markets like carbon capture and high-tech industrial manufacturing. We continue to monitor and track an increasing number of energy transition projects. Our business development team has been working a variety of RFIs and RFPs for many customers pertaining to renewable diesel and gasoline, sustainable jet fuel, direct air capture, carbon capture and storage, hydrogen and CO2 transmission and storage projects. As we review bill of materials from the list of energy transition projects, we work with our manufacturer partners to secure access to broader ranges of suitable products that will service these expanding end markets. With that, let me hand it over to Mark. Thank you, Dave, and good morning, everyone. Fourth quarter 2021 revenue was $432 million, a 2% decrease from the third quarter, mainly due to the normal seasonal decline from holiday impacts and fewer working days at the better end of our guided expectation. The U.S., revenue for the fourth quarter 2021 was $303 million, down $9 million or 3% from the third quarter. Our U.S. Energy Centers contributed approximately 79% of total U.S., revenues in the fourth quarter. Sequentially, revenue was down approximately 4%, and the U.S. Process Solutions revenue was up 2% sequentially. Moving to the Canadian segment, Canada revenue for the fourth quarter of 2021 was $72 million, up $4 million or 6% from the third quarter. Year-over-year revenue was up $24 million or 50% from the fourth quarter of 2020. Canada's strong Q4 performance was propelled by improving demand in the Canadian energy market, paired with the value our customers see in DistributionNOW's model as a trusted and established technical solutions provider. International revenue was $57 million, slightly down sequentially with a decline of $2 million or relatively flat from the third quarter when considering unfavorable impacts from weaker foreign currencies relative to the U.S., dollar. International revenue increased 21% in the fourth quarter or $10 million compared to the same period of 2020. Gross margins improved from the third quarter by 150 basis points to 23.4%. This increase in gross margins came from several drivers in the quarter. About a third of the sequential gross margin basis point improvement, or approximately $2 million favorable, was attributable to lower transportation costs and lower inventory charges, each by approximately $1 million in the fourth quarter, with both expected to revert back towards the mean in the first quarter. So far in 2022, we see our transportation costs returning to the elevated norms, eroding some of the margin tailwind as we move into 2022. Another favorable impact on margins in the fourth quarter was driven by increased vendor consideration levels that we do not expect to repeat at the same level in the first quarter of 2022 as purchase volume level thresholds are reset. The final component of margin improvement came from pricing, with the inflationary currents, especially in line pipe and high steel content products, helping margins expand again in the quarter. We continue to capture margin growth, although to a lesser extent, across most of our other product lines as we selectively migrate products and solutions that provide the greatest value to DNOW and our customers. Warehousing, selling, and administrative expense for the quarter was $91 million, higher by $5 million sequentially due to strategic facility relocation and severance costs of $3 million, increased variable compensation resulting from much better financial performance than expected, and the early cessation of almost $1 million in COVID-related government subsidies, and our intentional investments in resources and people in an overstressed labor market to position DNOW for this growth cycle. We could see a similar reversal in the WSA build moving into 1Q 2022 as our fitness measures continue to bear fruit. When looking back to 2019, it is clear the Herculean effort carried out by our team to transform our model for durable profitability through the cycles is paying off as we've reduced our annual warehousing, selling, and administrative expenses by $200 million since 2019. Looking forward, we expect WSA to decrease in the first quarter, nearing our third quarter levels as we see these initiatives take hold across a higher revenue base. Impairment and other charges in the quarter, as disclosed on the income statement, were approximately $3 million. These primarily relate to the leased and company-owned facility exits in the period as we consolidated 15 facilities in the fourth quarter. GAAP net income for the fourth quarter was $12 million or $0.11 per share. On a non-GAAP basis, net income excluding other costs was $8 million or $0.07 per share. Non-GAAP EBITDA excluding other costs, or EBITDA, was $17 million or 3.9% for the fourth quarter of 2021. As Brad noted, our EBITDA reconciliation now and going forward adds back non-cash stock-based compensation expense in each of the periods presented. Stock-based compensation expense for each quarter of 2021 was $2 million. We've been focused on continuously identifying and implementing initiatives to improve our operating model and increase our value to customers. The hard