Good afternoon, ladies and gentlemen, and welcome to the Global Industrial Company's Q1 2022 earnings call. At this time, I'd like to turn the call over to Mike Smargiassi of The Plunkett Group. Please go ahead. Thank you, and welcome to the Global Industrial Q1 2022 earnings call. Leading today's call will be Barry Litwin, Chief Executive Officer, and Tex Clark, Senior Vice President and Chief Financial Officer. Formal remarks will be followed by a question-and-answer session. Today's discussion may include certain forward-looking statements. It should be understood that actual results could differ materially from those projected due to a number of factors, including those described under the Forward-Looking Statements caption and under Risk Factors in the company's annual report on Form 10-K and quarterly reports on Form 10-Q. The press release is available on the company's website and has been filed with the SEC on a Form 8-K. This call is the property of Global Industrial Company. I will now turn the call over to Barry Litwin. Thanks, Mike. Good afternoon, everyone, and thank you for joining us. We delivered an exceptional Q1 performance with record revenue and profitability driven by strong demand and excellent execution across the business. Revenue of $288 million was a quarterly record and improved nearly 15% over the prior year. For the third consecutive quarter, we delivered record gross margin, which reached 37.4% in the quarter, and we generated over $29 million in operating income as operating margin surpassed 10%. Looking at our results on a 12-month basis, we achieved double-digit operating margin for the first time. I am very pleased with how we have started 2022. It was truly a terrific quarter for Global Industrial and reflects the continued implementation of the ACE Strategy, and most importantly, the commitment and efforts of our associates who made it happen. A focus on the customer continues to guide everything we do. We are making further investments that will position us to expand market share and capitalize on our growth opportunities. From sales and marketing to digital technology, procurement and distribution, we are enhancing the service we provide and elevating the customer experience. In the Q2, we expect to launch a new digital e-commerce platform on both desktop and mobile that will redefine how we engage and interact with customers across all digital channels. We remain committed to digital leadership, and this is a ground-up undertaking designed to provide a completely new user interface and customer experience. Our expanded one-to-one managed sales organization continues to lead our growth. The team is making continued progress in the development of larger accounts as we look to grow share of wallet and build new customer relationships. Our NASCAR sponsorship in partnership with Richard Childress Racing and Austin Hill is helping to drive brand awareness and increase customer and associate engagement. It has been exciting to be a part of the 2022 NASCAR season and to capitalize on the benefits this national platform brings to Global Industrial. In Canada, we have seen tremendous growth, which has caused us to exceed the capacity of the current distribution network. In order to support our continued expansion, I'm pleased to announce we have entered into a long-term lease for a new state-of-the-art distribution center in the Greater Toronto Area. Operations in Canada have historically been serviced through a cross-dock fulfillment model, relying on our U.S. distribution network. This new facility, which is expected to begin operating this fall, will allow us to better service customers by significantly shortening delivery times. Finally, we will be hosting our annual Global Industrial National Trade Show on June seventeenth in New Orleans. This is an exciting event with more than 100 vendors that will showcase our industrial solutions, know-how, and leadership team In closing, we had a terrific start to the year with record revenue and profitability. Customer demand remains strong, and we believe we are well-positioned for long-term growth. We continue to focus on operational excellence, embracing digital transformation, and investing in our people, private brand, and operations. Execution of our ACE Strategy is strengthening our customer-focused culture, driving top-line growth, and delivering sustainable improvements in profitability. We continue to elevate our position as a trusted partner to our customers, and remain excited about what the rest of 2022 has in store. I'll now turn the call over to Tex. Thank you, Barry. In the Q1, revenue was $288.6 million, a quarterly record, and increased 14.9% on a GAAP basis over Q1 of last year. U.S. revenue increased over 14%, while Canada revenue improved nearly 22% in local currency. Overall sales trends were strong throughout the quarter, while open orders increased modestly due to growth in customer demand. We continue to make progress in fulfilling backorder positions and are making inventory investments in key product categories to support our growth. Gross profit for the quarter was $107.8 million, up 39.5% from last year. Gross margin was a quarterly record of 37.4%, an improvement of 660 basis points from the prior year, and up 40 basis points on a consecutive quarter basis. This was our third consecutive quarter of record gross margins. Gross margin improvement in the quarter reflects the impact of normalized freight margins as compared to the costs incurred in Q1 2021 related to the transition of a new LTL freight partner last year. A continued increase in our balance of sales of our higher-margin private brands, the beneficial impact of price rationalization in an inflationary environment, and a reduction in inventory adjustments as compared to a large PPE write-down incurred last year. In the face of ongoing supply chain and inflationary challenges, we continue to implement mitigation strategies which have proven effective. This includes driving higher margin sourcing channels, pricing analytics, and freight optimization. While we do experience seasonal revenue and margin variations due to product and customer mix, we continue to believe that annual margin gains are sustainable given the ongoing benefit we recognize from an increasing balance of private brand sales. Selling, general, and administrative spending for the quarter was $78.3 million, or 27.1% of net sales, an improvement of 110 basis points as a percentage of sales from last year. SG&A primarily reflects targeted expense management and fixed cost leverage on sales growth. We continue to maintain strong cost controls, but expect to see higher levels of SG&A as 2022 progresses as we make growth related investments in key ACE focus areas, including the new distribution center in Canada. We will also see the impact of a company-wide distribution center wage adjustment that was implemented early in the Q2. Operating income from continuing operations was $29.5 million in the Q1 at more than 4x improvement from the year ago period. Operating margin expanded 760 basis points to 10.2%, our third consecutive double digit operating margin performance. Total depreciation and amortization expense in the quarter was $0.9 million, while capital expenditures were $1.1 million. We continue to expect 2022 capital expenditures in the range of $7 million-$9 million, which includes the new Canada DC. Let me now turn to our balance sheet. We have a strong and liquid balance sheet with a current ratio of 1.7: 1. As of March 31, we had over $14 million in cash, approximately $25 million of debt, and availability of approximately $46 million under our $75 million credit facility. Our debt position reflects increased borrowings to meet working capital needs related to inventory investments to support longer lead times in our supply chain, as well as the value of inflationary costs within our inventory. We maintain significant flexibility to fully execute on our strategic plan and continue to fund our quarterly dividend. As a result, our board of directors declared a quarterly dividend of $0.18 per share of common stock, and we anticipate continuing a regular quarterly dividend in the future. This concludes our prepared remarks today. Operator, please open the call for questions. We will now begin the question and answer session. To ask a question, you may press Star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press Star then two. At this time, we will pause momentarily to assemble our roster. Thank you. Your first question comes from Paul Dirks from William Blair. Please go ahead. Hey, good afternoon, guys, and congrats on a strong start to the year. Hey, Paul. Thank you. A few questions for me. First of all, on the top line, is there a way to frame if any of the Q1 sales growth was at all a catch up from some of the constrained periods we saw in the Q3 and the Q4 of last year? You know, I'll kind of take real quick my view on that. I will tell you, I think I believe that what we're seeing is you know, current sales demand flowing both from you know, just overall business demand we're seeing in the market right now and expansion of our sales organization. We're definitely starting to see that revenue flow through. You know, the open orders for us has been you know, fairly consistent flat over the last several periods. Our volume right now is still speaking to some fairly robust demand that we're seeing in the market. It's fair to say that. Yeah, Paul. Yeah, Paul. Yeah, I'm sorry. Yeah, yeah, I'll just add to that. Yeah. As Barry mentioned, the open order value, really kind of orders that were taken last period, actually was modestly up, but very small. We actually did a pretty good job of reducing some back orders, but new customer demand filled that up. We didn't see a large catch up on that open order, which disproportionately benefited Q1. It has been fairly stable for the last six months, not eroding, but we have not seen a big catch up in that yet. But yeah, just as Barry mentioned. No, that's helpful. Is it fair to say that the robust demand and the velocity of orders has continued here at least so far into April and perhaps into early May? You know, obviously we don't give a lot of, you know, guidance in terms of current performance, but we've continued to see a very robust demand market for ourselves right now. I definitely have good confidence, you know, going forward in terms of just the general market conditions for us. You know, that would be my view on it. Okay. No, that's helpful. Appreciate that. Switching to the inventory balance, you know, I couldn't help but notice on the balance we're up about 50% year-over-year. I also noticed a little bit more of short-term debt to help float that. I guess my question is, can you parse out, maybe this is a question for Tex, how much of that is price versus volume increase? Are you short in any key product lines or categories at this point? No. Yeah. I'll jump on that. Absolutely. Yeah, absolutely. Inventory is up and I think that two primary reasons, absolutely the price and the capitalization of ocean freight that really goes into our inventory value. Absolutely, it's increased the value of inventory in our DCs. The other piece that we really took a significant look at in Q4 as we listened to our customers and still realized that availability has been still the leading cause for or one of the leading reasons to win sales right now. Make sure you have the product readily available for your customer. In order to make sure that we had that product in stock, we did have to increase safety stock levels because you have longer lead times, which will then overall increase kind of that inventory in transit, inventory on the water, as well as the inventory you're holding in your distribution center ready to fulfill. So there definitely is a bit of a bubble that we purposely invested in to be ready. When we think about fill rates, we've definitely seen continued improvements in fill rates, looking at it from last year into the early part of 2022. Not at—they're not at the levels back to where we were pre-pandemic, but they are sequentially improving every period, and we see some benefit there. Overall, again, while we haven't directly shaped that, it's both a more product because of that lead time as well as the higher value. The use of debt to fund that is, I mean, we have a working capital revolver, and we thought that was prudent use of really having that inventory on hand. It is a key reason that we maintain that revolver. While we're drawing more than we had been in the past, we're not overly concerned or doesn't impact the liquidity of the business. No, that's helpful. Two more from me. You know, regarding the gross margin performance in the quarter, obviously very impressive. Excluding the inventory charge in the prior year quarter, you guys are up 550 basis points. Is there a way to bucket either in terms of magnitude or with, you know, with numbers, how much of that expansion was driven by the freight carrier performance? How much was driven by inventory profits, and how much was driven by other factors such as your price optimization tools and private label expansion? Yeah, Barry, I'll try to take that. If you wanna add any color, please do. Yeah. Paul, yeah. Let's just take out that inventory adjustment that we had called out last year for the PPE product. The biggest factor year-over-year is obviously a full year ramped of our transition from that LTL transition that we did last year on our new 3PL partner. That was a significant impact in the Q1 of last year. Normalized probably by the end of the Q2 and stayed strong through Q3 and Q4. Really, our freight margins have been fairly consistent in the Q1 this year and at a normalized level. That's the biggest bucket. The next biggest bucket will be that private label balance of sales. That's where we really see some staying power. As we've invested in our private label, it's obvious we focus on high quality products for our customers, but that also deliver high margin and high margin differential when you look at the sales of those products. That would be that second kinda leading bucket of margin improvement. Then the third will be going back to that pricing analytics and the things that we really do to be very cognizant when we're making decisions on how we price products for the customers, how we're discounting in our managed organization, and just overall how we are managing the overall portfolio of products to make sure that we balance both revenue as well as that gross margin rate. That would really be that third bucket when we look at the magnitude of impact. That's helpful. One piece I'd also add as it relates to the second piece around private label balance of sale, and I think, you know, given price inflation that's in the market, when I look across the peer set, I do think that we've been looking at private label balance of sale shift as part of a strategy for the last couple of years. So I think it is really starting to come into its own. I would suspect that there you know, we have a good outlook in terms of where we think private label balance of sale can go for us, and I think that's always going to be a positive gain for us. You know, even as pricing starts to adjust in the long term, I think that's gonna be one of the keys for us and why we feel good about, you know, sustainment around gross profit levels. No, absolutely. Certainly encouraging to hear. Last one from me. You know, in the Q1, of course, the higher volume and price helped and you guys performed well in the SG&A line. At the same time too, with the incremental investments coming into the Canada DC facility, is it your expectation that you'll be able to continue to leverage SG&A expenses in the Q2 and over the balance of the year? I think that we will be able to do that. I think, you know, SG&A across the board, I mean, we're definitely looking for gaining higher efficiency across the sales organization and the marketing organization relative to SG&A investment. From the Canadian facility, you know, those numbers are, you know, put into our CapEx, and we're definitely looking at acceleration of our Canadian business to help offset and drive some of those costs. I do think we have a pretty good feel for continuing SG&A leverage in the business. You know, as the market grows and continues to expand, we also wanna be able to invest incrementally into the market where we see opportunity. Right now we've been pretty pleased with the overall efficiency, particularly in sales, marketing, and what we think the DC can help drive in terms of increases in our Canadian business. Very good. Appreciate the color, guys. Thank you. Sure. Thank you, Paul. Thank you. Your next question comes from Anthony Lebiedzinski from Sidoti & Company. Please go ahead. Thank you and good afternoon. Thanks for taking the questions, and certainly a very strong start to the year for sure. First question, as far as gross margins, you know, seasonally speaking, you know, looks like your Q2 and Q3 have been the highest gross margins of the quarters for the year. Do you expect that same type of seasonality to happen this year as well? Yeah. I think I'll jump in there. When we think about why that margin variation tends to happen in the summer, it's really gonna be more on the product mix. As we sell more and more cooling and some of those outdoor products that are core to our category sales in the summer months, those typically have a higher private label balance and an overall better margin profile for the organization. That macro factor within our business will be, we do expect that to continue as we really move into that seasonal summer selling cycle. At the same time, there is a lot of fluctuation in the market. Obviously, I'm probably a little bit more cautious, but we know that the fuel surcharges are quite high when we think about what's going on in the transportation sector. It's not unique to us, but it's something everyone's dealing with right now. We are going to be cautious and make sure that we're staying competitive with our pricing. Again, if that natural cycle holds true, then yes, there's a little bit of upside, but I think it's still in a bit of a time of uncertainty with some of the external factors that are impacting gross margin. For sure. Absolutely. You guys do a fair amount of imports from China. Have you been impacted by the lockdowns there? Obviously, your inventory is much higher versus last year, but just wanted to get a better sense of that as to what you're seeing as for health of your inventory, especially for your top performing products. Yeah. We've been... I'll tell you, Anthony, we've been really very close to, you know, supply chain challenges over the last year, you know, since we started this back in 2021. I would say that, you know, we've definitely seen some improvement. As was mentioned earlier, some of our in-stock rates continue to climb back, which I think is certainly gonna help us, you know, relative to conversion and sales growth going forward. From some of the impact in China shutdowns, we're staying very close to it. We haven't seen material impact, you know, at this point, but we're definitely staying on top of it and it's something we're managing day to day in the business. Gotcha. Okay, just overall, as far as your longer term outlook, as far as acquisitions, is that something you guys are still looking at? I mean, I know you have a little bit of debt on your balance sheet, but it doesn't seem like that should impact your ability to look at M&A. Is that fair to say? Yeah. I mean, I think right now, you know, and we talked a little bit about it last quarter. We're definitely keeping our eyes open relative to strategic acquisitions that can help drive further category growth for us, can help drive further customer growth, along the way that we are driving very hard on our organic growth strategy. That's kind of our primary goal in the company, is to continue to drive ACE and drive great market performance. Absolutely, Anthony, we are continuing to keep our eyes open for acquisitions that make sense for us. That's definitely part of our approach, and we feel we've got adequate cash resources and abilities to go ahead and make those deals if they were to present themselves. Got it. Okay. Well, thank you very much and best of luck. Thank you. Thank you. That does conclude our conference for today. Thank you for attending today's presentation. You may now disconnect.