Good afternoon, ladies and gentlemen, and welcome to Global Industrial's Fourth Quarter 2024 Earnings Conference Call. As a reminder, this event is being recorded. At this time, I would like to turn the call over to Mike Smargiassi of the Plunkett Group. Please go ahead.

Thank you, and welcome to the Global Industrial fourth quarter 2024 earnings call. Today's call will include formal remarks from Richard Leeds, Executive Chairman; Anesa Chaibi, Chief Executive Officer; and Tex Clark, Senior Vice President and Chief Financial Officer. Formal remarks will be followed by a question-and-answer session. Today's discussion may include certain forward-looking statements. It should be understood that actual results could differ materially from those projected due to a number of factors, including those described under the forward-looking statements caption and under Risk Factors in the company's annual report on Form 10-K and quarterly reports on Form 10-Q. The press release is available on the company's website and has been filed with the SEC on a Form 8-K. This call is the property of Global Industrial Company. I will now turn the call over to Richard.

Thanks, Mike. Good afternoon, everyone, and thank you for joining us. I would like to start today's call by welcoming Anesa Chaibi who has recently joined Global Industrial as our new CEO. Anesa is a proven executive with extensive experience in B2B and industrial distribution businesses. She brings a growth-driven mindset and a strong background in marketing and e-commerce. Anesa is an ideal fit with Global Industrial's entrepreneurial spirit and can-do culture. As I stepped back into the CEO role the past several months, it provides me with the opportunity to gain a deeper understanding of where our company fits in today's competitive landscape. My recent time as CEO has only strengthened my belief in our long-term outlook and more importantly, my confidence in the management team and associates at Global Industrial that make it all happen. These insights helped shape our CEO search, and I'm confident that Anesa is the right person to improve our performance and drive our future success. Anesa?

Thank you, Richard. I'm excited to join the Global Industrial family. The onboarding process is well underway and with Richard's wealth of knowledge and generous support, we are set for a smooth transition. I believe Global Industrial has a unique go-to-market platform, strong customer relationships and an exceptional team. These attributes provide an outstanding foundation to further enhance our operating performance and drive long-term growth. To capitalize on its opportunities, Global Industrial must further strengthen its position in the market, optimize its customer acquisition and sales approach and capture share in the fragmented industrial distribution market. I look forward to updating investors on our progress and meeting many of you in the coming months. I'll now turn the call back to Richard.

Thank you, Anesa. Turning to our performance. In 2024, we generated revenue of $1.3 billion, an improvement of 3.3% driven by the addition of Indoff in May 2023. We delivered top line growth in the first half of 2024, but results softened as we moved throughout the year. The fourth quarter was our weakest period in 2024. Revenue declined 5.6% with continued underperformance in our core SMB customer base. As we enter 2025, we've seen some encouraging signs of demand trends, although performance has been inconsistent. The early part of January was negatively impacted by the midweek timing of the New Year's holiday, and we've seen a soft start to 2025. Gross margin was 33.8% in the fourth quarter, in line on a year-over-year basis, but declined sequentially as we continue to face increased transportation costs, both on inbound ocean transportation as well as higher parcel fulfillment, which is typical in the fourth quarter. Bottom-line performance reflects the lack of operating leverage given the tough market environment and continued investments in key growth initiatives to help drive engagement and strengthen our long-term competitive position. We had good cash flow generation during the year and ended 2024 with more than $44 million in cash. In 2024, we continued to execute on our customer-centric strategy and made measurable progress elevating the customer experience across the business. This is highlighted in the strong retention rates and customer satisfaction scores we attained throughout the year. One area noted by our customers has been improving the quality of our fulfillment process, which was driven by a 20% reduction in damage claims in 2024. As we have noted in the past, shipping damage is the number one source of customer dissatisfaction and has been a key quality initiative. The improvement is a significant achievement and a true team effort that involved our distribution center associates, LTL carriers and drop-ship partners. Recent efforts to better align our marketing and sales teams to capture and build the long-term B2B relationships that drive the high lifetime value are making good progress. We recently went live with Salesforce for our U.S. sales team and marketing and customer service modules are set to go live later this summer. When fully implemented, our new CRM will help drive operational efficiencies and provide a more unified perspective of our customer across business functions, enabling us to better serve customer needs. As many of you know, our managed account relationships are a large component of our business and a key driver of our performance. To better support these customers, we've launched a targeted and customized account-based marketing program to deepen these relationships and drive growth. This initiative will allow us to better support our sales team by elevating our value proposition and enhance engagement across our top managed accounts. Additional initiatives for the year ahead include: One, a continued focus on pricing analytics and intelligence to optimize price capture and ensure that we continue to deliver our exceptional value to our customers; two, driving e-procurement and growth in e-enabled sales platforms, including API and punch-out. This will help us meet the expectation of today's digital B2B buyers and build deeper connections with our customers. Three, enhancements to customer experience, quality and freight to elevate the delivery of a frictionless customer experience to ensure we maintain high customer satisfaction scores. And finally, alignment across the organization to drive top line performance and optimize sales opportunities. This is a broad effort that includes continued enhancements to improve web performance and digital marketing optimization to expand conversion rates and drive more efficient marketing investment in what remains a very inflationary CPC environment. This also involves the allocation of additional sales resources to support the further development and penetration of our largest accounts. We are also implementing new growth-focused incentive programs for our sales team and external marketing partners. In closing, we are not satisfied with our performance, but I believe we have the right strategy in place as we continue to sharpen our execution on serving the needs of our core customers and highlight the value we bring to market through our core product offerings, exclusive brands and extensive product knowledge. As we drive operational excellence and enhance the customer experience, we will further strengthen connections with our customers and unlock additional revenue opportunities. We have an exceptional balance sheet. We remain well positioned to continue to invest in our growth initiatives, evaluate strategic opportunities and drive our long-term performance. I will now turn the call over to Tex.

