Tex Clark, the company's CFO, as well as Mike Smargiassi from Investor Relations. The format for today will be a management presentation for the first 20 or so minutes, and then we will open up for Q&A. For those in the audience who have questions, please type your question into the Q&A box at the bottom of your Zoom screen. At the end of management's prepared remarks, I will go ahead with those questions. Really, with no further delay, Tex, the floor is yours.
Yeah, thank you, Anthony. Again, my name is Tex Clark, CFO here at Global Industrial. It's a pleasure to be here at the Sidoti Conference in Spring 2025. Again, we'll start with our cautionary statement, forward-looking statements. We've all seen these before, so we'll just quickly move past that. Let me just start telling you a little bit about who we are. Again, Global Industrial Company is a value-added industrial distribution player headquartered in Port Washington, New York. It's about 20 miles outside of New York City. Last year, we generated approximately $1.3 billion in sales, and our primary go-to-market brand is also Global Industrial. We operate on a national distribution model with seven distribution centers across the United States and Canada, and that allows us to reach the majority of our customers, about 90% of our customers, for our in-stock products within two days.
We do also partner with a number of vendors to drop ship product directly to our customer set. When we think about what we sell, we consider ourselves the experts in big and bulky. We're going to be selling capital, light capital, durable goods, storage and shelving, furniture, parts and trucks, etc. These categories, again, are going to be the non-conveyable, non-conforming. It's not a high-velocity parcel environment. It's more of an LTL or truckload environment, something that really differentiates us in the product set that we focus upon versus some of our competitive set out there. One of the things that differentiates Global is our strong private label offering. A little bit over 40% of our total revenue is generated from the exclusive brands that we manufacture. We'll talk quite a bit more about that as we move forward.
We're an e-commerce-first business focusing on globalindustrial.com, as well as other e-central areas. We have 600 customer-facing associates that then will support our sales model. That includes both, again, starting at the e-commerce side, but also focused on subject matter experts and other sales teams across the country. One of the areas that we have continued to focus on over the past decade is returning capital to shareholders. In that time, we've delivered over $650 million of capital returns to our shareholders. We began a recurring dividend in 2016 that most recently increased to $0.26 per quarter. That was updated just a couple of weeks ago when we reported year-end results. Now, let me just start by talking about how did we get to where we are and what is our North Star? Who are we trying to be?
When we think about what's going to help us succeed in 2025 and beyond, it's going to be guided by our customer-centric strategy. By really focusing on the customer, we're going to be able to deliver a unique and personalized experience. We want to make sure that we make that customer engagement the heart of what we're doing. By focusing on the customer, we're able to grow share of wallet and expand categories, the categories that we sell to the customers. When we know when customers buy more different product sets from us or different categories, they drive a stickier customer relationship. We become more than just a product supplier. We become a solution provider. That's going to allow us to grow top line and then ultimately operating income over time. Again, focusing on the frictionless experience is one of the key areas in this focus.
We know that our customers have choices. We know that a customer really wants to make sure that it's a seamless process from the time that they're searching for their product to placing the order to receiving the product to ultimately paying their invoice. We have to have a very, very, very streamlined and simple process for our customers because they have choices. They don't want roadblocks in the way. They don't want there to be points that derail those processes. That just needs to be part of the everyday business. As a supply chain partner, that's what we're really working to continue to drive. By focusing on these different key areas, we're going to be aligning our people to enable growth in the company. We think about who we're selling to. We do have that very broad and diverse customer base.
When we think about manufacturing, retail, wholesale, trade, construction, when we think about these types of customers, the one thing that's in common is they're operating distribution-type environments, warehousing, distribution, expansion, product expansion, etc. When we think about those customers, what our product sets can be, the key and core products that we offer lend themselves very well to these off-the-carpet in the warehouse environments. We also have been expanding into hospitality, healthcare, and other areas. While they may not be operating distribution environments, what's common across them is they all have significant facilities, maintenance, and facilities budgets, as well as large campus structures that have broad outdoor space. Again, that aligns very well with what we're selling.
