Q4 2021 Resideo Technologies Inc Earnings Call
Ladies and gentlemen at this time I'd like to welcome everyone to the residual fourth quarter and full year 2021 earnings conference call.
Today's call is being recorded.
All participants will be in a listen only mode.
A formal question and answer portion of the call.
It is now my pleasure to turn today's call over to Jason Willey, Vice President of Investor Relations. Mr. Willie you May now begin.
Good afternoon, everyone and thank you for joining us for resilience fourth quarter and full year 2021 earnings call on today's call will be Jacob <unk>, Chief Executive Officer, and Tony Trunzo, Our Chief Financial Officer, a copy of our earnings release and related presentation materials are available on the Investor Relations page of our website.
At investors Dot residual dot com, we would like to remind you that this afternoon's presentation contains forward looking statements statements other than historical facts made during this call may constitute forward looking statements and are not guarantees of future performance or results and involve a number of risks and uncertainties actual results may differ materially.
For those in the forward looking statements as a result of a number of factors, including those described from time to time and resilient filings with the Securities and Exchange Commission. The company assumes no obligation to update any such forward looking statements. We identify the principal risks and uncertainties that affect our performance and our annual report on Form 10-K and other SEC.
Filings.
With that I will now turn the call over to Jay.
Thank you, Jason and good afternoon, everyone.
<unk> 21 was a record year for residual with revenues growing 15% year over year gross margin expanding by 80 basis points and operating margin up 350 basis points.
We generated $315 million of operating cash flow in 2021 up from $244 million in 2020 and $23 million in 2019.
These results were well above the expectations, we outlined at the beginning of 2021 and reflect positive underlying market conditions and strong execution across the organization.
This significant improvement in financial performance was against the backdrop of a dynamic and challenging supply chain environment continued inflationary pressures and the ongoing challenges of navigating COVID-19 .
The team managed through all of this and made significant progress strengthening the foundation of the business and then driving key investment initiatives.
We also unveiled our vision purpose and values and completed strategic planning initiatives at the corporate level and within the businesses.
I would like to thank the entire resilient team for their tremendous efforts in 2021, we.
We delivered for our customers and partners, while generating record financial results and taking important steps to position the business for long term sustainable success.
Thanks to improved profitability and cash flow combined with favorable financings. We ended 2021 with a dramatically improved capital structure.
This enabled us to execute on our strategic initiatives and focus on long term value creation.
Our announcement last week of an agreement to acquire first alert a leading provider of home safety products highlights this financial flexibility and the value it brings.
First alert provides residual a highly complementary suite of fire and carbon monoxide detection and fire suppression products with widely recognized and respected brands.
First alert expands our centers in the home and occupies a highly strategic position on the ceiling.
This transaction will more than double of products and solutions sales in the retail channel and provides new products for our professional partners.
We are excited to bring the first alert team on board and expect to hit the ground running upon closing, which we anticipate to occur by the end of Q1.
Moving to segment performance for 2021.
Products and solutions delivered 16% year over year growth with revenue, reaching a record $2 5 billion.
Demand was strong across our key markets product categories and channels.
People continue to invest in their homes and we are well positioned as the go to partner for professional contractors and Oems to capitalize on what we see are sustainable trends toward increased comfort through managing air water security and energy.
In 2021, we completed critical foundational work that positions the business for sustained growth.
This includes investments in sales operations and business development systems consolidations introduction of a comprehensive integrated business planning process and digital efforts to consolidate and refresh our web presence.
We also launched the probe perks loyalty program with professional security dealers and HVAC contractors.
Each of this work was centered around solidifying systems and processes to ensure we are more deeply engaged with key customers and partners and we have the visibility to better plan and meet their needs.
We also accelerated investment in our engineering organization to strengthen our innovation engine and better focused new product development efforts.
During 2021, we rolled out enhancements to our pro series security platform across the general market in North America.
Launched an innovative entry level connected thermostat with Amazon and refreshed our hydronic portfolio in Europe .
We also consolidated software development efforts under one leader and made significant progress in development and platform initiatives.
