Core & Main Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
June 6, 2023

There are 9 speakers on the call.

Operator

Good morning, everyone, and welcome to the Court and Main First Quarter 2023 Earnings Call. My name is Carla, and I will be coordinating your call today. I will now hand you over to the management team to begin. Please go ahead.

Speaker 1

Thank you. Good morning, everyone. This is Robin Bradbury, Vice President of Finance and Investor Relations for Core and Main. Core and Main is a leader in advancing reliable infrastructure with local service nationwide. We are thrilled to have you join us this morning for our Q1 earnings call.

Speaker 1

I'm joined today by Steve LeClaire, our Chief Executive Officer and Mark Lukowski, our Chief Financial Officer. Steve will lead today's call with a business update followed by an overview of our recent acquisitions. Mark will then discuss our Q1 financial results And full year outlook followed by a Q and A session. We will conclude the call with Steve's closing remarks. We issued our Q1 earnings release this morning and posted a presentation to the Investor Relations section of our website.

Speaker 1

As a reminder, our press release, presentation and the Statements made during this call include forward looking statements. These statements are subject to risks and uncertainties that cause actual results to differ materially from our expectations and projections. Such risks and uncertainties include the factors set forth in our earnings Press release and in our filings with the Securities and Exchange Commission. We will also discuss certain non GAAP financial measures, which we believe are useful to Thus, the operating results of our business. A reconciliation of these measures can be found in our earnings press release and in the appendix of our investor presentation.

Speaker 1

Thank you for your interest in Quorum Main. I will now turn the call over to Chief Executive Officer, Steve LeClair.

Speaker 2

Thanks, Robin. Good morning, everyone. Thank you for joining us today. We're excited to share our results with you. Starting on Page 5 of the presentation, 1st quarter net sales finished in line with our expectations, Reflecting a return to more typical seasonality for the Q1.

Speaker 2

Our sales grew 25% in the Q1 of fiscal 2021 And another 52% in the Q1 of last year. This makes year over year comparisons tough especially when confronted with disruptive weather in some of our major markets. We had an excellent quarter from a profitability standpoint with adjusted EBITDA margin increasing 30 basis points year over year To a new first quarter record of 14%. Prices remained elevated against improving supply chains And gross margins outperformed our expectations, offsetting lower sales volume and inflationary cost pressure to deliver a solid adjusted EBITDA outcome for the quarter. Our end markets remained stable throughout the Q1.

Speaker 2

Non discretionary municipal repair and replacement demand continue to show resilience, backed by healthy municipal budgets and strong project backlogs. As we expected, residential volumes were down significantly compared to a strong prior year comparable. That said, we believe the long term fundamentals of the housing industry are solid and we are pleased with the level of demand we are seeing from our customers And many of the public homebuilders. Residential lot development is still in balance representing a short supply of vacant developed lots. On the non residential side, on shoring trends have generated an increasing number of large projects and our scale advantage has positioned us To capture meaningful growth from these projects in select markets.

Speaker 2

While we remain optimistic about the opportunities for growth in the non residential market, We recognize that tightening lending standards could have a short to medium term impact on non residential development, which could impact the demand for our products and services. During the quarter, we made significant strides in executing the capital allocation framework we've laid out in prior quarters. In the Q1, we deployed over $400,000,000 of capital to organic growth, acquisitions and share repurchases And we maintain ample capacity to continue investing in growth opportunities. We continue to invest in resources to Support the growth of our product, customer and geographic expansion initiatives, which help drive market outperformance and long term value creation. For example, we opened 2 new locations in underserved markets during the Q1 to grow our footprint and make our products and Our greenfields continue to mature and offer new growth opportunities.

