Q4 2021 NOW Inc Earnings Call

Speaker 1: you

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Walker.

Speaker 2: Welcome to the now incorporated 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 star then one on your touchtone phone. I will now turn the call over to vice president digital strategy investor relations. Brad Wise. Mr. Wise you may begin.

Fourth quarter and full year, 'twenty or 'twenty, One earnings conference call. My name is Sheryl.

For today's call at this time all participants are in a listen only mode. Later, we will conduct a question and answer session.

Have a question. Please press Star then one on your Touchtone phone I will now turn the call over to Vice President Digital strategy Investor Relations spread wise Mr. Wise you may begin.

Thank you Cheryl.

Speaker 3: 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 Cherichinsky, President and Chief Executive Officer and Mark Johnson, Senior Vice President and Chief Financial Officer.

And welcome to <unk> 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 <unk>, President and Chief Executive Officer, and Mark Johnson, Senior Vice President and Chief Financial Officer.

Speaker 3: We operate primarily under the Distribution Now and D-Now brands, and you'll hear us refer to Distribution Now and D-Now, 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 on limited to comments about the outlook of the company's business.

Operate primarily under the distribution now and <unk> brands and you'll hear us refer to distribution now in D. Now, 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.

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.

Speaker 3: These are forward-looking statements within the meaning of the US Federal and 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.

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.

Speaker 3: 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.

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.

Speaker 3: 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.

In addition, this conference call contains time sensitive information that reflects management's best judgment at the time of the live call a.

I'll 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.

Speaker 3: Further information as well as supplemental financial and operating information may be found within our earnings release on our website at ir.denial.com or in our filings with the SEC. In an effort to provide investors with additional information relative to our results as determined by US GAAP, you'll notice that we also disclose various non-GAAP financial measures.

Further information as well as supplemental financial and operating information may be found within our earnings release on our website at IR at <unk> dot 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.

Speaker 3: including EBITDA, excluding other costs, sometimes referred to as EBITDA, net income, excluding other costs, and diluted earnings per share, excluding other costs.

Excluding other costs each excludes the impact of certain other costs and therefore have not been calculated in accordance with GAAP.

Speaker 3: Each excludes the impact of certain other costs and therefore have not been calculated in accordance with GAAP.

Speaker 3: in an effort to better align with management's evaluation for 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 peer-

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 noncash.

Cash stock based compensation expense.

Prior periods presented.

Speaker 3: have been adjusted to conform with the current period presentation.

Have been adjusted to conform with the current period presentation.

Speaker 3: Please refer to a reconciliation on each of these non-GAAP financial measures to its most comparable GAAP financial measure and the supplemental information available at the end of our earnings release.

Please refer to our 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.

Speaker 3: 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.

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.

Speaker 3: A replay of today's call will be available on the site for the next 30 days.

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 and it will also be available on our website.

Speaker 3: plan to file our 2021 Form 10-K today and it will also be available on our website. Now, let me turn the call over to Dave.

Now, let me turn the call over to Dave.

Thanks, Brad and good morning, everyone.

Speaker 4: On our earnings call one year ago, as we were emerging from a year when the industry had experienced the worst market conditions, D-NOW responded swiftly and resolutely to defend its bottom line and lay the groundwork for prosperity in the future. We believe that D-NOW is the only place in the world where the market is going to be able to affordable for investors and employers, especially during the pandemic.

On our earnings call one year ago, as we were emerging from a year when the industry had experienced the worst market conditions.

<unk> responded swiftly and resolutely to defend its bottom line and lay the groundwork for prosperity in the future.

We believe then that the market.

Speaker 4: 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.

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 D. Now have not just embraced but driven.

Speaker 4: downturns motivate change and I sit here this morning amazed at how the highly talented, caring, customer focused women and men of D-Now have not just embraced but have driven it.

Speaker 4: 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 stress environment.

The results of our decisions. These past two years are evident not only in the 90 day improvement in financial performance, but in the competence enthusiasm and confidence in our team that provides superior solutions, our customers crave and a supply chain stressed environment.

Speaker 4: During the first quarter of this year, we began operations at our new Permian Supercenter 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, flex flow, power service, and TS&M fiberglass. Strong, valuable, customer appealing names fortifying our brand in Permian.

During the first quarter of this year, we began operations at our new Permian Supercenter in Odessa, Texas. This facility expands our position in investment in the heart and one of the busiest oil producing regions in the U S.

A formidable presence of our energy locations and the complementary asset strength of Odessa pumps flex flow power service and TSM fiberglass strong valuable customer appealing names fortifying our brand in the Permian.

Speaker 4: During this quarter, we plan to open a new express center in the area to support our customers as their drilling plans ramp up.

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 supercenter as a means to regionalize fulfillment and drive efficiencies and deepen intimacy with target customers.

Speaker 4: This location will be primarily supported by the Supercenter as a means to regionalize fulfillment and drive efficiencies and deepen intimacy with target customers.

Speaker 4: 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.

Now moving onto our results fourth quarter revenue was down 2% to $432 million at the better end of our guide provided on the last call.

For the full year of 2021 revenues were one.

Speaker 4: $3.632 billion. Compared to the prior year, 2020 revenue grew 13 million or 0.8 percent, which is notable considering the strong $604 million 1Q20 pre-COVID print that contributed 37 percent of total 2020 revenue.

632 billion compared to the prior year 2020 revenue grew $13 million.

Zero, 8%, which is notable considering the strong 604 million <unk> 20, pre COVID-19 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.

Speaker 4: 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.

Speaker 4: In 4Q21 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.

In <unk> 'twenty, one 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.

Speaker 4: and full year 2021 gross margins of 21.9% set a record high as well.

And 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 but 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.

Speaker 4: We are in an inflationary environment and we benefit from that. But 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.

Speaker 4: 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 purchases, we can corral and allocate to our supplier partners. The more we benefit in terms of product availability return privileges and product costs.

Speaker 4: and the more our customers benefit from availability in a stress replenishment environment.

And the more our customers benefit from availability in a stressed replenishment environment.

And because we are selective about which product lines businesses locations and suppliers will support and customers will pursue we are able to meaningfully improve product line pricing and the overall mix of product margins as we favor the more lucrative ones and elevate prices or pass on the less lucrative ones.

Speaker 4: And because we are selective about which product lines, businesses, locations, and suppliers will support, and customers will pursue, we are able to meaningfully improve product line pricing and 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, our U S energy customer capital discipline continues to be a major driving factor on our topline performance as public operators maintained production and returned cash to shareholders.

Speaker 4: 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.

Speaker 4: 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.

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.

Speaker 4: 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.

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.

Speaker 4: 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 plan.

Mutual success success continues with our integrated supply chain services customers as we deliver additional value added services.

That help our customers lower lifting cost and deliver on their production plans.

Speaker 4: As an example, we're seeing gains in our workover rig materials management program in support of several key EMP producers on increased maintenance capex activity.

As an example, we're seeing gains in our Workover rig materials management program in support of several key E&P producers and increased maintenance capex activity.

Speaker 4: Fueling growth into 2022, we secured several new PVF 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.

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 Who's flow line assets, where damage from Hurricane Ida last August .

Speaker 4: In the southeast, we received orders from an independent shelf Gulf of Mexico producer whose flowline assets were damaged from Hurricane Ida last August .

Speaker 4: We also provided PVF for several compressor station repairs also attributed to hurricane damage.

We also provided PBF for several compressor station repairs also attributed to hurricane damage.

Speaker 4: We experienced an uptick in activity securing orders for three well pad facilities in the gas producing Haynesville area from a large independent producer.

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 is drilling in gathering systems increased midstream takeaway capacity utilization driving more investment in midstream maintenance and Capex projects.

Speaker 4: 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.

Speaker 4: Our midstream customer span has been more focused on natural gas and associated produced water projects, a pivot from previous quarter.

Our midstream customer spend has been more focused on natural gas and associated produced water projects a pivot from previous quarters.

Speaker 4: In the Marcellus, Utica, and Haynesville plays, we supplied well-connected skid fabrication kits and launcher receiver packages for several gas producers.

In the Marcellus Utica and Haynesville plays we supplied well connect skid fabrication kits and launch a 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 field.

Speaker 4: We supplied actuated valves on several NGL transmission line extension projects where we provide technical support on product applications and field service.

Speaker 4: field service support for the mounting, testing, startup, and commissioning of our valves.

Field service support for the mounting testing startup and commissioning of our balance.

We provided line pipe actuated valves and fittings and planning for a number of gas utilities in the Midwest and Rockies.

Speaker 4: We provided line pipe, actuator valves, and fittings and planters for a number of gas utilities in the Midwest and rocks.

Shifting to U S process solutions, we observed some of our customers favoring drilling and completing infill wells that had been minimizing demand for a rotating and fabricating equipment due to existing transfer and processing capacity. However.

Speaker 4: Shifting to U.S. Process Solutions, we observe 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.

Speaker 4: However, we are starting to see increased orders as customer joint programs shift to areas with less existing infrastructure.

However, we are starting to see increased orders as customer drilling program shift to areas with existing infrastructure.

Some notable project wins during the quarter include pump rebuilds for a number of feedstock processed and transfer applications for a refinery in the Rockies.

Speaker 4: 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.

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 supply a number of three phase separators equipped with valves and instrumentation for a large independent operator as well as the saltwater disposal package for another E&P operator.

Speaker 4: 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.

Speaker 4: 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.

Our instrument compressed air and dry our packages continue to experience high demand as operators replaced gas pneumatic systems with compressed air systems to eliminate greenhouse gas emissions.

Speaker 4: 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.

In the Permian, we supplied a number of pipe racks pump skids and separate us from our Tom Ball, 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.

Speaker 4: We have been successful in expanding our hydraulic jetpup rentals, replacing ESP applications as operators gravitate to our solution, yielding improved performance on more flexible rental options.

SP applications as operators gravitate to our solution, yielding improved performance on more flexible rental options.

Speaker 4: In Canada, we saw notable wins in the quarter with PVF 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.

In Canada, we saw notable wins in the quarter with PBF orders for turnaround activity from a large Canadian oil sands producer wellhead at an injection packages in southeast Saskatchewan.

From an Alberta based producer along with artificial 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.

Speaker 4: we delivered several large actuated valve orders through an EPC for a private, Alberta-based midstream operation.

Speaker 4: Our international segment experienced the most impact to revenue associated from delays in supply chain and labor availability impacts.

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 reactivation occur in the middle East.

Speaker 4: Activity is increasing on smaller projects which are beginning to gain traction as more rig reactivations occur in the Middle East.

Speaker 4: Furthermore, a number of the EPCs we routinely conduct business with are seeing an increase in project activity and booking.

Furthermore, a number of Epc's, we routinely conduct business with are seeing an increase in project activity and bookings.

Speaker 4: Some notable winds in the corridor include delivering a large number of gate, globe, and check valves, power cables and accessories for a combined heat and power plant in the UK, power cables and accessories for an upstream producer in Kazakhstan, and electrical bulks for an operator in West Africa.

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 UK.

Power cables and accessories for an upstream producer in Kazakhstan, and electrical Bulks for an operator in West Africa.

Speaker 4: 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.

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 and check valves for a gas processing facility.

<unk> facility in Kurdistan.

Out of our UAE operations, we provided actuated valves to an EPC for a methylene reclamation unit for an Indian based refinery and try ethylene glycol production project and Pakistan.

Speaker 4: Out of our UAE operations, we provided actuated valves to an EPC for a methylene reclamation unit for an Indian based refinery and a triethylene glycol production project in Pakistan.

Speaker 4: 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.

We also provide a balance where our produced water project in Iraq for an IOC into 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.

Speaker 4: 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.

Speaker 4: Our supply chain team has been focused on minimizing disruption by ensuring we have ample products available to support our customers.

Speaker 4: 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.

We leverage our global spend with suppliers to ensure we have preferred access to volume 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 are providing suitable alternatives to customers will increasingly depend on <unk> now to find solutions that meet their requirements.

Speaker 4: Not only have we worked hard to obtain allocations, we have provided suitable alternatives to customers who increasingly depend on D-Now to find solutions that meet their requirements.

