Alex Riegel

Alex Riegel asked about DNOW's longer-term vision for revenue growth and profit margins for the consolidated company, or directional guidance for the core DNOW business in 2026. He also inquired about the company's strategies to retain and incentivize key employees amidst the current ERP headwinds.

Answer

David Cherechinsky, President and CEO, DNOW, indicated an expectation of 'flattish revenue' organically for 2026, with upside from cost and revenue synergies. He outlined the long-term benefits of the merger, including improved relationships with top manufacturers, better competitiveness, and enhanced product availability, aiming for the combined organization to achieve an 8% EBITDA range over several years. Regarding employee retention, Mr. Cherechinsky highlighted intentional efforts to financially reward top talent, offer long-term career prospects, and involve employees in decision-making to foster excitement and commitment.

Alex Riegel asked if the sale of Century Living units contributed to the gross margin headwind in Q4. He also inquired if the 3.75% teaser interest rate advertised on the company's website was a significant driver for buyer action and sought management's perspective on the industry's current level of spec inventory development as the spring selling season approached.

Answer

Scott Dixon, Chief Financial Officer, confirmed that the sale of Century Living units was not included in the gross margin or incentive commentary. Regarding mortgage rates, Dixon explained that the average originated rate was between 5.25%-5.5%, with teaser rates below 4% available for ARM products and a 4.875% 30-year fixed rate being popular. Rob Francescon, CEO and President, noted that the industry entered the year with fewer specs than the prior year, but new product could be created quickly due to reduced cycle times, which for Century Communities averaged 114 calendar days.

Alex Riegel requested an update on the integration of Canada's Best, specifically its progress in entering the U.S. banking vertical. He also asked about recent price increases, the impact of tariffs and raw material inflation, and any notable CapEx needs related to operational improvement opportunities.

Answer

President and CEO Jim Clark lauded Canada's Best's cultural fit and entrepreneurial drive, noting ongoing integration with JSI's Canadian operations. For the U.S. banking vertical, he indicated a 12-24 month gestation period for large projects, with initial activity and small wins, aiming for it to become a top 5-10 market within 12 months. Regarding pricing, Jim Clark stated that display solutions are minimally impacted by tariffs, while lighting sees slightly more. He clarified that LSI now implements 'price adjustments' rather than blanket 'price changes,' maintaining discipline and fairness, and always reserving the right for price review. CFO Jim Galeese added that their project-based business model allows for regular pricing examinations to optimize margins. On CapEx, Jim Clark reported 'nothing notable' for the foreseeable future, emphasizing broader investments in operational improvements, talent, and new products.