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0:03 Ladies and gentlemen, at this time, I'd like to welcome everyone to the Resideo Fourth Quarter and Full Year 2021 Earnings Conference Call. Today’s call is being recorded. All participants will be in a listen-only mode until the formal question-and-answer portion of the call.

0:24 It is now my pleasure to turn today’s call over to Jason Willey, Vice President of Investor Relations. Mr. Willey, you may now begin..

0:37 Good afternoon, everyone, and thank you for joining us for Resideo's Fourth Quarter and Full Year 2021 Earnings Call. On today's call will be Jay Geldmacher, Resideo's Chief Executive Officer; and Tony Trunzo, our Chief Financial Officer.

A copy of our earnings release and related presentation materials are available on the Investor Relations page of our website at investors.resideo.com. 0:59 We would like to remind you that this afternoon's presentation contains forward-looking statements.

Statements other than historical facts made during this call may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of risks and uncertainties.

Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in Resideo's filings with the Securities and Exchange Commission. The company assumes no obligation to update any such forward-looking statements.

We identify the principal risks and uncertainties that affect our performance in our annual report on Form 10-K and other SEC filings. 1:37 With that, I will now turn the call over to Jay..

1:40 Thank you, Jason, and good afternoon, everyone. 2021 was a record year for Resideo, with revenues growing 15% year-over-year, gross margin expanding by 80 basis points and operating margin up 350 basis points. We generated $315 million of operating cash flow in 2021, up from $244 million in 2020 and $23 million in 2019.

These results were well above the expectations we outlined at the beginning of 2021 and reflect positive underlying market conditions and strong execution across the organization 2:23 This significant improvement in financial performance was against the backdrop of a dynamic and challenging supply chain environment, continued inflationary pressures and the ongoing challenges of navigating COVID.

The team managed through all of this and made significant progress strengthening the foundation of the business and in driving key investment initiatives. We also unveiled our vision, purpose and values, and completed strategic planning initiatives at the corporate level and within the businesses.

2:58 I would like to thank the entire Resideo team for their tremendous efforts in 2021. We delivered for our customers and partners while generating record financial results and taking important steps to position the business for long-term sustainable success.

Thanks to improved profitability and cash flow, combined with favorable financings, we ended 2021 with a dramatically improved capital structure. This enabled us to execute on our strategic initiatives and focus on long-term value creation.

3:32 Our announcement last week of an agreement to acquire First Alert, a leading provider of home safety products highlights this financial flexibility and the value it brings. First Alert provides Resideo a highly complementary suite of fire and carbon monoxide detection and fire suppression products with widely recognized and respected brands.

First Alert expands our sensors in the home and occupies a highly strategic position on the ceiling. This transaction will more than double products and solutions sales in the retail channel and provides new products for our professional partners.

We are excited to bring the First Alert team on board and expect to hit the ground running upon closing, which we anticipate to occur by the end of Q1 4:21 Moving to segment performance for 2021. Products and Solutions delivered 16% year-over-year growth, with revenue reaching a record $2.5 billion.

Demand was strong across our key markets, product categories and channels.

People continue to invest in their homes, and we are well positioned as the go-to partner for professional contractors and OEMs to capitalize on what we see as sustainable trends toward increased comfort through managing air, water, security and energy 4:56 In 2021, we completed critical foundational work that positions the business for sustained growth.

This includes investments in sales operations and business development, systems consolidations, introduction of a comprehensive integrated business planning process and digital efforts to consolidate and refresh our web presence. We also launched the Pro Perks loyalty program with professional security dealers and HVAC contractors.

Much of this work was sent around solidifying systems and processes to ensure we are more deeply engaged with key customers and partners, and we have the visibility to better plan and meet their needs. We also accelerated investment in our engineering organization to strengthen our innovation engine and better focus new product development efforts.

5:46 During 2021, we rolled out enhancements to our Pro series security platform across the general market in North America, launched an innovative entry-level connected thermostat with Amazon and refreshed our Hydronic portfolio in Europe.

