Core Insights - Core & Main, Inc. (CNM) is a prominent distributor in the water, wastewater, storm drainage, and fire protection sectors in the U.S., serving municipalities, private water companies, and contractors [1] - CNM reported an EPS of $0.87 for Q3 2025, surpassing the Zacks Consensus Estimate of $0.77 and showing improvement from $0.61 in the same quarter last year [2] - The company's revenue was approximately $2.09 billion, slightly below the estimated $2.12 billion, indicating strong operational performance despite missing revenue expectations [2] Financial Metrics - CNM's price-to-sales ratio is 1.27, suggesting investor confidence as they are willing to pay $1.27 for every dollar of sales [3] - The enterprise value to sales ratio stands at 1.60, indicating a solid market valuation for the company [3] - A current ratio of 1.96 indicates that CNM has nearly twice as many current assets as current liabilities, positioning it well to meet short-term obligations [3] Leverage and Valuation - The debt-to-equity ratio of 1.45 shows that CNM has $1.45 in debt for every dollar of equity, highlighting its leverage level [4] - The price-to-earnings (P/E) ratio is 23.26, reflecting the price investors are willing to pay for each dollar of earnings [4] - An earnings yield of 4.30% demonstrates CNM's ability to generate returns for investors [4] - The enterprise value to operating cash flow ratio of 19.66 indicates the company's valuation relative to its operational cash flow, reflecting operational efficiency [4]

Core Insights - Core & Main reported quarterly earnings of $0.87 per share, exceeding the Zacks Consensus Estimate of $0.77 per share, and showing an increase from $0.61 per share a year ago, resulting in an earnings surprise of +12.99% [1] - The company generated revenues of $2.09 billion for the quarter ended July 2025, which was 1.29% below the Zacks Consensus Estimate, but an increase from $1.96 billion year-over-year [2] - Core & Main's stock has increased approximately 30.8% since the beginning of the year, outperforming the S&P 500's gain of 10.4% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.81, with expected revenues of $2.12 billion, and for the current fiscal year, the EPS estimate is $2.46 on revenues of $7.78 billion [7] - The estimate revisions trend for Core & Main was mixed prior to the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Industry Context - The Manufacturing - Tools & Related Products industry, to which Core & Main belongs, is currently ranked in the bottom 8% of over 250 Zacks industries, suggesting potential challenges ahead [8]

Financial Data and Key Metrics Changes - The company reported nearly 7% net sales growth in Q2 2025, reaching $2.1 billion, with approximately 5% organic growth [5][15] - Gross margin improved to 26.8%, up 10 basis points sequentially and 40 basis points year over year [9][15] - Adjusted diluted earnings per share increased approximately 13% to $0.87 compared to $0.77 in the prior year [17][18] - SG&A expenses rose 13% to $302 million, with half of the increase attributed to acquisitions and one-time costs [16][66] Business Line Data and Key Metrics Changes - Municipal demand remained strong, driven by repair and replacement activities and new construction projects [5][7] - Sales of meter products declined year over year due to project delays, but a growing backlog is expected to support future sales growth [8][76] - The residential market, accounting for roughly 20% of sales, saw a slowdown, particularly in Sunbelt markets, leading to a revised lower outlook [6][7] Market Data and Key Metrics Changes - Municipal end market volumes are expected to grow in the low single digits, while non-residential volumes are projected to be roughly flat [20][21] - Residential lot development is anticipated to decline in the low double digits for the full year [20][21] - The company expects pricing to have a neutral impact on full-year sales [22] Company Strategy and Development Direction - The company is focused on organic growth and complementary acquisitions, with recent acquisition of Canada Waterworks enhancing its position in the Canadian market [12][87] - Investments are being made in new locations and technology solutions to improve efficiency and support long-term margin expansion [12][16] - The company aims to align its business with current demand trends while maintaining growth opportunities [11][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in long-term growth prospects, particularly in the municipal market due to aging infrastructure investments [13][30] - The company is taking targeted cost-out actions to improve productivity and operating margins, with expected savings in the second half of the year [10][11] - Management acknowledged macroeconomic headwinds affecting the residential market but remains optimistic about pent-up demand in the future [41][85] Other Important Information - The company generated $34 million of operating cash flow in the quarter and returned $8 million to shareholders through share repurchases [11][19] - Total liquidity stood at $1.1 billion, primarily from availability under the ABL credit facility [19] Q&A Session Summary Question: What are the factors affecting the revenue guidance? - Management indicated that the decline in residential lot development is the main driver for the reduction in sales guidance, but there are bright spots in municipal and treatment plant sales [25][26] Question: What are the growth opportunities in the evolving water market? - Management highlighted increasing demand for water due to projects like data centers and the need for infrastructure improvements, positioning the company well for future growth [27][30] Question: How are operating expenses impacting EBITDA margins? - Management noted that while cost actions are being implemented, stubborn inflation and higher costs are affecting margins, with more significant impacts expected in FY2026 [34][35] Question: What is the outlook for the residential market? - Management reported that the residential market weakened throughout Q2, with expectations of low double-digit declines for the remainder of the year [40][45] Question: How is the competitive environment evolving? - Management stated that the competitive environment remains stable, with no significant changes noted, and emphasized the company's value proposition to customers [91][92]