At Adi revenue grew 15% in 2021% to three 4 billion with double digit growth in all key categories.
This is a continuation of the consistent above market growth Adi has delivered over the past decade.
Both residential and commercial market saw accelerated activity in 2021.
As the year progressed vendor supply issues became more prevalent, particularly in categories, such as video surveillance and intrusion, which resulted in a significant backlog at year end.
Adi also invested aggressively in 2021, including improvements to the e-commerce experience pricing optimization and sales force effectiveness tools.
<unk> initiatives, which have provided the Adi sales team better real time insight and the ability to price more efficiently helped the business deliver 100 basis points of year over year gross margin expansion, our digital investments support more transactions flowing through touchless channels, allowing Adi to free up sales.
Associates for more value added selling.
This allows for better leverage of these high value individuals as Adi execute on its long term growth strategy.
The average revenue per sales employee grew by 14% in 2021 to over $2 million.
During the year, we completed the acquisition and integration of the shore view in Norfolk businesses.
Expanding our presence in key strategic Adjacencies or data communications and audio visual markets.
Yesterday, we announced the acquisition of Arrow wire and cable.
West coast distributor of data communication products.
The acquisition complements Norfolk geographically strengthening our growing position in the data communications market.
I'd like to welcome the Aero team to residual.
We are excited by the value creation opportunity, we see for the combined organizations.
With that I will turn the call over to Tony to discuss our fourth quarter and full year performance and 2022 outlook in more detail. Thank.
Thank you Jay and good afternoon, everyone as.
As Jay said 2021 was a year of record financial performance for <unk> we.
We delivered strong top line growth higher gross.
<unk> and operating leverage resulting in meaningful expansion in earnings and cash flow.
We achieved these results while managing through the most challenging sourcing and inflation environments in decades.
In Q4, our ability to fully meet customer demand was again limited by the availability of critical components.
Q4 revenue of $1 5 billion.
It was down 3% compared to Q4 last year.
Gross margin for the quarter was 27, 2% down 100 basis points compared to Q4 2020.
While consolidated operating expenses for Q4 decreased by 6%, primarily due to a $19 million year over year reduction in corporate costs.
Operating income of $141 million was 7% lower than last Q4.
Products and solutions fourth quarter revenue of $633 million.
It was down 6% year over year and was essentially flat sequentially.
Revenue was negatively impacted by the ongoing shortage of semiconductor components.
Products <unk> solutions gross profit margin in Q4 was 37, 9% compared to 41, 9% in the fourth quarter of 2020.
The decline in gross margin was due to the deleveraging effect of lower volumes as well as materials price inflation and higher freight costs, all partially offset by price realization of approximately $40 million.
Products and solutions segment operating profit was $125 million.
Were 19, 7% of sales compared with $166 million or 24, 6% of sales last year.
Operating expense for products and solutions with unchanged year over year, reflecting lower transformation costs offset by increased investment and higher sales expense.
Adi Q4 revenue of $821 million was flat year over year, but grew 8% on a daily sales average basis, reflecting higher volumes and increased pricing over five fewer selling days.
Adi saw good activity in the quarter and fire access control and wire categories, while video surveillance and intrusion, we're constrained by product availability.
E Commerce sales were up 27% accounting for 17% of total Adi revenue in the quarter.
Adi also continues to make progress in expanding its private brand sales, which were up over 30% year over year in the quarter.
Adi gross profit margin in the fourth quarter was 19, 1% up from 17, 5% last year.
The higher gross margin was a result of improved product line margin as Adi benefits from investment and tools to support pricing initiatives and increased private brands' contribution.
Margins also benefited from positive industry pricing dynamics.
Adi Q4 operating margin increased 130 basis points from last year to eight 5% we.
We continue to direct investment towards Adi, especially in the areas of digital and sales tools, which is reflected in higher year over year operating expenses.
We're already seeing significant return from these investments as evidenced in strong topline performance and product line gross margin expansion.