We also consolidated software development efforts under one leader and made significant progress in development and platform initiatives. At ADI, revenue grew 15% in 2021 to $3.4 billion, with double-digit growth in all key categories. This is a continuation of the consistent above-market growth ADI has delivered over the past decade.

Both residential and commercial markets saw accelerated activity in 2021. 6:35 As the year progressed, vendor supply issues became more prevalent, particularly in categories such as video surveillance and intrusion, which resulted in significant backlog at year-end.

ADI also invested aggressively in 2021, including improvements to the e-commerce experience, pricing optimization and sales force effectiveness tools.

Pricing initiatives which have provided the ADI sales team better real-time insight and the ability to price more efficiently help the business deliver 100 basis points of year-over-year gross margin expansion.

Our digital investments support more transactions flowing through touchless channels, allowing ADI to free up sales associates for more value-added selling. This allows for better leverage of these high-value individuals as ADI execute on its long-term growth strategy. 7:29 The average revenue per sales employee grew by 14% in 2021 to over $2 million.

During the year, we completed the acquisition and integration of the Shoreview and Norfolk businesses, expanding our presence in key strategic adjacencies of data communications and audiovisual markets. Yesterday, we announced the acquisition of Arrow Wire & Cable, a West Coast distributor of data communication products.

The acquisition complements Norfolk geographically, strengthening our growing position in the data communications market. I would like to welcome the Arrow team to Resideo. We are excited by the value creation opportunity we see for the combined organizations.

8:16 With that, I will turn the call over to Tony to discuss our fourth quarter and full year performance and 2022 outlook in more detail..

8:23 Thank you, Jay, and good afternoon, everyone. As Jay said, 2021 was a year of record financial performance for Resideo. We delivered strong top line growth, higher gross margins and operating leverage, resulting in meaningful expansion in earnings and cash flow.

We achieved these results while managing through the most challenging sourcing and inflation environments in decades. In Q4, our ability to fully meet customer demand was again limited by the availability of critical components. Q4 revenue of $1.5 billion was down 3% compared to Q4 last year.

Gross margin for the quarter was 27.2%, down 100 basis points compared to Q4 2020. While consolidated operating expenses for Q4 decreased by 6%, primarily due to a $19 million year-over-year reduction in corporate costs. 9:22 Products and Solutions fourth quarter revenue of $633 million was down 6% year-over-year and was essentially flat sequentially.

Revenue was negatively impacted by the ongoing shortage of semiconductor components. Products and Solutions gross profit margin in Q4 was 37.9% compared to 41.9% in the fourth quarter of 2020.

The decline in gross margin was due to the deleveraging effect of lower volumes as well as material price inflation and higher freight costs, all partially offset by price realization of approximately $40 million 10:09 Products and Solutions segment operating profit was $125 million or 19.7% of sales compared with $166 million or 24.6% of sales last year.

Operating expense for Products and Solutions was unchanged year-over-year, reflecting lower transformation costs offset by increased investment and higher sales expense. ADI Q4 revenue of $821 million was flat year-over-year but grew 8% on a daily sales average basis, reflecting higher volumes and increased pricing over 5 fewer selling days.

10:48 ADI saw good activity in the quarter in fire, access control and wire categories, while video surveillance and intrusion were constrained by product availability. E-commerce sales were up 27%, accounting for 17% of total ADI revenue in the quarter.

ADI also continues to make progress in expanding its private brand sales, which were up over 30% year-over-year in the quarter. ADI gross profit margin in the fourth quarter was 19.1%, up from 17.5% last year.

The higher gross margin was a result of improved product line margin as ADI benefits from investment in tools to support pricing initiatives and increased private brands contribution. Margins also benefited from positive industry pricing dynamics 11:39 ADI Q4 operating margin increased 130 basis points from last year to 8.5%.

We continue to direct investment toward ADI, especially in the areas of digital and sales tools, which is reflected in higher year-over-year operating expenses. We're already seeing significant return from these investments as evidenced in strong top line performance and product line gross margin expansion.

Corporate costs for the quarter were $54 million or 4% of sales compared with $73 million or 5% of sales in the fourth quarter of 2020. During the quarter, we generated $112 million of cash from operations and for the year, operating cash flow was $315 million, compared to $244 million in 2020.