Again, with our broad customer base right now, again, it's going to be more concentrated towards small, medium business today with some recent very high success in moving up towards the larger and more complex customers. Again, the better part of 400,000 customers are active and buy from us, and no single customer represents more than 2% of sales. Again, it's a fragmented customer base similar to the fragmented customer market that we operate within. Generally, kind of thinking about overall total addressable market, we look at that about $50 billion of total addressable market across the product sets that we sell.
When we think about who we're competing with, this is the better part of, again, roughly 4,000 distributors in North America that service this industry, starting with going from the longest sale, the biggest public companies on the left of this equation, all the way to smaller plumbing shops and other small distributors or manufacturers on the far end of the spectrum. Again, generally, out of those 4,000 distributors or 4,000 participants in the market, we will be ranking approximately the 20th largest in the space. There is a lot of gray area, white area to the right of us to grow share that will help us support growth as we continue to help our customers consolidate their buying behaviors.
Again, we've talked a little bit about what we're selling, but these top 10 categories, storage, shelving, material handling, etc., are core to what we do, and these make up the vast majority of our revenue. What's common across these lines is that we have a long history in these categories, very good subject matter expertise at the merchandising and category management level, strong knowledge amongst our sales team, and then a robust product offering. That robust product offering is managed, including both key national brand providers, the biggest brands out there, as well as a very robust and broad exclusive brands product offering.
We've been developing the exclusive brands for a long time, and that's been one area that by giving the customers a great choice when they're coming to play, be it the national brand or a functional alternative or something with higher quality of our brands, we always try to focus on making sure that the customers have that right choice. We continuously expand into new products and new verticals, and that's, again, a core focus area of us. As we think about our supply chain, it's what products can we help drive into our exclusive brands? What type of products? What are our customers asking for that will allow us to shift products and allow us to grow into new categories? When we think about, again, just digging in deeper into our exclusive brands, we go to market with a tagline made to exceed.
What that really means is that this is a product set that we are making sure that we're investing in and driving very high-quality industrial-strength solutions. That could include improving the weight capacity or the storage capacity of a shelving unit to improving ball bearings in a set of drawers to a thicker gauge steel to prevent denting on a product line or other enhancements that our customers are looking at. Right now, actually a significant number of our team members are presenting at the ProMat Conference in Chicago this week and really presenting four new products for different awards there of new products that we're bringing to market that will really help our customers and help the market serve their business and perform better than they do today. We did begin sourcing these private brand sales and contract manufacturing relationships over 40 years ago.
We have a long track record of working with suppliers, understanding how to move product around, how to develop product. It has been an area that has been our fastest growing sourcing channel for quite some time, better part of 16% revenue CAGR in the last five years in our private brands. Again, when we think about what these private brand goods do, delivering a very high-quality product to our customers, typically lower total cost of ownership to our customers at a very attractive price point, and at the same time generating what could be a 15-20 percentage point premium in gross margin rate as compared to the national brand competitive product. We can earn more as a company, at the same time deliver a better price point and a great value to our customers. It is an area that we will continue to focus on.
Like we said, when we develop a product, it's not just about hitting a price point. It's about developing that extra chip in the cookie mentality. How can we enhance a product and make that product for a better use for our customers? That's where we've continued to focus as a company. Thinking about just a couple of new product examples, portable power stations, getting into vehicles for warehouse management, stock chasers, stock pickers, bringing higher quality digital wood laminate lockers. That's for a different product set of lockers. We had a long track record of lockers, bringing in new lockers to the space, new type of teardrop pallet racking.
These are just a sampling of, at any given point in time, we'll typically have north of 100 new products, new product introductions in the works that our teams are working on developing at any given point in time. That is an ongoing strategy of the company. We believe that there's still a long track record or a long opportunity to expand and grow the balance of share within our private brand offerings. Thinking about some of the financial profile of the business, we do have a strong history of organic growth. When we look at the CAGR right here, 2020 through 2024, the CAGR is approximately 6.3%, but that does include an acquisition that we completed in May of 2023.
