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, for -- results softened as we move 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…

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 the increased ocean transit costs. Our largest managed accounts performed well in the quarter, a trend that has continued in the first 2 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…

We will now begin question-and-answer session. [Operator Instructions] 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. 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. Yeah, and then so in terms of the positive consumer -- customer sentiment. Is that mostly still on the kind of larger accounts that you're seeing that? Or are you 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 gain good customer satisfaction. But that's an area that's a little bit sticky and that's an area that we're continuing to focusing 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 you can 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. And then it looks like your inventory was up slightly from 3Q. Did you guys bring in any inventory ahead of tariffs? Or just -- and while on the subject of tariffs, I know Tex, you spoke about that a little bit. But overall, it sounds like you are better prepared versus 2018. But yeah, if you could just talk about the inventory, the health of the inventory, quality of that? How you feel about that?

Sure. I mean the inventory as we kind of brought those into Q4, obviously, at that point, there had been no specific designations of what tariffs may or may not happen in 2025. But overall, it was really managing inventory ahead of the Lunar New Year and making sure we had all the product in, the seasonal product in advance. The other piece, as you've heard us talk throughout the course of the year, ocean transit costs are -- have been up throughout 2024. That cost of the inbound transportation product into the U.S. distribution centers that ultimately gets capitalized into cost of the inventory. So that's really been 1 of the drivers of some of that increased inventory valuation would come from the higher transit cost into that portfolio. And as you mentioned, from a tariff perspective, obviously, it's something that 2019 really brought a lot of -- kind of opened our eyes as a company to really invest in both pricing and technology to really make sure that we really understand the different external inputs into the cost structure. Clearly, we dealt with a lot of tariffs throughout 2018, 2019. And then again, leading into 2020, '21, '22, we saw significant inflation in ocean freight costs, which really impact that same product set in a very similar way. Actually -- it was actually a little bit more impactful than that first round of tariffs. So again, while it's something that is third-party impact, a lot many of our competitors in the broader industry are all facing challenge. And it's an area that, again, I think we have the right people, the right technology and the right team in what we're doing, how we're managing our costs, how we're working with our suppliers. And then ultimately, passing that price through if it makes sense, depending on the individual products set and what the competitive set is doing. So again, I do think we're well prepared. Clearly, there's a lot of information coming at us. But again, we're not unique to the situation. And we're not the only people there. So we're really focused on managing what we can and being ready when those cost changes do come through.

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?

Yeah. Again, I'll continue to take that one. So again, it's an area that we spend a lot of time focusing on, really managing both again, you have two sides of the gross margin equation, price and cost. So again, both sides of the house, our sales team, our pricing team and then ultimately, our supplier relationship team is really focused on managing our cost down and our price up. We know that transportation is a large component of our cost of sales, both the inbound transportation costs as well as delivering goods. As you know, we talked about our big and bulky product set. So there's a heavy mix of LTL and other costly transportation in there. So it's managing that profile. Again, we're generally confident in our ability to manage that margin. Clearly, as you know, we have our private brand and our exclusive brand products, which bring a higher margin profile to our composite mix. So we're continuing to focus on mixing into those products where it makes sense while, again, not -- making sure we're lifting all boats and focusing on our national suppliers as well. But the private brand does give us a different gross margin profile that helps us mitigate some of the pricing pressure in the market. So it's an area that, again, it's been fairly steady, but we're confident in being able to continue to manage that. And again, our focus is whenever possible how do we capture a little bit more gross margin is always a focus of the company.

Thanks. Thank you very much and best of luck.

Thank you.

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