Core & Main Q4 2025 Earnings Report

Core & Main EPS Results

• Actual EPS: $0.33
• Consensus EPS: $0.36
• Beat/Miss: Missed by -$0.03
• One Year Ago EPS: $0.34

Core & Main Revenue Results

• Actual Revenue: $1.70 billion
• Expected Revenue: $1.67 billion
• Beat/Miss: Beat by +$24.34 million
• YoY Revenue Growth: +17.90%

Core & Main Announcement Details

• Quarter: Q4 2025
• Date: 3/25/2025
• Time: Before Market Opens
• Conference Call Date: Tuesday, March 25, 2025
• Conference Call Time: 8:30AM ET

Core & Main (NYSE:CNM) is a specialty distributor focused on water, wastewater, storm drainage and fire protection products, and related services. The company provides infrastructure solutions to municipalities, private water companies and professional contractors across municipal, non-residential, and residential end markets, nationwide. The company was founded in 1874 and is headquartered in St. Louis, MO.

Core & Main Q4 2025 Earnings Call Transcript

Presentation

[Operator]

Hello and welcome to the Call and Main Q4 twenty twenty four Earnings Call. My name is Alex, and I'll be coordinating the call today. I'll now hand it over to Robin Bradbury, Senior Vice President of Finance and Investor Relations. Please go ahead.

[Robyn Bradbury, Senior Vice President of Finance & Investor Relations at Core & Main]

Thank you. Good morning, everyone. This is Robin Bradbury, Senior Vice President of Finance and Investor Relations for CoronMate. We are excited to have you join us this morning for our fiscal twenty twenty four fourth quarter and full year earnings call. I'm joined today by Steve LeClair, our Chair and Chief Executive Officer and Mark Wachowski, our Chief Financial Officer.

[Robyn Bradbury, Senior Vice President of Finance & Investor Relations at Core & Main]

He will begin today's call by discussing the executive changes we announced this morning. He will then provide an overview of our business and strategy, followed by an update on our fiscal twenty twenty four accomplishments. Mark will then discuss our financial results and fiscal twenty twenty five outlook, followed by a Q and A session. Our press release, presentation and the statements made during this call may include forward looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections.

[Robyn Bradbury, Senior Vice President of Finance & Investor Relations at Core & Main]

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 in assessing 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. Thank you for your interest in CoronMe. I will now turn the call over to Chair and Chief Executive Officer, Steve LeClair.

[Steve LeClair, CEO, Board Chair & Executive Chair at Core & Main]

Thanks, Robin. Good morning, everyone. Thank you for joining us today for our fiscal twenty twenty four fourth quarter and full year earnings call. I'll begin by discussing the executive leadership changes we announced this morning. After much thoughtful consideration and planning, I've decided that now is the right time for a smooth transition of leadership at Korn Main.

[Steve LeClair, CEO, Board Chair & Executive Chair at Core & Main]

At the end of the month, I will transition to the role of Executive Chair, where I will continue to lead the Board and serve as an advisor to the business to ensure a smooth transition. I'm pleased to share that Mark Wachowski, our CFO, will succeed me as CEO and Robin Bradbury, our Senior Vice President of Finance and Investor Relations, will become CFO. Mark will also be joining our Board of Directors. Mark and Robin know our business well and have been instrumental in the development and and I am so proud of what we have accomplished together, including exceptional business performance, outstanding service for our customers and meaningful value creation for our shareholders. With this strong foundation in place, now is the right time to transition the leadership of the company to Mark, Robin and the rest of our talented executive team.

[Steve LeClair, CEO, Board Chair & Executive Chair at Core & Main]

I am confident in their ability to execute against our strategic priorities and take our organization to the next level. Now turning to our results. We were pleased to finish the year with strong momentum as we achieved 18% sales growth and solid gross margins in the fourth quarter. Our results have truly been a team effort, and I want to thank our associates for their dedication and commitment to our customers. I'll begin on Page five of the presentation with an overview of Korn Maine and our market position.

[Steve LeClair, CEO, Board Chair & Executive Chair at Core & Main]

Korn Maine is a leader in advancing reliable infrastructure with local service nationwide. As a specialty distributor with a dedicated focus on water, wastewater, storm drainage and fire protection products, we provide solutions to municipalities, private water companies and professional contractors across municipal, nonresidential and residential end markets. We have a deep portfolio of more than 225,000 products, many of which are made specific for our sector and must meet water industry regulations and local municipal specifications. Our footprint consists of more than three seventy branches across 49 states, which serves as a critical link between over 5,000 suppliers and a diverse base of more than 60,000 customers, with no single customer accounting for more than 1% of our annual sales. We are an industry leader, yet we estimate we have only 19% share of a highly fragmented $39,000,000,000 addressable market.