Financial Data and Key Metrics Changes - The company reported nearly 7% net sales growth in Q2 2025, reaching $2.1 billion, with approximately 5% organic growth [3][5] - Gross margin improved to 26.8%, up 10 basis points sequentially and 40 basis points year-over-year [4][6] - Adjusted diluted earnings per share increased approximately 13% to $0.87 compared to $0.77 in the prior year [6] - SG&A expenses rose 13% to $302 million, with half of the increase attributed to acquisitions and one-time costs [6][42] Business Line Data and Key Metrics Changes - Sales of meter products declined year-over-year due to project delays, but a growing backlog is expected to support strong sales growth in the second half [4][47] - The municipal market remains strong, with healthy demand driven by funding and infrastructure projects [3][9] - Residential lot development slowed, particularly in the Sun Belt markets, leading to a revised outlook for residential demand [3][4] Market Data and Key Metrics Changes - Municipal end market volumes are expected to grow in the low single digits, while non-residential volumes are projected to be roughly flat [6] - Residential lot development is anticipated to decline in the low double digits for the full year [6][18] Company Strategy and Development Direction - The company is focusing on organic growth and complementary acquisitions, with recent acquisition of Canada Waterworks enhancing its position in the Canadian market [4][5] - Investments are being made in new locations and technology solutions to improve efficiency and support long-term margin expansion [4][6] - The company aims to capture growth opportunities in aging U.S. water infrastructure and is confident in its long-term growth and profitability prospects [4][6] Management's Comments on Operating Environment and Future Outlook - Management noted that higher interest rates and affordability concerns are impacting residential demand, which is expected to remain soft [3][4] - The company is implementing targeted cost-out actions to improve productivity and operating margins, with some benefits expected in the second half of the year [4][6] - Management remains optimistic about the long-term demand characteristics across its end markets and the potential for above-market growth [6][18] Other Important Information - The company generated $34 million of operating cash flow in the quarter and returned $8 million to shareholders through share repurchases [6] - Total liquidity was reported at $1.1 billion, primarily from availability under the ABL credit facility [6] Q&A Session Summary Question: What are the factors affecting the revenue guidance? - Management indicated that the decline in residential outlook is the main driver, but there are positive contributions from municipal markets and successful sales initiatives [8][9] Question: What are the growth opportunities in the evolving water market? - Management expressed optimism about the water market, highlighting increased demand from data centers and aging infrastructure projects [10][11] Question: How is the company addressing higher operating expenses? - Management acknowledged stubborn inflation and higher costs but emphasized ongoing cost-out actions and targeted investments for growth [15][16] Question: What is the outlook for residential demand? - Management noted that residential demand weakened throughout Q2 and is expected to remain low double digits for the rest of the year [17][18] Question: How does the company view the competitive environment? - Management stated that the competitive environment remains typical, with no significant changes, and emphasized the stability Core & Main provides to customers [59][60]

Core & Main (NYSE:CNM) Q2 2026 Earnings Call September 09, 2025 08:30 AM ET Speaker4Hello and welcome to the Core & Main Q2 2025 earnings call. My name is Alex. I'll be coordinating today's call. If you'd like to ask a question at the end of the presentation, please press star followed by one on your telephone keypad. I'll now hand it over to Glenn Floyd, Director of Investor Relations. Please go ahead.Speaker0Good morning and thank you for joining us. I'm Glenn Floyd, Director of Investor Relations at Core ...

Financial Performance - Net sales increased by 7% from $1964 million in Q2 2024 to $2093 million in Q2 2025[16] - Gross profit increased by 8% from $518 million in Q2 2024 to $560 million in Q2 2025, with gross margin expanding by 40 basis points to 268% of sales[16] - Net income increased by 12% from $126 million in Q2 2024 to $141 million in Q2 2025[16] - Adjusted EBITDA increased by 4% from $257 million in Q2 2024 to $266 million in Q2 2025, but Adjusted EBITDA margin decreased by 40 basis points to 127% of sales[16] - Adjusted diluted EPS increased by 13% from $077 in Q2 2024 to $087 in Q2 2025[16] Cash Flow and Capital Structure - The company generated $24 million in operating cash flow in Q2 2025[19] - Net debt stood at $2253 million as of August 3, 2025[21] - Free cash flow yield was 46% based on the last twelve months free cash flow divided by market capitalization as of August 3, 2025[22, 41] Fiscal 2025 Outlook - The company lowered its net sales outlook for fiscal year 2025 to $7600 - $7700 million, reflecting current market conditions and higher operating expenses[24] - The company expects fiscal year 2025 sales growth of 4% to 5%, excluding the effects of one less selling week versus fiscal year 2024[24] - The company expects operating cash flow to be between $550 and $610 million for fiscal year 2025[24]