work and commitment from our employees can be seen today in our financial performance. I wanna highlight that our fourth quarter 2021 revenue of $432 million or 35% higher than that of Q4 2020 had EBITDA flow-throughs of 39% or a quarterly EBITDA dollar improvement year-over-year of $44 million. These strong flow-throughs are a combination of our significantly improved inventory profile, higher product margins, and operational efficiencies that bring greater value to our customers and our bottom line. When looking at the full-year EBITDA, we transformed from a loss of $47 million in 2020 to delivering in 2021 positive EBITDA of $45 million or an improvement of $92 million in EBITDA over the past 12 months on a similar level of revenue. Clear proof of the tremendous efforts and actions our employees have taken as we delivered a meaningful shift in our company. I wanna thank our employees for this incredible feat that positions us well into this expected multiyear growth cycle. Another success in the fourth quarter that enhances our optionality into the future was our amendment to our undrawn senior secured revolving credit facility, which now extends through December 2026 and provides ample liquidity above our current net cash position of $313 million. Total debt remained at zero and included zero draws in the quarter, with total liquidity of $561 million, comprising of the $313 million of cash on hand, plus an additional $248 million in credit facility availability. Accounts receivable was $304 million, an increase of 2% from the third quarter, and inventory was $250 million, up $6 million from the third quarter, with strong quarterly inventory turns at 5.3. Accounts payable was $235 million, a decrease of 3% from the third quarter of 2021. As of December 31, 2021, working capital excluding cash as a percentage of fourth quarter annualized revenue was 11.6%. We do expect this working capital ratio to increase some as we intentionally fuel growth with product availability to support our customers. 2021 marks our fourth consecutive year of positive free cash flow. In the last four years, we've generated $480 million in free cash flow, and that is notable. For 2021, a year where the fourth quarter experienced 35% revenue growth or revenue growth of $113 million from our fourth quarter of 2020, we actually generated $25 million in free cash flow in the year 2021, a period that we would have typically consumed cash at that level of growth. We remain committed to balance sheet management, making investments in good inventory, pursuing strategic acquisitions, and maximizing asset health to fuel the future. We celebrate again the successful quarter with optimism for the future, and we possess the talent, resources, and strength 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 some comments on M&A. A top priority with respect to capital deployment continues to be on margin-accretive inorganic opportunities. Through M&A, we are targeting businesses that strengthen and expand our product, geographic or solutions offering to our customers and position the organization to take advantage of the market recovery and build on earnings throughout the business cycle. We continue active engagement with potential targets as we evaluate opportunities in our strategic areas of focus, notably for process solutions and differentiating product lines as well as the industrial markets. For every prospective deal, there are two parties involved, so getting to a conclusion takes time and finesse. With $90 oil and a relatively strong general economy, seller expectations are heightened. We are looking for durable and solid financial performance at the acquired company through the cycle, not just when the commodity prices are high. We are evaluating numerous opportunities in our pipeline and will continue to be selective and strategic in what we pursue and ultimately take across the finish line. Over the previous six quarters, oil producers have worked to reduce the global oil inventory surplus, achieved through the combination of North American E&P capital discipline and OPEC Plus supply curtailments. This behavior has led to higher commodity prices, improved balance sheets, and better financial performance for most of our customers. As their financial health improves, we anticipate additional CapEx investment to maintain and grow production. Increased activity will lead to more demand for our PVF products and engineered equipment packages as customers ramp up. I'm optimistic that the current recovery and pace will continue in driving higher demand for our products and services while delivering improved profitability. For our U.S., segment, I expect solid growth on a year-over-year basis as market fundamentals continue to improve. In Canada, we are well-positioned to take advantage of a continued recovery with commodity pricing providing motivation for producers to increase their budgets. We also expect growth in our Canadian business in 2022 on a year-over-year basis. We are seeing more activity in the energy space, providing lift to international projects. In the meantime, as our international segment has been slower to recover, we are adjusting our footprint while