We do see, unfortunately, on the right side of the equation, we do see that there has been some margin erosion on the operating income side the last three years. I think that's predicated on two primary issues. Throughout the pandemic and supply chain disruption time period of 2020 through 2022, we were actually generating record gross margins for our company, peaking in 2022 at 9%. We have seen that dilute over the last two years, and that's primarily associated with two factors. One being that the growth on the top line has been a little bit slower in the most recent periods organically. By acquiring Indoff, while we're very happy with the cash flow and the absolute operating income dollars they're generating, it was a business that did have a lower margin profile, both on the gross and operating side.
Its margin profile was approximately 20% as compared to Global Industrial's mid-30% gross margin profile. On the operating margin side, again, they're going to be a sub-5% operating margin business. That's primarily because they were an almost exclusively dropship supplier, as well as larger project-based that typically had a lower margin profile. We believe we can move that up over time by mixing our private brand and other product sets into the Indoff business, as well as launching some e-commerce capabilities to allow Indoff to get more day-to-day business and not just the somewhat slightly lower margin profile of the large projects that they service for their customers. Overall, as a company, our gross margin has been quite stable in the mid-30%. Maximizing the operating margin profile is a continued focus of the company.
Getting back to growth will really help drive that number. Let me turn to our position in the market. There are many trends that are impacting the overall industrial distribution space. I think no more than kind of the e-commerce adoption. E-commerce adoption will not just be www.globalindustrial.com. This will also include things such as e-procurement through EDI, cXML, punch-out catalogs, and other ways that customers want to connect to their suppliers to make that buying experience as simple as possible. We talked about the frictionless experience. Creating these EDI connections and e-procurement connections helps take friction away from the buying experience. We have a great team. We have that ability. That is one thing that we have seen our mid-size and larger customers really moving towards and shifting towards and something we have been well-positioned to help serve.
Another area, obviously, we know that AI is obviously the key word that we're all hearing about in our daily lives. Really using AI, using data to help unlock different productivity, different areas has been a continued focus of the company to make sure that we're, again, delivering the right product at the right time to the right customer. We have to continue to make sure that we know that the market is rapidly changing. It is an area that we're continuing to focus on to make sure that we're well-positioned to meet these emerging industry challenges. Again, over time, we do believe that we are positioned and our capabilities are well-positioned to win against our smaller competitors and continue to compete against our larger peers.
We know many of the smaller competitors may not have the robust capabilities of the full suite of e-commerce capabilities, the full suite of product offering through including exclusive brands. By our robust supply chain offering and product offering, we believe we can be very well in this business. It is an area that we will continue to, we believe we are well-positioned to gain share over time. Again, how are we going to deliver growth? When we think of that, we do have that powerful digital-first model. I started today by talking about an e-commerce-centric business. That is typically as we start with the e-commerce relationship, we want to make sure that we have a comprehensive approach to that customer relationship.
That would include e-commerce as well as other channels that will drive retention, allow us to expand our share of wallet in absolute dollar spend, but also our category share of wallet, selling additional categories in. We want to make sure that that starting point is becoming that true partner, not just a product distributor, but a solutions-oriented partner to our customers. We have talked a lot about driving that friction out of the experience. One area that we have invested recently to really focus on that is the implementation of a brand new CRM platform for the company that will really bring a 360-degree view of our customer relationship. Every touchpoint they have with us across our sales engine, our marketing engine, our service engine, and really bringing those all together will really, again, help us deliver the right experience for our customers.
That will allow us to move those customers to that higher one-to-one, that Salesforce sales team-focused approach where we know we have better retention when we have that one-to-one selling model. Here's how we've expanded how we go to market. Again, e-commerce first. We have that one-to-one sales model. We know that our customers do a lot better with us and have a higher retention rate, higher satisfaction, and really, really think our sales team differentiates us. We bring subject matter expertise, full account management tools, and we have approximately a little over 200 inside sales representatives supporting our customers. We've added a new channel through bringing outside sales Indoff that was acquired in May 2023, as well as a different type of sales team that we have in-house that really supports in the field, walking with our customers on their sites, identifying new opportunities.