Speaker 4: This has resulted in several of our customers expanding their approved manufacturer's list using DNow's AML.

This has resulted in several of our customers expanding their approved manufacturers list using denounce AML.

We do have a bit of pipeline inventory in transit and pending timing of ultimate receipt, we may experience some challenges with pipe availability in the first half of 2022.

Speaker 4: 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 is both domestic and import prices were up during the quarter.

Speaker 4: Inflation continues for seamless pipe as both domestic and import prices were up during the quarter.

Speaker 4: Moving to our Digital Now 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.

Moving to our digital now initiatives, our digital revenue as a percent of total 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 workflows solutions through our shop that Dino Dot com platform.

We are leveraging <unk>, our digital product configuration for complex engineered equipment packages to advance our U S process solutions business.

Speaker 4: We are leveraging e-spec, our digital product configurator, for complex engineered equipment packages to advance our US Process Solutions business.

Speaker 4: 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.

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.

Speaker 4: Furthermore, a number of our customers' project teams use e-spec to help build and construct project bids, while others are used to synthesize launcher and receiver packages for quoting.

Furthermore, a number of our customers project teams use <unk> to help build and construct project bids while others are using it to size launcher and receiver packages for quoting.

And finally, we have launched access now a suite of automated inventory management inventory control solutions for our customers.

Speaker 4: And finally, we have launched AccessNow, a suite of automated inventory management and inventory control solutions for our customers.

Speaker 4: 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.

Our access product include cameras sensors, smart locks Barcoding 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.

And now I'd like to touch on a few comments related to energy transition.

Speaker 4: In the US Gulf Coast, we provided duplex stainless vein pump packages to a biodiesel refiner who converts animal fat to biodiesel.

In the U S. Gulf Coast, we provided duplex stainless bain pump packages to a biodiesel refiner, who converts animal fat to biodiesel.

Speaker 4: and fire water pumps for an electric truck vehicle manufacturer plant in Texas.

And firewater pumps for an electric truck vehicle manufacturer plant in Texas.

Speaker 4: In Canada, we won multiple orders for zero emission actuated valves to 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 and market.

In Canada, we won multiple orders for zero emission actuated valves to an EPC working on carbon capture and storage project in Alberta.

And from a producer drilling exploratory exploratory wells to extract helium for use in the high tech industry end market.

Speaker 4: These successes highlight how a number of existing products we provide can extend to growth markets like carbon capture and high-tech industrial manufacturing.

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 increasing number of energy transition projects.

Speaker 4: we continue to monitor and track increasing number of energy transition projects.

Speaker 4: 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.

Our business development team has been working a variety of RFID and rfps for many customers pertaining to renewable diesel and gasoline sustainable jet fuel direct air capture carbon capture and storage hydrogen and cotwo transmission and storage projects.

Speaker 4: As we review bill of materials from the list of energy transition projects...

As we review Bill of materials from the list of energy transition projects.

Speaker 4: We work with our manufacturer partners to secure access to broader ranges of suitable products that will service these expanding end markets. With that,

We work with our manufacturer partners to secure access to a broader ranges of suitable products that will service these expanding end markets.

With that let me hand, it over to Mark.

Speaker 5: 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.

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 expectations.

Speaker 5: The U.S. revenue for the fourth quarter of 2021 was $303 million, down 9 million or 3% from the third quarter.

The U S revenue for the fourth quarter of 2021 was $303 million down $9 million or 3% from the third quarter.

Speaker 5: our US Energy Centers contributed approximately 79% of total US revenues in the fourth quarter. Sequentially, revenue was down approximately 4% and the US Process Solutions revenue was up 2% sequentially.

Our U S energy centers contributed approximately 79% of total U S revenues in the fourth quarter <unk>.

Sequentially revenue was down approximately 4% in the U S process solutions revenue was up 2% sequentially.

Speaker 5: 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.

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.

Speaker 5: year-over-year revenue was up $24 million, or 50% from the fourth quarter of 2020.

Year over year revenue was up $24 million or 50% from the fourth quarter of 2020.

Speaker 5: Canada's strong Q4 performance was propelled by improving demand in the Canadian energy market paired with the value our customers see in distribution now's model as a trusted and established technical solutions provider.

Canada strong Q4 performance was propelled by improving demand in the Canadian energy market paired with the value our customers see in distribution now is model as a trusted and established technical solutions provider.

Speaker 5: 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 US dollar.

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 increased revenue, 21% in the fourth quarter or $10 million compared to the same period of 2020.

Speaker 5: international increased revenue 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%.

Speaker 5: Gross margins improved from the third quarter by 150 basis points to 23.4%.

Speaker 5: 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.

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.

Speaker 5: both expected to revert back towards the mean in the first quarter.

With both expected to revert back towards the mean in the first quarter.

Speaker 5: 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.

So far in 2022, we see our transportation costs returning to the elevated norms eroding some of the margin tailwind as.

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.

Speaker 5: 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.

Speaker 5: And 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 D-NOW and our customers.

And the final component of margin improvement came from pricing with the inflationary currency, especially in line pipe and high steel content products, helping margins expand again in the quarter we.

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 <unk> and our customers.

Speaker 5: 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.

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-19 related government.

Subsidies.

And our intentional investments in resources and people and an overstress labor market to position D. Now for this growth cycle.

Speaker 5: and our intentional investments in resources and people in an overstressed labor market to position D now for this growth cycle.

Speaker 5: we could see a similar reversal in the WSA build moving into 1 Q2 022 as our fitness measures continue to bear fruit.

We could see a similar reversal in the WSI build moving into <unk> 2022, as our fitness measures continued to bear fruit.

And 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.

Speaker 5: And 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.

Speaker 5: as we've reduced our annual warehousing, selling, and administrative expenses by $200 million since 2019.

As we have reduced our annual warehousing selling and administrative expenses by $200 million since 2019.

And looking forward, we expect there'll be USA to decrease in the first quarter nearing our third quarter levels as we see these initiatives.

Speaker 5: And looking forward, we expect WSA to decrease in the first quarter, nearing our third quarter levels, as we see these initiatives.

Take hold across the higher revenue base.

Speaker 5: 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.

Impairment and other charges in the quarter as disclosed on the income statement were approximately $3 million and these primarily relate to the least and company owned facility exits in the period as we consolidated 15 facilities in the fourth quarter.

Speaker 5: Gap net income for the fourth quarter was $12 million, or $0.11 per share. And on a non-gap basis, net income, excluding other costs, was $8 million, or $0.07 per share.

GAAP net income for the fourth quarter was $12 million or <unk> 11 per share.

And on a non-GAAP basis net income excluding other costs was $8 million or <unk> <unk> per share.

Speaker 5: non-GAAP EBITDA excluding other costs or EBITDA was $17 million or 3.9% for the fourth quarter of 2021.

non-GAAP EBITDA, excluding other costs or EBITDA was $17 million or three 9% for the fourth quarter of 2021.

As Brad noted our EBITDA reconciliation now and going forward adds back noncash stock based compensation expense in each of the periods presented stock based compensation expense for each quarter of 2021 was $2 million.

Speaker 5: 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 and I want to highlight that our fourth quarter 2021 revenue of $432 million or 35% higher.

Speaker 5: 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. And I want to highlight that our 4th quarter 2021 revenue of $432 million, or 35% higher than that of 4 Q2 020, had EBITDA flow-throughs of 30% and was estimated to be a 1.5% increase in revenue.

And that of <unk> 2020.

At EBITDA flow throughs of 39%.

Speaker 5: or a quarterly EBITDA dollar improvement year over year of $44 million.

Or a quarterly EBIT 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.

Speaker 5: 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.

Speaker 5: And when looking at the full year EBITDA, we transformed from a loss of 47 million in 2020.

And when looking at the full year EBITDA, we transformed from a loss of $47 million in 2022.

Speaker 5: 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.

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.

Speaker 5: clear proof of the tremendous efforts and actions our employees have taken as we delivered a meaningful shift in our company. And I want to thank our employees for this incredible feat that positions us well into this expected multi-year growth cycle.

Clear proof of the tremendous efforts and actions our employees have taken as we delivered a meaningful shift in our company and I want to thank our employees for this incredible feat that positions us well into the expected multiyear growth cycle.

Another success in the fourth quarter that enhances our optionality into the future with 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.

Speaker 5: 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.

Speaker 5: 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.

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 and credit facility availability.

Speaker 5: Accounts receivable was $304 million, an increase of 2% from the third quarter, and inventory was $250 million.

Accounts receivable was $304 million, an increase of 2% from the third quarter and inventory was $250 million.

Speaker 5: up 6 million from the third quarter with strong quarterly inventory turns at 5.3.

Up 6 million from the third quarter with strong quarterly inventory turns at five three.

Accounts payable was $235 million a decrease of 3% from the third quarter of 2021 and 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 fueled growth.

Speaker 5: accounts payable is $235 million, a decrease of 3% from the third quarter of 2021. And 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.

With product availability to support our customers.

Speaker 5: 2021 marks our fourth consecutive year of positive free cash flow. And 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.

2021 marks our fourth consecutive year of positive free cash flow and 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.

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.

Speaker 5: 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. And with that, I'll turn the call back to Dave.

We celebrate again the successful quarter with optimism for the future when 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 and with that I'll turn the call back to Dave.

Thank you Mark.

Speaker 4: Thank you Mark. And now some comments on M&A. A top priority with respect to capital deployment continues to be on margin accretive inorganic opportunities.

And 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 our solutions offering to our customers and position the organization to take advantage of the market recovery and build on earnings throughout the business cycle.

Speaker 4: 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.

Speaker 4: 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 market.

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.

Speaker 4: For every prospect of 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.

Speaker 4: But we are looking for durable and solid financial performance at the acquired company through the cycle, not just when the commodity prices are high.

But 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.

Speaker 4: 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.

Speaker 4: Over the previous six quarters, oil producers have worked to reduce the global oil inventory surplus achieved through the combination of North American EMP capital discipline and OPEC Plus supply to curtailment.

<unk> through the combination of North American E&P capital discipline, and OPEC plus supply curtailments. This.

Speaker 4: This behavior has led to higher commodity prices, improved balance sheets, and better financial performance for most of our customers.

This behavior has led to higher commodity prices improved balance sheet and better financial performance for most of our customers.

Speaker 4: As their financial health improves, we anticipate additional CapEx investment to maintain and grow production.

As their financial health improves we anticipate additional capex investment to maintain and grow production.

Speaker 4: Increased activity will lead to more demand for our PVF products and engineered equipment packages as customers ramp up.

Increased activity will lead to more demand for our PDF products.

In engineered equipment packages as customers ramp up.

Speaker 4: I'm optimistic that the current recovery and pace will continue in driving higher demand for our products and services while delivering improved profitability.

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.

Speaker 4: For our U.S. segment, I expect solid growth on a year-over-year basis as market fundamentals continue to improve.

Speaker 4: In Canada, we are well positioned to take advantage of continued recovery with commodity pricing providing motivation for producers to increase their budget.

In Canada, we are well positioned to take advantage of continued recovery with commodity pricing, providing motivation for producers to increase their budgets.

Speaker 4: We also expect growth in our Canadian business in 2022 on a year-over-year basis.

We also expect growth in our Canadian business in 2022 on a year over year basis.

Speaker 4: 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 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.

Speaker 4: We expect to see growth in our international segment next year, in 2022.

Speaker 4: 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 percentage range sequentially.

Despite persistent logistics and product availability constraints and a slow start in 2022 due to COVID-19 surge in January and weather related issues. We believe revenue in the first quarter of 2022 will be up in the mid single digit percentage range sequentially.

WSI could revert to the <unk> 21 levels in <unk> 22, and we expect a near term normalization of gross margins to approximate the full year 2021 levels, which were 21, 9%.

Speaker 4: WSA could revert to the 3Q21 levels in 1Q22, 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 teen percentage range.

Speaker 4: On a year-over-year basis, we expect 2022 revenue to be up in the low to mid-teen percentage range.

Speaker 4: We expect EBITDA to revenue incrementals in the high teen percentage range for the full year 2022, driven by continued market expansion, solid gross margins, similar to the full year percentage levels cultivated in 2021.