[Cautionary Note Regarding Forward-Looking Statements](index=3&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) Forward-looking statements in this report are subject to risks and uncertainties that could cause actual results to differ materially - The report contains forward-looking statements regarding future operations, financial position, business strategy, and plans, identifiable by terms like "believes," "expects," "may," and "will," which are subject to known and unknown risks and uncertainties that could cause actual results to differ materially[9](index=9&type=chunk)[10](index=10&type=chunk)[11](index=11&type=chunk) - Key risk factors include declines in construction markets, slowdowns in municipal spending, price fluctuations in product costs, inventory management issues, acquisition risks, competitive markets, and the ability to retain key personnel[11](index=11&type=chunk)[13](index=13&type=chunk) Part I - Financial Information [Item 1. Financial Statements (unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20%28unaudited%29) Presents Core & Main, Inc.'s unaudited condensed consolidated financial statements, covering balance sheets, operations, equity, and cash flows, with detailed notes [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20as%20of%20August%203%2C%202025%20and%20February%202%2C%202025%20%28unaudited%29) Condensed Consolidated Balance Sheets (Amounts in millions) | Metric | August 3, 2025 | February 2, 2025 | Change | | :----------------------------------- | :------------- | :--------------- | :----- | | Total current assets | $2,510 | $2,025 | +$485 | | Total assets | $6,306 | $5,870 | +$436 | | Total current liabilities | $1,117 | $866 | +$251 | | Total liabilities | $4,344 | $4,096 | +$248 | | Total stockholders' equity | $1,962 | $1,774 | +$188 | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20for%20the%20three%20and%20six%20month%20periods%20ended%20August%203%2C%202025%20and%20July%2028%2C%202024%20%28unaudited%29) Condensed Consolidated Statements of Operations (Amounts in millions, except per share data) | Metric | Three Months Ended Aug 3, 2025 | Three Months Ended Jul 28, 2024 | Six Months Ended Aug 3, 2025 | Six Months Ended Jul 28, 2024 | | :----------------------------------- | :----------------------------- | :----------------------------- | :--------------------------- | :--------------------------- | | Net sales | $2,093 | $1,964 | $4,004 | $3,705 | | Gross profit | $560 | $518 | $1,070 | $986 | | Operating income | $213 | $204 | $384 | $372 | | Net income | $141 | $126 | $246 | $227 | | Net income attributable to Core & Main, Inc. | $134 | $119 | $234 | $214 | | Basic EPS | $0.71 | $0.62 | $1.23 | $1.11 | | Diluted EPS | $0.70 | $0.61 | $1.22 | $1.11 | [Condensed Consolidated Statements of Comprehensive Income](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20for%20the%20three%20and%20six%20month%20periods%20ended%20August%203%2C%202025%20and%20July%2028%2C%202024%20%28unaudited%29) Condensed Consolidated Statements of Comprehensive Income (Amounts in millions) | Metric | Three Months Ended Aug 3, 2025 | Three Months Ended Jul 28, 2024 | Six Months Ended Aug 3, 2025 | Six Months Ended Jul 28, 2024 | | :----------------------------------- | :----------------------------- | :----------------------------- | :--------------------------- | :--------------------------- | | Net income | $141 | $126 | $246 | $227 | | Total comprehensive income | $133 | $93 | $217 | $212 | | Total comprehensive income attributable to Core & Main, Inc. | $126 | $88 | $206 | $200 | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity%20for%20the%20three%20and%20six%20month%20periods%20ended%20August%203%2C%202025%20and%20July%2028%2C%202024%20%28unaudited%29) Changes in Stockholders' Equity (Amounts in millions) | Metric | Balances at Feb 2, 2025 | Balances at Aug 3, 2025 | | :----------------------------------- | :---------------------- | :---------------------- | | Total Stockholders' Equity | $1,774 | $1,962 | | Net income (attributable to Core & Main, Inc.) | $100 (for 3 months ended May 4, 2025) + $134 (for 3 months ended Aug 3, 2025) | $234 | | Equity-based compensation | $5 (for 3 months ended May 4, 2025) + $5 (for 3 months ended Aug 3, 2025) | $10 | | Repurchase and Retirement of equity interests | $(39) (for 3 months ended May 4, 2025) + $(8) (for 3 months ended Aug 3, 2025) | $(47) | - The company repurchased **959,103 shares** of Class A common stock for **$47 million** during the six months ended August 3, 2025, with **$277 million** remaining authorized under the program[33](index=33&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20six%20month%20periods%20ended%20August%203%2C%202025%20and%20July%2028%2C%202024%20%28unaudited%29) Condensed Consolidated Statements of Cash Flows (Amounts in millions) | Metric | Six Months Ended Aug 3, 2025 | Six Months Ended Jul 28, 2024 | Change | | :----------------------------------- | :--------------------------- | :--------------------------- | :----- | | Net cash provided by operating activities | $111 | $126 | $(15) | | Net cash used in investing activities | $(28) | $(618) | +$590 | | Net cash (used in) provided by financing activities | $(66) | $504 | $(570) | | Increase in cash and cash