12:31 Over the past 12 months, we've made significant improvements to our capital structure, including refinancing all of our debt instruments. These transactions extended our debt maturities and will generate approximately $8 million in annualized interest expense savings.

We ended Q4 with cash and cash equivalents of $779 million and total outstanding debt of $1.2 billion. Net debt stood at $451 million at the end of the year compared to $645 million a year earlier.

I would also note that this morning, we launched a $200 million add-on to our existing Term Loan B to provide incremental liquidity in anticipation of the First Alert transaction. 13:18 Looking toward 2022, we expect revenue for the year to be in the range of $5.95 billion to $6.2 billion, implying year-over-year growth of 4% at the midpoint.

Consolidated gross margin is expected to be in the range of 27% to 28%, and GAAP operating profit is expected to be in the range of $610 million to $650 million 13:45 For the first quarter, revenue is expected to be in the range of $1.425 billion to $1.475 billion.

Consolidated gross margin is expected to be in the range of 27.5% to 28.5% and GAAP operating profit is expected to be in the range of $140 million to $150 million. 14:07 Corporate expenses for the full year 2022 are expected to be approximately $240 million, down an additional $10 million compared to 2021.

We also expect a positive impact to gross margin in Q1 due to a larger-than-normal annual inventory revaluation in the Products and Solutions business. Our first quarter and full year operating profit outlook includes approximately $10 million in transaction costs associated with the pending First Alert acquisition.

No other impact from First Alert is contemplated in our annual or first quarter outlook. Assuming a first quarter closing, we will provide an updated 2022 outlook, including First Alert on our first quarter earnings call.

Additional outlook details can be found on Page 12 of our earnings slides 15:01 I'll turn the call back to Jay for a few concluding remarks before we take questions..

15:06 Thank you, Tony. As we look to 2022, we see another year of growth, margin expansion and increased cash generation, being not the significant progress delivered in 2021. We continue to expect pressure on material input costs, freight prices and labor cost.

While visibility into how these dynamics will play out over 2022 is imperfect, we are running the business on the assumption that current conditions related to supply chain and cost headwinds will persist throughout the year.

Helping offset these cost pressures our price realization within Products and Solutions and continued benefits from pricing initiatives and digital investments at ADI. 15:54 We remain excited by the opportunities that exist across the markets we serve.

With the steps we have taken over the past 18 months, we are well positioned to continue to navigate these challenges to deliver for customers and drive increased growth and profitability in the business. ADI is focused and continued to be an indispensable partner of choice for our customers and suppliers.

This begins with building on our momentum in 2021 to deliver the leading omni channel user experience for the pearl. We will continue to broaden our offering of exclusive brands and technologies, not only in traditional security categories, but also with our expansion into adjacent categories in audio visual and data communication.

16:41 In 2022, ADI will further enhance its digital and sales enablement tools and expand its private brand offerings, each of which are already delivering returns. We expect to continue to drive growth in private brands as a percentage of ADI sales over time.

Within Products and Solutions, the team has continued to execute on better leveraging our footprint in the home through product innovation.

And over time, increase value-added service offerings 17:12 Our 2022 budget calls for a significant increase in R&D with a specific focus on platform and connected ecosystem development to support new products, services and revenue streams.

Our product road map has progressed significantly over the past year, and our development pipeline is building across our portfolio.

This includes specific programs targeting the expansion of our services offerings for enabling the professional and leveraging our broad portfolio of partners across our ecosystem, including utilities and in residential new construction. 17:50 This concludes our prepared remarks. Operator, we are now ready for questions..

17:58 [Operator Instructions] Your first question comes from the line of Ryan Merkel with William Blair. Your line is open..

18:18 Hey, thanks. Good afternoon. So a couple questions. First off, is there any way you can size the backlog? Whether that's, I'm really curious about P&S.

But if you want to include ADI, that's fine, or just how big is it versus normal? And then what sort of the timing of selling it through?.