[Steve LeClair, CEO, Board Chair & Executive Chair at Core & Main]

Our long term opportunity to grow and gain market share is significant as is our opportunity to grow our addressable market over time. We maintain balanced exposure across new construction and repair and replacement projects. Central to this balance is our stable, nondiscretionary municipal demand, which accounts for over 40% of our sales. Municipal spending on water infrastructure has demonstrated long term resilience and is expected to continue growing, driven by the need to address aging water systems, environmental challenges and water scarcity. Our significant exposure to municipal repair and replacement activity provides the business with a strong foundation, ensuring stability even if our other end markets experience a period of volatility.

[Steve LeClair, CEO, Board Chair & Executive Chair at Core & Main]

Customers partner with Core and Main for our breadth of products and services, extensive industry knowledge, familiarity with local municipal specifications, convenient branch locations and project management capabilities, all of which make it easy to do business with us. We serve both smaller local customers and large regional or national contractors with relevant expertise. Our sales associates take a consultative approach in providing tailored solutions for projects of all sizes. And we are deeply involved in our customers' planning processes, all the way from project design through completion. Our strategy is rooted in our people first culture, where we prioritize the well-being, growth and development of our associates.

[Steve LeClair, CEO, Board Chair & Executive Chair at Core & Main]

From there, we thrive by fostering an entrepreneurial mindset at the local level, being action oriented, driving operational excellence and then rewarding our associates with performance based compensation. One underappreciated element in our operating model is the linkage between local expertise and national capabilities. We supplement our local presence with the power of scale, enabling us to value engineer complex projects by utilizing our extensive supply chain and national resources. Data centers and other megaprojects are great examples of where these capabilities come to life. These projects require a sophisticated approach that blend local presence with national support.

[Steve LeClair, CEO, Board Chair & Executive Chair at Core & Main]

They involve intricate technical requirements, ever changing timelines, and a need for precise coordination. With boots on the ground at the local level, we become intimately familiar with the specific needs and challenges of each project, offering hands on support and quick response times. Our national scale allows us to utilize our robust supply chain to secure access to the right products while leveraging our distribution network and project management capabilities to ensure an efficient project delivery that meets time lines and stays within budget. And we do all this while maintaining the customer service and reliability that our customers have come to expect from Core and Main. The impact of these capabilities are reflected in the work we do every day to help communities advance reliable infrastructure.

[Steve LeClair, CEO, Board Chair & Executive Chair at Core & Main]

We highlight a great example of this on Page seven of the presentation. As you know, in August 2023, a devastating wildfire struck Lahaina, Hawaii. Nearly two years later, Lahaina's long cleanup process continues and efforts to return to a sense of normalcy have progressed with the completion of an elementary school. Rebuilding required extensive water infrastructure and the contractor selected to complete the project relied on Core Maine to be its one stop shop provider. The project involved design build plans, so the material list, quantities and product lines changed constantly.

[Steve LeClair, CEO, Board Chair & Executive Chair at Core & Main]

Our nearest branch was a short distance away, enabling our local team to be on the job site daily, sometimes multiple times a day, to ensure our customer had the right products at the right time. And if our local team didn't have the products on hand because of redesigns or change orders, they called on other core main branches and product specialists along the West Coast for support. The project was completed in an impressive ninety five days, marking a significant milestone in Lahaina's recovery. The school serves as a vital stepping stone, helping to reestablish a sense of community while Lahaina's permanent infrastructure is rebuilt over the next three to five years. Turning to our recent accomplishments.

[Steve LeClair, CEO, Board Chair & Executive Chair at Core & Main]

Fiscal twenty twenty four was a notable year for Core and Main and it marked our fifteenth consecutive year of positive sales growth. Our teams navigated a dynamic environment to deliver strong financial performance, including record net sales of over $7,400,000,000 adjusted EBITDA of $930,000,000 and operating cash flow of more than $620,000,000 The consistency of our results is driven by our balanced business mix, the dedication and expertise of our associates and our ability to generate significant cash flow to reinvest back into the business, including investments to support and execute our growth strategies. Our product, customer and geographic expansion initiatives produced strong results throughout the year as we continue to accelerate the adoption of new products in the industry, improve our differentiated value proposition. This included strong double digit average daily sales growth in metering and storm drainage products, high single digit average daily sales growth in treatment plant projects and additional market share gains as our greenfields continue to grow and mature. We opened two new locations and attractive markets during the year to expand our reach, building on our commitment to make our products and expertise more accessible nationwide.