ensuring uninterrupted service levels. We expect to see growth in our international segment next year in 2022. Despite persistent logistics and product availability constraints and a slow start in 2022 due to a COVID surge in January and weather-related issues, we believe revenue in the first quarter of 2022 will be up in the mid-single-digit% range sequentially. WSA could revert to the 3Q 2021 levels in 1Q 2022, and we expect a near-term normalization of gross margins to approximate the full-year 2021 levels, which were 21.9%. On a year-over-year basis, we expect 2022 revenue to be up in the low- to mid-teens% range. We expect EBITDA-to-revenue incrementals in the high-teens% range for the full year 2022, driven by continued market expansion, solid gross margins, similar to the full-year 2021 levels cultivated in 2021. While COVID, geopolitical matters, and supply chain volatility create a fog deeper into the year, we believe revenue gains will be in excess of $200 million, and EBITDA in dollar terms could double in 2022. Now I'll close with a recap of where we are in the early innings of what we expect to be a prolonged market expansion. A year ago, we went into 2021 expecting a full year revenue decline given the strength of 1Q 2020 pre-pandemic revenue levels. Our focus was on cultivating a world-class sales team, evolving our fulfillment model to improve product availability and customer service, and to reduce cost per revenue dollar and mitigate inventory risk through the cycle. We worked to bias our efforts towards the top-line growth to focus our precious resources where the customer sees value and significantly improve earnings and free cash flow. Looking back, we outperformed our expectations on all accounts, from strong revenue gains to record gross margins, record inventory turns, record working capital turns, and now we're expecting to enter our fifth consecutive year of positive free cash flow in 2022, where we have historically struggled to do so in growth years. We closed the book on 2021 with a lot of pride. We enter 2022 pumped. I'm proud that we have zero debt, ample total liquidity for strategic flexibility to fund organic growth and to seize inorganic opportunities. I'm comforted that we don't have the cash strain from debt service interest payments. I'm excited about the transformation of our operating model and how our super center and regionalization initiatives will provide us continued opportunity to improve financial performance. I'm happy about our organizational skills and how we're helping solve the current supply chain challenges and bottlenecks our customers encounter. I'm excited about our ability to secure products or substitutes for them. I'm jazzed about how our employees and our customers understand the value we provide, and it's showing up at the gross margin line. I'm excited about our DEI efforts, about how we're on a journey of education and action with the diversity and inclusion, and how it will separate us as a company and a competitor. I'm proud of our leadership training and development programs and the opportunities for our employees to hone their skills. I'm proud of our innovation partnerships with key firms, where we're pursuing cutting-edge technology from experts to integrate into our business. I'm proud that we have the best sales team and the most conscientious, tireless, customer-focused operations people in the business. I'm excited about our employees earning bonuses and making DNOW a great place to work and prosper. Finally, beyond all the features, strengths, and accomplishments, we have incredible momentum here at DNOW. What I want our employees and their families to know is that we are shifting from a defensive, protective, and hesitant orientation to one of proactiveness, winning, pride, and excitement. We are building for our future. I want to specifically thank our sales team and our people in the field, and all those in front of customers who do everything they can each day to delight our customers, for making DNOW a premier destination our customers seek for solutions, and for the collective knowledge that will help us continue to win the market. We are where we are, and we are who we are because of you. With that, let's open the call up for questions. Thank you. We will now begin the question-and-answer session. If you have a question, please press star then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset first before pressing any numbers. Once again, if you'd like to ask a question, please press star then one on your touch-tone phone. Standing by for questions. Our first question comes from Nathan Jones from Stifel. Your line is now open. Yeah. Good morning. This is Adam Farley on for Nathan. Hi, Adam. Good morning. Hey, first on, gross margins. With inflation likely peaking in the first half, does DNOW expect to see gross margins peak with some pressure on gross margins as the year progresses, which would usually be typical as inflation moderates? Well, it depends on the product line in question. You know, one of the big product lines where we probably had the most success in terms of gains in gross margins, although we've had very broad price appreciation beyond