Good morning, ladies and gentlemen, and welcome to the Lawson Products First Quarter 2021 Earnings Call. This call will be hosted by Michael DeCata, Lawson Products’ President and Chief Executive Officer; and Ron Knutson, Lawson Products’ Chief Financial Officer. During this call, they will be providing an update on the business as well as covering relevant financial and operational information. There will then be time for question and answers. Please note that statements on this call and in the press release contain forward-looking statements concerning goals, beliefs, expectations, strategies, plans, future operating results and underlying assumptions that are subject to the risks and uncertainties that could cause actual results to differ materially from those described. In addition, statements made during this call are based on the company’s views as of today. The company anticipates that future developments may cause those views to change. Please consider the information presented in that light. The company may, at some point elect to update the forward-looking statements made today, but specifically disclaims any obligation to do so. This call is being audio simulcast on the Internet via the Lawson Products Investor Relations page on the company’s website, lawsonproducts.com. A replay of the webcast will be available on the website through May 31, 2021. I will now turn the call over to Lawson Products’ CEO, Mike DeCata.

Good morning and thank you for joining the call. This morning, I’ll comment on the first quarter and share some thoughts with you about 2021. Additionally, I’ll update you on the integration of Partsmaster as well as some growth markets, which we will be investing in during the year. Ron Knutson, our CFO, will provide a more detailed review of our financial results followed by your questions. Overall, our business performed as planned and we’re pleased with our progress. Putting aside a challenging week in February from a weather perspective, we’re seeing good progress in returning to our pre-pandemic growth and we’re confident that we’re on the path to returning to our pre-pandemic levels. On a consolidated basis, we achieved 13.8% growth compared to the first quarter of 2020, including the Partsmaster acquisition, which occurred on August 31 of last year, and 5.6% growth as compared to the fourth quarter of 2020. Partsmaster generated sales of $15.7 million in the quarter. Excluding Partsmaster, core loss in average daily sales decreased by 3.1% as compared to the first quarter of 2020. This is due to the ongoing effect of the pandemic and the slow but steady return of customer demand to pre-pandemic levels. Since 2020 was such an unusual year due to pandemic-related business disruption, we are primarily measuring our performance based on sequential monthly growth. Monthly results are likely to experience normal variation. However, our overall expectation is that we will see growth versus the previous month throughout the year, which should result in a significant increase in earnings as compared to last year. The Lawson core business has achieved growth on that basis for 10 of the last 12 months. Core Lawson average daily sales for the quarter grew by nearly 6% as compared to the fourth quarter of 2020. The business achieved 8.8% adjusted EBITDA for the quarter. As a reminder, our second and third quarters are typically the strongest from an EBITDA perspective. Our core Lawson gross profit percent continued to be in the narrow band, which we have come to expect. However, gross profit percent was impacted by SKU rationalization, which we are undertaking as part of the Partsmaster integration. We’re keeping a large number of Partsmaster SKUs, and we’ll be making these SKUs available to our combined sales team. The inclusion of nearly 9,000 new products into the distribution centers as a result of the acquisition has not required additional people in the distribution centers. However, labor hours have increased in the short-term to accommodate the infusion of these products. Over the long-term, these processes will have a positive impact on inventory terms and cash flow. Inclusive of this one-time charge, Lawson core gross profit for the quarter was 58.2% as compared to 59.6% for the fourth quarter of 2020. Now I’d like to take a moment to discuss the integration of Partsmaster. We’ve made great progress in