Global Industrial Company

Good afternoon, ladies and gentlemen, and welcome to Global Industrials' fourth quarter 2021 earnings call. All participants will be in a listen-only mode. Should you need assistance, please signal a 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 a 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 Smarjasi of the Plunkett Group. Please go ahead.

Thank you and welcome to the Global Industrial Fourth Quarter 2021 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 ended 2021 with another solid financial performance on both the top and bottom line. Revenue in the quarter increased 3.5% on an average daily sales basis, led by our managed sales channel, which continues to drive growth from core customers. For the full year, revenue grew to $1.06 billion, average daily sales improved 5%, and our two-year compounded annual growth rate was 6%. Customer demand was strong during the quarter, and we continue to be pleased with the performance of our core product lines. Open orders have doubled since the beginning of 2021 as a result of ongoing constraints within the supply chain, but were flat the last three months of the year. This elevation in open orders has restricted 2021 top line results and had a modest impact on operating leverage as the company incurred variable selling expenses to generate these orders, which have been delayed in their fulfillment. We are currently optimistic that supply chain challenges may normalize as we move through 2022. However, if they continue, we have shown and remain confident in our ability to manage through these challenges. Profitability remains strong as we mitigated significant product and transportation cost inflation and leveraged pricing intelligence to deliver another quarterly gross margin record of 37%. For the second consecutive quarter, we achieved double-digit operating margins. the first time the company has achieved this level of profitability in back-to-back periods. We generated over $26 million of operating income in the fourth quarter, an increase of approximately 24% from the prior year, and for the full year, generated $88 million of operating income. In December, we paid a special $1 per share dividend, and today increased the quarterly recurring dividend for the sixth consecutive year. I'm really proud of how our organization has responded and risen to the challenges of the last two years. From the onset of the pandemic to unprecedented supply chain constraints, our entire team has continued to execute on the ACE strategy, delivered for our customers and allowed us to grow and strengthen the business for the future. We have embraced a can-do attitude and enhanced our customer-focused culture during a difficult operating environment. In the past year, we further built out the team as we onboarded senior leaders in sales, merchandising, operations, and legal. We promoted key talent to new roles and drove higher associate engagement, which is reflected in continued improvements in our annual employee engagement survey. We also launched an entirely new brand identity and changed the company name and ticker symbol, which formally aligned our business to our key stakeholders, including our shareholders. From the customer and digital experience to our distribution network, we made improvements in essentially every aspect of the business. Now, as we move into 2022, our ACE focus is one of continued investment and execution that we believe will allow us to expand market share and capitalize on our growth opportunities. In our sales organization, we will be expanding our sales team with a key focus on public sector sales, as well as launching a strategic account management team that's focused on larger, more complex accounts. In new business development, we aim to drive important growth as we ramp up public sector and private market relationships and expand field support through our territory sales management program. Execution of these initiatives is targeted at broadening and deepening existing relationships while purposefully driving entry into new customer and markets. Private brand remains a key focus that brings a strong margin profile and a point of difference in the market for our sales organization. As we look to expand the product verticals we serve, we will continue to leverage our private brand capabilities as well as vendor relationships. On the digital front, Global Industrial is committed to remaining a leader in digital transformation. It's our mission to offer our customers a modern, informative, and friction-free user experience across all digital channels. We are currently developing a new website platform with a completely updated user experience across desktop, tablet, and mobile with additional features, personalization, a new look and feel, and navigation. We continue to roll out new and innovative programs and content that highlights Global's position as a trusted partner in our customer success. In the first quarter, we launched the We Got This campaign. focused on the partnerships we form with customers and our ability to support them in the current business environment. These campaigns help us drive engagement by directly relating to current challenges and opportunities our customers face and creating a rallying point for our internal teams. Across the organization, we are taking steps to deliver efficiency improvements. For example, we'll be launching a new CRM that brings all customer service tools into a single platform. This will help us deliver a better customer experience and drive efficiencies within the customer service team. In our distribution centers, we recently started implementing advanced slotting techniques, which will improve order processing speeds and enhance productivity. And we continue to explore various technology and automation opportunities that can improve the customer experience and efficiency of our operations. In conclusion, we had a great 2021, growing the top line and delivering strong improvements in profitability, as we navigated the ongoing impact of COVID and supply chain and inflationary pressures. While we expect these challenges will remain elevated, we are proactively managing these external factors and aggressively addressing issues within our control. We are continuing to innovate and strengthen our competitive position. We are investing in our ACE strategy, specifically in areas such as sales, marketing, private brand, digital transformation, and distribution. all of which are targeted to help us drive better execution, enhance our ability to deliver an exceptional customer service experience, and support our growth for years to come. I'm excited by the momentum I see in the company as we continue to drive operational excellence in everything we do. We are building a world-class organization, developing a culture of innovation, and creating a company where every member of our team is dedicated to the customer. I'll now turn the call over to Tex.