We expect EBITDA to revenue Incrementals in the high teen percentage range for the full year of 2022, driven by continued market expansion solid gross margins similar to the full year percentage levels cultivated in 2021.

While COVID-19 geopolitical matters and supply chain volatility create a fog deeper into the year. We believe revenue gains will be in excess of $200 million in EBITDA in dollar terms could double in 2022.

Speaker 4: 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.

Speaker 4: Now I'll close with a recap of where we are in the early innings and what we expect to be a prolonged market expansion.

Now I'll close with a recap of where we are in the early innings.

<unk> 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 <unk> 'twenty pre pandemic pandemic revenue levels. So our focus was on cultivating a world class sales team.

Speaker 4: A year ago, we went into 2021 expecting a full year revenue decline, given the strength of one Q20 pre-pandemic revenue level.

Speaker 4: So 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.

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.

Speaker 4: We work to bias our efforts towards the top line growth to focus our precious resources where the customer sees value and significantly improve earnings and pre-cash flow.

We work 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.

Speaker 4: 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 pre-cash flow in 2022, where we had historically struggled to do so in growth years.

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 had historically struggled to do so in <unk>.

<unk> years.

We closed the book on 2021 with a lot of pride.

Speaker 4: We closed the book on 2021 with a lot of pride. We entered 2022 pumped.

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 am comforted that we don't have the cash drain from debt service interest payments.

Speaker 4: 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.

Speaker 4: I'm excited about the transformation of our operating model and how our supercenter 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.

Im excited about the transformation of our operating model and how our supercenter and regionalization initiatives will provide us continued opportunity to improve financial performance.

Happy about our organizational skills and how we're helping solve the current supply chain challenges and bottlenecks our customers encountered.

Speaker 4: 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 am excited about our ability to secure products are 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.

Speaker 4: I'm excited about our DEI efforts, about how we're on a journey of education and action with diversity and inclusion and how it will separate us as a company and a competitor.

I'm excited about our DDI efforts about how we're on a journey of education in action with the diversity and inclusion and how it will separate us as a company and a competitor.

Speaker 4: 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 am proud of our leadership training and development programs and the opportunities for our employees to hone their skills.

Out of our innovation partnerships with key firms, where we're pursuing cutting edge technology from experts to integrate into our business I.

Speaker 4: I'm proud that we have the best sales team and the most conscientious, tireless, customer-focused operations people in the business.

I am proud that we have the best sales team in the most conscientious tireless customer focused operations people in the business.

And I am excited about our employees, earning bonuses and making Dino a great place to work and prosper.

Speaker 4: And I'm excited about our employees earning bonuses and making D-NOW a great place to work and prosper.

Speaker 4: Finally, beyond all the features, strengths, and accomplishments, we have incredible momentum here at Dina.

Finally beyond all the features strengths and accomplishments we have incredible momentum here at Dana.

Speaker 4: 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.

What I want our employees and their families to know is that we are shifting from a defensive protective and hesitant orientation to a proactive miss winning pride and excitement.

We are building for our future.

Speaker 4: 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.

I want to specifically, thank our sales team and our people in the field and all of those in front of customers, who do everything they can each day to delight our customers.

Speaker 4: 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.

For making <unk>, 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.

Speaker 4: We are where we are and we are who we are because of you.

With that let's open the call up for questions.

We will now begin the question and answer session. If you have a question. Please press Star then one on your Touchtone 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.

Speaker 2: We will now begin the question and answer session. If you have a question, please press star then 1 on your touch tone phone. If you are using a speaker phone, please pick up your handset first before pressing any numbers. Once again, if you would like to ask a question, please press star then 1 on your touch tone phone. I'm standing by for questions.

One on your Touchtone phone standing by for questions.

And our first question comes from Nathan Jones from Stifel. Your line is now open.

Speaker 2: And our first question comes from Nathan Jones from Stiefel. Your line is now open.

Speaker 6: Yeah, good morning. This is Adam Farley on for Nathan. Hi Adam, good morning.

Yes. Good morning. This is Adam Farley on for Nathan Hi, Adam Good morning.

First on gross margins.

Speaker 6: Hey, first on gross margins, with inflation likely...

With inflation likely peaking in the first half.

Does do you now expect to see gross margins peak with some pressure on gross margins as the year progresses, which would usually be typical as inflation moderates.

Speaker 6: Does VMAO expect to see gross margins peak with some pressure on gross margins as the year progresses, which would usually be typical as inflation moderate?

Well it depends on the product line and question one of the Big <unk>.

Speaker 4: Well, it depends on the product line in question. One of the big...

Speaker 4: 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 we still have pipe prices rising for seamless pipe, which is the primary steel pipe we sell, and that could be experienced further into the year beyond the first half. One of the issues though, and I mentioned it in my opening comment.

<unk> 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.

We still have pipe prices rising for seamless pipe, which is the primary pipe steel pipe, we sell and that could.

Could be experienced further into the year beyond the first half one of the issues, though and I mentioned it in my opening comments.

Speaker 4: was the timing of recidiv.

<unk>.

The timing of receipt of prop.

Products.

Speaker 4: you know, is not completely certain. So we could receive some products later in the year, not just us, of course, but our competition and our customers, and that could extend what we expect to see as a kind of a premium margin for that particular product line.

It is not completely certain so we could receive some product later in the year not just us of course, but our competition and our customers and that could.

And what we expect to see as a kind of a premium margin for that for that particular product line. We are seeing broad based inflation continuing to your point, Adam that could kind of add.

Speaker 4: We are seeing broad-based inflation continuing. To your point, Adam, that could kind of ebb, you know, mid-year. But for pipe in particular, I don't know that that's the case. And for a lot of the product lines, we...

Mid year, but but for pipe in particular, I don't know that Thats, the case and for a lot of the product lines. We.

We support.

Speaker 4: There are still some long lead times.

There are still some long lead time so.

Speaker 4: You know, I think we've guided our.

I think we've guided R. R.

Speaker 4: gross margin is very high for 2022. And 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.

Gross margin is very high for 2022 and.

And that's pretty pretty much at the same level of 2021, where we saw four.

Consecutive quarterly record. So it's a timing question in terms of receipt of goods.

Speaker 4: And 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.

And it depends on how strong our market is and when the inflection point occurs I mean, I've 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 may be lingering into the second half.

Okay. That's helpful.

Speaker 6: And then turning to exiting lower margin product lines, we're in the process of denial.

Then turning to.

Exiting lower margin product lines.

We're in the process is due now.

Exiting lower margin business and is there a significant work still to be done or is most of the heavy lifting done.

Speaker 6: exiting lower margin business and is there significant work still to be done or is most of the heavy lifting done?

Well.

Okay.

We're probably we're well down that path and I'll say it this way so.

Speaker 4: We're probably, we're well down that path. And I'll say it this way.

Speaker 4: To me, we have areas, regions that have strong financial performance due to grid movements and customer budgets and customer consolidations, and those things all affect the...

To me, we will have we have areas regions that had strong.

Financial performance.

Due to rig movements in customer budgets and customer consolidations.

Those things all affect.

The.

Thank you.

Success.

Speaker 4: 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 could make money for our shareholders so we could save money.

The contrary forward 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 are.

Ply limited resources to where we can make money for our shareholders.

So we could.

Prepare for the future and continue to grow the company. So I just think it's an ongoing reality of business no matter what business you're in that you always have to.

Speaker 4: for the future and continue to grow the company. So 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...

Kind of fertilize and weed and replant and kind of.

Speaker 4: always situate the business where the sweet spot is in the industry. So that's just an ongoing thing. In terms of major structural changes, I think we're done there. I think we're out of the cost reduction mode. We are in the kind of the phase, I call it a kind of a fulfillment migration, where we do want to regionalize most of our fulfillment to major centers.

All of these situate the business, where the where the sweet spot is in.

In the industry. So that's just an ongoing ongoing thing in terms of major structural changes I think we're done there.

I think we're out of the cost reduction mode. We are in the kind of the phase <unk>.

I call it a kind of a fulfillment migration, where we do want a regionalized most of our fulfillment to major centers.

Speaker 4: of opportunity like we're standing up in Williston and Houston and Odessa and Casper, etc.

Of opportunity like we're standing up in Williston and.

And Houston, and Odessa, and Casper et cetera.

Speaker 4: 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.

We want we want those to be high volume locations.

With well trained people focused on one thing that's taken care of the customer whether it's walk in business everyday business.

Speaker 4: large projects, speculative activity. We want that to be regionalized. We want top talent managing those supply chains. And we want more kind of nodes or express centers or small local locations being intimate with the customer. So I see that's still happening, but it's kind of speeding up right now. I'm real excited about it. Okay, that makes a lot of sense.

Large projects speculative activity, we want that to be regionalized, we want top talent managing that those supply chains and we want more kind of nodes are express centers are small local locations being intimate with the customers. So I see that that's still happening but.

But it's kind of speeding up right now im real excited about it.

Okay that makes a lot of science very for taking my questions Youre welcome.

Speaker 2: Thank you. As a reminder, if you would like to ask a question, please press star then 1 on your touchtone phone. Our next question comes from Tommy Moll from Stevens. Your line is now open.

Thank you as a reminder, if you would like to ask a question. Please press Star then one on your Touchtone phone. Our next question comes from Tommy Moll from Stephens. Your line is now open.

Speaker 5: Morning, and thanks for taking my questions. Good morning, Tommy.

Good morning, and thanks for taking my questions Good morning, Tommy.

Speaker 5: Dave, I wanted to start on WSNA. 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

David I wanted to start on Ws in a it 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.

Speaker 5: For every dollar of revenue, you're looking at $0.03 to $0.05 of incremental WS&A. So, 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.

For every dollar of revenue Youre looking at <unk> to <unk> <unk> of incremental <unk>.

So if you could just refresh us on that and give us any signal of how that debt expense line might progress sequentially throughout the year that'd be helpful.

Speaker 4: Sure, so I think on the last call I said a few things that we are, we still have a list of projects we're working on to improve efficiency of the business.

Sure. So I think on the last call I said, a few things that we are we still have.

A list of projects, we're working on to improve efficiency in the business.

Speaker 4: And I said that we had a plan to reduce WSAA in the 12 to 15 range in 2022. And as you said, I also said that, you know, for each incremental revenue dollar above what last year's level, we'd add 3 to 5 cents in expense, offsetting those reductions we're making. In the meantime...

And I said that we had a plan to reduce WSJ and the 12% to 15 range in 2022.

And as you said I also said that for each incremental revenue dollar above last.

Last year's level, we'd add three to five and expense offsetting those reductions were making.

In the meantime, especially in the last several months I think it's been over 100 days since since we talked to the public the impact of.

Speaker 4: especially in the last several months, I think it's been over 100 days since we talked to the public, the impact of.

Speaker 4: You know, on one hand, we benefited quite nicely.

On one hand, we benefited quite nicely.

I believe most of it.

Our cultivation strategy on focusing on the right things from from improved pricing that comes from product inflation.

Speaker 4: 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. So that's kind of a new layer of...

Product scarcity, a lack of availability and of course, we experienced that in the labor market as well.

And so that's kind of a new layer of.

Speaker 4: attraction or retention costs that we experience that's layered into our guidance for 2022. But our philosophy is to significantly bring down.

Attraction and retention costs that we experience that's layered into our guidance for 2022, but our philosophy is to significantly bring down.

Speaker 4: WSA as a percent of revenue to continue down a path of improved efficiencies.

WSI is a percent of revenue to continue down a path.

Improved efficiencies.

From.

From 2021 to 2022 will probably reduce WSI by at least 200 basis points as a percent of revenue.

Speaker 4: 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 are in a growth mode. We are prioritizing growth over over cost containment, but we are like I said in the answer to last question. We're focused on changing our model and we're really making good headway on that path. So we did kind of.

Speaker 4: 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, but 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. So we did kind of guide the first quarter to around 86 million. It gets a little murky going.

Guide, the first quarter to around $86 million.

It gets a little murky going forward because.

Speaker 4: We are, although we guide to it, I think, very tightly in our overall guidance on flow-throughs and revenues, etc., but, you know, we're going to be, we're focused on having the best people in the business.

We are.