[Steve LeClair, CEO, Board Chair & Executive Chair at Core & Main]

We also welcomed 10 complementary businesses to the Corn Maine family, adding over 600,000,000 of annual sales while expanding our presence in key geographies, gaining access to new product lines and adding key talent. In terms of organic sales growth, we believe we outgrew the market by a couple hundred basis points in 2024. And looking ahead, we have ample opportunities to drive additional growth, expand gross margins and improve our operating leverage. We continue to develop a scalable assortment of private label brands and products used in water, wastewater, geosynthetics and fire protection applications. We added over 30,000 square feet of distribution space and more than 1,000 private label SKUs to our offerings since the end of last year.

[Steve LeClair, CEO, Board Chair & Executive Chair at Core & Main]

We ended fiscal twenty twenty four with private label products representing approximately 4% of our sales with an opportunity for it to grow to 10% of our sales or more over time. Our cash flow generation and flexible balance sheet allowed us to invest in the growth of the business while returning capital to shareholders. We deployed $176,000,000 in fiscal twenty twenty four to repurchase 4,000,000 shares under our repurchase program. We expect to generate similar levels of operating cash flow going forward, resulting in significant available capital being reinvested in the business and returned to shareholders. Moving to our acquisition strategy and recent success.

[Steve LeClair, CEO, Board Chair & Executive Chair at Core & Main]

We are one of only two national distributors competing in our space and the remainder of the market is served by hundreds of other local and regional distributors. Since 2017, we have completed over 40 acquisitions. Most of the deals were proprietarily sourced based on our relationships and reputation in the industry. We are honored that so many owners and operators in our space have chosen Corning Maine as a home for their businesses, and many of them continue to thrive in leadership positions throughout our company. We are well connected with some of the best companies in our industry and we have a healthy pipeline of potential deals to pursue.

[Steve LeClair, CEO, Board Chair & Executive Chair at Core & Main]

We expect to continue adding and integrating businesses in 2025 and beyond to support our long term growth and value creation efforts. Before I hand it over to Mark, I want to address a few other recent topics of interest. Starting with tariffs, we do not anticipate a significant impact on our business as most of our products are produced in The United States. Where we do have exposure, we anticipate that it may lead to rising product costs, and we are working closely with our customers to ensure real time transparent pricing. As I mentioned last quarter, we generally view tariffs as neutral to slightly positive to our pricing and gross margins.

[Steve LeClair, CEO, Board Chair & Executive Chair at Core & Main]

The tariff environment continues to evolve, creating a level of uncertainty that could limit end market growth in the near term. That being said, our spring bidding activity is encouraging and sentiment from our customers continues to be positive. In regards to the status of federal funding, there have not been cuts to any of the water funding set aside by the Infrastructure Investment and Jobs Act. Investments in water infrastructure continue to receive bipartisan support, in part due to the extreme circumstances highlighted across the country when water, sewer or stormwater management systems fail. While federal grants and low interest loans are available to municipalities to help fund their projects, the vast majority of the municipal funding is produced by local revenue streams, including local taxes and utility usage fees.

[Steve LeClair, CEO, Board Chair & Executive Chair at Core & Main]

To wrap up my prepared remarks, our teams have had to navigate several challenges and distractions throughout the year, and we consistently rose to the occasion, demonstrating focus, agility, and resilience. Our team's ability to adapt, collaborate and deliver best in class service to our customers speaks volumes about the strength of our culture and dedication of our people. Thank you all for your ongoing support. I look forward to what Corning Maine will accomplish in the years ahead. Go ahead, Mark.

[Mark Witkowski, Chief Financial Officer at Core & Main]

Thank you, Steve, and thank you to everyone for being with us today. Steve, we have been so fortunate to have benefited from your tremendous leadership for over a decade at CoronMain. I know that I speak for the entire CoronMain family in thanking you for your dedication and commitment to excellence. You've been the architect behind much of our success to date, and I'm honored to have been able to work side by side with you and now be selected to lead Corn Maine in the next chapter alongside Robin and the rest of our executive team. Having worked closely with Robin for over a decade now, I know she is ideally suited to serve as our Chief Financial Officer.