many aspects of combining Lawson and Partsmaster. And shortly, the two organizations will be fully integrated. Partsmaster sales and earnings continue to exceed our initial projections. And we’re increasingly confident in our growth plans for 2021. I’d like to again, thank our Partsmaster and Lawson teammates. People across the board have been committed to this integration and have demonstrated a very high degree of professionalism. Now looking at operations and our DCs, we’re focused on improvements in a few of our facilities. We’ve embarked on a modernization program of our Suwanee, Georgia distribution center, which will expand capacity through updating antiquated conveyor systems and warehouse management software. Additionally, we’re investing in our fulfillment process at McCook, which will also allow additional volume within our existing footprint. Our Bolt Supply business continues to perform very well, achieving a 9.1% EBITDA for the quarter. We’re in the process of relocating our Calgary distribution center, which will double the square footage to support our continued growth. As well, during the quarter, we also doubled the size of our Saskatoon Bolt store in a new location, and it’s gotten off to a great start. As I mentioned a moment ago, all three primary businesses are doing well. Now turning to sales. Strategic accounts achieved good sequential progress. First quarter sales grew 4% as compared to the fourth quarter; fourth quarter was up 11% as compared to the third quarter, and the third quarter was up 22% as compared to the second quarter. The manufacturing sector through our integrated supply partners, equipment rental and new strategic accounts were the primary drivers of this growth. We anticipate continued growth through these markets and others. We added 300 new strategic account locations on the Lawson side of the business and 174 new Kent locations. We believe that the strength of our relationships with our integrated supply partners is driving growth as they continue to bring us into their existing large customers. This has the effect of enhancing their value proposition and leveraging our nearly 1,100 sales reps while contributing to Lawson growth and profitability. Sales in our overall government segment was up 3.7% as compared to the fourth quarter, led by increases in state, local and educational, we call it SLED, as well as our federal business. Our Kent Automotive business was up 7% sequentially versus the fourth quarter. One area requiring closer attention this quarter was our supply chain. Some of our suppliers are struggling to keep up with demand due to many factors, including labor shortages, raw material shortages, and transportation challenges. We’re also seeing some cost increases from suppliers. We will continue to take the necessary actions to manage our overall gross margins in line with historical results. Our three-part growth strategy remains unchanged. We ended the quarter with approximately 1,100 sales reps and, as in the past, we plan to continue incrementally adding reps in underserved territories. Sales rep productivity remained a key focus area through the pandemic. We realized a 3.9% improvement in sales per rep per day versus the fourth quarter of 2020. Looking forward, we are focusing on new and exciting products as part of the Partsmaster acquisition. Deeper penetration into several underserved markets and the development of additional channels to market these programs will enhance our value proposition and bolster our strong service offering. Let me conclude my remarks by saying that in the first quarter, results were in line with our expectations coming out of 2020. We’ve become a stronger organization as a result of our three-part growth strategy, including making accretive acquisitions along with managing our cost structure. I’m encouraged with our continued sequential improvement in sales and profitability, and firmly believe that we’re well positioned to continue this growth pattern in 2021. We’ve managed the business well through uncertain times, successfully making a large acquisition and continued to invest in the business that will benefit our future growth. Long-term labor demographics and their operational excellence continue to make our value proposition critical to our customers. Now I’d like to turn it over to Ron for more information on our financial performance.

Thank you, Mike, and good morning, everyone. I will first provide some key takeaways on business trends during the first quarter, and I’ll then discuss some of the details and provide an update on the integration of Partsmaster. A few highlights for the quarter. First, consolidated sales improved by $12.5 million or 13.8% over the first quarter of 2020, and also increased $5.4 million or 5.6% over Q4 of 2020. Sales from Partsmaster for the quarter were $15.7 million. Excluding Partsmaster, organic average daily sales grew by 5.1% versus Q4 driven by increases in most product categories, offset by a small decline in PPE products. Second, our adjusted EBITDA was $9.1 million or 8.8% of sales. Excluding Partsmaster, adjusted EBITDA improved by approximately $330,000 over Q4 as we continue to sequentially improve our organic earnings. And third, we ended the quarter with $26.3 million in cash and cash equivalents and approximately $65 million of availability under our revolver. As previously discussed, we were deemed an essential business early in 2020, which allowed us to continue to service our customers. We continue to work remotely from a corporate perspective, while all of our distribution centers continue to operate. As we reflect on the first quarter, we have continued to see improvement in many aspects of our business. Sales continue to improve as does our sales rep productivity. Most product categories realized sequential increases over the fourth quarter. We continue to make great progress in this environment and continue our focus on driving sales, cost controls, and cash flows, all while ensuring the safety of our team. For the quarter, excluding the acquisition, average daily sales declined by 1.9% compared to a year ago. On a consolidated basis, average daily sales increased by 2.2% over the fourth quarter, which includes the negative impact of the very difficult weather conditions in mid-February that hit a large part of the U.S. As Mike previously mentioned, we remained focused on supporting our customers in generating revenue in this environment while ensuring the safety of our teammates. We are performing on-site visits to essentially all of our customers. As we see pandemic spikes in certain areas, we are continuing to offer additional support through phone outreach, internal customer service representatives, email communication and our website. However, this is being done to a lesser degree than most of 2020 as our customers have reopened for business and we are able to resume most of our onsite service in many locations. Our focus is to grow sales sequentially from month to month during 2021. Consolidated gross margin for the quarter came in at 52.7% compared to 53.7% in the year-ago quarter. On a standalone basis before the service cost reclassification, loss in MRO margin was 58.2% for the quarter compared to 59.6% in Q4. During Q1, we recorded an $825,000 non-recurring increase to our inventory reserves associated with the rationalization of Partsmaster inventory as part of the integration process, and a one-time charge for PPE items in which the market drop in selling price exceeded our costs. These two items combined negatively impacted Q1 margins by approximately 107 basis points. Higher net freight costs and a shift in sales mix drove the remaining decline. For the quarter, total operating expenses were $49.8 million compared to $30.3 million. $11.7 million of this increase was due to a flip in the accounting for stock-based compensation based on our stock price movement in the early stages of the pandemic a year ago. The remaining increase was due to the inclusion of Partsmaster expenses of $8.7 million and higher severance and employee acquisition costs of $569,000. Excluding these items, adjusted operating expenses decreased by $1.6 million, primarily due to lower employee compensation on lower sales and lower travel-related expenses. Our reported operating income was $4.8 million for the first quarter. On an adjusted basis, non-GAAP operating income was $7.2 million compared to adjusted operating income of $6.9 million in Q4 of 2020 and $7.9 million in the year-ago quarter. Adjusted EBITDA as a percent of sales was 8.8% for the quarter. Partsmaster contributed $1.7 million of adjusted EBITDA to the quarter. On an adjusted basis, excluding stock-based compensation and other non-recurring items, diluted earnings per share was $0.58 for the quarter versus adjusted earnings per share of $0.52 in the year-ago quarter and $0.60 in Q4 of 2020. Capital expenditures for the quarter were approximately $800,000 as we eliminated non-essential CapEx to manage our cash flows. We expect our total capital expenditures in 2021 to be in the range of approximately $5 million to $6 million, including planned upgrades to our Suwanee and McCook infrastructure to allow for increased volume in the future. Additionally, we will be relocating our Calgary distribution center to a new location with expanded square footage. As an organization, we continue to make investments in the business, in particular, in areas that have a direct impact on sales. And while there is still some uncertainty in the marketplace, we continue to make investments in the business and balance our cost structure against our current sales trends. We continue to place focus on improving our working capital. And we ended the quarter in a net positive cash position of $26.3 million. While we took on debt of $33 million in the third quarter of 2020 related to the acquisition of Partsmaster from the sellers, we ended the quarter with $64.4 million of availability under our credit facility, which is net of the $33 million letter of credit issued for the acquisition. Keep in mind that we will pay the remaining $33 million purchase price for Partsmaster in the second quarter of 2021. After doing so, we anticipate that we will have approximately $90 million of availability under our credit facility to fund future growth initiatives and acquisitions. As Mike and I both have stated previously, we are managing through this challenging time with the expectation that we will come out of this environment in a stronger position than how we entered it. The integration of Partsmaster into the organization is progressing as originally planned. Since the acquisition, Partsmaster results have continued to be strong, and while we took a charge related to the integration of their product offering into the combined company, we will be well-positioned to service all customers with an expanded product offering in the future. Let me close my comments on what we’re seeing in terms of the supply chain and inflation. Similar to others in our space, many of our suppliers are experiencing labor shortages, transportation challenges, and raw material increases that undoubtedly will impact us. Over the many years, we’ve been able to manage our MRO organic gross margin percentage within a fairly narrow range around 60%. Putting aside customer and product mix going forward, we plan to manage in that same range and we’ll take the necessary actions to preserve that margin, which supports our high customer service levels. I’ll now turn it over to the operator for questions.

Our first question is from Carl Schemm with KeyBanc. Please proceed.

Good morning. First, just wanted to get a sense of how the cadence for sales was on an organic basis through the quarter, maybe from January through February, March and into April.

Sure, Carl. So good morning. This is Ron Knutson. So let me – I will comment on that, if we look at the kind of the base MRO business, overall versus Q4, we were up nearly 6% sequentially over Q4. And if you look at that progression that we made, and both Mike and I commented on this a little bit, January was a pretty strong month for us. February stepped back a little bit. As you recall, February was a pretty tough month, in particular, in the middle couple of weeks. And then we saw a sequential increase, March over February, and we’re seeing sequential increase to date as well, sitting here towards the end of April. So a step-up in January, we stepped back a little bit in February, and then stepped forward again in both March and April. And as I look at the overall business on a consolidated basis, as I compare April versus where we finished March, we’re up call it in the mid- to low single-digit range. So we’re pleased with how April is performing so far to date.

And Carl, this is Mike. To that point, that’s one of the things I had mentioned in passing on my prepared comments was its normal variation on a month-to-month basis, but we do expect that every month will be on average, an improvement over the previous month, an increase over the previous month.

Got it. That’s helpful. Thanks. And so you kind of – to touch on you just mentioned price, obviously, kind of an inflationary environment. And you’re talking about maybe trying to maintain gross margin. Have you seen – like what sort of level of cost increase have you seen thus far in the channel? And what are you doing in terms of pricing actions? How are the conversations going with customers?

Yes, Carl, this is Mike. We are seeing some price increases from suppliers. We’ve experienced this in previous years and previous cycles. And where necessary, we do pass those cost increases along to customers. But it’s important to bear in mind that with our average piece price of $0.94 and then remembering that an hour of downtime for a piece of machinery can be thousands of dollars. Our customers and our service intensity, again, differentiates us. So putting all that together, we feel like our customers are far more focused on machine uptime than going from $0.94 to $0.95. So we have had a very good and very long track record of being able to successfully pass modest price increases along when necessary. And underneath it all, the combination of our service-intensive vendor-managed inventory with our differentiated product and then the macro overlay of real labor shortages that our customers are having makes our value proposition even more critical to their success. So when you put all of that together, we have really, really high confidence in our ability, both to maintain margin, but to accelerate sales and increase sales. And just everything about our value proposition is rock solid and more critical every day to our customers than it has been ever in the past.

Got it. Thanks. And maybe just transitioning to specifically the MRO gross margin? I know you’ve talked in the past about sort of that 59% to 60% range. It looks like it dipped a little bit below that here in the quarter, but just maybe for the rest of the year, are you expecting, I guess, a fairly even, obviously, for the rest of the year, a fairly even 59% to 60%? Or is there any seasonality or other factors that might influence any other quarters to go below or above that?

Yes, Carl, this is Ron. So as we mentioned, the major movement this quarter that brought the margin down was related to the $825,000 that we recorded in Q1 on an MRO basis ended at 58.2%, as we’re thinking about gross margins. So that was impacted by about 100 basis points, a little bit over 100 basis points from that recording. So it puts us back to 59.3%. We’re pretty comfortable that we can maintain that level of margin if 2021 develops. And I would say that our business is a little bit more seasonal in terms of the sales volume and certainly connected to the number of business days within a quarter, but the margins typically don’t vary that much. The gross margins typically don’t vary that much by quarter. So putting aside that inventory reserve that we recorded this quarter, we’re pretty comfortable that we’ll be able to manage back in that high 50 percentile range for the rest of the year.

Great. And then I guess last one for me, and I can jump back in line, is just you briefly mentioned this in the prepared remarks, I believe. But in the past, you’ve talked about adding sales reps in underserved territories. Just curious maybe if you’re looking at the things today versus pre-pandemic and into the pandemic, I’m just curious where you see those underserved territories today, what geographies, verticals, product categories or other areas. Do you see the greatest opportunities to ramp up headcount? And what kind of cadence are you looking at there?

Sure, Carl, this is Mike. So two parts to that. The first part is with the infusion of all of the new Partsmaster sales reps, we still have our three-part growth strategy. It’s unchanged. It’s add reps, it’s sales rep productivity, and it’s growth through acquisition. Well, that second leg, sales rep productivity, huge opportunity for us going forward is now that we’ve got this infusion of a large number of sales reps. Those sales reps are going to have access to all of the Lawson core products, all the Lawson products. By the way, some of the Lawson sales rep have access to all of the Partsmaster products, and they are highly differentiated products, many of the Partsmaster products, very high margin, highly differentiated. So the real growth opportunity in the very short term is enabling 1,100 sales reps to win share of wallet within existing customers and because of new product offerings, the combination of the two product families, both teams should see acceleration in their top line growth. Relative to sales reps, there will always be untapped territories. One of the things that I mentioned in passing, again in my prepared comments, is some investments in growth initiatives. While we’re not prepared to go into great detail at this point because we’re just beginning this work. But sort of an interesting data point that I found eye-opening was there are about 42,000 ZIP codes in America. Today, we transact in about 20,000 ZIP codes. The reason that half of the ZIP codes have no transactions is that they’re very geographically remote. There’s not enough business density within any rational drive time for a sales rep. So looking at channels to market, looking at while this business is not dense, it’s still a lot of business. So there will always be an opportunity to add physical sales reps. And one of our growth initiatives is to pursue geographically remote territories where it is not cost-effective to add sales reps. So all of these things still fit within the three-part growth strategy. But we will continue to add reps. And it’s kind of random. As business grows, even in the very dense East Coast, there are still opportunities to add reps. And geographically remote areas, there are opportunities to add reps. At some point, in the most geographically remote areas, the question is, is that the most cost-effective way to serve a customer? So far, again, we’re serving about half of the ZIP codes in America.

Great. Thanks.

Our next question is from Kevin Steinke with Barrington Research Associates. Please proceed.

Good morning, Mike and Ron. I was curious to learn more about your goal to or your focus on growing sales on a monthly sequential basis and throughout 2021. Kind of what gives you the confidence you can achieve that, given typical seasonality and potential disruptions from the pandemic, even though that seemed to be receding somewhat supplier challenges, et cetera. Can you just talk a little bit more about that and maybe how your growth initiatives might contribute to you being able to achieve that?

Yes, Kevin, thank you. I’ll start us off with that. So a myriad factors that go into that confidence as I just mentioned, with Carl, the infusion of new products for the Partsmaster folks and the Lawson folks. That’s a part of it. We’re seeing evidence of that in our strategic accounts. One area that we’ve spoken about is our continuing growth in strategic accounts; one subsegment within strategic accounts is our relationship with a growing number of integrated supply partners. The integrated supply partners generally have on-site presence at large factories. And yet, even with that on-site presence, they believe, as we do, that bringing us in enhances their value proposition. So someone’s still got to be at a large factory every week, counting inventory, putting away fasteners, putting away electrical connectors, and small quantity chemicals. The integrated suppliers are generally not optimized for that kind of work. They are optimized for on-site MRO, but not service-intensive vendor-managed inventory and certainly not with our products. So that is another sector that’s growing. It’s likely, even more so now than we first built a plan that with a likely infrastructure investment, there’ll be more growth in construction equipment. So a myriad of market segments, subsegments, governments. Across the board, there are a lot of encouraging things happening, some of them are structural, some of them have to do with specific customers in specific markets. And lastly, just one-third of the macro drivers of pent-up demand in the marketplace, I mean, people sat home for a year and couldn’t spend money. So we expect that our customers will be ramping up across our 85,000 active customers across the board, they’ll be ramping up production. The more you run your machine, the more of the maintenance to the machine has to happen. So that, combined with a continuing labor shortage on the part of our customers, makes our value proposition even more critical. We will see over the next couple of years if customers that are currently sort of insourcing VMI or not VMI, but inventory management of consumables, whether more and more of those companies turn to outsource consumables to companies like us. I believe that will happen. We’ll see over the next couple of years whether the market – the available market expands for us. But I certainly believe it will, and our operational excellence gives us great encouragement that we’re able to win share within existing customers in existing markets. So when you put all of this together, we are very, very confident in the business plan that we’ve built, which has a continuous incremental step-up every month upon month upon month for quite a while to come. By the way, Kevin, I could just add one other little thing. Recently, we’ve crossed over an important milestone to us. We’re very excited about crossing over the $100 million quarter. It’s just – I mean, it’s just a round number, but it’s a nice big round number, and it’s an important milestone for us. That combined with the structural cost savings that we put in place, in part during the pandemic, but also as a result of technology we’ve embraced, we see structural cost savings every quarter that were put in place last year. Ron, I’m sure you’ll want to jump in and talk more about those. But on so many different dimensions, we feel like the company is in a great position from an infrastructure perspective, from a cost perspective, and most importantly, our value proposition is really resonating with customers, large and small.

That’s great. That’s helpful commentary. And how – where do we stand in terms of the Partsmaster integration, and you did the rationalization of products. Is that the inventory? Is that part of it done? And what more are you moving forward with the integration?