18:37 So Hey, Ryan, it's Tony. We're not in a position to give the absolute numbers and the main, the main reason for that is typically, backlog isn't a significant factor for us, and our expectation is that over time, it's going to go back to not being a significant factor. I mean, this is very much in both businesses, kind of looking ship.

That said, we've got a pretty – we've got delinquent backlog, backlog that we could ship if we could get the parts and P&S and the products in ADI, that's meaningful. And our, the P&S, it continues to grow actually, it ticked up in Q4 and its ticking up again, I mean, we're not in a position to satisfy all the demand.

19:20 The backlog at ADI became more of an issue in the second half of the year, and it's really centered around the video surveillance part of their business. There's -- the manufacturers there that supply us are having some challenges with their supply chains.

And there was a significant amount of revenue that we didn't realize in both businesses in Q4, simply because we couldn't ship product..

19:50 And I would add also, Ryan, as I mentioned there, as I closed off my statements, that as we've modeled the business, both businesses for this -- for 2022, the various challenges that we faced with material shortages, in particular, in the semiconductor space, we've modeled it for just like we saw in '21, for '22 because it's just an imperfect world right now in terms of the crystal ball of when that will improve.

20:21 Got it? All right. I was gonna say that, what Jay said there kind of leads me to my next question, the guidance for '22 revenue is up 4% at the midpoint. I guess, first off, how much price is in that number? And then secondly, just given the backlog, I think Jay just answered it.

It sounds like you're not expecting supply chain to ease all that much. You're not really assuming a whole lot of volume acceleration, and that's one of the reasons..

20:56 Yes. So Ryan, we're roughly assuming for P&S, we're roughly planning for flat volumes in 2022. So pretty much all of the revenue growth in P&S that you're seeing is price and a significant majority of that is flow-through of price increases that have already taken effect in the latter part of 2021.

The -- and our expectation in that business absolutely is that we don't see significant relief in the backlog. It will fluctuate and -- but we don't see a significant change in the delinquent backlog in that business. So it's pretty much all of that four points – four point-ish is price. At ADI, it's a mix.

We do see some volume expansion at ADI, but we also see a little bit of continued inflation. So it's more of a 50/50 split at ADI..

21:57 And I would just add, there's certain things in the market that maybe are a little bit clearer than others in terms of some of the supply chain things. But again, this is to imperfect now to stick our neck out and so that's why we've modelled the way we have for this year..

22:16 Yep, completely understand. Okay, I'll get back in line. Thanks..

22:20 Thank you, Ryan. Appreciate the questions..

22:23 Your next question comes from the line of Amit Daryanani with Evercore. Your line is open..

22:32 Great. This is Michael on for Amit. I was curious. So on the gross margin guide, with the first quarter coming in a little bit higher than the full year. I mean I think that's kind of the opposite of what we've seen in the past year. So I was just wondering what we saw last year.

So I was just wondering if there's maybe some different dynamics at play that we should be aware of?.

22:54 Yeah, I mean, there's – there's really one dynamic in Q1, relative to the rest of the year, and it relates to what I – what I referred to in my script, this revaluation of the inventory associated with our cost rolls. That's really it..

23:10 Okay, great. Thanks. Yeah, my call dropped out for about 10 minutes, I probably missed that commentary. But then on the inventory levels as well.

I'm kind of curious, I mean, are you guys like securing maybe at higher levels of inventory than usual and that's something you expect to continue through the year?.

23:29 So our inventory turns have slowed a little bit, and that's really relative to trying to have effectively safety stock in the areas that we can't. It hasn't been dramatic. I think it's a little less than one turn. But we are trying to build safety stock. The challenge is, there are certain components that were still hand to mouth.

So the inventory itself there's stuff in the inventory that if we had a typical balance of raw materials, we'd be flowing through, and we'd see those inventory turns back to kind of in that 6.5x range, which is where we were, maybe a year, a year and change ago..

24:13 Yes, I would agree with Tony. And again, I hate to beat a dead horse, but I know we're not the only people in that same situation. But you want to make sure you have the parts on hand so that when the parts that are short do come in, you can -- you're able to turn around and ship it to customers.

And so that's always a balancing act, but that's our job to do that..