Although we guide to I think very tightly in our overall guidance on flow throughs in revenues et cetera, but.

We're going to be more focused on having the best people in the business.

Speaker 4: We're focused on beating the competition. We're focused on growth.

We're focused on beating the competition.

<unk> focused on growth.

Speaker 4: We're focused on higher margins and cultivating new business and biasing those efforts towards higher margins costs a little more. That percentage, that percent 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 supercenters.

Focused on higher margins and cultivating.

New business.

And by seeing those efforts towards higher margins cost a little more so that percentage as a percent of revenue will come down our projects to pull cost out of the business are underway, but we are also like I said, we're standing up a location this quarter.

We're investing in new Super centers.

Speaker 4: for the future to grow the business. And those will be kind of offsetting costs. But 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.

For the future to grow the business and those will be kind of offsetting cost but.

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.

And just as a follow up on your your Supercenter comment there Dave.

Speaker 5: And just as a follow-up on your Supercenter comment there, Dave.

You are in a in a growth market now and.

Speaker 5: You are in a growth market now and you pointed out you'll get increasing leverage on the WSNA line not withstanding your investing there. So I'm curious the philosophy...

You pointed out youll get increasing leverage on the <unk> line, notwithstanding youre investing there so I'm curious the philosophy when you.

Speaker 5: when you green light those investments like what you just called out on the supercenter what what are the set of conditions you want to see have the competent audio

When you Green light those investments like what you just called out on the Super Center. What are the set of conditions you want to see to have the confidence to move forward and make that incremental investment.

Speaker 4: That's a great question, Tommy, and I think I can answer for you. So, for example, the Permian Basin, which to me, D-NOW 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, Flex Flow, Odessa Pumps, TSN Fiberglass.

That's a great question Tommy.

I think I can answer for you.

So for example, the Permian Basin, which to me Dino has it has a really strong position in the Permian basin, not just from our standard branch business, which is which for evolving but from like I said flex flow Odessa pumps TSM fiberglass.

Speaker 4: and power service, we've got a really strong presence there with great brands.

And power service, we've got a really strong presence there with.

Great brands.

Speaker 4: And we think we have a real good position. Now in the last quarter, in the fourth quarter of 2021.

And and we think we are.

Good position now in the last quarter in the fourth quarter of 2021.

Speaker 4: we consolidated 10 locations in the Permian into five.

Consolidated 10 locations in the Permian into five.

And one part of the Permian.

Speaker 4: in one part of the permit. We think from that, we'll have more inventory for our customers.

We think that we will have more inventory for our customers.

Speaker 4: We'll be able to manage projects from fewer locations.

We'll have we been able to manage the projects from fewer locations.

From people, who deal in volumes, where we can get the expense per revenue dollar down we wont have distributed inventory risk what I call. When you have inventory strewn about network kind of exponential inventory risk you'll have less inventory risk in the next downturn.

Speaker 4: from people who deal in volumes where we can get the expense per revenue dollar down. We won't have distributed inventory risks.

Speaker 4: 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.

Speaker 4: and you'll have a much more efficient business. So we're growing in the Permian, we're standing up, we're growing in the Permian, we're standing up,

And youll have a much more efficient business so.

We're growing in the Permian, we're standing up.

We're growing in the Permian.

We just stood up a supercenter, but consolidated and we're doing it smartly and we're going to be better and better able to take care of our customers have more important to do so with less inventory risk. So that's an example of we are pulling cost out and getting better and getting stronger in the market.

Speaker 4: We just stood up a super center, but we're consolidating, and we're doing it smartly. And we're going to be better able to take care of our customers, have more employee to do so with less inventory risk. So that's an example of we are pulling costs out and getting better and getting stronger in the market.

Speaker 5: And 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.

Dave I hope I'm not Overstaying my welcome here, but just just on that point you've made so using the Permian as an example.

If you can.

Net of everything you just described and.

Pro forma for the Supercenter 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 your consolidated 10% to five branches.

Speaker 5: 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 to 5%.

Speaker 4: Yeah, I think so. Now, now the roofline comment I'm not sure about.

Yes, I think so now the <unk> comment I'm not sure about we might actually have more space today.

Speaker 4: We might actually have more space today, so I'm not going to comment on that, but we should see improved, really improved earnings per employee.

So I'm not going to comment on that but but we will we should see improved.

<unk> improved earnings per employee.

Speaker 4: Because 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. Thank you, Dave. I'll turn it back.

Because I.

I'd be more interested in the bottom line impacts of the investments we make are choose to walk away from then the topline, but but generally that topline should follow suit, but I'd be more interested in watching the bottomline.

Thank you, Dave I will turn it back thank.

Thank you Tommy.

Thank you. Our next question comes from Jon Hunter from Cowen <unk> Company. Your line is now open.

Speaker 2: Thank you. Our next question comes from John Hunter from Cohen and Company. Your line is now open. Hey, thank you.

Hey, Thank you and good morning.

No.

Speaker 7: Hey, good morning. So 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 21 margin in the first quarter. And that's what you're aiming for for the year to be in line with 2021. So, you know, I'm curious.

Hey, good morning. So first question is.

Just going back to the margins.

Guidance seems to imply you're at like 2021.

Hi, <unk> 'twenty one.

Margin in the first quarter and Thats, what youre aiming for for the year.

To be in line with 2021.

So.

I'm curious.

How you see margin progressing it seems flattish based on this outlook, but you have got.

Speaker 7: 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 percent, is that a level of gross margin you think you can...

HRC pricing Thats gone down quite a bit since the peak in September .

I'm curious the things that Youre doing.

Offset some of that pipe inflation and then.

As it relates to 21, 9% is that a level of gross margin you think you can.

Speaker 7: maintain on a multi-year basis, I guess, as we go into 23 and 24. Thanks.

Maintain on a multiyear basis I guess as we go into 'twenty three.

Sure. Thanks.

I do I mean.

So.

22.

Speaker 4: 2021 was our best gross margin year. Each quarter had successive improvements in gross margin.

2021 was our best gross margin year, each year had success.

Each quarter had success of improvements in gross margins.

Speaker 4: So, 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, and to the points about hot-rolled coils, steel prices declining.

So while we wanted to come into this call, saying, 22% in 'twenty two 2022 we're a little bit cautious about over over guiding on gross margins because we had such success in 2021 and to the points about hot rolled coil steel prices declining.

Inflation may be adding mid year, which I think it would be later in the year generally and NAV. Even later in the year for pipe.

Speaker 4: Inflation may be 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. But in terms of maintaining it over time, I believe we can, and here's what I mean.

There are some offsets to that but 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.

Speaker 4: We didn't talk about it in our prepared remarks, and we didn't talk about it in the Q&A yet, but during.

During.

Speaker 4: During 2021, we, in fact, mostly in the fourth quarter of 2021, we exited, consolidated,

During 2021.

<unk>.

In fact, mostly in the fourth quarter of 2021 week.

Exited consolidated 15 locations.

Speaker 4: Today, we have over 125 fewer people than we did at the end of 2020, in part because we've walked away from some lower margin business. We didn't see ... We're trying to be more efficient as a company. The efforts underway for those folks wasn't generating any kind of margin, so we walked away from maybe $30 million in business.

And we today, we have over 125 fewer people than we did at the end of 2020.

In part because we've walked away from some low margin lower margin business. We didn't see we're trying to be more efficient as a company. The efforts underway for those bulks wasn't wasn't generating the kind of margins.

Walked away from maybe $30 million of the business.

Speaker 4: What that means is we have our people focused on the higher margin stuff.

What that means is we have our people focused on the higher margin stuff.

We don't have our people focus on lower margin stuff.

Speaker 4: 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. So I think it's a matter, it's not just the market that's driving our gross margin performance.

We are able to generate much better flow through from the activity.

In an environment, where it's hard to.

We have to deal with labor inflation as well as product inflation. So 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 and then last call we've made year over year.

Speaker 4: In fact, I made a big deal about it on the last call. We've made year over year.

Speaker 4: uh... product margin improvements for the last five years. That's a matter to me of careful cultivation of what you're not going to do in the market to make sure you have the right people focused on the right thing. So I do think that these gross margins can be...

Product margin improvements over the last five years, that's a matter to me a careful cultivation of what you are not going to do in the market to make sure you have the right people focused on the right things. So I do think that the.

These gross margins can be sustained.

And in terms of how it flows during the year I think we're just going to have to see I think.

Speaker 4: And in terms of how it flows during the year, I think we're just going to 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 mixed issue and that would be depressive to margins. But you know, we've got it for a very strong gross margins. I do believe it's sustainable and it comes from real laser focus to what we're not going to do as a company.

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, but we have guided for a very strong gross margins I do believe it's sustainable and it comes from we are laser focused on what we're not going to do as a company.

Speaker 7: Thanks, Dave, that's very helpful. Switching gears a little bit, I guess, to the top line side of things, so you guided 22 revenues up low to mid-teens. To me, it seems like it could be a little bit conservative. I mean, the recount's tracking up 30%.

Thanks, Dave.

That's very helpful switching.

Switching gears, a little bit I guess to the.

Topline side of things. So you guided 22 revenues up low to mid teens.

To me it seems like it could be a little bit conservative I mean, the rig count is tracking up 30%.

Year over year U S is maybe 70% of your business.

Speaker 7: year over year, US is maybe 70% of your business. So just based on that you're up 20%.

So just based on that you are up 20%.

Speaker 7: 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. So, curious if you can help me kind of look into the moving pieces regionally in the 2022 outlook for revenue to be uploaded.

Now I know theres, a little bit of public versus private customer mix going on.

But you also said that Canada and international should be up in 2022. So.

Curious if you can help me.

Kind of looking at the moving pieces regionally in the 2022 outlook for revenue to be up low to mid teens.

Speaker 4: Okay, so we're basing that on what we see in terms of what's happened in the first 45 days of the court.

Okay. So so we're basing that.

On what we see in terms of what's happened in the first 45 days in the quarter.

Speaker 4: 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, and we're looking at some of our peers and how they're seeing the market, and we think that's...

We're basing that on what we see in terms of the influx of products or.

We're basing that on what our customers are telling us.

And we're looking at some of our peers and how they are seeing in the market and we think thats.

Speaker 4: 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.

I don't see it we gave 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're seeing the strongest growth in the U S. Seconded by Canada, and then more modest growth internationally.

But there is.

Speaker 4: You know, if you look at rig count and completion and some of the things we traditionally looked at, there's been a decoupling in terms of customer budgets from those numbers for several quarters now. We expect that to persist.

If you look at rig count and completions and some of the things. We traditionally looked at Theres been a decoupling in terms of customer budgets from those numbers for you know for several quarters now we expect that to persist and.

Speaker 4: And so we're guiding, we're giving this our best.

So we're guiding we're giving.

Our best.

Speaker 4: effort at what we think the growth is going to be. And like I said earlier, you know, to see the kind of gross margin progression we've delivered and to continue to

Effort at what we think the growth is going to be.

And like I said earlier.

See any kind of gross margin progression we've delivered.

And to continue to.

Speaker 4: kind of prune the business and fall out costs where the value is not being added. We've walked away from probably $39 million in revenue. So that would be 2 or 3% more revenues that we would have enjoyed in 2022, but that we wouldn't have benefited from at the bottom line.

Kind of pruned business and pull out costs, where the value is not being added.

Walked away from probably $30 million in revenue, so that would be 2% to 3% more revenues that that we would have enjoyed in 2022, but that.

Wouldn't have benefited from the bottom line.

Speaker 4: So, you know, I think that's a good range and, uh...

So I think that's a good range and.

Speaker 4: And it depends on how the year flows. And so I think we're sticking with that. I don't think it's conservative. I think it's, certainly at the top end, it's a pretty strong number.

It depends on how the airflows.

So I think we're sticking with that I don't think it's conservative I think it's certainly at the top end is a pretty strong number.

Speaker 7: Absolutely. And then 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.

Absolutely and then 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 under that outlook. Thanks.

Yes, I think it's I think it's in that range I mean, we.

Speaker 4: The one wild card there is the receipt and timing of inventory.

The one wildcard there is.

The receipt and timing of inventory.

