Financial Data and Key Metrics Changes - Net sales increased by 1% to $2.1 billion, with organic volumes and prices remaining roughly flat year-over-year, while acquisitions contributed about one point of growth [19][21] - Gross margin improved by 60 basis points year-over-year to 27.2%, driven by private label initiatives and disciplined purchasing and pricing execution [21][15] - Adjusted diluted EPS increased approximately 3% to $0.89 compared to $0.86 last year, supported by higher adjusted net income and a lower share count from share repurchases [24] Business Line Data and Key Metrics Changes - Municipal projects represent over 40% of sales, providing steady demand supported by reliable funding sources, while non-residential markets also show healthy growth in infrastructure projects [5][10] - Residential activity, which accounts for less than 20% of sales, remains challenged in the near term, particularly in Sunbelt markets, but the long-term outlook is viewed as attractive [6][12] - The company achieved double-digit growth in product initiatives like fusible HDPE and treatment plant solutions, while meter products returned to high single-digit growth [12][19] Market Data and Key Metrics Changes - The overall end markets were down low single digits, primarily due to declines in residential lot development, with municipal demand remaining strong [19][20] - Significant funding for municipal projects is being driven by state and local sources, with recent legislative actions in states like Texas and New York reinforcing a robust project pipeline [9][10] - Data centers, while currently a low single-digit portion of total sales, are becoming a more meaningful growth driver due to increased water infrastructure needs [10][11] Company Strategy and Development Direction - The company is focused on expanding into high-growth geographies, broadening product offerings, and pursuing strategic M&A opportunities, including a recent expansion into the Canadian market [7][14] - A disciplined approach to pricing and gross margin expansion is emphasized, alongside investments in technology to enhance operational efficiency and customer service [15][16] - The company aims to convert momentum into stronger growth and improved SG&A leverage while maintaining a robust pipeline of acquisition opportunities [29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term fundamentals of the end markets, particularly in municipal and non-residential sectors, despite short-term challenges in residential markets [17][46] - The company anticipates flat to slightly down end market volumes for the year, with pricing expected to have a neutral impact on sales growth [27][28] - Management highlighted the importance of operational excellence and local relationships in capturing growth opportunities, particularly in complex projects like data centers [33][80] Other Important Information - The company has implemented $30 million of annualized cost savings, with a focus on improving operating leverage and maximizing efficiency [15][23] - A $500 million increase to the share repurchase authorization was announced, reflecting confidence in growth outlook and free cash flow generation [16][26] - The company generated free cash flow equal to 5.6% of its market capitalization, significantly above the average for S&P 500 companies [25] Q&A Session Summary Question: Can you talk about the large, complex projects? - Management highlighted the importance of local relationships and distribution capabilities in supporting complex projects, particularly in data centers, which are driving growth [31][33] Question: What caused the slight raise in municipal outlook? - Management cited significant funding at federal and state levels, with local water funds supporting projects, leading to increased confidence in the municipal end market [37][40] Question: Any early thoughts on 2026? - Management expects steady growth in the municipal end market and mixed results in non-residential, with potential for pent-up demand in residential to release [43][46] Question: Can you elaborate on gross margin strength? - Management indicated that gross margin performance was driven by private label growth and effective purchasing strategies, with expectations for continued annual expansion [49][50] Question: What is the current state of the M&A pipeline? - Management remains optimistic about the M&A pipeline, with active deals in progress and a commitment to deploying capital for both organic growth and acquisitions [97][98]