Core & Main(US:CNM)2025-06-10 13:30Financial Data and Key Metrics Changes - The company reported record net sales of $1.9 billion for Q1 2025, representing a 10% increase year-over-year [20] - Adjusted EBITDA for the quarter was $224 million, a 3% increase from the previous year [23] - Gross margins improved sequentially to 26.7% from 26.6% in the prior quarter, although down from 26.9% year-over-year [21][22] - Diluted earnings per share increased approximately 6% to $0.52 due to higher net income and a lower share count following share repurchases [23] Business Line Data and Key Metrics Changes - The company achieved mid-single-digit organic sales growth, with a 10% increase in meters and double-digit growth in treatment plant and fusible high-density polyethylene offerings [9][20] - Storm drainage products saw a 17% growth, driven by road and bridge projects and increased infrastructure funding [72][74] Market Data and Key Metrics Changes - The company noted steady growth in municipal construction activity, supported by funding from the Infrastructure Investment and Jobs Act [6] - Residential lot development showed resilience, although there are signs of softening due to economic conditions and affordability pressures [7][64] - Non-residential markets remained stable, with strong sales in data center construction and institutional buildings, while commercial buildings and manufacturing showed softer activity [8] Company Strategy and Development Direction - The company is focused on expanding its geographic footprint through both greenfield openings and acquisitions, with plans to open 5 to 10 new greenfields in 2025 [90] - The strategic plan emphasizes local service and performance-based culture to drive organic growth [13] - The company aims to achieve 2 to 4 points of above-market volume growth by expanding presence in underpenetrated geographies and driving product line expansion [27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term fundamentals of the U.S. housing market, despite short-term uncertainties [7] - The company reaffirmed its full-year guidance for net sales between $7.6 billion and $7.8 billion and adjusted EBITDA of $950 million to $1 billion [25] - Management highlighted the potential impact of tariffs, inflation, and interest rates on customer sentiment and demand in the latter half of the year [26] Other Important Information - The company deployed approximately $58 million in capital during the first quarter, focusing on organic investments, share repurchases, and debt service [11] - The acquisition pipeline remains healthy, with ongoing evaluations of various opportunities [12] Q&A Session Summary Question: Thoughts on SG&A productivity for the year - Management indicated expectations for improved SG&A rates in the second quarter, with ongoing M&A synergies expected to materialize over time [34][35] Question: Top-line guidance and market conservatism - Management expects the market to be roughly flat for the full year, with stronger performance in the first half and potential challenges in the second half due to economic uncertainties [40] Question: Pricing situation with commodities versus finished goods - Management noted that pricing has improved sequentially, with expectations for flat pricing for the year, despite some inflationary pressures [46][48] Question: Residential construction market outlook - Management acknowledged a slowdown in residential construction, with expectations for a slight headwind as the year progresses [64] Question: Growth in storm drainage products - Management attributed strong growth in storm drainage to increased infrastructure funding and a shift in product distribution dynamics [74] Question: Employee retention trends - Management reported high employee retention rates, viewing occasional poaching as an opportunity to attract talent [103][104] Question: Cost-out initiatives - Management confirmed ongoing cost-out initiatives but did not provide substantial quantification at this time [106][108]