That's been an area that's really allowed us to service different customers a little better. It's helped really drive and launch our GPO effort. We launched our GPO effort in 2022. That's for purchasing organization, our contract buying. We have relationships with Omnia, Kinetic, Vizient for the healthcare space. We've continued to identify new contract vehicles that will allow us to attract a different kind of buyer and service a different kind of market. We're very pleased with the progress. This has grown actually, this is our fastest growing channel since we launched this in 2022. Again, when we think about, we've talked a little bit about that one-to-one sales model, but as we graduate our customers to the managed sales engine.
As we take a customer from a pure play e-commerce business or a prospect and really move them into our managed sales team, that deepens the relationship. We can really build that loyalty through that one-to-one relationship. We shift more customers. We have the ability to shift those customers to exclusive brands, really have someone helping to move beyond the web merchandising of why a customer should buy the exclusive brand to really making sure that we're actually pitching that to the customer, explaining the difference and allowing for that loyalty to be built. Again, increasing that share of wallet in those repeat sales. That's going to be the key to continue to grow the business over time. Again, getting back to our financial view of the business, we generally have had a very strong free cash flow generation.
When we look at that on the left side, 2023 was a bit of a unique year, very strong cash flow generation. That was primarily the result of selling through a substantial amount of inventory. As inventory peaked in 2022, we know at that point, availability was king. We know there were supply chain disruptions, both in the U.S. as well as abroad, at point of origin and point of destination. We knew customers were, as long as you had the product, it was not a price-dominated market at that time. It was an availability-dominated market. Having the flexibility, our balance sheet, no debt, strong cash position, we were able to invest in inventory in 2022, really make sure we had the products for our customers.
We were able to, again, like any other distributor, destock in 2023 as we moved through that product. That really helped generate very strong free cash flow in 2023. Again, like I said, debt-free balance sheet, strong cash conversion cycle, and an area that we continue to believe that we're well-positioned to give us the ultimate flexibility to deploy capital. Again, that capital allocation strategy, I mean, again, always it's going to be investing for growth. What are the e-commerce capabilities? Investing in those CRM platforms, focusing on customer acquisition, focusing on product selection and development. How can we get faster to our customers through support of our supply chain and our distribution network? That's going to be our first use of cash always. M&A is another area.
While it's been a smaller part of our growth story over time, it's something that we're going to continue to focus on and keep that flexibility in what we're doing. We often find acquisitions that fit our strategy. We don't want to look for things that are—we want things that are adjacent in the markets that we operate in, adjacent to the product lines, or bringing some new skill sets or new customers. Again, typically, areas that we can leverage our exclusive brands, leverage our e-commerce platform and e-commerce capabilities are two areas that we really think when we're looking at acquisitions that will help us bring value to those when we do find the right fit to our business. Again, we did mention that we will continue to—we have returned a lot of capital to shareholders. We'll continue to dividend growth over time.
We've had a number of special dividends in that period. Again, returning, we do have an authorized buyback in place that, again, while it hasn't been utilized recently, we do maintain that flexibility. Quarterly dividend per share, again, 10 consecutive years of increase in that quarterly dividend. Most recently, just in February of 2025, we increased that a penny a share per quarter to $0.26. This is an area that we did have a number of special dividends in 2018, 2019, and 2020. That was really more based upon the company had divested a number of other non-core assets in the IT distribution space and using those proceeds from those distributions or those divestitures to return that capital through special dividends. Again, we do anticipate continuing a recurring quarterly dividend going forward and increasing that each year. Current payout ratio is about 60% of net income.
Again, long term, when we get to solid revenue growth, I mean, we believe if we looked at over a longer period horizon, we've been able to outpace the market. Again, continuing to grow fast in the market is an absolute strategy that we believe is going to be key to being able to continue to drive business. We're going to do that through expanding share of wallet. Expanding the share of our exclusive brand sales will continue to help drive that profitability and help generate operating income across our fixed cost structure. Ultimately, our goal at the end of the day, we want to maximize the total shareholder return. Again, we've continued to focus on that as a company. With that said, I know we're right about 20 minutes into the presentation. Happy to open up for any questions.