Speaker 2

We have the ability to efficiently open new branches in attractive markets due to our scale advantage, talent pool and training programs. We are pleased with the progress we've made across these initiatives as we entered the busiest time of our selling season. We complement our organic growth investments with acquisitions to broaden our geographic footprint, enhance our product lines, Enter adjacent markets and acquire key talent. We completed 3 acquisitions during the quarter and signed a definitive agreement to acquire another business Subsequent to the quarter, our M and A pipeline remains very active and we expect to continue adding new businesses to the Corn Maine family throughout 2023 and beyond. Our record Q1 operating cash flow also contributed to the liquidity to fund a $332,000,000 share repurchase For a majority shareholder, which was concurrent with a 5,000,000 share secondary offering.

Speaker 2

The share repurchase reduced our diluted share count by 15,000,000 Looking ahead, organic and inorganic growth investments remain our number one capital allocation priority, We will look to return capital to shareholders as opportunities arise. Turning to our recent acquisitions on Page 6, We added 3 high performing businesses to our family and subsequent to the quarter signed a 4th generating combined historical annualized net sales Over $115,000,000 Landscape and Construction Supplies is a full service provider of geosynthetics products With 2 locations in the Chicago Metropolitan area. Since opening nearly 20 years ago, the team at LCS has built a well regarded business It serves customers in more than 15 states. The acquisition adds key talent and expands our existing geosynthetics and erosion control product offering For our customers in the upper Midwest. UPSCO is a provider of utility infrastructure products and services Headquartered in the Finger Lakes region of New York with sales offices in the Northeast, Mid Atlantic and Midwest regions of the U.

Speaker 2

S. Since 1965, UPSCO has earned a trusted reputation for providing its customers with best in class products and services To build and remediate utility infrastructure. In addition to prefabricated meter sets, they offer a broad range of products and services, Including pipe, valves, fittings and fusible piping solutions to satisfy the needs of its customers. This acquisition brings us adjacent product lines and unique cross selling opportunities to our existing customer base, Thereby expanding the addressable market for our products and services. The team at Upsco shares our commitment to providing high quality products and service for reliable utility And we are excited to have them join our business.

Speaker 2

Midwest Pipe Supply is a single branch Full service distributor of storm drainage and water products in Northern Iowa. Since 2002, the team at Midwest Pipe Supply Has built a strong reputation as a dependable distributor of drainage, septic and waterworks solutions. The company offers a wide range of products and services for contractors, municipalities and agriculture customers throughout the state. This acquisition expands our product offering and geographic reach in the Midwest alongside a team with commitment and dedication to the communities they serve. Foster Supply is a leading producer, installer and distributor of specialty precast concrete products, storm drains and other erosion control solutions, Operating out of 7 locations across Kentucky, Tennessee and West Virginia.

Speaker 2

Since 1981, the team at Foster Supply has been Partner of choice for contractors and municipalities seeking innovative solutions for unique worksite challenges. Bringing that team to Korn Main will allow us to combine our collective expertise and differentiated product and service offerings to better meet the needs of our Shared Waterworks and Geosynthetics customers. Lastly, I want to share that I'm extremely proud to see our vision of advancing reliable infrastructure realized through the achievement of our growth strategies. Our strategy is to leverage the scale, resources, talent and capabilities we have as one of the largest companies In our industry, all in our support of experience and entrepreneurial local teams to consistently deliver value to our customers and suppliers. We've come a long way in building the foundation for Core and Main and executing our strategy and we have a significant runway of growth opportunities ahead.

Speaker 2

Now I'll turn the call over to our Chief Financial Officer, Mark Wachowski to discuss our financial results and fiscal 2023 outlook. Go ahead, Mark.

Speaker 3

Thanks, Steve. I'll begin on Page 8 with highlights of our Q1 results. We reported net sales of nearly $1,600,000,000 for the quarter, a decrease of 1.5% compared with the prior year period. The slight year over year sales decline was expected and follows strong comparative performance in the prior year When net sales grew 52% compared with the Q1 of fiscal 2021. We saw positive price contribution during the quarter As material costs have sustained at elevated levels and we experienced pressure on volumes due to a return to more typical seasonality for the Q1.