Well, we’re a long way – again, this is Mike, a long way into the integration and feeling like if there’s anything about us, you’ve all come to know, is we’re very systematic and methodical in how we do things. Lean Six Sigma is now fully embraced as part of our DNA. So in a systematic way, we are knocking down work streams. Our integration team and the Partsmaster integration team have done an incredible job of managing a large number, 57 work streams that were all going on in parallel to get fully integrated seamlessly with no bumps in the road. We are mostly through – I think we are through the inventory positioning that we talked about, the number of SKUs that will be coming over and the number of SKUs that will not be coming over. That work is pretty much behind us. So we’re a long way into that. Now we get all the benefits. And so far, there have been no bumps in the road. We’re very pleased with how the process has gone, and we’re extremely optimistic as we’re coming closer to the end of that process that it will continue to go as smoothly as it has gone from pretty much September 1 through today. So – but directly to answer your question, yes, the inventory work is pretty much behind us.

Mike, just to add on top of that, I just haven’t had this in my prepared remarks. But Kevin, you’ll recall that we do have a payable of $33 million that we’ll make here in the second quarter. And so I really want to make sure that everybody is aware of that. And from a cash position and from a balance sheet perspective, getting through that payment for which the majority of that will just be paid with cash that we have on hand already, our availability under our credit facility will be close to $90 million once we get through that payment because the letter of credit effectively goes away because we pay the balance via cash that we are currently sitting on. So to Mike’s point earlier, I mean, we are in a great position to continue to reinvest back in the business and to fund future acquisitions. It’s exactly why we set up that facility the way we did a year plus ago, probably 18 months ago. So we feel really, really good about the overall financial strength of our balance sheet, and it gives us tremendous flexibility going forward.

Great. Were you able to measure kind of the impact of that challenging week in February due to weather, just kind of on the overall sequential growth in the first quarter versus the fourth quarter?

We did look at it, Kevin. And what I would say is that sequentially, we were growing every week up until that week. And then we stepped back. So I didn’t do the calculation in terms of the entire quarter, but kind of putting that week aside, I’ve mentioned earlier on Carl’s question around the sequential growth that we stepped back in February. I think excluding that week or 1.5 weeks, we would have been slightly positive for the month of February versus January as well. So – but overall for the quarter, we still feel really good about even the rebound that we saw kind of post that week or week to 10 days, and then where March finished and as I commented earlier, where April is trending. So a little bit of a blip there in the middle of the quarter, but seam to recapture it pretty quickly.

Great. I think you mentioned that the Kent Automotive piece of the business was up 7% sequentially in the first quarter. And I think that’s been one of the more economically sensitive parts of the business just based on miles driven, what have you. So are you – is that business kind of back on a nice uptrend? It seems like it is, but what are you seeing? Or is that seems like it’s kind of really starting to get back on a path of rebounding?

Yes, Kevin, I think it is on a nice trend, but it’s not a nice trend for two reasons. First, I think as miles driven continue to creep up, that will certainly have a driver effect, but the other thing that is even more exciting to us is we’re winning share. We’re picking up customers. We’re winning locations. In an environment, in a market that is so fragmented, it’s an easy thing to say and a hard thing to do, but we should be able to pick up share no matter what the market is doing through our operational excellence and our sales reps and our superior product and differentiated service proposition. So again, it’s in highly fragmented markets, you should be able to grow no matter what the market is doing. Now again, a very easy thing to say and a very hard thing to achieve. But a big part of our success in Kent is, yes, existing customers getting back onto a trajectory that makes – that they were on before, but also our ability to win new customers and new locations within existing customers. So we’re pleased on both fronts as it relates to Kent.

Okay. Good. And selling expenses as a percentage of sales were up year-over-year in the first quarter. You mentioned some of the factors behind that, reinstatement of normalized selling activities, higher Partsmaster selling expenses as a percentage of sales. Should we kind of think about this selling expense, kind of more of the run rate or growing off that first quarter level as we move throughout the year? Or how should we kind of think about that line item?

Yes. So Kevin, as you’re aware, there’s certainly a piece of those – of that expense that is variable, and for the quarter, I think we were all in about 23% versus 22%. So it – what I would say is if you strip out the variable piece of that being the commission portion of it because that is the most closely tied to sales. As you look at the other expenses that we’ve taken out within that line, we’re down probably about $0.5 million in our selling expenses, again, putting aside the variable components in comparing Q1 versus Q1 from a year ago. So as I look at the first quarter of 2021, I think that’s a pretty good trend from a go-forward standpoint. Those savings that we realized throughout 2020, we are able to put those basically in from a permanent standpoint. And there are areas that the comparison becomes a little challenging because of, for example, travel-related items, travel-related expenses really dropped in 2020 – for the most part, in 2020 from April through the end of the year. And certainly, as we resume more of our sales activities, those will increase versus where we were a year ago. But we still plan to have pretty significant savings, for example, in that category versus if you were to compare the 2021 forecast versus 2019. So again, the comparisons are going to be a little bit more challenging as we move forward even into future quarters just because a lot of those activities have now resumed, and we’ve got at least on the expense side, really low numbers that we’re up against as we move into Q2 and Q3.

Okay. Got it. And lastly, I assume you didn’t mention, but you still have confidence in the ability to drive that 25% to 30% incremental adjusted EBITDA margin goal kind of as you move throughout the year?

Yes, Kevin. So this is Ron. Yes, we would – we’ve provided that guidance in the past of being able to get the operating leverage of 25% to 30%. And we’re comfortable with that guidance on a go-forward basis as well. So it’s the reason that we focus so heavily on driving top-line sales. And as Mike mentioned, hitting a milestone this quarter was really important to the organization, driven by our three-part growth strategy that we started many years ago. I think this quarter is a reflection of all that. So – but yes, we’re – yes, we’re still comfortable with that operating leverage and driving incremental improvement to our overall profitability, primarily through top-line sales growth.

Kevin, we would probably also be a little bit remiss if we didn’t mention that we don’t generally talk that much about facilities. But in the prepared comments, we talked about doubling the size of our Calgary facility moving it as well, doubling the size of a large store that Bolt has. Bolt is doing a great job this quarter and has been all along. And as well with really very modest CapEx investments, we will be increasing over time, doesn’t happen in a step function, but over time, we will be increasing the lines picked capacity of our McCook distribution center by 75%. As well, the small investment we’re making to update conveyors and warehouse software, warehouse management systems in Suwanee, all of that with very, very modest CapEx investments, will give us a tremendous boost in our capacity, again, further enabling growth through acquisition. So we’re excited about that because with a very modest input you get huge capacity growth, which further enables our ability to continue to grow through acquisitions, and of course, organically.

Great. Have you kind of sized how much additional revenue you can handle with that capacity you’re adding? Or how much you can handle additional revenue you can handle currently and what you’re adding on top of that?

Yes. Yes, Kevin, we have – and I would say just within the McCook facility, certainly, we’ll get some additional capacity out of Suwanee as well. But we anticipate that there is an incremental capacity north of $100 million of throughput throughout our DC network. So to Mike’s point, it puts us in a great position. These investments allow us, one, to bring in the Partsmaster activities into our existing infrastructure and then even putting that aside, still gives us tremendous opportunity or tremendous growth capacity going forward. So – in Suwanee, for example, I mean that’s pretty antiquated equipment right now that we’re replacing. So that will be a nice upgrade for that facility as well.

Great. That’s good to hear. Thanks for taking the questions.

This concludes our question-and-answer session. I would like to turn the conference back over to Mike DeCata for closing remarks.

Thank you. Thank you for joining the call today. We’ve gotten off to a great start in 2021. Actions that we took last year, both those in response to the pandemic as well as other growth initiatives that are paying dividends and will result in both sales and earnings growth. We’ve achieved a new milestone and crossed over the $100 million threshold in sales for the quarter. As the impact of the pandemic begins to recede, we expect to continue the benefit from new technologies that we’ve embraced during this time as well as structural cost reductions within operations, while maintaining our focus on growth. We have once again demonstrated to our customers that even under the most difficult circumstances, they can depend on us to keep them running. Our three-part growth strategy is unchanged. The addition of sales reps, sales rep productivity, and growth through acquisition continues to be the foundation that we’re building the company on. Lastly, our teammates are committed to growth and excellence in everything we do. We are grateful every day for your professionalism and commitment to our values. Thank you. We look forward to speaking with you on the next call. Have a wonderful day.

Conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.