Thank you very much, Tex, for the terrific overview of Global Industrial. As a quick reminder for those in the audience, if you do have a question, please type it into the Q&A box. We already have a few questions here. I'll try to combine one of my questions with one that came in here. How do you guys think about your ability to grow market share over the medium to long term? Certainly realizing that it's still a kind of a choppy environment, somewhat volatile with the tariff noise. How do you guys think about that as far as growing the business? As you do that, how should we think about the operating margins longer term?
Sure. Yeah.
I mean, we think about our ability to grow market share will come from, we believe that we can actually grow it from both sides of the equation, both from kind of smaller customer concentration, supplier concentration in the smaller customers, as well as ability to take some share on the larger side, especially through the GPO programs and the other areas. Growing market share against the smaller competitive set or the more niche suppliers is when we look to our customers and the customers are looking for easier experiences, more concentrated buying. They want to streamline their supply chain. They want to make sure that they're bringing suppliers together.
That's one area that we think we continue to grow share as customers are trying to consolidate multiple suppliers, becoming that one-stop shop, having the broad product offering, both private brand and national brand, that will give them the options and the optionality that they need for their environments. Again, on the larger end, again, being able to pick off opportunities by moving up the value chain on some large customers and making sure we're there. Again, we have seen softness in that SMB side of the house for the better part of a year and a half. That's one area that we know that has been soft. Sometimes we look at the PMI index or other kind of public indexes out there. We've seen that was in contraction territory for quite some time, sub-50.
Recently, we've seen that actually expand, which says the potential sentiment is improving. In the short term, obviously, we know that there's some disruption and some cautious behavior. I think we're all waiting to see really where the different cost inputs are going to move and where maybe tariff policy will move from the administration. That is one area that I think there's probably a little bit of cautiousness in the marketplace right now with customers waiting to see. I think once the clarity comes out there, we'll be in a good position to grow share over time. Again, Anthony, in terms of the operating margin, and clearly, as we get back to growth, we have good capacity within our distribution network, good capacity within our sales team.
As we have invested in a number of productivity tools across our CRM and elsewhere, we believe that we will be able to drive operating leverage as we get back to a sustained growth in the business.
Gotcha. All right. If you are able to grow revenue, hypothetically, let's say low to mid single digits, you think that is enough to be able to expand your operating margins?
Yeah. I mean, and that is going to be, that is an area, yeah. As we get there, we believe we will. I mean, we will definitely stabilize and then begin growing that. We look at it a few different ways. I mean, a lot of it is predicated on that gross margin line as well. We know that some of the cost of goods inputs could impact that.
That's where our private brand actually helps, etc., your defensive strategy as well because of that higher margin profile. We're able to help offset some other pressure on the gross margin line. I think, yes, Anthony.
Gotcha. In one of your slides, you had yourselves compared to your competitors, how you stack up. Do you guys see any additional competitive threats out there, or do you think it will be kind of more of the same? Just kind of more specifically, looking at, let's say, project management expertise, how do you differentiate yourselves versus the larger national players in the industry?
Yeah.
I mean, I think in terms of the competitive side, I mean, that's one area that it's ever-changing to the extent as we need to bring new products in, you may find that new product could bring a new competitor into your environment. Again, we have a fairly robust pricing team that really focuses on that competitive intelligence when it comes to what our competitors of each product set are pricing at, how they're offering, what their lead times are, and really focusing on that side of the equation.
Gotcha. Got it. All right. In terms of just kind of thinking about the current kind of environment, how do you guys think about volume versus pricing trends here? Kind of more near term, what are you seeing out there?
Yeah.
I mean, I think as we came into the year and we look at different industry surveys, the expectation was that pricing was going to be fairly neutral and growth would be more volume-driven. Now, I think that maybe calculus has changed a little bit. Again, that was as we think about some of the surveys, we look at MDM as an example. When they think about market growth, they were projecting market growth in the 3-4% range. With of that, less than 1% was going to come from pricing. Again, I haven't seen the next survey will come out in a couple of months' time, or I believe in April, actually the next month.