What kind of a one thing driving whether that will be more or less than 25 million, but I think we can be $25 million. There are scenarios, where we're ahead of that in scenarios, where we're a little bit behind it but we.

Speaker 4: That's kind of the one thing driving whether that'll be more or less than $25 million. But 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. But we do plan to be well prepared for the growth in the coming months.

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 <unk>, CEO and president for closing statements.

Speaker 2: 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 Cherchinsky, CEO and President, for closing statements.

Speaker 4: Okay, thank you for your interest in Dean Allen. I look forward to talking to everyone on our first quarter call in May. Have a good day.

Okay. Thank you for your interest in denying I look forward to talking to everyone on our first quarter call in May have a good day.

Yes.

Speaker 2: Thank you, ladies and gentlemen, for participating in today's conference. This concludes our event. You may now disconnect.

Thank you, ladies and gentlemen for participating in today's conference. This concludes our event you may now disconnect.

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Speaker 2: Welcome to the now incorporated 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 star then 1 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.

Welcome to the now incorporated 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 Star then one on your Touchtone phone I will now turn the call over to Vice President Digital strategy Investor Relations, Brad Wise, Mr. Wise, you may begin.

Speaker 3: 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 Cherachinsky, President and Chief Executive Officer and Mark Johnson, Senior Vice President and Chief Financial Officer.

Thank you Cheryl.

Good morning, and welcome to <unk> fourth quarter and full year of 2021 earnings Conference call. We appreciate you joining us and thank you for your interest in now Inc.

With me today is David <unk>, President and Chief Executive Officer, and Mark Johnson, Senior Vice President and Chief Financial Officer, We operate primarily under the distribution now and <unk> brands and you'll hear us refer to distribution now and do you know, which is our New York stock exchange ticker symbol during our conversation.

Speaker 3: 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.

<unk> 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.

Speaker 3: These are forward-looking statements within the meaning of the U.S. Federal and Securities laws based on limited information as of today, which is subject to change. They are subject to risk and uncertainties, and actual results may differ materially.

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.

Speaker 3: 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.

We do not undertake any obligation to publicly update or revise any forward looking statements for any reason.

Speaker 3: 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.

In addition, this conference call contains time sensitive information that reflects management's best judgment at the time of the live call a.

I'll 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.

Speaker 3: Further information as well as supplemental financial and operating information may be found within our earnings release on our website at ir.denial.com or in our filings with the SEC. In an effort to provide investors with additional information relative to our results as determined by US GAAP, you'll notice that we also disclose various non-GAAP financial measures.

Further information as well as supplemental financial and operating information may be found within our earnings release on our website at IR Dot <unk> dot 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.

Speaker 3: including EBITDA excluding other costs, sometimes referred to as EBITDA, net income excluding other costs, and diluted earnings per share excluding other costs.

Excluding other costs.

Speaker 3: Each excludes the impact of certain other costs and, therefore, have not been calculated in accordance with GAAP.

Each excludes the impact of certain other costs and therefore have not been calculated in accordance with GAAP.

Speaker 3: in an effort to better align with management's evaluation for 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...

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 noncash.

Cash stock based compensation expense.

Higher periods presented.

Speaker 3: have been adjusted to conform with the current period presentation.

Been adjusted to conform with the current period presentation.

Please refer to our 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.

Speaker 3: reconciliation on each of these non-GAAP financial measures available at the end of our earnings release.

Speaker 3: 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.

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.

Speaker 3: A replay of today's call will be available on the site for the next 30 days.

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.

Speaker 3: plan to file our 2021 Form 10-K today, and it will also be available on our website. Now, let me turn the call over to Dave.

Now, let me turn the call over to Dave.

Thanks, Brad and good morning, everyone.

Speaker 4: On our earnings call one year ago, as we were emerging from a year when the industry had experienced the worst market conditions, D-NOW responded swiftly and resolutely to defend its bottom line and lay the groundwork for prosperity in the future. We believe that

On our earnings call one year ago, as we were emerging from a year when the industry had experienced the worst market conditions.

Now responded swiftly and resolutely to defend its bottom line and lay the groundwork for prosperity in the future.

We believe then that the market.

Speaker 4: 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.

And our customer spending habits had fundamentally changed.

Mandy and decisive action to redefine our supplier sales and customer engagement playbook and adjust our operating model to thrive as the economy began to recover.

Speaker 4: 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.

Downturns motivate change and I sit here. This morning amazed at how the highly talented caring customer focused women and men of D. Now have not just embraced but driven.

Speaker 4: 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.

The results of our decisions. These past two years are evident not only in the 90 day improvement in financial performance, but in the competence enthusiasm and confidence in our team that provides superior solutions, our customers crave and a supply chain stressed environment.

During the first quarter of this year, we began operations at our new Permian Supercenter in Odessa, Texas. This facility expands our position in investment in the heart of one of the busiest oil producing regions in the U S.

Speaker 4: 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 TSNM Fiberglass, strong, valuable, customer-appealing names fortifying our brand in Permian.

Formidable presence of our energy locations.

And the complementary asset strength of Odessa pumps flex flow power service and TSM fiberglass strong valuable customer appealing names fortifying our brand in the 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.

Speaker 4: During this quarter, we plan to open a new express center in the area to support our customers as their drilling plans ramp up.

Speaker 4: This location will be primarily supported by the Supercenter as a means to regionalize fulfillment and drive efficiencies and deepen intimacy with target customers.

This location will be primarily supported by the supercenter as a means to regionalize fulfillment and drive efficiencies and deepen intimacy with target customers.

Now moving onto our results fourth quarter revenue was down 2% to $432 million at the better end of our guide provided on the last call.

Speaker 4: 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.

For the full year of 2021 revenues were one.

Speaker 4: .632 billion. Compared to the prior year, 2020 revenue grew 13 million or 0.8%, which is notable considering the strong 604 million 1Q20 pre-COVID print that contributed 37% of total 2020 revenue.

632 billion compared to the prior year 2020 revenue grew $13 million or 0.8%, which is notable considering the strong 604 million <unk> 20, pre COVID-19 print that contributed 37% of total 2020 revenue.

Speaker 4: 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.

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 <unk> 'twenty, one gross margins expanded again to a record high of 23, 4% up 150 basis points sequentially.

Speaker 4: In 4Q21, 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.

This is the fourth consecutive quarterly record for gross margins.

Speaker 4: and full year 2021 gross margins of 21.9% set a record high as well.

And 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 but 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.

Speaker 4: We are in an inflationary environment, and we benefit from that. But 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.

Speaker 4: 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 purchases, we can corral and allocate to our supplier partners. The more we benefit in terms of product availability return privileges and product costs.

Speaker 4: and the more our customers benefit from availability in a stressed replenishment environment.

And the more our customers benefit from availability in a stressed replenishment environment.

Speaker 4: And because we are selective about which product lines, businesses, locations and suppliers will support and customers will 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.

And because we are selective about which product lines businesses locations and suppliers will support and customers. We will pursue we are able to meaningfully improve product line pricing and 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, our U S energy customer capital discipline continues to be a major driving factor on our top line performance as public operators maintain production and returned cash to shareholders.

Speaker 4: 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.

Speaker 4: 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.

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.

Speaker 4: 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.

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 success continues with our integrated supply chain services customers as we deliver additional value added services.

Speaker 4: 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.

That help our customers lower lifting cost 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 and increased maintenance capex activity.

Speaker 4: As an example, we're seeing gains in our work over rig materials management program in support of several key EMP producers on increased maintenance CAPEX activity.

Speaker 4: 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.

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 Who's flow line assets, where damage from hurricane either last August .

Speaker 4: In the southeast, we received orders from an independent shelf Gulf of Mexico producer whose flowline assets were damaged from Hurricane Ida last August .

Speaker 4: We also provided PVF for several compressor station repairs also attributed to hurricane damage.

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.

Speaker 4: 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 increased midstream takeaway capacity utilization driving more investment in midstream maintenance and Capex projects.

Speaker 4: 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.

Speaker 4: Our midstream customer spend has been more focused on natural gas and associated produced water projects, a pivot from previous quarters.

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 launch a receiver packages for several gas producers.

Speaker 4: In the Marcellus, Utica, and Haynesville plays, we supplied well-connect skid fabrication kits and launcher receiver packages for several gas producers.

Speaker 4: We supplied actuated valves on several NGL transmission line extension projects where we provide technical support on product applications and field service.

We supplied actuated valves on several NGL transmission line extension projects, where we provide technical support and product applications and field service field.

Speaker 4: field service support for the mounting, testing, startup, and commissioning of our valves.

<unk> service support for the mounting testing startup and commissioning of our valves.

Speaker 4: We provided line pipe, actuator valves, and fittings and planches for a number of gas utilities in the Midwest and Rockies.

We provided line pipe actuated valves and fittings and flanges for a number of gas utilities in the Midwest and Rockies.

Speaker 4: 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.

Shifting to U S process solutions, we observed some of our customers favoring drilling and completing infill wells that have been minimizing demand for a rotating and fabricating equipment due to existing transfer and processing capacity. However.

Speaker 4: However, we are starting to see increased orders as customer joint programs shift to areas with less existing infrastructure.

However, we are starting to see increased orders as customer drilling programs shift to areas with existing infrastructure.

Some notable project wins during the quarter include pump rebuilds for a number of feedstock processed and transfer applications for a refinery in the Rockies.

Speaker 4: 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.

And we provided a mix of high alloy isolation and control valves for a trona mine project in southwest Wyoming.

Speaker 4: 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 EMP operator.

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 the saltwater disposal package for another E&P operator.

Our instrument compressed air and dry our packages continue to experience high demand as operators replace gas pneumatic systems with compressed air systems to eliminate greenhouse gas emissions.

Speaker 4: 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.

Speaker 4: 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.

In the Permian, we supply a number of pipe racks pump skids and separate us from our Tom Ball, Texas fabrication facility for a large operator and received a number of orders for new heater treater vessels and separators.

Speaker 4: 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.

We have been successful in expanding our hydraulic jet pump rentals, replacing.

ASP 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 at an injection packages in southeast Saskatchewan.

Speaker 4: In Canada, we saw notable wins in the quarter with PVF 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.

From an Alberta based producer along with artificial artificial lift products for maintenance Capex work in Central Canada.

Speaker 4: we delivered several large actuated valve orders through an EPC for a private Alberta-based midstream operator.

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.

Speaker 4: Our international segment experienced the most impact to revenue associated from delays in supply chain and labor availability impact.

Speaker 4: Activity is increasing on smaller projects, which are beginning to gain traction as more rig reactivations occur in the Middle East.

Activity is increasing on smaller projects, which are beginning to gain traction as more rig reactivation occur in the middle East.

Speaker 4: Furthermore, a number of VEPCs we routinely conduct business with are seeing an increase in project activity and booking.

Furthermore, a number of Epc's, we routinely conduct business with are seeing an increase in project activity and 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 UK.

Speaker 4: Some notable wins in the quarter include delivery in a large number of gate, globe, and check valves, power cables, and accessories for a combined heat and power plant in the UK, power cables and accessories for an upstream producer in Kazakhstan, and electrical bulks for an operator in West Africa.

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.

Speaker 4: 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.

Facility in Kurdistan.

Out of our UAE operations, we provided actuated valves to an EPC for a methylene reclamation unit for an Indian based refinery and a try ethylene glycol production project and Pakistan.

Speaker 4: Out of our UAE operations, we provided actuated valves to an EPC for a methylene 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 in to an EPC for the Jurassic production facility in Kuwait.

Speaker 4: 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.

Speaker 4: Our industry has been dealing with product inflation and impacts on product availability caused by shortages and delays in the supply chain.

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.

Speaker 4: Our supply chain team has been focused on minimizing disruption by ensuring we have ample products available to support our customers.

Speaker 4: We leverage our global span 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.

We leverage our global spend with suppliers to ensure we have preferred access to volume to the volume available while balancing the risk and cost elements through a combination of domestic and import sources.

Speaker 4: Not only have we worked hard to obtain allocations, we have provided suitable alternatives to customers who increasingly depend on D-Now to find solutions that meet their requirements.

Not only have we worked hard to obtain allocations. We have provided suitable alternatives to customers will increasingly depend on <unk> now to find solutions that meet their requirements.

Speaker 4: This has resulted in several of our customers expanding their approved manufacturers list using D-NOW's AML.

This has resulted in several of our customers expanding their approved manufacturers list using denounce AML.

We do have a bit of pipeline inventory in transit and pending timing of ultimate receipt, we may experience some challenges with pipe availability in the first half of 2022.

Speaker 4: 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.

Speaker 4: Inflation continues for seamless pipe as both domestic and import prices were up during the quarter.

Moving to our digital now initiatives, our digital revenue as a percent of total revenue for the quarter was 42%.

Speaker 4: Moving to our digital now 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 continue to work with our digitally integrated customers to further enhance their e-commerce experience by optimizing their product catalogs and developing customized workflows solutions through our shop Dot <unk> Dot com platform.

Speaker 4: We are leveraging eSPEC, our digital product configurator, for complex engineered equipment packages to advance our U.S. process solutions business.

We are leveraging <unk>, our digital product configuration 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.

Speaker 4: 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 <unk> to help build and construct project bids while others are used at the sized launcher and receiver packages for quoting.

Speaker 4: 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.

Speaker 4: And finally, we have launched Access Now, a suite of automated inventory management and inventory control solutions for our customers.

And finally, we have launched access now a suite of automated inventory management inventory control solutions for our customers.

Speaker 4: Our AccessNow product includes cameras, sensors, Smart Locks, barcoding, 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. And now I'd like to turn it over to my co-sponsor to talk a little bit more about AccessNow.

Our access now product include cameras sensors, smart locks Barcoding RFID and automatic data collection solutions that enable our customers to better manage and control inventory without incurring the expense of a staff inventory locations.

Yeah.

And now I'd like to touch on a few comments related to energy transition.

Speaker 4: In the US Gulf Coast, we provided duplex stainless vein pump packages to a biodiesel refiner who converts animal fat to biodiesel.

In the U S. Gulf Coast, we provided duplex stainless bain pump packages to a biodiesel refiner, who converts animal fat to biodiesel.

Speaker 4: and fire water pumps for an electric truck vehicle manufacturer plant in Texas.

And firewater pumps for an electric truck vehicle manufacturer plant in Texas.

Speaker 4: 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 and market.

In Canada, we won multiple orders for zero emission actuated valves through an EPC working on carbon capture and storage project in Alberta.

And from a producer drilling exploratory exploratory wells to extract helium for use in the high tech industry end market.

Speaker 4: These successes highlight how a number of existing products we provide can extend to growth markets like carbon capture and high-tech industrial manufacturing.

These successes highlight how a number of existing products, we provide can extend to growth markets like carbon capture and high tech industrial manufacturing.

Speaker 4: We continue to monitor and track an increasing number of energy transition projects.

We continue to monitor and track increasing number of energy transition projects.

Speaker 4: 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.

Our business development team has been working on a variety of RFID in rfps for many customers pertaining to renewable diesel and gasoline sustainable jet fuel direct air capture carbon capture and storage hydrogen and cotwo transmission and storage projects.

As we review Bill of materials from the list of energy transition projects.

Speaker 4: As we review bill of materials from the list of energy transition projects

Speaker 4: we work with our manufacturer partners to secure access to broader ranges of suitable products that will serve as the expanding end markets. With that.

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.

Speaker 5: 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.

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 expectations.

Speaker 5: The U.S. revenue for the fourth quarter 2021 was $303 million, down $9 million or 3% from the third quarter.

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.

Speaker 5: 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.

Sequentially revenue was down approximately 4% in the U S process solutions revenue was up 2% sequentially.

Speaker 5: 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.

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.

Speaker 5: Year-over-year revenue was up $24 million, or 50% from the fourth quarter of 2020.

Speaker 5: 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.

Canada strong Q4 performance was propelled by improving demand in the Canadian energy market paired with the value our customers see in distribution now is model as a trusted and established technical solutions provider.

Speaker 5: 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 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.

Speaker 5: international increased revenue 21 percent in the fourth quarter or 10 million compared to the same period of 2020.

International increased revenue, 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%.

Speaker 5: Gross margins improved from the third quarter by 150 basis points to 23.4%.

Speaker 5: 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.

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.

Speaker 5: both expected to revert back towards the mean in the first quarter.

Speaker 5: 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.

So far in 2022, we see our transportation costs returning to the elevated norms eroding some of the margin tailwind as.

As we move into 2022.

Speaker 5: 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. Has purchase volume level thresholds are reset.

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.

Speaker 5: And 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 D-NOW and our customer.

And the final component of margin improvement came from pricing with the inflationary currency, 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 <unk> 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-19 related government.

Speaker 5: 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.

Subsidies.

Yeah.

Yeah.

And our intentional investments in resources and people and an overstress the labor market to position <unk> for this growth cycle.

Speaker 5: and our intentional investments in resources and people in an overstressed labor market to position D-NOW for this growth cycle.

Speaker 5: we could see a similar reversal in the WSA build moving into 1Q2022 as our fitness measures continue to bear fruit.

We could see a similar reversal in the WSI build moving into <unk> 2022, as our fitness measures continue to bear fruit.

Speaker 5: And 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.

And 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.

Speaker 5: as we've reduced our annual warehousing, selling, and administrative expenses by $200 million since 2019.

As we have reduced our annual warehousing selling and administrative expenses by $200 million since 2019.

And looking forward, we expect WSI to decrease in the first quarter nearing our third quarter levels as we see these initiatives.

Speaker 5: And looking forward, we expect WSA to decrease in the first quarter, nearing our third quarter levels as we see these initiatives.

Take hold across the higher revenue base.

Impairment and other charges in the quarter as disclosed on the income statement were approximately $3 million and these primarily relate to the least and company owned facility exits in the period as we consolidated 15 facilities in the fourth quarter.

Speaker 5: 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.

Speaker 5: Gap net income for the fourth quarter was $12 million, or $0.11 per share. And on a non-gap basis, net income excluding other costs was $8 million, or $0.07 per share.

GAAP net income for the fourth quarter was $12 million or <unk> 11 per share.

And on a non-GAAP basis net income excluding other costs was $8 million or <unk> <unk> per share.

non-GAAP EBITDA, excluding other costs or EBITDA was $17 million or three 9% for the fourth quarter of 2021.

Speaker 5: 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 noncash stock based compensation expense in each of the periods presented stock based compensation expense for each quarter of 2021 was $2 million.

Speaker 5: 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.

Speaker 5: 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. And I want to highlight that our fourth quarter 2021 revenue of $432 million, or 35% higher than that of 4 Q2 020, had EBITDA flow-throughs of $30 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 and I want to highlight that our fourth quarter 2021 revenue of $432 million or 35% higher than <unk>.

<unk> 2020 at.

That EBITDA flow throughs of 39%.

Speaker 5: or a quarterly EBITDA dollar improvement year-over-year of $44 million.

For our quarterly EBITDA dollar improvement year over year of $44 million.

Speaker 5: 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.

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.

Speaker 5: And when looking at the full year EBITDA, we transformed from a loss of $47 million in 2020.

And when looking at the full year EBITDA, we transformed from a loss of $47 million in 2022.

Speaker 5: 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.

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 and I want to thank our employees for this incredible feat that positions us well into this expected multiyear growth cycle.

Speaker 5: clear proof of the tremendous efforts and actions our employees have taken as we delivered a meaningful shift in our company. And I want to 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 with 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.

Speaker 5: 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.

Speaker 5: 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.

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 and credit facility availability.

Speaker 5: 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 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 five three.

Speaker 5: Accounts payable was $235 million, a decrease of 3% from the third quarter of 2021. And 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.

Accounts payable was $235 million a decrease of 3% from the third quarter of 2021 and 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 fueled growth.

With product availability to support our customers.

Speaker 5: 2021 marks our fourth consecutive year of positive free cash flow. And 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.

2021 marks our fourth consecutive year of positive free cash flow and 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.

<unk> that we would've typically consumed cash at that level of growth.

Speaker 5: 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. 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.

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 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.

Speaker 4: Thank you, Mark. And now some comments on M&A. A top priority with respect to capital deployment continues to be on margin accretive inorganic opportunities.

Thank you Mark.

Now some comments on M&A.

Priority with respect to capital deployment continues to be on margin accretive inorganic opportunities.

Speaker 4: 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.

Through M&A, we are targeting businesses that strengthen and expand our product geographic our solutions offering to our customers and position the organization to take advantage of the market recovery and build on earnings throughout the business cycle.

Speaker 4: 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 market.

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.

Speaker 4: For every prospect of 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.

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.

Speaker 4: But we are looking for durable and solid financial performance at the acquired company through the cycle, not just when the commodity prices are high.

But we're 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 we will continue to be selective and strategic in what we pursue and ultimately take across the finish line.

Speaker 4: 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.

Speaker 4: Over the previous six quarters, oil producers have worked to reduce the global oil inventory surplus achieved through the combination of North American EMP capital discipline and OPEC plus supply curtailment.

<unk> through the combination of North American E&P capital discipline, and OPEC plus supply curtailments.

Speaker 4: This behavior has led to higher commodity prices, improved balance sheets and better financial performance for most of our customers.

This behavior has led to higher commodity prices improved balance sheets and better financial performance for most of our customers.

Speaker 4: As their financial health improves, we anticipate additional CapEx investment to maintain and grow production.

As their financial health improves we anticipate additional capex investment to maintain and grow production.

Speaker 4: Increased activity will lead to more demand for our PVF products and engineered equipment packages as customers ramp up.

Increased activity will lead to more demand for our PVA products.

In engineered equipment packages as customers ramp up.

I am optimistic that the current recovery and pace will continue in driving higher demand for our products and services, while delivering improved profitability.

Speaker 4: I'm optimistic that the current recovery and pace will continue in driving higher demand for our products and services while delivering improved profitability.

Speaker 4: For our U.S. segment, I expect solid growth on a year-over-year basis as market fundamentals continue to improve.

For our U S segment, I expect solid growth on a year over year basis as market fundamentals continue to improve.

Speaker 4: In Canada, we are well positioned to take advantage of a continued recovery with commodity pricing providing motivation for producers to increase their budget.

In Canada, we are well positioned to take advantage of continued recovery with commodity pricing, providing motivation for producers to increase their budgets.

Speaker 4: We also expect growth in our Canadian business in 2022 on a year-over-year basis.

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.

Speaker 4: 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.

Speaker 4: We expect to see growth in our international segment next year, in 2022.

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 our COVID-19 surge in January and weather related issues. We believe revenue in the first quarter of 2022 will be up in the mid single digit percentage range sequentially.

Speaker 4: 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 percentage range sequentially.

WSI could revert to the <unk> 21 levels in <unk> 'twenty, two and we expect a near term normalization of gross margins to approximate the full year 2021 levels, which were 21, 9%.

Speaker 4: WSA could revert to the 3Q21 levels in 1Q22, and we expect a near-term normalization of gross margins to approximate the full year 2021 levels, which were 21.9%.

Speaker 4: On a year-over-year basis, we expect 2022 revenue to be up in the low-to-mid-teen percentage range.

On a year over year basis, we expect 2022 revenue to be up in the low to mid teen percentage range.

We expect EBITDA to revenue Incrementals in the high teen percentage range for the full year 2022, driven by continued market expansion solid gross margins similar to the full year percentage levels cultivated in 2021.

Speaker 4: We expect EBITDA to revenue incrementals in the high teen percentage range for the full year 2022, driven by continued market expansion, solid gross margins, similar to the full year percentage levels cultivated in 2021.

Speaker 4: 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.

While COVID-19 geopolitical matters and supply chain volatility create a fog deeper into the year. We believe revenue gains will be in excess of $200 million in EBITDA in dollar terms could double in 2022.

Now I'll close with a recap of where we are in the early innings.

Speaker 4: 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.

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 <unk> 'twenty pre pandemic pandemic revenue levels. So our focus was on cultivating a world class sales team.

Speaker 4: A year ago, we went into 2021 expecting a full-year revenue decline given the strength of 1Q20 pre-pandemic revenue levels.

Speaker 4: So 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.

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.