24:32 No, and I think in some ways, it's actually a good thing that you guys can check some excess inventory, because not everyone can but um, that I mean, I assume, we can kind of model that staying the same throughout the year, right, there's probably not going to be a significant change in supply that would cause you to just kind of lower inventory levels?.

24:48 No, I don't think so..

24:50 Yeah, I hope that as we get towards the latter part of the year, more things become, more predictable, more visible and I think it will, but to what degree it's hard to predict today..

25:03 Good. Thanks for taking my questions..

25:06 Yep. You bet, Michael..

25:08 Your next question is from the line of Paul Chung with JPMorgan. Your line is open..

25:14 Hi, thanks for taking my questions. So, very nice progression on ADI, operating margins this year.

Now, how should we think about the pace of margin expansion in ’22? And can you also kind of quantify the impact of supply shortages, freight that kind of hit the quarter? And maybe your expectations of that hit for ’22?.

25:43 Yes. So thanks for the question, Paul. ADI has done a great job, obviously, not just in progression of margin, but keeping the revenue growth solid and strong and frankly, integrating their acquisitions and really just executing.

We did see in the second half of the year, some part of -- the second half of '21, some part of the margin expansion was the result of some the flow-through of some inflationary -- inflationary dynamics. That is -- it's measured in a few tens of basis points. It's not all of the margin expansion, but some part of it came from inflation.

Our current expectation is that's going to level off in the latter part of the year, and we won't see that lift.

That said, that business is tracking really well towards its toward its margin targets a couple of years out 26:37 And your second question was in our on freight for what period for Q4?.

26:45 Q4 the year and expectations for 22?.

26:51 Let me get all for those to you here on the call..

26:57 Do I have or we have?.

26:59 We roughly have the first two at least, yeah. I want to say it was 9 and 40 for Q4 and the year that let me get to you..

27:06 And while other things at that, Paul, I would just say that it's because I don't think we're going to get that many more big surprises on freight. I think that is becoming a little more visible. So I think we've probably modeled that in a way that I think we're comfortable with, we'll see, of course.

And one is on cost, of course, the other is predictability in terms of transit time. So both of those are very important as we run the business..

27:37 I've only got two of the three numbers for you..

27:40 Okay..

27:40 I'm looking at Jason's Chichi. For P&S the freight impact for the quarter was $9 million. Like I said, the impact for the -- for the year 2021 was $49 million. I don't have the '22 impact handy, but we don't expect it to be of that magnitude incrementally..

28:00 Okay. And then last….

28:01 And I think I'd point out about freight is, it hasn't come down. Overall, it's bounced, right? Overall, our freight costs haven't come down from these elevated levels..

28:10 Right.

28:11 Right. And then just on First Alert, quite a material transaction, kind of relative to some of the tuck ins you've done in the past.

How long are you looking at this asset? What kind of spurred the decision there and then moving forward? Should we kind of expect continued tuck ins? Or are you embarking on warm material acquisitions, like First Alert in the coming quarters and years? Thank you..

28:37 So thanks for the questions, Paul. So First Alert is it's in many ways, it's the perfect first sizable acquisition for us. We've been looking at it for a while.

And the business it's consistent with what we've communicated in terms of our overall M&A strategy because we've talked about the fact that ADI in particular, has the opportunity to do some small and medium-sized roll-ups, including the one that we just announced this week in addition to the ones that were done last year.

That part of the strategy continues to march forward, and I'd expect that you'll continue to see those transactions. In aggregate they're not material, but overall, they're, they're additive.

And the ones that we did last year, are now 100%, fully integrated, and they're performing above the level that we expected them to in terms of in terms of synergy and, and their own growth and margins. 29:34 Firstly, it falls into a different bucket, and we've tried to communicate this.

And the bucket really is what we'll call the kind of regular way products and solutions, product line expansion type acquisitions. We always thought those would be more sizable. From a size standpoint, I think First Alert is a good example of the -- I hate to say, appropriate size, but it's not too big. It's not overwhelming, but it's of scale.