Thank you, Richard. Fourth quarter revenue was $302.3 million, down 5.6% over Q4 of last year. U.S. revenue was down 5.9% and Canada revenue was up 4.1% in local currency. Revenue softness was most prominent in our unmanaged small customer accounts, which were impacted by lower web traffic due to significant CPC inflation within our paid search advertising programs. Price was slightly positive in the quarter, reflecting modest pricing actions taken throughout the year in reaction to increased ocean transit costs. Our largest managed accounts performed well in the quarter, a trend that has continued in the first two months of 2025. E-commerce and broader digital sales were once again our leading channel and ended the year representing more than 60% of total annual order volume in our core global industrial business. Private brand demand remains robust and showed modest growth in absolute dollars as well as a percentage of total sales in 2024. Fully incorporating the Indoff acquisition, 2024 private brand was in the low 40% range as a percentage of total sales, providing further opportunity to expand this product set across our business. The start of 2025 has shown top line volatility, largely attributable to the shift in New Year's holiday to a Wednesday versus a Sunday a year ago and weather-related shutdowns due to the arctic cold weather in January. Our largest accounts continue to perform well with increasing softness as we move down our customer profile. First quarter revenue is currently pacing in line with the fourth quarter results. We are making progress against our strategic initiatives and believe customer sentiment continues to improve. Gross profit for the quarter was $102.3 million. Gross margin was 33.8%, in line with the year-ago period. I would note gross margin in the fourth quarter of 2023 benefited from a one-time settlement with a former LTL freight carrier. Excluding this prior year benefit, gross margin would have expanded nearly 40 basis points year-over-year. We are very pleased with our gross margin performance, adjusting for this benefit. Management of our margin profile remains a key area of focus. Performance will continue to reflect the impact of strategic promotions and freight actions as part of our competitive pricing initiatives and ocean freight costs, which remain volatile and elevated. We are closely monitoring trade policy, and we are well prepared to take action as needed. We effectively managed through the tariffs of 2019 and extreme ocean freight inflation during the pandemic with volatility remaining to this day. We believe we are better positioned today given that experience and have a significantly more diversified supply chain when it comes to country of origin sourcing. The current cycle will provide unique challenges given the sourcing relationships with Canada and Mexico, which have been subject to free trade agreements for decades, may shift rapidly. We have been very proactive in our planning and believe we have the operational flexibility to manage through this cycle. We currently anticipate being able to negotiate cost savings with sourcing partners and pass-through pricing to mitigate this impact of new tariffs. Selling, distribution and administrative spending in the quarter was $87.8 million, an increase of 1.2% from the year-ago period. As a percentage of net sales, SG&A was 29%, an increase of 190 basis points from last year, with negative leverage driven by the soft top line performance. SG&A reflected planned investment in key sales and marketing growth initiatives as well as significant CPC inflation. This was partially offset by a planned moderation in digital marketing, ongoing discipline in the control of general and discretionary costs and a reduction in variable compensation expense in the period. We expect SG&A levels to remain elevated in the first quarter, primarily as a result of CPC inflation. We continue to proactively manage our costs and currently expect to incur approximately $1 million in severance in the first quarter related to cost reduction efforts. Operating income from continuing operations was $14.5 million in the fourth quarter, and operating margin was 4.8%. Operating cash flow from continuing operations was $15.8 million in the quarter. Total depreciation and amortization expense in the quarter was $1.8 million, including approximately $0.7 million associated with the amortization of intangible assets related to the Indoff acquisition, while capital expenditures were $0.7 million. In 2024, total capital expenditures were $3.8 million. We expect 2025 capital expenditures in the range of $2 million to $3 million, which primarily reflects maintenance-related investments and equipment within our distribution network. Let me now turn to our balance sheet. We have a strong and liquid balance sheet with a current ratio of 2.1 to 1. As of December 30, we had $44.6 million in cash, no debt and approximately $120.5 million of excess availability under our credit facility. We maintain significant flexibility to fully execute on our strategic plan and continue to fund our quarterly dividend. As a result, our board of directors declared a quarterly dividend of $0.26 per share of common stock. This marks the 10th consecutive year that we have increased our dividend. One housekeeping item in regards to 2025 selling days. I would note that 2025 has four extra selling days in December in both the U.S. and Canada when compared to 2024. We expect a very modest sales impact from these additional days given the timing of the 2026 New Year's holiday. Historically, sales performance for similar weeks has come at 50% of the weekly run rate. This concludes our prepared remarks today. Operator, please open the call for questions.

We will now begin the question-and-answer session. Our first question today is from Anthony Lebiedzinski with Sidoti & Company. Please go ahead.

Good afternoon, everyone. And thanks for taking the questions. And welcome aboard, Anesa. I look forward to working with you. So I guess, first, as far as the fourth quarter, just curious whether you guys saw any meaningful changes in the business after the election? Or was it more or less kind of consistent throughout the quarter?

Yeah, I'll jump right in there. So during the quarter, we definitely saw revenue results move up and down. They were volatile, and that's continued a little bit in. So really in the more recent periods, as you know, we're halfway through the first quarter. We're seeing some positive customer sentiment, but overall, we are trending still in line with where we reported our fourth quarter results.

Got you. Thanks. In terms of the positive customer sentiment, is that primarily from the larger accounts, or are you also seeing some from your core SMB clients?

Yeah. Again, I think that's also a little bit of a mixed signal. But again, our biggest customers, we are seeing some of those larger orders, some of those capital budgets seem to be opening up a little bit, which gives us confidence. I mean, again, looking at some of those industry metrics such as PMI and others. We've seen some positive trends in that really into January in 2025, so that's begun to tick up after being stagnant for some time. And again, I think we see that manifest itself in some of the customer behaviors. On the smaller customer segment, again, we're seeing good retention and gaining good customer satisfaction. But that's an area that's a little bit sticky and that's an area that we're continuing to focus strategic efforts to continue to reignite that revenue channel.

Got you. Okay. And you talked about the recent rollout of Salesforce. Just overall, when do you think that will be fully implemented and when can you start to see some tangible results from that initiative?

Yeah. So it's a major CRM rollout for our organization. We ultimately were able to roll that out to our entire sales team, the sales personnel by the end of 2024. And really, as we move into the summer of 2025, that's when we're really going to be able to bring our marketing and our customer service and really the broader customer-facing side of our team onto the one unified platform. So again, it's an area that we believe that we'll be close to kind of that full rollout over the summer and should start seeing that the positive benefit of the integration and collaboration that that brings to the table as we move throughout the course of the year.

Got you. Okay. It seems your inventory has increased slightly from Q3. Did you bring in any inventory in anticipation of tariffs? Also, Tex, you mentioned tariffs earlier. Overall, it seems like you are better prepared compared to 2018. Could you provide some insights on the inventory, its health, and its quality? How do you feel about that?

Sure. As we entered Q4, we managed our inventory with the upcoming Lunar New Year in mind, ensuring we had all the seasonal products ready, especially since there were no clear indications regarding tariffs for 2025 at that time. Throughout 2024, ocean transit costs have increased, and these transportation costs for bringing products into our U.S. distribution centers are included in the inventory valuation. This rise in transit costs has contributed to the increase in our inventory value. The tariff situation, particularly from 2019, prompted us to invest in pricing strategies and technology to better understand external factors affecting our cost structure. We faced numerous tariffs from 2018 through 2022 and experienced significant inflation in ocean freight costs, which influenced our product costs even more than the initial tariffs did. While these challenges are external, our competitors in the industry are facing similar issues. We believe we have the right team and technology to manage our costs effectively and to adjust pricing when appropriate, based on the specific product and competitive landscape. We feel well-prepared to navigate these changes, aware that we are not alone in this situation. Our focus remains on controlling what we can and being ready for any cost adjustments that may arise.

Got you. Okay. And then lastly, I guess, as far as the gross margins, I know there were some factors affecting the performance. But overall, it was up 10 basis points for the year in '24. Just how should we think directionally about the gross margin? I know there's a lot of moving pieces, but just overall, what is the expectation for gross margins going forward?

We continue to focus heavily on managing both sides of our gross margin equation, which includes both pricing and costs. Our sales and pricing teams, along with our supplier relationship team, are dedicated to reducing costs while increasing prices. Transportation is a significant part of our cost of sales, affecting both inbound transportation and delivery of goods, particularly for our large and bulky product offerings that rely on less-than-truckload (LTL) options and other expensive transportation methods. We feel generally confident in our ability to manage margins. Our private and exclusive brand products contribute higher margins to our overall mix, and we will keep directing our focus towards those where appropriate, while also ensuring we don’t neglect our national suppliers. The private brand offerings provide us with a distinct gross margin profile that helps alleviate some market pricing pressures. This area has remained relatively stable, and we are optimistic about our ability to continue managing it effectively. Our ongoing aim is to find ways to capture additional gross margin whenever possible.

Thanks. Thank you very much and best of luck.

Thank you.

Thank you. This concludes our question-and-answer session, and the conference has now also concluded. Thank you for attending today's presentation. You may now disconnect.