equivalents | $17 | $12 | +$5 | | Cash and cash equivalents at end of period | $25 | $13 | +$12 | [Notes to the Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements%20%28unaudited%29) - The financial statements are unaudited and include all normal recurring adjustments necessary for a fair statement of the Company's results, but interim results may not be indicative of full-year performance[35](index=35&type=chunk) [1) Basis of Presentation & Description of Business](index=11&type=section&id=1%29%20BASIS%20OF%20PRESENTATION%20%26%20DESCRIPTION%20OF%20BUSINESS) - The Company is a leading specialty distributor dedicated to advancing reliable infrastructure with local service, nationwide, focusing on water, wastewater, storm drainage, and fire protection products and services[31](index=31&type=chunk) - Core & Main is a holding company that indirectly owns Core & Main LP, the operating entity, through its interest in Core & Main Holdings, LP[32](index=32&type=chunk)[34](index=34&type=chunk) - The Company's board authorized a **$500 million** share repurchase program on June 12, 2024. For the six months ended August 3, 2025, **959,103 shares** were repurchased for **$47 million**, with **$277 million** remaining available[33](index=33&type=chunk) - The Company operates as a single operating and reportable segment, with performance measured by net sales and net income at the consolidated level[36](index=36&type=chunk) [2) Recent Accounting Pronouncements](index=12&type=section&id=2%29%20RECENT%20ACCOUNTING%20PRONOUNCEMENTS) - ASU 2023-09 (Income Tax Disclosures) is effective for annual periods beginning after December 15, 2024, and is expected to result in additional disclosures but no material financial impact[40](index=40&type=chunk) - ASU 2024-03 (Disaggregation of Income Statement Expenses) is effective for annual periods beginning after December 15, 2026, and is being evaluated for its impact on consolidated financial statements[41](index=41&type=chunk) [3) Revenue](index=13&type=section&id=3%29%20REVENUE) Net Sales by Product Category (Amounts in millions) | Product Category | Three Months Ended Aug 3, 2025 | Three Months Ended Jul 28, 2024 | Six Months Ended Aug 3, 2025 | Six Months Ended Jul 28, 2024 | | :----------------------- | :----------------------------- | :----------------------------- | :--------------------------- | :--------------------------- | | Pipes, valves & fittings | $1,430 | $1,329 | $2,727 | $2,498 | | Storm drainage products | $335 | $306 | $630 | $559 | | Fire protection products | $155 | $143 | $307 | $310 | | Meter products | $173 | $186 | $340 | $338 | | Total net sales | $2,093 | $1,964 | $4,004 | $3,705 | [4) Acquisitions](index=13&type=section&id=4%29%20ACQUISITIONS) - The Company completed no acquisitions in the six months ended August 3, 2025. In the prior year (six months ended July 28, 2024), it made several acquisitions with an aggregate value of **$623 million**, including Dana Kepner, ACF West, EGW Utilities, GSC, and Eastern Supply[43](index=43&type=chunk)[44](index=44&type=chunk) - The Fiscal 2024 Acquisitions resulted in **$285 million** in goodwill and **$233 million** in intangible assets (primarily customer relationships)[46](index=46&type=chunk) - Pro forma net sales for the six months ended July 28, 2024, including the Dana Kepner acquisition as if it occurred on January 30, 2023, would have been **$3,734 million**, with net income of **$228 million**[53](index=53&type=chunk) [5) Goodwill and Intangible Assets](index=17&type=section&id=5%29%20GOODWILL%20AND%20INTANGIBLE%20ASSETS) Intangible Assets, Net (Amounts in millions) | Intangible Asset | August 3, 2025 | February 2, 2025 | | :----------------------- | :------------- | :--------------- | | Customer relationships | $834 | $907 | | Internal use software | $29 | $23 | | Other intangible assets | $4 | $5 | | Total | $867 | $935 | Amortization Expense (Amounts in millions) | Period | August 3, 2025 | July 28, 2024 | | :----------------------- | :------------- | :------------ | | Three Months Ended | $37 | $38 | | Six Months Ended | $74 | $73 | - Estimated aggregate amortization expense for intangible assets is **$74 million** for the remainder of fiscal 2025, **$138 million** for fiscal 2026, **$129 million** for fiscal 2027, **$120 million** for fiscal 2028, and **$106 million** for fiscal 2029[56](index=56&type=chunk) [6) Debt](index=18&type=section&id=6%29%20DEBT) Debt Obligations (Amounts in millions) | Debt Type | August 3, 2025 (Principal) | February 2, 2025 (Principal) | Weighted Average Interest Rate (Aug 3, 2025) | Maturity Date | | :----------------------------------- | :------------------------- | :--------------------------- | :----------------------------------- | :------------ | | Current maturities of long-term debt | $24 | $24 | N/A | N/A | | Senior ABL Credit Facility | $100 | $93 | 5.58% | Feb 9, 2029 | | 2028 Senior Term Loan | $1,226 | $1,233 | 6.27% | Jul 27, 2028 | | 2031 Senior Term Loan | $928 | $933 | 6.27% | Feb 9, 2031 | | Total Debt (Principal) | $2,278 | $2,283 | N/A | N/A | - The Company uses interest rate swaps to mitigate exposure to variable interest rates, effectively converting **$700 million** of variable rate debt to a fixed rate of **2.693%** until July 27, 2026, and another **$750 million** (increasing to **$1,500 million**) to a fixed rate of **5.913%** until July 27, 2028[63](index=63&type=chunk)[64](index=64&type=chunk) - The Company was in compliance with all debt covenants as of August 3, 2025[61](index=61&type=chunk) [7) Income Taxes](index=20&type=section&id=7%29%20INCOME%20TAXES) Effective Tax Rate | Period | August 3, 2025 | July 28, 2024 | | :----------------------- | :------------- | :------------ | | Three Months