Core & Main, Inc. Q1 FY2025 earnings call

• Mark highlighted strong first quarter performance with net sales of $1.9 billion and adjusted EBITDA of $224 million, both all-time highs. • End markets: Municipal construction activity steady with Infrastructure Investment and Jobs Act funding creating opportunities; residential lot development resilient initially but showing softening; nonresidential end market had stability with diversified mix, strong sales into data center, positive trends for certain institutional buildings but softer for some commercial sectors. • Product initiatives: Meters, fusible HDPE, treatment plant, storm drainage, and geosynthetics have allowed faster growth than the market historically, averaging 13% annual growth and delivering nearly $2.5 billion in combined annual net sales. • Greenfields: Since 2017, 20 greenfields opened, each generating positive operating income within 2 years, now delivering nearly $300 million in annual net sales. • Training: Award-winning training program commercializes go-to-market strategy, deepens industry expertise, and equips field sales reps. • Acquisitions: Since 2017, over 40 acquisitions completed, adding ~140 branches and $1.8 billion in annual net sales.

In the first quarter, Core & Main achieved net sales of $1.9 billion, an all-time high for the first quarter. Adjusted EBITDA was $224 million. Product segments showed strong performance: meters had 10% growth, fusible high-density polyethylene offerings saw double-digit growth, and storm drainage had 17% growth compared to the company total of about 10%. The absolute net sales for the quarter were $1.9 billion, with adjusted EBITDA at $224 million. The storm drainage segment's 17% growth contributed significantly to the overall performance, driven by factors like infrastructure bill funding, road and bridge work, and product type shifts.

• Reaffirmed full-year guidance for net sales of $7.6 billion to $7.8 billion and adjusted EBITDA of $950 million to $1 billion, with adjusted EBITDA margins in the range of 12.5% to 12.8%. • Expect adjusted EBITDA margins in 12.5%-12.8% range, supported by gross margin expansion from private label, sourcing optimization, and pricing initiatives. • SG&A growth has been impacted by acquisitions, but organic productivity gains and cost-out activities expected to drive improvements. • Pricing expected to be neutral or better for the full year, with sequential improvement from prior quarters. • Market expected to be roughly flat for the full year, stronger in the first half, and less clear in the second half due to uncertainty from tariffs, inflation, and interest rates.

• Tariffs, inflation, and interest rates could impact customer sentiment and demand in the back half of the year. • Uncertainty surrounding the impact of tariffs on the broader economy and private construction specifically remains. • Residential development faces short-term uncertainty due to general economic conditions and affordability pressures, though secular fundamentals of the U.S. housing market are strong.

Q: Matthew Bouley asked about SG&A productivity, specifically Q2 and second half implications.

A: Robyn responded that there was productivity during the quarter, expecting more organic improvement in SG&A rate from year-over-year basis in Q2, with M&A synergies on track but taking 12-18 months.

Q: David Manthey asked about pricing and market comparables.

A: Robyn said pricing improved sequentially, steel improved, PVC stable, expecting pricing to be flat to slightly up for the year. Also noted 1 less week in Q4 this year impacting comps.

Q: Nigel Coe asked about SG&A equity comp and EBITDA margin expansion.

A: Robyn said equity comp not from executive transition but normalized post-IPO, Mark added EBITDA expansion expected to be gross margin driven with SG&A optimization.

Q: Collin Verron asked about residential slowdown and meter growth.

A: Mark said residential lot development showing softening, but secular fundamentals strong; meter growth at 10% with strong volume gains and expected price increases.

Q: Brian Biros asked about storm drainage outperformance.

A: Robyn said M&A and road/bridge work funded by infrastructure bill, shift in product type driving storm drainage growth.

Q: Mike Dahl asked about pricing, gross margin, and greenfields.

A: Mark said pricing neutral with potential positives, greenfield strategy with focus on opening 5-10 new greenfields in 2025.

Q: Anthony Pettinari asked about muni customer spending and M&A competition.

A: Robyn said muni funding healthy; Mark said M&A market lumpier but Core & Main viewed as acquirer of choice with healthy pipeline.

Q: David Ridley-Lane asked about employee retention and cost-out initiatives.

A: Mark said employee retention extremely high, Robyn said cost-out initiatives focused on aligning resources to growth areas with no substantial quantification yet.