Speaker 3

We have since seen demand improve in the second half of April and into May with drier and more stable weather conditions across the country. Gross margins of 27.9 percent was 160 basis points higher than the prior year period And it reflects the benefit of accretive acquisitions, execution of our margin enhancement initiatives and the utilization of low cost inventory. Despite the strong start to gross margins in the Q1, we continue to expect gross margin for the full year to be lower than fiscal 2022, But likely stronger than we anticipated at the beginning of the year. Selling, general and administrative expenses increased 8.3% To $223,000,000 for the Q1. The increase in SG and A reflects the impact of cost inflation, Acquisitions and investments to support our anticipated growth.

Speaker 3

SG and A as a percentage of net sales increased 130 basis points The 14.2 percent. Our SG and A as a percentage of net sales is typically higher in the Q1 due to seasonality of our sales and fixed cost structure. Interest expense was $17,000,000 for the Q1 compared with $13,000,000 in the prior year period. The increase was due to higher variable interest rates on the unhedged portion of our senior term loan. Income tax expense for the Q1 was $31,000,000 Compared with $30,000,000 in the prior year period, reflecting effective tax rates of 18.9% and 18%, respectively.

Speaker 3

The increase in effective tax rate was due to an increase in income attributable to Corn Maine Inc, resulting from a decline in partnership interest held by non controlling Interest holders. Diluted earnings per share in the Q1 was in line with the prior year period at $0.50 per share. The diluted earnings per share calculation includes the basic weighted average shares of Class A common stock plus the dilutive impact of outstanding Class A common stock That would be issued upon exchange of partnership interest. Adjusted EBITDA increased nearly 1% to $220,000,000 And adjusted EBITDA margin increased 30 basis points to 14%. The increase in adjusted EBITDA margin was due to our strong gross margin performance during quarter, partially offset by the impact of cost inflation and investments to support our growth.

Speaker 3

Turning to our cash flow and balance sheet performance on Page 9. Operating cash flow was a record for the Q1 at $120,000,000 We continued the inventory optimization initiative. We started in the middle of last year, generating $35,000,000 of cash from inventory in the Q1 Compared with a $207,000,000 investment in the prior year. We typically build inventory in the 1st and second quarter to prepare for our Spring and summer selling seasons. However, we were able to reduce inventory this year while maintaining service levels with our customers Due to our prudent inventory investments in the prior year.

Speaker 3

On a year over year basis, net inventory was down about 2% in the Q1 Even with the higher product costs, inventory acquired through acquisitions and new inventory to support our greenfields. As I mentioned last quarter, we are targeting an operating cash conversion range of 80% to 100% of adjusted EBITDA and we expect continued improvement in cash flows as Our available liquidity stands at $1,100,000,000 following the capital deployment actions we took during the quarter. The $332,000,000 share repurchase we executed during the quarter was done concurrently with a public secondary offering of 5,000,000 shares by our majority As a result of the repurchase, we reduced our diluted share count by 15,000,000 shares. Our capital allocation framework remains consistent with what we laid out last quarter. Organic and inorganic growth investments remain our number one capital allocation priority and we intend to continue returning capital to shareholders through share repurchases or dividends.

Speaker 3

We have ample capacity to invest and we remain confident in our ability to capture growth opportunities as they develop throughout the year. I'll wrap up on Page 10 with an update on our outlook for the remainder of 2023. We expect end market volumes to remain stable for the rest of the year. We expect lot development for new residential construction to be down on a year over year basis, but the sentiment and level of demand from our customers Public Home Builders has improved since last quarter. We continue to expect growth in non discretionary municipal repair and replacement activity And a relatively stable non residential end market supported by a diverse project exposure.

Speaker 3

In total, we continue to expect end market volumes to be down in the low to mid single digit range for the year. We expect to deliver 2 to 3 points of above market Growth from the execution of our product, customer and geographic expansion initiatives. In terms of acquisitions, we've seen an acceleration of activity in recent months And we look forward to adding more high quality companies to the Coramine family in 2023. We now expect roughly 4 points of sales growth from acquisitions That have signed or closed within the last 12 months. Our acquisitions are performing well and we continue to improve our ability to integrate them into our company.

Speaker 3

We've seen price inflation continue to moderate as we lapse the price increases from a year ago and we continue to expect roughly flat price contribution We still expect gross margins to normalize in fiscal 2023, but the impact is likely to be better than we anticipated last quarter as a result of our continued utilization of low cost inventory. Given our recent acquisitions and strong margin performance in the Q1, We are raising our expectations for fiscal 2023 net sales and adjusted EBITDA. We now expect net sales to be in the range of 6.6 The $6,900,000,000 and we expect adjusted EBITDA to be in the range of $820,000,000 to $880,000,000 Our expectation for operating cash conversion remains unchanged at 80% to 100% of adjusted EBITDA. As we progress throughout the year, we will continue to focus on organic and inorganic growth opportunities, margin expansion and operating cash conversion We are well positioned to outperform the market in this complex demand environment, creating value for all our stakeholders. We look forward to helping our customers build more reliable infrastructure as we enter a key part of the construction season.

Speaker 3

At this time, I'd like to open it up for questions.

Speaker 4

Thank

Operator

Our first question comes from Kathryn Thompson from Thompson Research Group. Your line is now open. Please go ahead.

Speaker 5

Hi. Thank you for taking my questions today. Just a first a bigger picture question before I get to more to the quarter. When you look at several federally funded initiatives, IIJA, CHIPS Act and Inflation Reduction Act, How does core domain participate, those million short, how do they win with those dollars as they flow through?

Speaker 2

Thanks, Catherine. This is Steve. A couple of different areas I would share with you. Certainly, the projects themselves have A lot of opportunity for us, whether it's new chip facilities that are going in, battery facilities, a lot of this on shoring activity That has been part of that in addition to the infrastructure piece itself, all benefit us. But what I would also share is that just given our size and scale, we've been able to A lot of these major contractors that are involved with these across multiple geographies, we've been able to help assist in getting product That in some cases may still be in short supply or being utilized in other parts of the country.

Speaker 2

So as we've Continue to work with a lot of these larger projects and these larger contracts. We continue to find ways To utilize size and scale to get our unfair share of business in those areas.

Speaker 5

Okay. And maybe digging a little bit deeper to pipe styles and fittings and fire protection, both that Saw modest declines in the quarter. Pipe sales and fittings assume was more driven by resi, could you give more clarity on that? And then just A little bit more color on the modest softness in the Fire Protection segment.

Speaker 2

Yes. Well, I'll start first with residential. So we Anticipated a challenging residential quarter here, particularly given some of the softening that we've seen with the New land development as homebuilders have been scaling back, that certainly was anticipated as we got Into the quarter and certainly from beginning to the end, we saw what I'd call a slightly change in sentiment more positive as we exited Q1. But we are also going up against pretty difficult comps from last year. As you saw, we were up 52% last year.

Speaker 2

So we were certainly seeing some challenges there. As far as fire protection, some of the other areas, We did see some softness in a couple of different areas across the country. Weather and seasonality were also part of the impact that we saw. It's difficult to put our finger exactly on how much was parceled out between The typical seasonality which returned last year and weather, we certainly were impacted in California and other areas with Extraordinarily wet weather that impacted all the underground work. And then even in the northern areas where seasonality returned, It was a pretty tough winter in some of those areas and pushed a lot of things into later in the spring.

Speaker 5

Okay, great. Thanks very much.

Speaker 6

Thanks, Catherine.

Operator

Our next question comes from Michael Dow from RBC Capital Markets. Your line is now open. Please go ahead.

Speaker 4

Good morning. Thanks for taking my questions. I wanted to start off on capital allocation. Obviously, a lot of moving pieces in the quarter with the nice buyback, but then the comments that you made Just now about the accelerating M and A activity. Can you help us understand kind of what What do you think is driving the acceleration in some of the deals in pipeline?

Speaker 4

It sounds like maybe progressing along Better than you might have anticipated. And when you think about kind of the contribution, I think you outlined 4 points. Just to be clear, is that that's a little higher than I would have thought based on the deals you've already Close, so is that inclusive of any contribution from deals that you're still contemplating and expecting to close?

Speaker 2

Well, I'll talk a little bit about what we delivered in terms of M and A in the Q1. So as you saw there, We had close to 11 branches and $115,000,000 in annualized sales that came through in that quarter. Our pipeline continues to be very robust. You saw last year we had a number of really solid bolt on acquisitions for Water Works. We're continuing to see those You know, increased as well too with Midwest Pipe and Supply.

Speaker 2

And then as you get into some of our other product categories, we get into geosynthetics and erosion control. We've been able to tie in a number of different acquisition targets in that space as well too. So we're seeing a lot of opportunity there. The multiples have been very Favorable for us as we've gone through this, and we continue to see a very robust pipeline. And I can let Mark talk a little bit more about The capital allocation and how we've been prioritizing?

Speaker 3

Yes, Michael, thanks for the question. On the capital allocation, again, no change From what we described last quarter in terms of the priorities, organic growth, inorganic growth Being our top priorities, and then I think the repurchase that we completed during the quarter really Our commitment to the capital deployment back to shareholders and you can expect that We'll continue along that path of capital allocation priorities that we've laid out. In terms of your question on the guide, We do have four points of acquisitions embedded in there, which includes the addition of Upsco, Midwest Pipe and Foster for the remaining parts of 2023. So no contemplation of acquisitions That have not been signed and that's all acquisitions that have been completed at this point.

Speaker 4

Okay. That's very helpful. Thanks. And my follow-up is also around capital allocation. So if we look at the balance sheet and the cash flow that you're guiding For the year, it seems like you'd probably end up all else equal, close to 1 like in the net leverage range In the low ones, or around one time.

Speaker 4

So relative to your target range, I think that gives you a full turn Or more of leverage, which is technically kind of like $850,000,000 Of available dry powder this year based on your EBITDA guide. So is that in terms of kind of order of magnitude on What you think you can deploy this year between M and A and potentially incremental buybacks? Is that the right way to think about it or would you be thinking about kind of a more gradual layering in of deployment?

Speaker 3

Yes. Michael, I think that's the right way to think about it over a period of time, the timing of it, we'll continue to assess the timing of cash flows This year, where that leverage level shakes out and liquidity as we think about deploying that capital. But That's how we feel that the 2 to 3 times leverage is a comfortable level for us. And yes, that provides for Decent amount of capital that we'll look to deploy again through our organic and inorganic initiatives and potentially Additional share repurchases and or dividends.

Speaker 4

That's great. Okay. Thank you.

Speaker 3

Yes,

Operator

thanks. Our next question comes from Joe Ritchie Joe Ritchie from Goldman Sachs. Your line is now open. Please go ahead.

Speaker 7

Thank you. Good morning, everyone. So I was wondering if you can maybe start by giving us just a little bit Color on your organic growth this quarter. So specifically like any kind of like order of magnitude on the different end markets

Speaker 3

and how they contributed

Speaker 7

to the quarter from a volume standpoint. And And how they contributed to the quarter from a volume standpoint. And also curious, I know that pricing is expected to be flat for the year, but curious how pricing started out in the Q1?

Speaker 3

Yes. Thanks, Joe. Yes, in terms of the sales breakdown for the quarter, I'd say from a price standpoint, we were in the, I'd say single digit range for the quarter, definitely much less of an impact than what we saw in the prior years as we've seen some of that pricing Stabilize and then from a volume perspective kind of low double digit range there with the bigger impacts In the residential end market given the softness there and the really tough comps, in particular in the residential market in the prior year. And I'd say from a volume perspective down to a lesser extent in non resi and muni that was primarily Due to the return to the typical seasonality that we talked about and some of the weather impacts. So wouldn't necessarily call that market necessarily, but were the drivers of The softer volume in the quarter.