pipe. Pipe is one where, you know, we still have pipe prices rising for seamless pipe, which is the primary pipe, steel pipe we sell, and that could, you know, be experienced further into the year beyond the first half. One of the issues, though, and I mentioned it in my opening comments, was the timing of receipt of products, you know, is not completely certain. We could receive some products later in the year, not just us, of course, but our competition and our customers. That could extend what we expect to see as a kind of a premium margin for that particular product line. We are seeing broad-based inflation continuing. To your point, Adam, that could kind of ebb, you know, midyear. But for pipe in particular, I don't know that that's the case. For a lot of the product lines we support, there are still some long lead times. You know, I think we've guided our gross margins very high for 2022. That's pretty much at the same level of 2021, where we saw four consecutive quarterly records. So it's a timing question in terms of receipt of goods. It depends on how strong our market is and when the inflection point occurs. I mean, I talked earlier about January starting off pretty slow, and I think things will get a little more hot here, and that should mean a little more scarcity issues in the first half and maybe lingering into the second half. Okay, that's helpful. Turning to exiting lower margin product lines. Where in the process is DNOW exiting lower margin business? Is there significant work still to be done, or is most of the heavy lifting done? Well, you know, we're well down that path, and I'll say it this way. To me, you know, we have areas, regions that have strong financial performance due to rig movements and customer budgets and customer consolidations, and those things all affect the success or the contrary for locations, product lines, customers, et cetera. That's always changing. To me, this is a gardening effort around making sure we're focused on the right things, making sure we apply limited resources to where we can make money for our shareholders, so we could prepare for the future and continue to grow the company. I just think it's an ongoing reality of business, no matter what business you're in, that you always have to kind of fertilize and weed and replant and, you know, kind of always, you know, situate the business where the, you know, sweet spot is in the industry. That's just an ongoing thing. In terms of major structural changes, you know, I think we're done there. You know, I think we're out of the cost reduction mode. We are in the kind of phase, you know, I call it a kind of fulfillment migration, where we do wanna regionalize most of our fulfillment to major centers of opportunity, like we're standing up in Williston and in Houston and Odessa and Casper, et cetera. We want those to be high volume locations with well-trained people focused on one thing, that's taking care of the customer, whether it's walk-in business, everyday business, large projects, speculative activity. We want that to be regionalized. We want top talent managing that, those supply chains, and we want, you know, more kind of nodes or express centers or small local locations being intimate with the customer. I see that's still happening, but it's kind of speeding up right now, and I'm real excited about it. Okay. That makes a lot of sense. Thanks for taking my questions. You're welcome. Thank you. As a reminder, if you would like to ask a question, please press * then one on your touchtone phone. Our next question comes from Tommy Moll from Stephens. Your line is now open. Morning, and thanks for taking my questions. Good morning, Tommy. Dave, I wanted to start on WS&A. Sounds like the guidance is pretty clear for first quarter, maybe in the range of third quarter from last year. I wonder if you can just refresh us on the higher level philosophy here. I think last quarter you said, for every dollar of revenue, you're looking at $0.03-$0.05 of incremental WS&A. If you could just refresh us on that and give us any signal of how that expense line might progress sequentially throughout the year, that'd be helpful. Sure. I think on the last call I said a few things that we still have a list of projects we're working on to improve efficiency of the business. I said that we had a plan to reduce WSA in the 12-15 range in 2022. As you said, I also said that, you know, for each incremental revenue dollar above what last year's level, we'd add $0.03-$0.05 in expense offsetting those reductions we're making. In the meantime, especially in the last several months, I think it's been over 100 days since we talked to the public, the impacts of you know, on one hand, we benefited quite nicely. I believe most of it's our cultivation strategy and focusing on the right things from improved pricing. That comes from product inflation, product scarcity, lack of availability, and of course, we experience that in the labor market as well. That's kind of a new layer of attraction and retention costs that we experience that's layered into our guidance for 2022. Our philosophy is to significantly bring down WSA as a percent of revenue, to continue down a path of improved