Corporate costs for the quarter were $54 million or 4% of sales compared with $73 million or 5% of sales in the fourth quarter of 2020.
During the quarter, we generated $112 million of cash from operations and for the year operating cash flow was $315 million compared to $244 million in 2020.
Over the past 12 months, we've made significant improvements to our capital structure, including refinancing all of our debt instruments. These.
These transactions extended our debt maturities and will generate approximately $8 million in annualized interest expense savings.
We ended Q4 with cash and cash equivalents of $779 million in total.
Standing debt of $1 2 billion.
Net debt stood at $451 million at the end of the year compared to $645 million a year earlier.
I would also note that this morning, we launched a $200 million add on to our existing term loan b to provide incremental liquidity in anticipation of the first alert transaction.
Looking towards 2022, we expect revenue for the year to be in the range of $5 95 billion to $6 2 billion.
Implying year over year growth of 4% at the midpoint.
Consolidated gross margin is expected to be in the range of 27% to 28% and GAAP operating profit is expected to be in the range of $610 million to $650 million.
For the first quarter revenue is expected to be in the range of $145 billion.
$214 75 billion.
Consolidated gross margin is expected to be in the range of 27, five to 28, 5% and GAAP operating profit is expected to be in the range of $140 million to $150 million.
Corporate expenses for the full year 2022 are expected to be approximately $240 million down an additional $10 million compared to 2021.
We also expect a positive impact to gross margin in Q1 due to a larger than normal annual inventory revaluation and the products and solutions business.
Our first quarter and full year operating profit outlook includes approximately $10 million in transaction costs associated with the pending <unk> acquisition.
Other impact from first solar is contemplated in our annual or first quarter outlook.
Assuming a first quarter closing, we will provide an updated 2022 outlook, including first alert on our first quarter earnings call.
Additional outlook details can be found on page 12 of our earnings slides.
I'll now turn the call back to Jay for a few concluding remarks before we take questions.
Thank you Tony.
As we look to 2022, we see another year of growth margin expansion and increased cash generation building not the significant progress delivered in 2021.
We continue to expect pressure on material input costs.
Prices and labor cost.
While visibility into how these dynamics will play out over 2022 is imperfect we are running the business on the assumption that current conditions related to supply chain and cost headwinds will persist throughout the year.
Helping offset these cost pressures or price realization within products and solutions and continued benefits from pricing initiatives and digital investments at Adi.
We remain excited by the opportunities that exist across the markets we serve.
With the steps we have taken over the past 18 months, we are well positioned to continue to navigate these challenges to deliver for customers and drive increased growth and profitability in the business.
Adi is focused on continuing to be an indispensable partner of choice for our customers and suppliers.
This begins with building on our momentum in 2021 to deliver the leading omnichannel user experience for the pro well.
We will continue to broaden our offering of exclusive brands and technologies not only in traditional security categories, but also with our expansion into adjacent categories and audio visual and data communications.
In 2022, Adi will further enhance its digital and sales enablement tools and expanded private brand offerings each of which are already delivering returns.
We expect to continue to drive growth in private brands as a percentage of Adi sales over time.
Within products and solutions. The team is continuing to execute on better leveraging our footprint in the home through product innovation and over time increase value added service offerings.
Our 2022 budget calls for a significant increase in R&D with a specific focus on platform and connected ecosystems development to support new products services and revenue streams.
Our product roadmap has progressed significantly over the past year and our development pipeline is building across our portfolio. This.
This includes specific programs targeting the expansion of our services offerings for enabling the professional and leveraging our broad portfolio of partners across our ecosystem, including utilities and in residential new construction.
This concludes our prepared remarks, operator, we are now ready for questions.
Yes.
At this time I would like to remind everyone in order to ask a question press star one on your telephone keypad.
I would like to withdraw your question again press Star one.
First question comes from the line of Ryan Merkel with William Blair. Your line is open.
Hey, Thanks, good afternoon.
So a couple of questions first off is there any way you can size the backlog, whether that's I'm really curious about <unk>, but you wont include Adi that's fine or just how big is it versus normal and then what's sort of the timing of selling it through.