And most importantly, it's probably the best hardware product fit in the market available for us. I mean we really believe that First Alert is we think we're the perfect owner for that business. In fact, going back 30 years, First Alert and our Security business, we're together in the same entity even before that entity was owned by Honeywell.

So we're kind of bringing them back together. 30:30 And the opportunity here is this is a good business that we bought. Newell disposed of it because it didn't fit their portfolio. They're not in electronics manufacturing shop, but they took very good care of this business. They invested in R&D. They invested in advertising and promotion.

They invested in some factory automation. So we're getting a very healthy business. The reason we can achieve the synergies that we can is because of the very close adjacency of the product lines, really the adjacency of the manufacturing and distribution facilities themselves.

And from our perspective, given the valuation and the opportunity here, we see meaningfully more upside than we do risk from a deal like this in our hands..

31:18 I would – I would add also to that, timing wise in terms of where we're at with products and solutions and what's in the marketplace. I think it's very really super timing for this acquisition.

In additional sensors in terms of our total ecosystem that gives us access to the ceiling for the types of products, that First Alert has, as you know, we're taking a look at how, we integrate how many different products into total ecosystem, is this fits perfectly.

And so we're excited about this opportunity and look forward to move forward with this deal..

31:55 Paul, at the risk of beating this horse, I mean, it really, our objective here is to have sensor-based real estate in the home. And this significantly advances that strategy and puts us in a position where we can really lead the integration of their products from a connected standpoint with the ones that we have in home, yeah..

32:18 Great, thank you..

32:21 Your next question is from the line of Erik Woodring with Morgan Stanley. Your line is open..

32:28 Thank you. Congrats guys on the nice 1Q and 22 guide here. Maybe if we just circle back to an earlier question, talking about the guidance.

Tony, you mentioned for P&S, 4 points of tailwind is price kind of flat volumes? Should I interpret that is you guys implying both P&S and ADI kind of grow at the same rate in 2022 around 4%? Or should we think of the divergence between the growth rates, perhaps more so matching kind of how you think about those two segments growing through 2024 at least the relative difference between the two? I'm gonna have a follow up..

33:08 I think relatively -- thanks, Erik. Thanks for the nice comments and thanks for the question. Yes, we're not giving specific guidance to the individual segments in terms of revenue growth. So the number I threw out was kind of directional. And so just to be clear.

But in general, yes, the businesses are going to grow, we think, at rates this year that are relatively closer to each other than what we've seen in the past..

33:35 Okay. And then maybe Tony, or Jay, either one for you. You guys talk about underlying demand trends remaining solid. Maybe can you just help us give an example or 2 of KPIs that you follow or conversations that you're having with your customer base that kind of reinforce that.

And then any change in behavior you've seen in 1Q versus 4Q as it relates to potentially inflation concerns or labor headwinds or anything that might have changed in the last few weeks? Thanks..

34:05 So I don't have any specific KPI. I can point you to other than we do, as a result of some of the enhancements we've made to our loyalty and partnership programs with our Pros, we do get better insight into their channel inventory than we used to.

We don't -- I mean, our product line is super broad, right? So it's hard to look at one sort of channel, if you will, and understand and have a view that spans the whole enterprise. But by and large, I think we get a pretty reasonable view of our channel inventory. We mentioned this at the beginning of last year.

We have initiated an account management activity and a sales operations activity that really has helped us get a better arms around that. I'll also say we're talking to our customers, we're listening to them in terms of what they have to say about their expectations of demand and pretty darn consistent with kind of what we laid out..

35:08 I’d also add on, I think you asked Erik about changes over the last 12 months in terms of labor situation out there, probably both in terms of availability as well as cost, knock on wood.

I mean, we don't – we are not facing now, any late – any relative labor shortages and I think we have a pretty good understanding of what the cost will be now after going through 2021. So that's one thing. I don't wait thinking about 3:00 in the morning..

35:38 We are seeing add on, we are seeing wage inflation in Mexico, not having an availability problem..

35:43 That's right..

35:44 It's a pretty efficient market, particularly in the areas that we operate in. But we are seeing wage inflation that is in the teens..

35:52 Yeah..