efficiencies. From 2021 to 2022, we'll probably reduce WSA by at least 200 basis points as a percent of revenue. Like I've said for several quarters, we are in a build mode. We're in a growth mode. We are prioritizing growth over cost containment. We are, you know, like I said in the answer to the last question, we're focused on changing our model, and we're really making good headway on that path. We did kind of guide the first quarter to around $86 million. It gets a little murky going forward because although we guide to it, I think, very tightly in our overall guidance on flow-throughs and revenues, et cetera. You know, we're gonna be focused on having the best people in the business. We're focused on beating the competition. We're focused on growth. We're focused on higher margins and cultivating new business and biasing those efforts towards higher margins costs a little more. That percentage as a% of revenue will come down. Our projects to pull costs out of the business are underway. We are also, like I said, we're standing up a location this quarter. We're investing in new super centers for the future to grow the business, and those will be kind of offsetting costs. We understand how important it is to be lean. That'll help us in good times and bad, and we're still going down that path for sure. Just as a follow-up on your super center comment there, Dave. You are in a growth market now, and you know, you pointed out you'll get increasing leverage on the WS&A line notwithstanding you're investing there. I'm curious the philosophy when you green light those investments, like what you just called out on the super center. What are the set of conditions you wanna see to have the confidence to move forward and make that incremental investment? That's a great question, Tommy, and I think I could answer for you. So for example, the Permian Basin, which to me, DNOW has a really strong position in the Permian Basin. Not just from our standard branch business, which we're evolving, but from, like I said, FlexFlow, Odessa Pumps, TS&M Supply Fiberglass, and Power Service. We've got a really strong presence there with great brands. And we think we have, you know, a real good position. Now, in the last quarter, in the fourth quarter of 2021, we consolidated 10 locations in the Permian into 5, in one part of the Permian. We think from that we'll have more inventory for our customers. We'll be able to manage projects from fewer locations, from people who deal in volumes where we can get the expense per revenue dollar down. We won't have distributed inventory risk, what I call when you have inventory strewn about a network, kind of exponential inventory risk. You'll have less inventory risk in the next downturn, and you'll have a much more efficient business. We're growing in the Permian. We're standing up. We're growing in the Permian. We just stood up a super center, but we're consolidating, and we're doing it smartly. We're gonna be better able to take care of our customers, have more inventory to do so with less inventory risk. That's an example of we are pulling cost out and getting better and getting stronger in the market. Dave, I hope I'm not overstaying my welcome here, but just on that point you made, so using the Permian as an example. If you net of everything you just described and pro forma for the super center, is it fair to say that revenue per employee and revenue per square foot of roof line versus before the downturn should be higher, notwithstanding the fact, like you said, that you consolidated 10-5 branches? Yeah. I think so. Now the roof line comment, I'm not sure about. We might actually have more space today, so I'm not gonna comment on that. We should see improved, really improved earnings per employee. Yep. Okay. Because, you know, I'd be more interested in the bottom line impacts of the investments we make or choose to walk away from than the top line. But generally that top line should follow suit, but I'd be more interested in watching the bottom line. Yep. Thank you, Dave. I'll turn it back. Thank you, Tommy. Thank you. Our next question comes from Jonathan Hunter from Cowen and Company. Your line is now open. Hey, thank you. Good morning. Hi, Jonathan. Hey, good morning. First question is just going back to the margins. You know, the guidance seems to imply you're at like the 21, you know, high 20s margin in the first quarter, and that's what you're aiming for for the year to be in line with 2021. You know, I'm curious how you see margin progressing. It seems flattish based on this outlook, but you've got, you know, HRC pricing that's gone down quite a bit since the peak in September. I'm curious the things that you're doing to offset some of that pipe inflation. And then, you know, as it relates to the 21.9%, is that a level of gross margin you think you can maintain on a multi-year basis, I guess, as we go into 2023 and 2024? Thanks. I do. I mean, 2021 was our best gross margin year. Each quarter had successive improvements in gross margins. While we wanted to come into this call saying 22% in 2022, we're a little bit cautious about over-guiding on gross margins because we had such success in 2021. To the points about hot-rolled coil steel prices declining, inflation maybe ebbing mid-year, which I think would be later in the year generally, and maybe even later in the year for pipe. You know, there are some offsets to that. In terms of maintaining it over time, I believe we can, and here's what I mean. We didn't talk about it in our prepared remarks, and we didn't talk about it in the Q&A yet, but during 2021, in fact, mostly in the fourth quarter of 2021, we exited, consolidated 15 locations. Today we have over, you know, 125 fewer people than we did at the end of 2020. In part, because we walked away from some lower margin business. We didn't see. You know, we're trying to be more efficient as a company. The efforts underway for those folks wasn't generating the kind of margin, so we walked away from maybe $30 million of business. What that means is we have our people focused on the higher margin stuff. We don't have our people focused on the lower margin stuff. We are able to generate much better flow throughs from the activity, in an environment where it's hard to, you know, we have to deal with labor inflation as well as product inflation. I think it's a matter. It's not just the market that's driving our gross margin performance. In fact, I made a big deal about it on the last call. We've made year-over-year product margin improvements for the last five years. That's a matter to me of careful cultivation of what you're not gonna do in the market to make sure you have the right the people focused on the right things. I do think that these gross margins can be sustained. In terms of how it flows during the year, I think we're just gonna have to see. I think it's, you know, if some of our higher margin products are less available, then of course we'll see a mix issue, and that would be depressive to margins. You know, we've guided for a very strong gross margins. I do believe it's sustainable, and it comes from real laser focus of what we're not gonna do as a company. Thanks, Dave. That's very helpful. Switching gears a little bit, I guess, to the top-line side of things. You guided 2022 revenues up low to mid-teens. To me, it seems like it could be a little bit conservative. I mean, the rig count's tracking up 30%, year-over-year. U.S., is maybe 70% of your business. Just based on that, you're up 20%. Now, I know, you know, there's a little bit of public versus private customer mix going on, but you also said that Canada and international should be up in 2022. Curious if you can help me kind of look into the moving pieces regionally in the 2022 outlook for revenue to be up low to mid-teens. Okay, we're basing that on what we see in terms of what's happened in the first 45 days of the quarter. We're basing that on what we see in terms of the influx of products. We're basing that on what our customers are telling us. You know, we're looking at some of our peers and how they're seeing the market, and we think that's. You know, I don't see it as. We gave a range of low to mid-teens in terms of revenues. I think most of that, by the way, will happen. I think we'll see the strongest growth in the U.S., seconded by Canada, and then more modest growth internationally. But there is, you know. If you look at rig counts and completions and some of the things we traditionally looked at, there's been a decoupling in terms of customer budgets from those numbers for, you know, for several quarters now. We expect that to persist. We're guiding, you know, we're giving this our best effort at what we think the growth is gonna be. Like I said earlier, you know, to see the kind of gross margin progression we've delivered and to continue to kind of prune the business and pull out costs where the value is not being added, we walked away from probably $30 million in revenue. That would be, you know, 2%-3% more revenues that we would have enjoyed in 2022, but that we, you know, wouldn't have benefited from at the bottom line. You know, I think that's a good range and it, you know, it depends on how the year flows. You know, I think we're sticking with that. I don't think it's conservative. I think it's, you know, certainly at the top end is a pretty strong number. Absolutely. Last one for me. You expect to generate free cash flow in 2022. Do you think you can do better than the $25 million you did in 2021? And how does working cap consumption work into that outlook? Thanks. Yeah. I think it's in that range. I mean, the one wild card there is the receipt and timing of inventory. That's kind of the one thing driving whether that'll be more or less than $25 million. I think we can beat $25 million. There are scenarios where we're ahead of that and scenarios where we're a little bit behind it. We do plan to be well prepared for the growth in the coming months. Great. Thanks. I'll turn it back. Okay. Thank you. Thank you. Ladies and gentlemen, we have 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 closing statements. Okay. Thank you for your interest in DNOW, and I look forward to talking to everyone on our first quarter call in May. Have a good day. Thank you ladies and gentlemen for participating in today's conference. This concludes our event. You may now disconnect.