So hey, Ryan it's Tony.
We're not in a position to give the absolute numbers in the main the main reason for that is typically backlog isn't a significant factor for us and our expectation is that over time, it's going to go back to not being a significant factor I mean this is very much in both businesses kind of a book and ship.
That said, we've got a pretty we've got delinquent backlog backlog. The we could shift if we could get the parts in P&L and the products and Adi.
That's meaningful.
And our yes.
And PFS it continues to grow actually ticked up in Q4, and it's ticking up again I mean, we're not in a position to satisfy all the demand.
The backlog at Adi became more of an issue in the second half of the year and it's really centered around the video surveillance part of part of their business. There is there is.
The manufacturers there that suppliers are having some challenges with their supply chains.
And there was there was a significant amount of revenue that we didn't realize in both businesses in Q4 simply because we couldnt, we couldnt ship product.
I would add also Ryan as I mentioned, there was I closed off my statements there.
As we've modeled the business both businesses for this for 2022.
The various challenges that we faced with the material shortages and particularly in the semiconductor space.
Modeled in for just like we saw in 'twenty, one for 'twenty two because it's an imperfect world right now in terms of the crystal ball of when that will improve.
Got it alright.
Go ahead.
No sorry go ahead Ray.
I was just going to say that what Jay said, they're kind of leads me to my next question the guidance for 'twenty, two revenues up 4% at the midpoint.
I guess first off how much price is in that number and then secondly, just given the backlog and I think the I think Jay just answered it it sounds like youre not expecting supply chain. He's all that much that youre not really assuming a whole lot of volume acceleration that's one of the reasons.
Yes, so Ryan.
Roughly assuming for PFS, where roughly.
Planning for flat volumes in 2022, so pretty much all of the revenue growth in PFS that youre seeing is price and a significant majority of that is flow through of price increases that have already taken effect in the in the latter part of in the latter part of 2021.
Sure.
<unk>.
And our expectation in that business absolutely is that we don't see significant relief in the backlog it will fluctuate and.
But we don't see a significant change in the.
And the delinquent backlog in that business. So.
It's pretty much all of that four points 454 points ish is price.
At at Adi, It's a mix.
We do see some volume expansion at <unk>.
Hi.
But we also see a little bit of continued inflation. So it's more about 50 50 split at at Adi.
I would just add there are certain things in the market that maybe are a little bit clearer than others in terms of some of the supply chain things, but again. This is two imperfect now to stick our neck out and so that's why we model it the way we have for this year.
Yes completely understand okay I'll get back in line. Thanks.
Thank you Brian I appreciate the question.
Your next question comes from the line of Mike <unk> with Evercore. Your line is open.
Yeah.
Great. This is Michael on for Amit. Thanks for taking my question I was curious so on the gross margin guide with the first quarter coming in a little bit higher than the full year I think that's kind of the opposite of what we've seen in the past year. So I was just wondering what we saw last year. So I'm just wondering if there's maybe some different dynamics at play that we should be aware of.
Yes, I mean, theres really one dynamic in Q1 relative to the rest of the year and it relates to what.
What I referred to in my script this revaluation of inventory associated with our cost roles.
That's really it.
Okay, great. Thanks, and my call dropped out for about 10 minutes I, probably missed that commentary.
But then on the inventory levels as well I'm kind of curious I mean are you guys.
Like securing maybe higher levels of inventory than usual.
Something you expect to continue through the year.
So our inventory turns have slowed a little bit.
And that's really relative to us trying to.
Trying to effectively safety stock in the areas that we that we can it hasnt been dramatic I think it's a little less than one turn.
But if we are we are trying to build safety stock.
The challenges there are certain components that were still hand to mouth. So the inventory itself.
There's stuff in the inventory that if we had a typical balance of raw materials.
We'd be flowing through and we'd see those inventory turns back to kind of in that six five times range, which which is where we were maybe a year a year and change it I agree with Tony.
Hate to beat a dead horse, but I know, we're not the only people in that same situation, but do you want to make sure you have the parts on hand, so that when the parts that are short do come in you can youre able to turn around and ship it to customers and so that's always a balancing act.
It's our job to do that.
No and I think in some ways, it's actually a good thing that you guys can secure some excess inventory because not everyone can but.
I assume we can kind of model that staying the same throughout the year right. There is not probably not going to be a significant change in supply that would cause you to kind of where inventory levels.
No I don't think so.
I hope.
Get towards the latter part of the year more things become more predictable more visible and and I think it will but to what degree its hard to hard to predict today.
Yeah.
Great. Thanks for taking my questions.
Yes, you bet Michael.
Your next question is from the line of Paul Chung with Jpmorgan. Your line is open.
Hi, Thanks for taking my questions.
Very nice progression on Adi.
Operating margins this year, how should we think about the pace of.
Margin expansion in 'twenty two and.
Can you also quantify the impact of supply shortages freight that kind of hit the quarter and maybe your expectations of that.
That hit for 'twenty two.
Yeah. So so thanks for the questions Paul Adi.
Adi has done a great job, obviously improved not just in progression of margin, but keeping the keeping the revenue growth solid and strong and frankly integrating their acquisitions and really just just executing we did see in the second half of the year. Some part of second half of 'twenty. One some part of the margin expansion was.
The result of some flow the flow through of some inflationary.
Inflationary dynamics that is it.
It's measured in.
Few tens of basis points. So it's not all of the margin expansion, but some part of it came from inflation.
Our current expectation is that's going to level off in the latter part of the year and we won't see that that lift.
That said that business is tracking really well towards its.
Toward its margin targets a couple of years out.
And your second question was was on freight.
For what period for Q4.
Q4, the year end expectations for 'twenty two.
Okay.
Let me get all four of those to you.
Here on the call.
Do I have to I hope we have we roughly have the first two at least.
I want to say it was 9% and 40% for Q4 in the year, but let me, let me get to you and why.
Paul I would just say that it's.
Because I don't think we're going to get that many more big surprises on freight I think that is becoming a little more visible. So I think we've probably model that.
In a way that I think we're comfortable with we will see of course.
And one is on cost of course, the other is predictability in terms of transit time. So both of those are very important in that as we as we run the business.
I've only got two of the three numbers for you.
I'm looking at Jason's cheat sheet.
For PNM.
The freight impact for the quarter was $9 million like I said the impact to the court for the year 2021 was $49 million I don't have the I don't have the 22 impact handy, but we don't expect it to be of that magnitude incrementally.
Okay, and then I guess the thing I'd point out about <unk> is it hasn't it hasn't come down overall, it's bounced right right overall, our freight costs haven't come down from these elevated levels right.
Right.
And then just on first alert quite a material transaction kind of relative to.
Some of the tuck ins you've done in the past.
How long were you looking at this asset what kind of spurred the decision there and then moving forward should we kind of expect continued tuck ins.
Or are you embarking on more material acquisitions like first solar in the coming quarters and years. Thank you.
So thanks for the questions Paul So first alert.
Is it's in many ways.
It's the perfect size first sizable acquisition for us we've been looking at for a while.
And the business.
It's consistent with what we've communicated in terms of our overall M&A strategy, because we've talked about the fact that Adi in particular has the opportunity to do some small and medium sized roll ups and including the one that we just announced this week. In addition to the ones that were done last year that part of the strategy continues to March forward.
Third and I would expect that Youll continue to see those transactions in aggregate theyre not material, but overall there they're additive in the ones that we did last year are now 100% fully integrated and they are performing above the level that we expected them to in terms of in terms of synergy in and their own growth and margins.
First of all it falls into a different bucket and we've tried to communicate this in the bucket really is what we'll call the kind of regular way products and solutions product line expansion type acquisitions, we always thought those would be more sizeable from.
From a size standpoint, I think first alert.
Is a good example of of the I hate to say appropriate size, but it's not too big it's not overwhelming but it's up scale and most importantly, it's probably the best hardware product fit in the market available for US I mean, we really believe that first alert is.
And we think we're the perfect owner for that business in fact going back 30 years first solar in our security business, where together in the same.
In the same entity, even before that entity was owned by Honeywell. So we're kind of bringing them back together and the opportunity here is.
This is a good business that we bought.
<unk> disposed of it because it didn't fit their portfolio they are not an electronics manufacturing.
Shop, but they took very good care of this business they.
They invested in R&D, they invested in advertising and promotion they invested in some factory automation. So we're getting a very healthy business. The reason we can achieve the synergies that we can is because of the very close adjacency of the product lines that really the adjacency of the of the of the manufacturing and distribution.
<unk> facilities themselves.
And from our perspective, given the valuation and the opportunity here, we see meaningfully more upside than we do risk from from a deal like this in our hands I would add also to that.
Timing wise in terms of where we're at with the products and solutions and what's in the marketplace I think it's.
We're really super timing for this acquisition.
Additional sensors in terms of our total ecosystem that gives us access to the ceiling for the types of products that first alert has as you know with the taking a look at how we integrate our many different products.
Into total ecosystem is this fits perfectly.
So we're excited about this opportunity and look forward to to move forward with this deal to Paul at the risk of beating this horse I mean, it's really.
Our objective here is to have sensor based real estate in the home and this significantly advances that that strategy and puts us in a position where we can really lead the integration of their products from our connected standpoint with the ones that we have in the hub.
Great. Thank you.
Your next question is from the line of Eric Woodring with Morgan Stanley . Your line is open.
Thank you congrats guys on the on the nice <unk> and 'twenty to guide here.
Maybe if we just circle back to an earlier question talking about the guidance Tony you mentioned for <unk> four points of tailwind as price kind of flat volumes.
Should I interpret that as you guys, implying both PNM and Adi can it grow at the same rate in 2020 to around 4% or should we think of the divergence between the growth rates, perhaps more so matching kind of how you think about those two segments growing through 2020 for at least the relative difference between the two.
Blow up.
Alright.
I think relatively thanks, thanks, Eric Thanks for the for the nice comments and thanks for the question.
Yes, we're not giving specific guidance to the individual segments in terms of revenue growth. So the number I threw out was kind of directional and so just just to be clear.
But in general yes, the businesses are going to grow we think AD rates. This year that are relatively closer to each other than what we've seen in the past.
Okay.
And then maybe Tony.
Tony or Joe.
Either one for you you know you guys talked about underlying demand trends remaining solid maybe can you just help US give an example, or two of Kpis that you follow where conversations that youre, having with your customer base I kind of reinforce that and then any change in behavior, you've seen in <unk> versus <unk> as it relates to potential inflation concerns.
Or labor headwinds or anything that might have changed in the last few weeks.
So I don't I don't have any specific kpis I can point you to other than we do as a result of some of the enhancements we've made to our loyalty and partnership programs with our pros, we do get better insight into there.
Into their channel inventory than we used to we don't want me.
Our product lines Super broad rate. So it's hard to it's hard to look at at one sort of channel. If you will and understand and have a view that spans the whole enterprise, but by and large I think we get a pretty reasonable view of our channel inventory.
We mentioned this at the beginning of last year, we have initiated.
And account management activity and our sales.
Operations activity that really has helped us get better or better arms around that.
I'll also say, we we're talking to our customers who are listening to them in terms of what they have to say about their expectations of demand and.
Pretty darn consistent with kind of what we laid out.
I also add.
Asked Eric about changes over the last 12 months in terms of labor situation out there probably both in terms of availability as well as cost.
No.
<unk> Wood I mean, we don't we are not facing now.
Any.
Relative labor shortages and I think we have a pretty good understanding of what the cost will be now after going through 2021. So that's one thing I'd always lay awake thinking about three in the morning.
We are seeing.
Add on.
We are seeing.
Wage inflation in Mexico, having an availability problem, that's right, it's a pretty efficient market, particularly in the areas that we operate in but we are seeing wage inflation that is in the teens I would agree and it's all baked in.