35:53 And it's all baked in..

35:56 And then maybe if I just make one last one, you mentioned pricing increases in 2021. How are you thinking about that dynamic for 2022? Is there anything kind of that is on the docket that we should expect? Or is it kind of, we'll see how it goes and reacts on that. And that's it for me. Thanks and congrats again..

36:14 Thanks, Erik. I definitely think it's a see how it goes dynamic. We took a lot of price last year. We – yeah, particularly at the end of the year we got – we moved price pretty significantly.

We did it, it is partnering away as we could with our channels and with our customers and the realization against our increases was actually quite high, but I think we want to be cautious, will react to if there's – if the marketplace changes and our costs increase, we'll obviously beyond what we expect, we'll react to that.

But overall, I think we're being cautious in terms of planning additional meaningful price moves that would have – in ’22 that would benefit ’22..

36:58 Yes.

I'd add that I think we've mentioned in prior earnings releases, but it reflective if you go back to first quarter of last year, crystal ball wasn’t very good in terms of what was going on out there and some of the price increases and as well as even in many areas, the tighter supply chain and so, we may have waited to hear too long before we really started laying out the price increase which we did as Tony was just saying, but so we're hypersensitive to that and we'll be on top of that..

37:28 Perfect. Thanks guys..

37:32 Your next question is from the line of Ian Zaffino with Oppenheimer. Your line is open..

37:40 Great. Thank you very much. Not to, I guess, beat a dead horse on the guidance. But can you maybe just talk about sort of what your assumptions are for market growth are you sort of assuming, I guess, in P&S, the market will be flat and just sort of push through pricing and then you just kind of hold your share.

And then maybe -- and I know you'll always give like perfect details on each area of the segment. But can you maybe tell us where you would expect better growth, maybe not as good growth or maybe some highlights or maybe just some low lights in P&S. Thank you..

38:26 Yes. Ian, so thanks for the questions. Yes, I think in general, our expectation -- this kind of ties back to some of the other questions that folks were asking. Broadly, the markets that P&S serves, we think, are going to be in aggregate, flattish for the year, and we think we're going to broadly hold share.

We're not making any assumptions about dramatic share change. We're really just trying to reflect the market, which, by the way, I mean, demand is really good. It's going to be flattish, we think, off of a big year, right? I mean we grew revenue last year a lot, and we see that level of volume being sustained.

So that's kind of the view there 39:09 In terms of where things are going to be stronger and maybe not as strong, I think we're probably looking at security being a little less executing a little less favorably in '22 than maybe some of the other channels, particularly some of the trade channels.

But it's not -- I wouldn't point you to any huge dramatic move there either..

39:31 All right, thank you very much..

39:35 [Operator Instructions] Your next question comes from the line of Brian Ruttenbur with Imperial Capital. Your line is open..

39:50 Thanks very much. Great quarter and guidance. Quick question on and I know it's been talked about a little bit that we want to dig down a little bit further on operating cash or 2022.

A lot of moving pieces here and maybe you can directionally tell us which way you think you did for this team, I believe in operating cash – cash from op, excuse me, in 2021 directionally, do you see that going higher in 2022?.

40:24 Yeah, and Brian, I think at the margin, we do see better cash flow in 2022, a higher number than what we saw in 2021, just reflective of the growth. I think cash conversion is going to be I don't think it's going to be better. I think the conversion is going to be equal to or maybe a little less than last year.

And as is usual, it's going to be skewed in second half of the year. So bear in mind the sort of dynamic of cash flow in this business, we tend to have pretty significant cash outflows in Q1 arising largely from stuff that's accrued in Q4. We pay bonuses, we pay rebates. So Q1 tends to be a softer quarter.

And as it was in '21, Q4 will most likely be the strongest quarter..

41:12 Great, thank you very much..

41:15 There are no further questions at this time. I will now turn the call back over to Jason Willey..

41:22 Thank you again, everyone for participating today and your continued interest. We look forward to speaking with you over the coming days and weeks and hopefully increasingly seeing many of you in person. Please take care. Thanks, everybody..

41:37 Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect..