Good day, welcome to the Global Industrial Company fourth quarter 2022 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Mike Smargiassi of Investor Relations. Please go ahead. Thank you. Welcome to the Global Industrial fourth quarter 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. Overall, 2022 was an outstanding year for Global Industrial as we executed against our strategy and delivered a record financial performance for total revenue, as well as gross and operating margin. For the full year, organic growth contributed over $100 million in additional revenue, resulting in 9.7% growth and bringing total revenue to $1.17 billion. Gross margin improved 90 basis points to 36.1%. We generated over $105 million of operating income, an increase of 19.5%, and delivered a 9% operating margin, a 70 point basis improvement from 2021. With the strong financial performance in 2022, today we announced an increase in the quarterly recurring dividend for the seventh consecutive year. 2022 started off with strong double-digit revenue gains, while the second half of the year reflected the impact of increased economic headwinds and a diminishing price benefit as we lapped price increases taken in mid to late 2021. As a result, fourth quarter revenue was off modestly, with flat price to volume comparisons from the year ago period. Demand was muted across categories and sales channels, and we have seen this trend continue into 2023. We were very pleased with the proactive management of gross margin in the quarter as we recorded a 30 basis point improvement on a sequential basis and remain confident in our ability to manage our margin profile in the current cycle. Looking back on the last year, we successfully executed on a number of initiatives that we believe set us up well for 2023 and beyond. First, we strengthened our managed sales organization as we expanded the team and made investments in tools and technology to enhance productivity and performance. We added a new customer acquisition engine focused on enterprise accounts and launched market verticals in hospitality and healthcare. These efforts are off to a great start and we're excited about what we see. Moving forward, we're focused on capturing share through customer acquisition and retention, deepening our existing relationships, and expanding our lineup of exclusive branded items. Second, marketing leadership. We executed against our fully integrated brand marketing campaign, which has allowed us to activate our We Can Supply That branding across everything we do, from our website, emails, trade show, and copywriting to our NASCAR sponsorship. I think we have one of the most exciting brands in the market today, and one that truly speaks to our customers and the products and solutions we provide. During the year, we also repositioned the private brand offering as Global Industrial Exclusive Brands with the tagline Made to Exceed. As the market continues to shift from winning with product availability to a price and value focus, we believe we're well-positioned with our exclusive brand offering. Recently, we launched a new marketing campaign focused on operational efficiency, a message that is timely given the current economic environment and one that aligns with the efforts we see from our customers and within our company to drive efficiencies and enhance operational performance. Third, we continue to elevate the customer experience with the launch of a new website designed to drive personalization. We are now optimizing this new platform with enhancements to further improve the digital shopping experience. On the service side, we have initiatives across the company to optimize satisfaction and loyalty at every customer touch point. From the training of customer service reps to expanding self-service options, we are committed to delivering five-star customer service experience. Fourth, distribution and supply chain. Our operations and merchandising teams delivered exceptional availability, reduced back orders, and improved lead times during the year. In addition, we opened a new distribution center in Toronto that allows us to receive direct imports into Canada, provide for the shipment of more products stocked directly to our customers, and foster our continued growth. Overall, we're off to a much better stocking position this year, which will help us enhance service levels and deliver value to customers. We have a number of initiatives planned for 2023, including a focus on shipping quality that will minimize damages, as well as efforts to increase same-day shipping volume and fully capture ocean and domestic freight savings that will help us pass more savings to our customers. Finally, I'm proud of the release of our inaugural ESG Report last fall, which reflects the universal commitment of the Board, executive team, and our associates to the mission of responsible stewardship. We look forward to updating you on our progress later this year. In closing, we believe we have a strong game plan for 2023 and a clear vision for our team to execute on. While uncertainty remains in the economic outlook, we're optimistic and excited about the opportunities we see for growth. We'll continue to invest in core strategic areas of the business that support our customer-centric strategy and help drive operational leverage. This includes pricing intelligence and analytics, productivity and cost management, and a company-wide focus on margin optimization. I have been impressed by the nimbleness we have demonstrated and continue to show our ability to drive operational excellence. With strong cash flow from operations and an exceptional balance sheet, we remain well-positioned to execute on our strategy, invest in our growth drivers, evaluate strategic M&A opportunities, and build long-term value for our stakeholders. I will now turn the call over to Tex. Thank you, Barry. Fourth quarter revenue was $260.5 million, down 0.6% over Q4 of last year. Average daily sales were off 2.2%. The quarter included one extra day. I would note the day fell on the Friday before the New Year's holiday and a historically low volume sales day and had limited impact on our results. U.S. revenue was down 0.2%, while revenue in Canada improved approximately 2.5% in local currency. Price volume was neutral in the quarter, in contrast to pricing benefit recognized throughout late 2021 and most of 2022. The private brand offering has been an area of focus and opportunity during 2022. For the full year, it represented approximately 50% of total sales. Public sector volume was robust in the quarter, a nice rebound from Q3, which was the close of the federal fiscal year. The heating and winter seasonal category was soft, reflecting a relatively mild winter for much of the US. Demand was consistent throughout the quarter, and we have seen a continuation of 4Q sales trends into the start of 2023. Overall, we perceive customers to be guarded in their buying decisions and the pricing environment remaining competitive. Gross profit for the quarter was $93.8 million, down 3.3% from last year. Gross margin was 36%, an increase of 30 basis points on a sequential quarter basis, but off 100 basis points from the prior year. In the year ago quarter, we delivered record gross margin as we benefited early in the business cycle from strong price realization and lower cost FIFO inventory sell-through, both of which have fully waned. We will also face strong margin comparisons in the first quarter of 2023, but believe we have shown an ability to manage through the challenges of the current environment. Maintaining our margin profile remains a key focus of our team. We have seen some early benefits from lower ocean supply chain costs. However, we expect variability throughout the year as we work through select inventory with higher total landed costs and manage a dynamic pricing environment. We continue to believe that long-term margin gains are achievable as we drive a higher balance of private brand sales, optimize our fulfillment and freight profile, and drive leverage of our fixed cost base. Selling, distribution, and administrative spending in the quarter was $76.1 million or 29.2% of net sales, an increase of 210 basis points from last year. SD&A primarily reflects the fixed cost nature of the business, investments in the expansion of our Canada DC network, including approximately $1.1 million in incremental costs, as well as planned marketing investment to support new verticals and to remain top of mind when our customers search for our products. We also recorded increased compensation expense, primarily related to $1.1 million of incremental variable compensation, which reflects the strong full year results as compared to 2021. We continue to maintain strong cost controls and in January, took steps to right-size our cost structure, including a reduction in force, which will reduce annualized costs by approximately $6 million. We expect to record a one-time severance expense of approximately $1.1 million in the first quarter. Operating income from continuing operations was $17.7 million in the fourth quarter and operating margin was 6.8%. During the quarter, we generated cash flow from continuing operations of $26.3 million. Total depreciation and amortization expense in the quarter was $1.1 million, while capital expenditures were $2.5 million. We expect 2023 capital expenditures in the range of $6 million-$8 million, which includes primarily maintenance-related investments of equipment within our distribution network. Let me now turn to our balance sheet. We have a strong and liquid balance sheet with a current ratio of 2.1 to 1. As of December 31st, we had over $28 million in cash and minimal debt. During the quarter, we expanded our credit facility by $50 million to $125 million and currently have $111.7 million of excess availability under the facility. The continued improvement in our debt position reflects decreased working capital needs as inventory levels normalize and total inventory landed costs moderate. We maintain significant flexibility to fully execute on our strategic plan and to continue to fund our quarterly dividend. As a result, our Board of Directors declared a quarterly dividend of $0.20 per share of common stock. This reflects an increase of 11.1% from our previous quarterly dividend. 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 touch-tone phone. If you're using a speaker phone, 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. Our first question comes from Ryan Merkel with William Blair. Please go ahead. Hey, good afternoon, and thanks for taking the questions. Hey, Ryan. I wanted to ask a question on sales in the fourth quarter. Any chance you can provide a little more details, either by product or end market and for the managed and non-managed accounts? That'd be helpful. Thanks. Yeah, Ryan, I'd give you a little bit of insight there relative to Q4 revenue. We certainly saw price benefit wane in the period. I think, if you look back, we probably captured a price benefit, you know, really early on in the cycle. I think to your question on kind of customer mix, I think there's a couple things we found. One, I think the SMB base for us appeared to be a little bit more cautious during the period versus some of the large national accounts that we've seen. That was one trend we saw. As you know, we've talked, we're continuing to kind of diversify our overall customer base, you know, as it pertains to some of the enterprise business, but we still are a fairly heavy SMB-based business. The other factor was really around some of the winter seasonal softness that we mentioned in the opening. That tends to be a fairly strong private brand category for us, particularly around heating. As we know, weather's been really mild throughout the U.S., and that, you know, that had some pressure as well. Got it. Okay. I think you said demand is down low single digits into the start of 2023. I just wanna confirm if I've heard that right and just confirm sales aren't getting a whole lot worse here? Yeah, I mean, I think our, you know. Sorry, go ahead, Barry. Yeah. Quick cover. I think our demand trend, you know, right now, certainly continues into Q1. You know, we've certainly seen, still some, you know, muted sales across categories and sales channels. I think we've seen the same type of approach around customers being a little bit more guarded right now as the pricing environment remains fairly competitive. Got it. Okay. Last one for me. I know you're not giving guidance