Speaker 7

Okay. That's super helpful. And I guess Maybe just my follow on question to that is, clearly, like we've been waiting now for a while for some of this infrastructure spending to come through. We got through the debt ceiling. I'm just curious like on the muni side specifically, what are you Seeing what are you hearing from your customers?

Speaker 7

I know that clearly you mentioned that things seem to have gotten a little bit better in the second half of April and into early May. Was that predominantly muni driven? Just any color around that would be helpful.

Speaker 2

Sure. I think municipal Full Peace has been incredibly resilient as we've gone through this period. Municipal budgets have been strong. The projects have been flowing. We certainly had some seasonality and some weather That hampered a few things in the Q1, but continue to be really encouraged by what we're seeing in bid activity with municipal piece.

Speaker 2

From the IIJA perspective, we're seeing a trickle of funds starting to make its way into projects. We've Seeing some in Florida, another one in Arizona that's been allocated. So, still slower than what we would anticipate, but We also know that it is starting to make its way through and certainly starting to see some of those positive Ramifications and green shoots coming through.

Speaker 7

That's great to hear, Steve. If I could maybe just ask one more. I was just looking at Your adjusted EBITDA margin guide for the year, the 12.4% to 12.8%, clearly you're off to a much better start in 1Q at 14%. So like how do we think about the rest of the year? Because it seems like this number looks at least from our that high level looks very conservative.

Speaker 7

What are kind of some of the offsets as you progress through the next three quarters?

Speaker 3

Yes, I think as you look at the guide in terms of what was embedded for us, obviously we had the surprise of the additional gross margin And from some of the release of some low cost inventory in the quarter. As we talked about it at year end, we do expect Normalization at some point at the gross margin level as we progress throughout the year, I'd say we still have some low cost inventory to release Even though we did make some progress on that in the quarter, but I think a little too early yet for us to revise the gross margin normalization that we're expecting, which In the 100 basis points to 150 basis point range, but I'd say that's the primary driver of that EBITDA margin reset that we've talked about.

Speaker 7

Understood. Thank you.

Operator

Our next question comes from Anthony Pettorini from Citigroup. Your line is now open. Please go ahead.

Speaker 6

Hi. This is Asher Sonnen on for Anthony. Thanks for taking my question. Just looking at Following up on the last one, the increase to EBITDA guide, it seems to be driven in at least part by more low cost inventory than So is that just a function of you moving through inventory or maybe slower than expected with volume pressure or maybe pricing has been Strong enough to make more of your inventory fit into sort of the low cost basis bucket or maybe you're even able to continue doing some pre buy, so what's driving that?

Speaker 3

Yes, Asher, good question. And I think the answer to that's really all the items that you mentioned there. I mean, we Did take us longer to get inventory through the system in Q1 just given some of the softness in volume. So we are hanging on to Some of that longer than anticipated. It's also given us an opportunity to invest in other product categories that we've continued to see some price Come through.

Speaker 3

So those have been some of the factors. And then I'd say beyond that, We are continuing to make progress against our gross margin initiatives, in particular private label and some of the other pricing initiatives that we've got. So I think What you'll see is the longer it takes us to kind of release some of that inventory. We have more of an opportunity to offset some of that reset that we have. But Again, I just think a little too early for us to adjust the normalization that we've been expecting that gross margin level.

Speaker 6

Okay. Thank you. That's helpful. And then just sort of switching gears. In your prepared remarks, I think you talked about sort of the risk Presented to kind of the commercial private on res segment from credit tightening.

Speaker 6

But I was just wondering, even anecdotally, have you actually seen the impact Come through on that, are you seeing maybe projects get delayed or sell the start or something like that?

Speaker 2

As of the end of Q1, really haven't seen much impact at all from the credit challenges that or perceived credit challenges that have been out there. And if you look at the projects that we have, we have a really diverse mix of project types in non residential. Everything from commercial and The Tushin buildings, data centers, warehouses and we talked a little bit about these large projects and the on shoring trends that have happened. All of those have been favorable for us and we've continued to see volume and bid activity there. In addition to just the $110,000,000,000 of federal infrastructure Funding that's been earmarked for roads and bridges.

Speaker 2

We view that as a tailwind, particularly as we look at projects that contain Storm Drainage and Erosion Control Products. So we're watching closely to make sure we understand a little bit A little bit what's happening here in terms of the lending aspect of this, but so far we've not seen it.

Speaker 6

Great. That's helpful. I'll turn it over.

Operator

Our next question comes from Andrew Obin from Bank of America. Your line is now open. Please go ahead.

Speaker 8

Good morning. This is David Ridley Lane on for Andrew. Can you maybe help Bridge the change in the adjusted EBITDA guidance for this fiscal year, how much of it was the Q1 outperformance versus Additional acquisitions versus the gross margin here being better than you had feared?

Speaker 3

Yes, David, thanks for the question. As you look at the adjustment to the guidance for the full year, I'd say we Took it up at the midpoint, it was about $25,000,000 Half of that was primarily the Better than expected gross margins that we had in the quarter. The remainder of it would be EBITDA related to acquisitions That we added that were not included in the prior guide.

Speaker 8

Thank you for that. And then how much of the because I know you have a couple of different Initiatives internally to improve gross margin. And so I'm just sort of wondering What was the kind of underlying progress versus kind of another benefit from just the sell through of the lower cost inventory?

Speaker 3

Yes, David. If you're looking at it year over year, I'd say that from a gross margin standpoint, still a lot of release of inventory in there, but a But a good chunk of benefit coming through from private label and some of the other gross margin initiatives, in particular, some of the pricing Initiatives that we put in place, I'd say if you look at it sequentially from Q4 to Q1 still had some nice improvement Over Q4 number and I'd say most of that was the release of low cost inventory, hard to make a lot of progress on some of those initiatives in just a quarter, but still had some nice In just a quarter, but still had some nice releases of that low cost inventory. So those are, I'd say, the primary components of that.

Speaker 8

Thank you very much.

Speaker 3

Thank you.

Operator

We have no further questions. I will now hand back to your host for any further remarks. Please go ahead.

Speaker 2

Thank you all again for joining us today. It was a pleasure to have you on the call. Our consistently strong performance quarter after quarter It's a direct result of the hard work of our field and functional support teams, our focus on operational discipline and the diversity of our products and end markets. We are well positioned to build on our positive momentum, and we have a strong outlook for fiscal 2023. Our platform provides for Value creation opportunity as our growth strategy is grounded in agility, innovation and execution.

Speaker 2

We have a tremendous amount of opportunity ahead of us, And we are well positioned to execute on those opportunities. Thank you for your interest in Core and Main. Operator, that concludes our call.

Operator

Thank you. This concludes today's call. Thank you for joining. You may now disconnect your lines. Have a great day.

Powered by Quartr

Key Takeaways

  • Core & Main delivered Q1 net sales of $1.6 billion, roughly flat year-over-year, and achieved a record first-quarter adjusted EBITDA margin of 14%, up 30 basis points driven by elevated pricing, supply-chain improvements and low-cost inventory.
  • Municipal repair-and-replacement demand remained resilient on healthy budgets and backlogs, while residential volumes lagged tough comparable periods; non-residential benefited from on-shoring projects but faces potential headwinds from tighter lending standards.
  • In Q1 the company deployed over $400 million in capital across organic growth, three acquisitions (with a fourth signed post-quarter) and a $332 million share repurchase, reducing diluted share count by 15 million.
  • Record operating cash flow of $120 million and ongoing inventory optimization fueled liquidity of $1.1 billion, positioning Core & Main to pursue further bolt-on acquisitions and opportunistic share returns.
  • For 2023 Core & Main raised its targets to $6.6–6.9 billion in net sales and $820–880 million in adjusted EBITDA, expecting low-to-mid single-digit volume declines offset by 2–3 points of above-market growth from expansion initiatives.
A.I. generated. May contain errors.
Earnings Conference Call
Core & Main Q1 2024
00:00 / 00:00