Core & Main(CNM)2023-12-05 18:09Financial Data and Key Metrics Changes - Net sales for the third quarter were just over 260 million, with adjusted EBITDA margin decreasing 90 basis points to 14.2% [13] - Net income for the third quarter was 178 million in the prior year period, primarily due to lower operating income [9] Business Line Data and Key Metrics Changes - Municipal repair and replacement activity remained stable year-over-year, while new residential lot development improved sequentially from the second quarter [3] - Nonresidential volumes began to stabilize late in the third quarter due to balanced exposure across various project types [3] - Price contribution to net sales growth was flat for the quarter, with organic volumes down low single digits [28][11] Market Data and Key Metrics Changes - The company expects municipal repair and replacement activity to remain stable year-over-year in the fourth quarter, with new residential lot development growth anticipated to improve sequentially [31] - Nonresidential volumes are expected to be flat to slightly down year-over-year, similar to the third quarter [31] Company Strategy and Development Direction - The company continues to target attractive M&A opportunities, announcing three new acquisitions after the quarter, with a total of eight acquisitions signed or closed this year, enhancing product offerings and market position [4][26] - The company aims for 2% to 4% annual net sales growth from M&A over the next several years [4][26] - Focus remains on customer service, technical expertise, productivity, and pricing execution, with significant liquidity expected to drive shareholder value through share repurchases or dividends [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to sustain margins through ongoing margin initiatives and synergies from M&A, despite expectations of gross margin normalization in the fourth quarter [11][33] - The company anticipates end market volumes to be roughly flat to up low single digits in 2024, depending on broader economic conditions [32][38] - Management noted that the IIJA funds have been slower than anticipated but are starting to see projects utilizing that funding, particularly in the upper Midwest [117] Other Important Information - The company executed share repurchases totaling $770 million so far this year, retiring 30 million shares in total [10][18] - The company opened two new greenfield locations in the third quarter, expanding product offerings in underpenetrated markets [24][36] Q&A Session Summary Question: What is the outlook for end markets in 2024? - Management expects overall end markets to be flat to low single digits, with municipal base remaining stable and potential growth in residential if mortgage rates stabilize [81][82] Question: How is the company managing inventory and cost pressures? - Management reported good progress in reducing inventory levels and optimizing sourcing, which has contributed to better margin performance than anticipated [91][96] Question: What is the company's strategy regarding M&A? - Management indicated a consistent appetite for M&A, with a robust pipeline and no significant changes in strategy despite market conditions [85][88] Question: How does the company view pricing in 2024? - Management anticipates a neutral price environment in 2024, with potential ups and downs in specific product categories [57][94] Question: What are the expectations regarding IIJA spending? - Management noted that while IIJA funds have been slow to materialize, there are signs of projects starting to utilize these funds, particularly in certain states [117]