here, but just curious what your outlook is for the MRO market in 2023. I think some of the larger players are thinking down low single digits, but curious how you're thinking about 2023. I mean, I think we kinda look at the same indicators. I mean, we look at industry stats around MDM and obviously the economy, you know, in terms of what we're looking at. I mean, I think we, you know, went in certainly with an optimistic approach around some of the sales initiatives and the investments that we've put in place. Certainly we're taking a fairly cautious tone relative to the MRO market right now. I'm hopeful that we start to see, you know, some better performance in the industry itself towards the back half of the year. I mean, we tend to follow the PMI index as well. You could see a fairly, you know, change in the ISM between this year and last year at the same time. We still are confident that we have a significant amount of initiatives in place, to help drive overall long-term growth, particularly around our category and private brand expansion, and certainly the benefit that our one-to-one sales organization has in terms of driving, good, solid relationships and insight to our customers. Certainly we're gonna continue to invest, into some new sales channels we've mentioned last year, certainly continuing on through this year, to help us and exploit some new markets. Thanks. I'll pass it on. Again, if you have a question, please press star then one to be joined into the queue. The next question comes from Anthony Lebiedzinski with Sidoti & Company. Please go ahead. Good afternoon, thank you for taking the questions. First for Q4, gross margin, can you go over the various puts and takes in regards to the gross margin? Barry, you talked about focusing on margin optimization. Can you give us a sense as to, like, how should we think about, you know, gross margins, kind of for the balance of the year? That'd be great. Barry, if you want me to just jump in real quickly to reconcile some of that. Absolutely. Hey, Anthony, good afternoon. Again, when we think about the overall margin, gross margin profile of 36% this year, obviously we are at 36% in Q4, 36.1% for the full year. Again, as we've mentioned, we saw sequential improvement from Q3 into Q4, which isn't always a normalized seasonal trend for us, but we did a little bit better in Q4 than Q3. When we look at a year-over-year basis, last year in Q4 was really we were fully entrenched in some early price moves that we had made, were primarily related to inflation in the ocean transportation rates. That drove higher selling prices, but also allowed higher gross margin because we were able to capture that as we were still working through inventory that had landed prior to some of those pretty significant increases in cost we saw. That really benefited both Q4 and Q1 2022, where we saw 37%+ margins in each Q4 and Q1. While we did see that year-over-year decline, that sequential increase gave us some strong confidence that we're able to manage through some of the, again, the continued pricing dynamics in the market, along with some higher both domestic and that ocean freight that we had mentioned. While the ocean freight costs are coming down, I mean, we've seen that in all the different public settings, that will be a benefit to the organization, but does take time to work through because obviously we're working through inventory turns to get to that lower cost inventory that we'll be able to take advantage of and obviously also pass through back to our customers as we move throughout the course of the year. I'm not sure if that answers your question. If Barry, if you wanna jump in and join anything more. No, I don't think it was. It was definitely well covered. Okay, great. Got it. All right. Terrific. Then as far as inventories, you know, they're down from the second quarter peak. How should we think about the, you know, inventories for, you know, as you look to I know you're looking to sort of work those down, I assume as the year progresses. You know, is there a goal in mind as far as as far as, you know, dollar amount you wanna get to by the end of the year or maybe inventory turns? I mean, how should we just think about inventory management? Yeah, I'll take that again, Barry, as well. Overall inventory, while we don't have a specific goal on target inventory numbers, we set goals internally based upon things such as bill rates and what overall stocking levels we need to have for our customers to deliver our product on time for what they need. Given that while the supply chain costs have come down, overall a lot of the disruption in the supply chain is out of the market in terms of lead times, both from kind of our overseas suppliers as well as domestic movements here in the States. That's allowed us to improve that or to lower those safety stock requirements and have allowed us to normalize inventory as we move throughout 2022. We would expect that to continue into 2023. While we may have some seasonal buys that happen from time to time, we do not anticipate that our inventory levels will expanse any material way in 2023. Got it. Okay, thanks. The last question from me is, you know, just overall, what is your appetite for acquisitions? It's been a few years since you've done anything as far as M&A. Just wondering if you could comment on that'd be great. Yeah, great question, Anthony. I know that we've been fairly consistent in kind of our policy around M&A, and certainly we continue to keep ourselves open, you know, to opportunities. Looking at businesses that can either add category strength to us, selling channel strength and customers, all make sense for us. As I mentioned, we certainly have been looking in the market for some time. We're looking to try to obviously as most businesses trying to find the right valuation and the right fit, most importantly for the company. It is certainly in our strategy to continue to address that, and we'll continue to do so going forward. Appreciate you asking the question. Got it. Well, thank you very much and best of luck. Thank you, Anthony. Thank you. This concludes our question and answer session. The conference has also now concluded. Thank you for attending today's presentation. You may all now disconnect.