Ended | 22.5% | 25.0% | | Six Months Ended | 23.8% | 24.8% | - The decrease in the effective tax rate for both periods was primarily due to certain tax windfall benefits from equity award exercises[68](index=68&type=chunk) - The Company has Tax Receivable Agreements requiring payments of **85%** of realized tax benefits, with expected payments of **$41 million** within the next 12 months[69](index=69&type=chunk)[70](index=70&type=chunk) [8) Supplemental Financial Statement Information](index=20&type=section&id=8%29%20SUPPLEMENTAL%20FINANCIAL%20STATEMENT%20INFORMATION) Receivables (Amounts in millions) | Receivable Type | August 3, 2025 | February 2, 2025 | | :----------------------- | :------------- | :--------------- | | Trade receivables, net | $1,282 | $986 | | Supplier rebate receivables | $75 | $80 | | Total Receivables, net | $1,357 | $1,066 | Accrued Compensation and Benefits (Amounts in millions) | Accrued Item | August 3, 2025 | February 2, 2025 | | :----------------------- | :------------- | :--------------- | | Accrued bonuses and commissions | $63 | $91 | | Other compensation and benefits | $31 | $32 | | Total Accrued Compensation and Benefits | $94 | $123 | Depreciation Expense (Amounts in millions) | Period | August 3, 2025 | July 28, 2024 | | :----------------------- | :------------- | :------------ | | Three Months Ended | $9 | $9 | | Six Months Ended | $18 | $17 | [9) Non-Controlling Interests](index=21&type=section&id=9%29%20NON-CONTROLLING%20INTERESTS) - Non-controlling interests represented **3.5%** of Holdings as of August 3, 2025, down from **3.9%** as of February 2, 2025[76](index=76&type=chunk) [10) Basic and Diluted Earnings Per Share](index=22&type=section&id=10%29%20BASIC%20AND%20DILUTED%20EARNINGS%20PER%20SHARE) - Basic EPS is calculated by dividing net income attributable to Core & Main by the weighted average Class A common stock outstanding. Diluted EPS includes the dilutive impact of potential Class A shares from Partnership Interests exchange and outstanding awards[79](index=79&type=chunk)[80](index=80&type=chunk) Basic and Diluted EPS (Amounts in millions, except per share data) | Metric | Three Months Ended Aug 3, 2025 | Three Months Ended Jul 28, 2024 | Six Months Ended Aug 3, 2025 | Six Months Ended Jul 28, 2024 | | :----------------------------------- | :----------------------------- | :----------------------------- | :--------------------------- | :--------------------------- | | Net income available to Class A common stock | $134 | $119 | $234 | $214 | | Basic EPS | $0.71 | $0.62 | $1.23 | $1.11 | | Diluted EPS | $0.70 | $0.61 | $1.22 | $1.11 | | Weighted average shares outstanding - basic | 189,904,002 | 192,797,961 | 189,855,388 | 192,495,255 | | Weighted average shares outstanding - diluted | 198,302,610 | 202,667,354 | 198,503,146 | 202,640,993 | [11) Related Parties](index=22&type=section&id=11%29%20RELATED%20PARTIES) - The Company has Tax Receivable Agreements and an Exchange Agreement with related parties, with no significant changes reported[82](index=82&type=chunk) [12) Subsequent Events](index=22&type=section&id=12%29%20SUBSEQUENT%20EVENTS) - Management has evaluated events or transactions that may have occurred and identified no subsequent events meriting recognition or disclosure[83](index=83&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses financial condition, operations, key factors, and results for the three and six months ended August 3, 2025, including liquidity and non-GAAP measures [Overview](index=23&type=section&id=Overview) - Core & Main is a leading specialty distributor of water, wastewater, storm drainage, and fire protection products, serving municipal, non-residential, and residential end markets through over **370 branches** across **49 U.S. states**[85](index=85&type=chunk) - The Company's fiscal year is a 52- or 53-week period ending on the Sunday nearest to January 31st, with the current fiscal year (fiscal 2025) comprising **52 weeks**[87](index=87&type=chunk) [Key Factors Affecting Our Business](index=23&type=section&id=Key%20Factors%20Affecting%20Our%20Business) - Demand for products is tied to municipal (**42%**), non-residential (**38%**), and residential (**20%**) construction markets, which are subject to cyclical pressures[88](index=88&type=chunk) - The Infrastructure Investment and Jobs Act (IIJA) includes **$55 billion** for water infrastructure, which is expected to benefit the business, although a temporary funding pause was issued in January 2025[89](index=89&type=chunk) - Operating results are impacted by seasonality, with net sales typically lower in the first and fourth fiscal quarters due to colder weather and shorter daylight hours[90](index=90&type=chunk) - Financial performance is affected by price fluctuations in product costs and the ability to pass these changes to customers. Over three-quarters of products are manufactured domestically, limiting tariff exposure[91](index=91&type=chunk)[92](index=92&type=chunk)[93](index=93&type=chunk) - The Company is exposed to interest rate risk on variable-rate debt (**$2,278 million** outstanding as of August 3, 2025) but mitigates this through interest rate swaps[95](index=95&type=chunk) - The Company opportunistically pursues strategic acquisitions, completing several in fiscal 2024 with an aggregate value of **$769 million**, focusing on expanding product lines and geographic reach[96](index=96&type=chunk)[97](index=97&type=chunk) [Key Business Metrics](index=25&type=section&id=Key%20Business%20Metrics) - Net sales are generated from selling water, wastewater, storm drainage, and fire protection products and services to over **60,000 customers**, categorized into pipes, valves & fittings, storm drainage, fire protection, and