Speaker 4: We work to bias our efforts towards the top line growth to focus our precious resources where the customer sees value and significantly improve earnings and pre-cash flow.

We worked to bias our efforts towards the topline growth to focus our precious resources, where the customer sees value and significantly improved 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 <unk>.

Speaker 4: 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 pre-cash flow in 2022, where we have historically struggled to do so in growth years.

Both years.

Speaker 4: We close the book on 2021 with a lot of pride. We enter 2022 pumped.

We closed the book on 2021 with a lot of pride.

We enter 2022 pumps.

Speaker 4: 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 am proud that we have zero debt ample total liquidity for strategic flexibility to fund organic growth and to seize inorganic opportunities I am comforted that we don't have the cash drain from debt service interest payments.

Speaker 4: 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.

Im excited about the transformation of our operating model and how our supercenter and regionalization initiatives will provide us continued opportunity to improve financial performance.

Speaker 4: I'm happy about our organizational skills and how we're helping solve the current supply chain challenges and bottlenecks our customers encounter.

Happy about our organizational skills and how we're helping solve the current supply chain challenges and bottlenecks our customers encountered.

Speaker 4: 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 am excited about our ability to secure products are 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.

Speaker 4: 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 am excited about our DDI efforts about how we're on a journey of education in action with the diversity and inclusion and how it will separate us as a company and a competitor.

Speaker 4: 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 am proud of our leadership training and development programs and the opportunities for our employees to hone their skills.

Out of our innovation partnerships with key firms, where we're pursuing cutting edge technology from experts to integrate into our business I am proud that we have the best sales team in the most conscientious tireless customer focused operations people in the business.

Speaker 4: I'm proud that we have the best sales team and the most conscientious, tireless, customer-focused operations people in the business.

Speaker 4: And I'm excited about our employees earning bonuses and making D-NOW a great place to work and prosper.

And I am excited about our employees, earning bonuses and making <unk> a great place to work and prosper.

Finally beyond all of the features strengths and accomplishments we have incredible momentum here at Dana.

Speaker 4: Finally, beyond all the features, strengths, and accomplishments, we have incredible momentum here at DNOW.

Speaker 4: 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.

What I want our employees and their families to know is that we are shifting from a defensive protective and hesitant orientation to one a proactive winning pride and excitement.

We are building for our future.

Speaker 4: 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.

I want to specifically, thank our sales team and our people in the field and all of those in front of customers, who do everything they can each day to delight our customers.

Speaker 4: for making D-NOW a premier destination our customers seek for solutions and for the collective knowledge that will help us continue to win the market.

For making Dino a premier destination, our customers seek for solutions and for the collective knowledge that will help us continue to win in the market.

Speaker 4: We are where we are and we are who we are because of you.

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 Touchtone 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.

Speaker 2: We will now begin the question and answer session. If you have a question, please press star then 1 on your touchtone 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 1 on your touchtone phone. Standing by for questions.

One on your Touchtone phone standing by for questions.

Speaker 2: And our first question comes from Nathan Jones from Schieffel, your line is now open.

And our first question comes from Nathan Jones from Stifel. Your line is now open.

Speaker 6: Yeah, good morning, this is Adam Farley on for Nathan. Hi Adam, good morning.

Yes. Good morning. This is Adam Farley on for Nathan Hi, Adam Good morning.

Speaker 6: Hey, first on the gross margins, with inflation likely.

First on the gross margins.

Sure.

With inflation likely peaking in the first half.

Speaker 6: Does D-NOW expect to see gross margins peak with some pressure on gross margins as the year progresses, which would usually be typical as inflation moderates?

Do you now expect to see gross margins peaked 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 and question one of the Big <unk>.

Speaker 4: Well, it depends on the product line in question. You know, one of the big

Speaker 4: 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 we still have pipe prices rising for seamless pipe, which is the primary steel pipe we sell, and that could be experienced further into the year beyond the first half. One of the issues though, and I mentioned it in my opening comments, is that we have

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 we still have pipe prices rising for seamless pipe, which is the primary pipe steel pipe, we sell and that could.

Could be experienced further into the year beyond the first half one of the issues, though and I mentioned it in my opening comments.

Speaker 4: was the timing of recedive.

<unk>.

The timing of receipt of prop.

Products.

Speaker 4: you know, is not completely certain. So we could receive some products later in the year, not just us, of course, but our competition and our customers, and that could extend what we expect to see as a kind of a premium margin for that particular product line.

It is not completely certain so we could receive some products later in the year not just us of course, but our competition and our customers and that could extend what we expect to see as a kind of a premium margin for that for that particular product line. We are seeing broad based inflation continuing to.

Speaker 4: We are seeing broad-based inflation continuing. To your point, Adam, that could kind of ebb, you know, mid-year. But for pipe in particular, I don't know that that's the case. And for a lot of the product lines, we...

To your point, Adam that could kind of add.

Mid year, but but for pipe in particular, I don't know that Thats, the case and for a lot of the product lines.

We support.

Speaker 4: There are still some long lead times. So.

There are still some long lead time so.

Okay.

Speaker 4: You know, I think we've guided our.

I think we've guided R. R.

Gross margin is very high for 2022 and.

Speaker 4: gross margins very high for 2022. And that's pretty, pretty much at the same level of 2021 where we saw four consecutive quarterly records. So it's a, it's a timing question in terms of receipt of goods.

And that's a pretty pretty much at the same level of 2021, where we saw four consecutive.

Consecutive quarterly record so.

It's a timing question in terms of receipt of goods.

Speaker 4: And 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.

And it depends on how strong our market is and when the inflection point occurs I mean, I've talked earlier about January starting off pretty slow and I think things will get a little more hot here and that should mean.

Little more scarcity issues in the first half and may be lingering into the second half.

Okay. That's helpful.

And then turning to.

Speaker 6: And then turning to exiting lower-margin product lines, we're in the process as D-NOW...

Exiting lower margin product lines.

We're in the process is due now.

Speaker 6: exiting lower margin business and is there significant work still to be done or is most of the heavy lifting done?

Exiting lower margin business in there.

Is there significant work still to be done or is most of the heavy lifting is done.

Well.

<unk>.

Sure.

Speaker 4: we're probably, we're well down that path. And I'll say it this way, so.

We're probably we're well down that path and I'll say it this way so.

Speaker 4: To me, you know, we have areas, regions that have strong financial performance due to grid movements and customer budgets and customer consolidations, and those things all affect the...

To me, we will have we have areas regions that had strong.

Financial performance.

Due to rig movements in customer budgets and customer consolidations.

And those things all affect.

The debt.

Success.

Speaker 4: success or the contrary for locations, product lines, customers, etc. 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 can, you know,

Or are the contrary forward locations product lines customers et cetera, that's always changing to me. It's 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. So I just think it's an ongoing reality of business no matter what business you're in that you always have to try.

Speaker 4: prepare for the future and continue to grow the company. So, 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...

Fertilize and weed and replant and kind of.

Always situate the business, where the where the sweet spot is in the industry. So that's just an ongoing ongoing thing in terms of major structural changes I think we're done there.

Speaker 4: always situate the business where the sweet spot is in the industry. So that's just an ongoing thing. In terms of major structural changes, I think we're done there. I think we're out of the cost reduction mode. We are in the phase, I call it a kind of a fulfillment migration, where we do want to regionalize most of our fulfillment to major centers.

I think we're out of the cost reduction mode. We are in the kind of the phase.

I call it a kind of a fulfillment migration, where we do want a regionalized most of our fulfillment to major centers.

Speaker 4: of opportunity, like we're standing up in Williston and in Houston and Odessa and Casper, etc.

Of opportunity like we're standing up in Williston and.

In Houston, and Odessa, and Casper et cetera.

Speaker 4: We want those to be high-volume locations with well-trained people focused on one thing, and that's taking care of the customer, whether it's walk-in business, everyday business.

We want we want those to be high volume locations with well trained people focused on one thing that's taken care of the customer whether it's walk in business everyday business.

Speaker 4: large projects, speculative activity, we want that to be regionalized, we want top talent managing those supply chains, and we want, you know, more kind of nodes or express centers or small local locations being intimate with the customer. So I see that 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.

Projects speculative activity, we want that to be regionalized, we wanted top talent managing that those supply chains can be.

Want more kind of nodes, where express centers are small local locations being intimate with the customers. So I see that that's still happening.

But it's kind of speeding up right now im real excited about it.

Okay that makes a lot of signs so much for taking my questions Youre welcome.

Speaker 2: Thank you. As a reminder, if you would like to ask a question, please press star then 1 on your touchtone phone. Our next question comes from Tommy Moll from Stevens. Your line is now open.

Thank you as a reminder, if you'd like to ask a question. Please press Star then one on your Touchtone phone. Our next question comes from Tommy Moll from Stephens. Your line is now open.

Good morning, and thanks for taking my questions Good morning, Tommy.

Speaker 5: morning and thanks for taking my question good morning tommy

Dave I wanted to start on Ws in a it sounds like the guidance is pretty clear for first quarter, maybe in the range of third quarter from last year.

Speaker 5: David, I wanted to start on WSNA. 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

I Wonder if you can just refresh us on the higher level philosophy here I think last quarter you said.

<unk>.

Speaker 5: For every dollar of revenue, you're looking at $0.03 to $0.05 of incremental WS&A. So 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.

For every dollar of revenue Youre looking at three to five cents of incremental Ws in a.

So if you could just refresh us on that and give us any signal of how that debt expense line might progress sequentially throughout the year that'd be helpful.

Speaker 4: Sure. So I think on the last call I said a few things that we are, we still have a list of projects we are working on to improve efficiency of the business.

Sure. So I think on the last call I said, a few things that we are we still have.

A list of projects, we're working on to improve efficiency in the business.

Speaker 4: And I said that we had a plan to reduce WSAA in the 12 to 15 range in 2022. And as you said, I also said that, you know, for each incremental revenue dollar above what last year's level, we'd add 3 to 5 cents in expense, offsetting those reductions we're making. In the meantime...

And I said that we had a plan to reduce WSJ and the 12% to 15 range in 2022.

And as you said I also said that for each incremental revenue dollar above last.

Last year's level, we'd add three to five and expense offsetting those reductions were making.

In the meantime, especially in the last several months I think it's been over 100 days since since we talked to the public the impact of.

Speaker 4: especially in the last several months, I think it's been over 100 days since we talked to the public, the impacts of.

Speaker 4: You know, on one hand, we benefited quite nicely.

On one hand, we benefited quite nicely.

I believe most of it.

Speaker 4: 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. And so that's kind of a new layer of...

Our cultivation strategy on focusing on the right things from from improved pricing that comes from product inflation.

Product scarcity, a lack of availability and of course, we experienced that in the labor market as well.

And so that's kind of a new layer of.

Speaker 4: attraction or retention costs that we experience that's layered into our guidance for for 2022 but our philosophy is to significantly bring down

Attraction and retention costs that we experience that's layered into our guidance for 2022, but our philosophy is to significantly bring down.

WSI is a percent of revenue to continue down a path.

Speaker 4: WSA as a percent of revenue to continue down a path of improved efficiencies, you know

Improved efficiencies.

From.

Speaker 4: from 2021 to 2022, we'll probably reduce WSA by at least 200 basis points as a percent of revenue.

From 2021 to 2022 will probably reduce WSI by at least 200 basis points as a percent of revenue.

Speaker 4: 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, but 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. So we did kind of guide the first quarter to around 86 million. It gets a little murky going.

Like I said for several quarters, we are in a build mode. We're in a growth mode. We are prioritizing growth over over cost containment, but we are like I said in the answer to last question. We're focused on changing our model and we are.

We're really making good headway on that path. So we did kind of guide the first quarter to around $86 million.

It gets a little murky going forward because.

We are.

Speaker 4: We are, although we guide to it I think very tightly in our overall guidance on flow-throughs and revenues, et cetera, but we're gonna be, we're focused on having the best people in the business.

Although we guide to I think very tightly in our overall guidance on flow throughs and revenues et cetera, but.

We're going to be more focused on having the best people in the business.

Speaker 4: We're focused on beating the competition. We're focused on growth.

We're focused on beating the competition.

We're focused on growth.

Speaker 4: focused on higher margins and cultivating new business and biasing those efforts towards higher margins costs a little more. So that percentage, that percent of revenue will come down. Our projects to pull costs out of the business are underway. But we are also, like I said, we're standing up a location this quarter, we're investing in new super centers.

We're focused on higher margins and cultivating.

New business.

And by seeing those efforts towards higher margins cost a little more so that percentage as a percent of revenue will come down our projects to pull cost out of the business are underway, but we are also like I said, we're standing up a location this quarter.

We're investing a new super centers.

Speaker 4: for the future to grow the business. And those will be kind of offsetting costs. But 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.

For the future to grow the business and those will be kind of offsetting costs, but.

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.

And just as a follow up on your your Supercenter comment there Dave.

Speaker 5: And just as a follow-up on your supercenter comment there, Dave.

You are in a in a growth market now and.

Speaker 5: You are in a growth market now, and you pointed out you'll get increasing leverage on the WS&A line, notwithstanding you're investing there. So I'm curious the philosophy.

You pointed out youll get increasing leverage on the <unk> line, notwithstanding youre investing there. So I'm just I'm curious the philosophy when you when you Green light those investments like what you just called out on the Super Center. What are the set of conditions you want to see to have the confidence to move forward and make that incremental investment.

Speaker 5: when you green light those investments like what you just called out on the super center what what are the set of conditions you want to see have the confidence to move forward make that

Speaker 4: That's a great question, Tommy, and I think I can answer for you. So, for example, the Permian Basin, which to me, D-NOW 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, Flex Flow, Odessa Pumps, TSN Fiberglass.

That's a great question Tommy.

I think I could I think I can answer for you.

So so for example, the Permian Basin, which to me Dino has it has a really strong position in the Permian basin not just from our standard branch business, which is which we're evolving but from like I said flex flow Odessa pumps TSN in fiberglass.

Speaker 4: and power service, we've got a really strong presence there with great brands.

And power service, we've got a really strong presence there with great brands.

Speaker 4: Um, and, and we think we have, you know, a real good position now in the last quarter, in the fourth quarter of 2021.

And and we think we have.

A real good position now in the last quarter in the fourth quarter of 2021.

Speaker 4: we consolidated 10 locations in the Permian into five.

We consolidated 10 locations in the Permian into five.

Speaker 4: uh... in in one part of the permit we think from that will have more inventory for our customers

And one part of the Permian.

We think that we will have more inventory for our customers.

We'll have we been able to manage the projects from fewer locations.

Speaker 4: we'll be able to manage projects from fewer locations.

Speaker 4: from people who deal in volumes, where we can get the expense per revenue dollar down. We won't have distributed inventory risk.

From people, who deal in volumes, where we can get the expense per revenue dollar down we wont have distributed inventory risk.

Speaker 4: 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.

I call when you have inventory strewn about network kind of exponential inventory risk you'll have less inventory risk in the next downturn.

Speaker 4: and you'll have a much more efficient business. So we're growing in the Permian. We're standing up. We're growing in the Permian.

And youll have a much more efficient business. So we're.

We're growing in the Permian, we're standing up.

We're growing in the Permian.

We just stood up a supercenter.

Speaker 4: We just stood up a super center, but we're consolidating and we're doing it smartly. And we're going to be better able to take care of our customers, have more employee to do so with less inventory risk. So that's an example of we are pulling costs out and getting better and getting stronger in the market.

Consolidated and we're doing it smartly and we're going to be better and better able to take care of our customers have more important to do so with less inventory risk. So that's an example of we are pulling cost out and getting better and getting strong in the market.

Speaker 5: And 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...

And Dave I Hope I am not Overstaying my welcome here, but just just on that point you've made so using the Permian as an example.

If you can.

Net of everything you just described.

Speaker 5: 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 to 5%.

Pro forma for the Supercenter 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% to five branches.

Speaker 4: Yeah, I think so. Now, now, the roof long comment I'm not sure about.

Yes, I think so now the roofline comment I'm not sure about we might actually have more space today.

Speaker 4: we might actually have more space today. So I'm not going to comment on that. But we should see improved, really, improved earnings per employee.

Im not going to comment on that but but we will we should see improved.

Really improved earnings per employee.

Speaker 4: 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.

Because.

I'd be more interested in the bottom line impacts of the investments we make are choose to walk away from then the topline, but but generally that topline should follow suit, but I'd be more interested in watching the bottomline.

Thank you, Dave I'll turn it back.

Thank you Tommy.

Speaker 2: Thank you. Our next question comes from John Hunter from Cohen and Company. Your line is now open. Hey, thank you.

Thank you. Our next question comes from Jon Hunter from Cowen <unk> Company. Your line is now open.

Hey, Thank you and good morning.

So.

Hey, good morning. So first question is just going back to the margins.

Speaker 7: Hey, good morning. So 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 21s margin in the first quarter. And that's what you're aiming for for the year to be in line with 2021. So, you know, I'm curious,

Guidance seems to imply you're at like the 2021.

Hi, <unk> 'twenty one.

Margin in the first quarter and Thats, what youre aiming for for the year.

To be in line with 2021 so.

I'm curious.

How you see margin progressing it seems flattish based on this outlook, but you've got.

Speaker 7: 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 percent, is that a level of gross margin you think you can...

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.

As it relates to 21, 9% is that a level of gross margin you think you can.

Maintain on a multiyear basis I guess as we go into 'twenty three.

And 24 thanks.

I do I mean.

So.

22.

2021 was our best gross margin year, each year had successive each quarter had success of improvements in gross margins.

So while we wanted to come into this call, saying, 22% in 'twenty two 2022 we're a little bit cautious about over.

Over guiding on gross margins, because we had such success in 2021 and to the points about hot rolled coil steel prices declining.

Inflation may be adding mid year, which I think it would be later in the year generally and NAV. Even later in the year for pipe.

There are some offsets to that but 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.

During.

During 2021.

Speaker 4: During 2021, we, in fact, mostly in the fourth quarter of 2021, we exited, consolidated.

<unk>.

In fact, mostly in the fourth quarter of 2021.

Exited consolidated 15 locations.

Speaker 4: Today, we have over 125 fewer people than we did at the end of 2020, in part because we've walked away from some lower margin business. We didn't see ... We're trying to be more efficient as a company. The efforts underway for those folks wasn't generating any kind of margin, so we walked away from maybe $30 million in business.

And we today, we have over 125 fewer people than we did at the end of 2020.

In part because we've walked away from some low margin lower margin business. We didn't see we're trying to be more efficient as a company. The efforts underway for those bulks wasn't wasn't generating the kind of margins.

Walked away from maybe $30 million of the business.

Speaker 4: What that means is we have our people focused on the higher margin stuff.

What that means is we have our people focused on the higher margin stuff.

Speaker 4: 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, and we have to deal with labor inflation as well as product inflation. So I think it's a matter, it's not just the market that's driving our gross margin performance.

We don't have our people focused on the lower margin stuff.

We are able to generate much better flow through from the activity.

In an environment, where it's hard to.

We have to deal with labor inflation as well as product inflation. So 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 last call we've made year over year.

Speaker 4: In fact, I made a big deal about it on the last call. We've made year over year.

Speaker 4: of product margin improvements for the last five years. That's a matter, to me, of careful cultivation of what you're not going to do in the market to make sure you have the right, the people focused on the right thing. So I do think that these gross margins can be.

Product margin improvements.

Last five years, that's a matter to me a careful cultivation of what youre not going to do in the market to make sure you have the right people focused on the right things. So I do think that.

These gross margins can be sustained.

Speaker 4: And in terms of how it flows during the year, I think we're just going to 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 mixed issue and that would be depressive to margins. But you know, we've got it for a very strong gross margins. I do believe it's sustainable and it comes from real laser focus of what we're not going to do.

And in terms of how it flows during the year I think we're just going to have to see I think.

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, but we have guided for a very strong gross margins I do believe it's sustainable and it comes from we are laser focused on what we're not going to do as a company.

Thanks, Dave.

Speaker 7: Thanks, Dave. That's very helpful. Switching gears a little bit, I guess, to the top line side of things. So you guided 22 revenues up low to mid-teens. To me, it seems like it could be a little bit conservative. I mean, the recount's tracking up 30%.

That's very helpful switching.

Switching gears, a little bit I guess to the.

Topline side of things. So you guided 22 revenues up low to mid teens.

To me it seems like it could be a little bit conservative I mean, the rig count is tracking up 30%.

Speaker 7: uh... year-over-year u s is maybe seventy percent of your business uh... so just based on that you're up twenty percent

Year over year U S is maybe 70% of your business.

So just based on that you are up 20%.

Speaker 7: 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. So, curious if you can help me kind of look into the moving pieces regionally in the 2022 outlook for revenue to be up a little bit teens.

Now I know there was a little bit of public versus private customer mix going on.

But you also said that Canada and international should be up in 2022. So.

Curious if you can help me.

Kind of looking at the moving pieces regionally in the 2022 outlook for revenue to be up low to mid teens.

Okay. So so we're basing that.

Speaker 4: Okay, so we're basing that on what we see in terms of what's happened in the first 45 days of the court.

On what we see in terms of what's happened in the first 45 days in the quarter.

Speaker 4: 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, and we're looking at some of our peers and how they're seeing the market, and we think that's...

We're basing that on what we see in terms of the influx of products for.

We're basing that on what our customers are telling us.

And we're looking at some of our peers and how they are seeing in the market and we think thats.

Speaker 4: 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.

I don't see it we gave 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.

Speaker 4: You know, if you look at rig count and completion 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.

If you look at rig count and completions and some of the things. We traditionally looked at Theres been a decoupling in terms of customer budgets from those numbers for you know for several quarters now we expect that to persist and.

Speaker 4: And so we're guiding, we're giving our best.

So we're guiding well given this our best.

Speaker 4: effort at what we think the growth is going to be, and like I said earlier, you know, to see the kind of gross margin progression we've delivered, and to continue to

Effort at what we think the growth is going to be.

And like I said earlier.

<unk> seen a kind of gross margin progression we've delivered.

And Ted to continue too.

Speaker 4: kind of prune the business and pull out costs where the value's not being added, we've walked away from probably $30 million in revenue. So that would be, you know, 2% or 3% more revenues that we would have enjoyed in 2022, but that we, you know, wouldn't have benefited from at the bottom line.

Kind of pruned business and pull out costs, where the value is not being added.

We've walked away from probably $30 million in revenue, so that would be 2% to 3% more revenues that that we would've enjoyed in 2022, but that wouldn't have benefited from the bottom line.

So I think that's a good range and.

Speaker 4: So, you know, I think that's a good range and, uh...

Speaker 4: And it depends on how the year flows. And so I think we're sticking with that. I don't think it's conservative. I think it's, certainly at the top end, it's a pretty strong number.

It depends on how the airflows.

So I think we're sticking with that I don't think it's conservative I think it's certainly at the top end is a pretty strong number.

Absolutely and then last one for me you expect to generate free cash flow in 2022.

Speaker 7: Absolutely. And then 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.

Do you think you can do better than the $25 million you did in 2021, and how does working cap consumption.

And of that outlook. Thanks.

Speaker 4: Yeah, I think it's I think it's in that range. I mean, we

I think it's I think it's in that range I mean, we.

The.

Speaker 4: The one wild card there is the receipt and timing of inventory.

One wildcard there is the.

The receipt and timing of inventory.

Speaker 4: is kind of the one thing driving whether that'll be more or less than 25 million. But 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. But we do plan to be well prepared for the growth in the coming months.

What kind of a one thing driving whether that will be more or less than 25 million, but I think we can be $25 million. There are scenarios, where we're ahead of that in scenarios, where we're a little bit behind it but we do plan.

To be well prepared for the growth in the coming months.

Great. Thanks, I'll turn it back 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 <unk>, CEO and president for closing statements.

Speaker 2: 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 Cherchinsky, CEO and President, for closing statements.

Okay. Thank you for your interest in DNI and look forward to talking to everyone on our first quarter call in May have a good day.

Speaker 4: Okay, thank you for your interest in D now 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.

Speaker 2: Thank you, ladies and gentlemen, for participating in today's conference. This concludes our event. You may now disconnect.