And then maybe if I just sneak one last one you mentioned pricing increases in 2021.
How are you thinking about that dynamic for 2022 is there anything kind of.
That is on the docket that we should expect or is it kind of yes, we will see how it goes and react from there and that's it for me thanks, and congrats again.
Thanks, Eric I definitely think it's so see how it goes dynamic.
We took a lot of price last year.
And particularly at the end of the year, we got we move price pretty significantly.
We did it in is partnering away as we could with with our channels and with our customers and the realisation against our increases was actually quite high but I think we want to be cautious we'll react to.
If there's if the marketplace changes in our costs increase will obviously beyond what we expect will react to that but overall I think we're being cautious in terms of planning additional meaningful price moves that would have in 'twenty two that would benefit 2002.
I would add that I think we've mentioned it.
Prior earnings releases, but.
Reflective if you go back to first quarter of last year.
No.
Crystal ball wasn't very good in terms of what was going on out there and some of the price increases as well as even though in many areas the tighter supply chain and so we may have waited to hear too long before we really started laying out the price increases, which we did as Tony was just saying but.
So we are hypersensitive to that will be on top of that.
Perfect. Thanks, guys.
Your next question is from the line of Ian Zaffino with Oppenheimer. Your line is open.
Great. Thank you very much.
Not to I guess beat a dead horse on the guidance, but can.
Can you maybe just talk about it.
Sort of what your assumptions are for market growth are you sort of assuming against some P&L market will be flat and just sort of push through pricing.
And then you just kind of hold your share and then maybe and I know you always gave like perfect details on each area of.
The segment, but can you maybe tell us where you would expect better growth.
Maybe not as good growth.
I mean, some highlights or maybe just some low lights in pms.
Yes.
Yes, Ian so so thanks for the questions.
Yes, I think in general our expectation this kind of ties back to some of the other questions that folks were asking broadly the markets that <unk> serves.
Are going to be an aggregate flattish for the year and we think we're going to broadly hold share we're not making any assumptions about dramatic share change. We're really just trying to reflect reflect the market, which by the way I mean demand is really good it's.
Going to be flattish, we think off of.
A big year right I mean, we grew revenue last year a lot.
We see we see that that level of volume being sustained so that's kind of the view there.
In terms of where things are going to be stronger and maybe not as strong I think we're probably looking at security being a little <unk>.
Little less executing a little less favorably in 'twenty two than maybe some of the other channels, particularly some of the trade channels, but it's not I wouldn't point you to any huge dramatic move there either.
Alright, Thank you very much.
Again, if you would like to ask a question press star followed by the number one on your telephone keypad.
Next question comes from the line of Brian Ruttenberg with Imperial Capital. Your line is open.
Thank you very much great quarter and guidance quick.
Quick question on <unk>.
And I know, it's been talked about a little bit that I want to dig down a little bit further on operating cash for 2022, a lot of moving pieces here and maybe you can directionally.
Tell us which way you think you did <unk> <unk> I believe in operating cash.
Cash from Ops gives me and.
And 2021, Directionally do you see that going higher and 2022.
Yes, Brian I think I think at the margin, we do see better cash flow in 2020 to a higher number than what we saw in 2021, just reflective of the growth I think I think cash conversion is going to be.
I don't think its going to be better I think the conversion is going to be equal to or maybe even a little less than last year and as is usual, it's going to be skewed to the second half of the year. So.
Bear in mind, this sort of dynamic of of cash flow in this business, we tend to have pretty significant cash outflows in Q1.
Arising largely from substance that's acute accrued in Q4, we paid bonuses we pay rebates.
So Q1 tends to be a softer quarter as it was in 'twenty, one Q4 will most likely be the strongest quarter.
Great. Thank you very much.
There are no further questions at this time I will now turn the call back over to Jason Willey.
To say, thank you again, everyone for participating today and your continued interest we look forward to speaking with you over the coming days and weeks and hopefully increasingly seeing many of you in person. So please take care. Thanks everybody.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
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