But again, we would anticipate as there's been more discussion about input costs and again, potentially even the tariff, as mentioned, that could drive some additional costs, which may bring some of the, which I would anticipate will bring some more pricing to the equation. It is something that we have to monitor and understand what the competitive set will endure. Currently, in most recent times, pricing has been fairly neutral. That is an area that, again, going forward, we do anticipate there will be some price benefit as we move through as costs increase.
Gotcha. Okay. In terms of the tariffs, obviously, we had Trump 1.0, and now we have Trump 2.0 as far as the tariffs. How are you guys better positioned now versus back in 2018 and 2019 in terms of your product sourcing and just overall thinking about tariffs?
Yeah.
I do not want to just kind of point to the kind of Trump 1 or Trump 2. When we think about, yes, clearly in 2018, 2019, tariffs came into the equation more than they had in the past decade. Obviously, that made us look at our supply chain and say, "Where should we?" We were highly concentrated as China country of origin. We began at that point kind of from an enterprise risk or de-risk standpoint. We needed to diversify that supply chain. In that scenario, we began focusing on heavily in 2019. At the same time, we really began focusing on really that pricing intelligence more than we ever had before because, again, things have been fairly stable for a decade because we know the cost can change.
What we do not want to forget about is from really in 2020, 2021, 2022, during the last administration, but during the Biden administration, we saw significant ocean transit increases. With the pandemic, those ocean transit increases actually were more significant from a cost than tariffs have been. That is an area that we have had a lot of different volatility in the input side of costs over the last now seven years. Through that time, while it has taken a significant portion of mind share, we have been able to generally manage our gross margin well. I have seen that. I think both of those actions, tariffs 1.0 and then ocean transit inflation, have really helped us get that much better at being fast to market when it comes to pricing. We also do benefit in general because typically we are going to be a list price-first company.
With transparent web pricing being the key, we do have flexibility to change our pricing. Obviously, we want to make sure we're partnering. I mean, as a supply chain partner to our customers, we have to make sure that we're delivering a good experience for them as well. It's not just about passing price through, but it's a combination of balancing relationships with our suppliers, diversifying where appropriate. Ultimately, again, if there is a need to pass that price through, that's something that we'll make sure we do very methodically and with a lot of understanding of what the broader market is doing as well.
Gotcha. We're almost out of time. I'll squeeze in one last question here.
Can you just share maybe, I know you touched on this a little bit in your prepared remarks, but as far as the new Salesforce CRM system that you're implementing, how do you think that will help the company?
Yeah. I think two areas. One, I mean, when we think about just the productivity that's going to bring to our sales team, when we look at what kind of a sales team, what a typical account manager would do on a day-to-day basis and understanding where we can streamline and simplify through dashboards and other reporting mechanisms, we're just going to be, we're giving more time back to our account managers to talk to customers. At the end of the day, we know being in front of our customers is the number one thing to driving more sales. From a productivity standpoint, we're very excited.
I think the other area is really that true broad-based 360-degree view of our customers. Again, we implemented this for our sales team. We're absolutely moving forward with our marketing and customer service module. That's going to give us the ability to really be very tailored, very precise in the marketing that we do to specific customers, really account-based marketing versus more focused on account-based marketing, very tailored marketing than the broader just paid search and other areas that are going to drive traffic to a website. You're going to be, again, that much more tailored, and that gets you higher efficiency in your marketing spend. I think both of those right now, again, we launched the first module within our sales team last year, finished that in Q4. Again, we'll be moving forward. We're actively moving forward with the marketing and service cloud this year.
We believe that should be fully implemented as we move towards the summer or throughout the summer. We will continue to update the shareholder base as we close out our Q1 remarks.
All right. Sounds great. Thank you very much. We are already over our allotted time. Thanks again to Tex and Mike for sharing the Global Industrial story. Thank you also everyone tuning in and listening and asking good questions as well. We will wrap it up here and have a great and productive day. Thanks.
Thanks, Anthony. Take care. Yeah. Thank you, Anthony. Thank you all for joining today. Thank you.