meter products[98](index=98&type=chunk)[99](index=99&type=chunk)[100](index=100&type=chunk) - Gross profit is the difference between net sale price and product cost (including material, labor, overhead, and depreciation), influenced by the timing of supplier cost changes and customer pricing[101](index=101&type=chunk) - Operating expenses primarily consist of selling, general, and administrative costs, including personnel, rent, insurance, utilities, professional fees, and freight[102](index=102&type=chunk) - Adjusted EBITDA and Adjusted Diluted Earnings Per Share are non-GAAP measures used to assess operating results and business effectiveness, excluding items like equity-based compensation and acquisition expenses[105](index=105&type=chunk)[107](index=107&type=chunk)[152](index=152&type=chunk)[154](index=154&type=chunk) [Results of Operations](index=27&type=section&id=Results%20of%20Operations) [Three Months Ended August 3, 2025 Compared with Three Months Ended July 28, 2024](index=27&type=section&id=Three%20Months%20Ended%20August%203%2C%202025%20Compared%20with%20Three%20Months%20Ended%20July%2028%2C%202024) Financial Performance (Three Months Ended) | Metric | Aug 3, 2025 | Jul 28, 2024 | Change ($) | Change (%) | | :----------------------------------- | :---------- | :----------- | :--------- | :--------- | | Net sales | $2,093 | $1,964 | +$129 | +6.6% | | Gross profit | $560 | $518 | +$42 | +8.1% | | Gross profit as % of net sales | 26.8% | 26.4% | +0.4 pp | N/A | | SG&A expenses | $302 | $268 | +$34 | +12.7% | | Operating income | $213 | $204 | +$9 | +4.4% | | Interest expense | $31 | $36 | $(5) | -13.9% | | Provision for income taxes | $41 | $42 | $(1) | -2.4% | | Effective tax rate | 22.5% | 25.0% | -2.5 pp | N/A | | Net income | $141 | $126 | +$15 | +11.9% | | Net income attributable to Core & Main, Inc. | $134 | $119 | +$15 | +12.6% | | Basic EPS | $0.71 | $0.62 | +$0.09 | +14.5% | | Diluted EPS | $0.70 | $0.61 | +$0.09 | +14.8% | | Adjusted EBITDA | $266 | $257 | +$9 | +3.5% | | Adjusted Diluted EPS | $0.87 | $0.77 | +$0.10 | +13.0% | - Net sales growth was driven by higher volumes and acquisitions, though meter products declined due to project delays[109](index=109&type=chunk) - SG&A expenses increased due to higher personnel expenses, variable compensation, employee benefits, and distribution-related costs[112](index=112&type=chunk) - EPS increases were also supported by lower Class A share counts due to share repurchases[119](index=119&type=chunk)[121](index=121&type=chunk) [Six Months Ended August 3, 2025 Compared with Six Months Ended July 28, 2024](index=29&type=section&id=Six%20Months%20Ended%20August%203%2C%202025%20Compared%20with%20Six%20Months%20Ended%20July%2028%2C%202024) Financial Performance (Six Months Ended) | Metric | Aug 3, 2025 | Jul 28, 2024 | Change ($) | Change (%) | | :----------------------------------- | :---------- | :----------- | :--------- | :--------- | | Net sales | $4,004 | $3,705 | +$299 | +8.1% | | Gross profit | $1,070 | $986 | +$84 | +8.5% | | Gross profit as % of net sales | 26.7% | 26.6% | +0.1 pp | N/A | | SG&A expenses | $595 | $525 | +$70 | +13.3% | | Operating income | $384 | $372 | +$12 | +3.2% | | Interest expense | $61 | $70 | $(9) | -12.9% | | Provision for income taxes | $77 | $75 | +$2 | +2.7% | | Effective tax rate | 23.8% | 24.8% | -1.0 pp | N/A | | Net income | $246 | $227 | +$19 | +8.4% | | Net income attributable to Core & Main, Inc. | $234 | $214 | +$20 | +9.3% | | Basic EPS | $1.23 | $1.11 | +$0.12 | +10.8% | | Diluted EPS | $1.22 | $1.11 | +$0.11 | +9.9% | | Adjusted EBITDA | $490 | $474 | +$16 | +3.4% | | Adjusted Diluted EPS | $1.55 | $1.42 | +$0.13 | +9.2% | - Net sales increased due to higher volumes and acquisitions, with fire protection products seeing a decline in selling prices partially offset by acquisitions[123](index=123&type=chunk) - Gross profit percentage improved slightly due to margin initiatives and accretive acquisitions, despite higher average inventory costs[125](index=125&type=chunk) - Net income attributable to Core & Main, Inc. increased due to higher net income and a decreased allocation to non-controlling interest holders[132](index=132&type=chunk) [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) - The Company's liquidity is primarily financed through operating cash flows, credit facilities, equity/debt issuances, and working capital management. Key requirements include working capital, capital expenditures, acquisitions, debt servicing, Tax Receivable Agreement payments, and share repurchases[136](index=136&type=chunk) - As of August 3, 2025, cash and cash equivalents totaled **$25 million**, with **$100 million** outstanding on the Senior ABL Credit Facility, which has a borrowing capacity of up to **$1,250 million**[137](index=137&type=chunk)[138](index=138&type=chunk) - Net cash provided by operating activities decreased by **$15 million** to **$111 million** for the six months ended August 3, 2025, primarily due to higher working capital investment[146](index=146&type=chunk) - Net cash used in investing activities decreased by **$590 million** to **$28 million**, mainly due to **$596 million** in cash outflows for acquisitions during fiscal 2024[147](index=147&type=chunk) - Net cash used in financing activities was **$66 million**, a **$570 million** change from the prior year, driven by decreased net borrowings and debt issuance costs, increased share repurchases, and higher Tax Receivable Agreement payments[148](index=148&type=chunk) - The Company expects current liquidity sources to be sufficient for the next 12 months, but future acquisitions may require additional equity or debt[142](index=142&type=chunk) - The Company had **$1,024 million** in purchase obligations, primarily for inventory, as of August 3, 2025, generally cancellable but with no intent to cancel[150](index=150&type=chunk) [Non-GAAP Financial Measures](index=33&type=section&id=Non-GAAP%20Financial%20Measures) - EBITDA, Adjusted EBITDA, and Adjusted Diluted Earnings Per Share are non-GAAP measures used to assess operating results and effectiveness, providing supplemental performance information not considered GAAP measures[151](index=151&type=chunk)[155](index=155&type=chunk) - Adjusted EBITDA is defined as net income adjusted for non-controlling interests, D&A, income taxes, interest expense, loss on debt modification, equity-based compensation, and acquisition-related expenses[152](index=152&type=chunk) - Adjusted Diluted EPS is diluted EPS adjusted for amortization of intangible assets, loss on debt modification, equity-based compensation, acquisition expenses, and their tax impacts[154](index=154&type=chunk) Reconciliation of Net Income to Adjusted EBITDA (Amounts in millions) | Metric | Three Months Ended Aug 3, 2025 | Three Months Ended Jul 28, 2024 | Six Months Ended Aug 3, 2025 | Six Months Ended Jul 28, 2024 | | :----------------------------------- | :----------------------------- | :----------------------------- | :--------------------------- | :--------------------------- | | Net income attributable to Core & Main, Inc. | $134 | $119 | $234 | $214 | | Net income | $141 | $126 | $246 | $227 | | Depreciation and amortization | $46 | $47 | $93 | $91 | | Provision for income taxes | $41 | $42 | $77 | $75 | | Interest expense | $31 | $36 | $61 | $70 | | EBITDA | $259 | $251 | $477 | $463 | | Equity-based compensation | $5 | $4 | $10 | $7 | | Acquisition expenses | $2 | $2 | $3 | $4 | | Adjusted EBITDA | $266 | $257 | $490 | $474 | Reconciliation of Diluted EPS to Adjusted Diluted EPS | Metric | Three Months Ended Aug 3, 2025 | Three Months Ended Jul 28, 2024 | Six Months Ended Aug 3, 2025 | Six Months Ended Jul 28, 2024 | | :----------------------------------- | :----------------------------- | :----------------------------- | :--------------------------- | :--------------------------- | | Diluted earnings per share | $0.70 | $0.61 | $1.22 | $1.11 | | Amortization of intangible assets | $0.19 | $0.19 | $0.37 | $0.36 | | Equity-based compensation | $0.03 | $0.02 | $0.05 | $0.03 | | Acquisition expenses | $0.01 | $0.01 | $0.02 | $0.02 | | Income tax impact of adjustments | $(0.06) | $(0.06) | $(0.11) | $(0.10) | | Adjusted Diluted Earnings Per Share | $0.87 | $0.77 | $1.55 | $1.42 | [Recently Issued and Adopted Accounting Pronouncements and Accounting Pronouncements Issued But Not Yet Adopted](index=35&type=section&id=Recently%20Issued%20and%20Adopted%20Accounting%20Pronouncements%20and%20Accounting%20Pronouncements%20Issued%20But%20Not%20Yet%20Adopted) - Refer to Note 2 of the financial statements for details on recent accounting pronouncements[159](index=159&type=chunk) [Critical Accounting Policies and Estimates](index=35&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - No significant changes to critical accounting policies and estimates have materially impacted the unaudited condensed consolidated financial statements during the three and six months ended August 3, 2025[160](index=160&type=chunk) [Off-Balance Sheet Arrangements](index=36&type=section&id=Off-Balance%20Sheet%20Arrangements) - The Company had no off-balance sheet arrangements as of August 3, 2025[161](index=161&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=36&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) Details the Company's exposure to market risks, including interest rate, credit, price, and foreign currency, and outlines management strategies - The Company is exposed to market risks from fluctuations in interest rates, foreign currency exchange rates, and product prices[162](index=162&type=chunk) [Interest Rate Risk](index=36&type=section&id=Interest%20Rate%20Risk) - The Company is exposed to interest rate fluctuations on its **$2,278 million** variable-rate debt (Senior Term Loan and Senior ABL Credit Facility). A one percentage point change in interest rates would result in an approximately **$22 million** change in annual interest expense on the Senior Term Loan Credit Facility[163](index=163&type=chunk) [Credit Risk](index=36&type=section&id=Credit%20Risk) - Credit risk on accounts receivable is mitigated by a large, diverse customer base, with the **50 largest customers** accounting for only **12%** of net sales in fiscal 2024[164](index=164&type=chunk) [Price Risk](index=36&type=section&id=Price%20Risk) - The Company faces price fluctuations in product procurement costs, which can impact gross profit margins. It aims to mitigate this through strategic inventory investments, inventory management, and gross margin initiatives[165](index=165&type=chunk) [Foreign Currency Risk](index=36&type=section&id=Foreign%20Currency%20Risk) - Foreign currency operations are not material, and a hypothetical **10%** change in the U.S. dollar's value would not materially impact net earnings[166](index=166&type=chunk) [Item 4. Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) Discusses the effectiveness of the Company's disclosure controls and internal control over financial reporting, including management's evaluation and quarterly changes [Evaluation of Disclosure Controls and Procedures](index=37&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective at a reasonable assurance level as of August 3, 2025[167](index=167&type=chunk) [Changes in Internal Control over Financial Reporting](index=37&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) - No changes in internal control over financial reporting materially affected, or are reasonably likely to materially affect, internal control over financial reporting during the fiscal quarter[168](index=168&type=chunk) [Limitations on Effectiveness of Controls and Procedures](index=37&type=section&id=Limitations%20on%20Effectiveness%20of%20Controls%20and%20Procedures) - Management acknowledges that control systems provide only reasonable, not absolute, assurance and may not prevent or detect all errors or fraud due to inherent limitations like human judgment, resource constraints, and potential for circumvention[169](index=169&type=chunk) Part II - Other Information [Item 1. Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) The Company is not party to material legal proceedings but faces incidental litigation, including product liability and asbestos-related matters - The Company is not currently involved in material legal proceedings but faces inherent risks of product liability, construction defect, and warranty claims, including ongoing asbestos-related litigation[171](index=171&type=chunk)[172](index=172&type=chunk) [Item 1A. Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors previously disclosed in the Fiscal 2024 Annual Report on Form 10-K - No material changes have occurred in the risk factors since the Fiscal 2024 Annual Report on Form 10-K[173](index=173&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=38&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Reports on the Company's equity security transactions, detailing issuer purchases of Class A common stock for the three months ended August 3, 2025 [Sales of Unregistered Securities](index=38&type=section&id=Sales%20of%20Unregistered%20Securities) - No unregistered sales of equity securities were reported[174](index=174&type=chunk) [Use of Proceeds from Public Offering of Common Stock](index=38&type=section&id=Use%20of%20Proceeds%20from%20Public%20Offering%20of%20Common%20Stock) - No use of proceeds from public offerings of common stock was reported[175](index=175&type=chunk) [Issuer Purchases of Equity Securities](index=38&type=section&id=Issuer%20Purchases%20of%20Equity%20Securities) Issuer Purchases of Class A Common Stock (Three Months Ended August 3, 2025) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Maximum Value Remaining Under Program (millions) | | :----------------------- | :----------------------------- | :--------------------------- | :----------------------------------------------- | | May 5 - May 31 | 3,350 | $51.50 | $285 | | June 1 - June 30 | 13,126 | $56.95 | $285 | | July 1 - August 3 | 126,704 | $61.61 | $277 | | Total | 143,180 | $60.95 | $277 | - The repurchases include **121,835 shares** for **$61.55 per share** through open market transactions under the Repurchase Program during the three months ended August 3, 2025[177](index=177&type=chunk) [Item 3. Defaults Upon Senior Securities](index=38&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The Company reported no defaults upon senior securities - No defaults upon senior securities were reported[178](index=178&type=chunk) [Item 4. Mine Safety Disclosures](index=38&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Mine safety disclosures are not applicable to the Company - Mine safety disclosures are not applicable to the Company[179](index=179&type=chunk) [Item 5. Other Information](index=39&type=section&id=Item%205.%20Other%20Information) Discloses new Rule 10b5-1(c) trading arrangements adopted by directors and officers during the quarter ended August 3, 2025 [Director and Officer Trading Arrangements](index=39&type=section&id=Director%20and%20Officer%20Trading%20Arrangements) - Several directors and officers, including Stephen O. LeClair (Executive Chair), Mark G. Whittenburg (General Counsel), Bradford A. Cowles (President), and Dennis G. Gipson (Director), adopted new Rule 10b5-1(c) trading arrangements for Class A common stock sales between October 2025 and April 2026[180](index=180&type=chunk)[181](index=181&type=chunk)[182](index=182&type=chunk)[183](index=183&type=chunk) [Item 6. Exhibits](index=39&type=section&id=Item%206.%20Exhibits) Lists exhibits filed with the Form 10-Q, including executive agreements, certifications, and XBRL documents - Exhibits include an Executive Transition Agreement, certifications by the Principal Executive Officer and Principal Financial Officer (pursuant to Sarbanes-Oxley Act Sections 302 and 906), and Inline XBRL documents[185](index=185&type=chunk) [Signatures](index=41&type=section&id=Signatures) - The report was signed on **September 9, 2025**, by Mark R. Witkowski, Chief Executive Officer and Director, and Robyn L. Bradbury, Chief Financial Officer[188](index=188&type=chunk)[189](index=189&type=chunk)

News Release FOR IMMEDIATE RELEASE Core & Main Announces Fiscal 2025 Second Quarter Results ST. LOUIS, Sept. 9, 2025—Core & Main, Inc. (NYSE: CNM) ("Core & Main"), a leading specialty distributor dedicated to advancing reliable infrastructure with local service, nationwide, today announced financial results for the second quarter ended August 3, 2025. Fiscal 2025 Second Quarter Results (Compared with Fiscal 2024 Second Quarter) "I am proud of our associates' dedication to supporting customers in delivering ...

Analysts estimate an EPS of $0.77 and projected revenue of $2.12 billion for the upcoming quarterly earnings.Recent acquisition of Canada Waterworks is expected to positively impact future performance, reflecting in a 2% increase in share price.Financial metrics reveal a P/E ratio of 30.56, a price-to-sales ratio of 1.67, and a debt-to-equity ratio of 1.45.Core & Main, Inc. (NYSE:CNM) is a leading distributor of water, wastewater, storm drainage, and fire protection products in the United States. The compan ...

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