[Mark Witkowski, Chief Financial Officer at Core & Main]

Robin and I played an integral role in shaping Coromain's current strategy, which will remain unchanged during this transition. Our focus remains on driving profitable growth, both organically and through acquisitions, while generating strong cash flow and delivering value to shareholders. We will continue to provide the high level of service our customers expect from Quora Maine, while building on the strength of our supplier relationships that are essential in achieving our growth objectives. This is an incredible business with the best talent in the industry, and I look forward to collaborating with our associates to build on the strong culture we have established. With that, I'll now turn to our financial performance.

[Mark Witkowski, Chief Financial Officer at Core & Main]

Fiscal twenty twenty four was another record sales year for Corn Maine. Since our separation seven years ago, we have grown net sales at an average annual rate of approximately 15% while significantly improving profitability. These results have been driven by our team's focus on operational excellence and delivering exceptional value to our customers. Starting with our fourth quarter results, we grew net sales by 18% to nearly $1,700,000,000 Acquisitions contributed about 9% of our sales growth and organic average daily volumes were up low single digits. As anticipated, pricing was stable on a sequential basis, but it was down slightly year over year.

[Mark Witkowski, Chief Financial Officer at Core & Main]

Approximately 7% of our sales growth in the quarter was driven by an extra selling week compared to the fourth quarter of last year, resulting in average daily sales growth of roughly 11%. Gross margin in the fourth quarter finished at 26.6%, which was consistent with last quarter. During our third quarter call in December, we communicated our expectation of maintaining gross margins at these levels. Our teams delivered on that by driving consistent performance across our private label, sourcing and pricing initiatives. Selling, general and administrative expenses increased 21% in the fourth quarter to $279,000,000 The year over year increase in SG and A primarily reflects the impact of acquisitions, inflation, investments to support our growth initiatives and additional costs from the fifty third week.

[Mark Witkowski, Chief Financial Officer at Core & Main]

Excluding acquisitions and the impact of the fifty third week, SG and A in the fourth quarter was up approximately 2%. Adjusted EBITDA in the fourth quarter increased approximately 12% to $179,000,000 and adjusted EBITDA margin decreased 60 basis points to 10.5. As a reminder, our operating margins are typically lower in our first and fourth quarters due to a reduction in volumes associated with normal seasonality. Turning to our full year performance. Fiscal twenty twenty four net sales grew approximately 11% to a record of just over $7,400,000,000 The increase was driven by approximately nine points of growth from acquisitions, organic market share gains and approximately two points of contribution from the fifty third selling week, partially offset by a minor impact from pricing.

[Mark Witkowski, Chief Financial Officer at Core & Main]

We estimate that end market volumes were roughly flat for the year, consisting of mid single digit growth in residential lot development and low single digit growth in municipal repair and replacement activity, partially offset by a low single digit decline in nonresidential construction starts. We achieved a couple hundred basis points of above market sales growth from improving our value proposition to the industry. We also drove additional market share gains from strategic acquisitions, strengthening our presence in key geographies and product lines. Gross margins for the year came in at 26.6% compared with 27.1% for fiscal twenty twenty three, a difference of about 50 basis points and in line with our expectations. The year over year decline in gross margin was driven by higher average cost of inventory this year compared to fiscal twenty twenty three.

[Mark Witkowski, Chief Financial Officer at Core & Main]

Going forward, we expect to continue driving sustainable gross margin enhancement through the execution of our initiatives. Selling, general and administrative expenses for fiscal twenty twenty four increased approximately 16% to nearly $1,100,000,000 The increase in SG and A primarily reflects the impact of acquisitions, inflation, investments to support our growth initiatives and additional costs from the 50 week. Excluding acquisitions and the impact of the fifty third week, SG and A expenses were up about 1% for the year. Interest expense for fiscal twenty twenty four was $142,000,000 compared with $81,000,000 in the prior year. The increase was due to higher average borrowings, partially offset by a decrease in rates on our variable rate debt.

[Mark Witkowski, Chief Financial Officer at Core & Main]

The provision for income taxes for fiscal twenty twenty four was $143,000,000 compared with $128,000,000 in the prior year, and our effective tax rates were 24.819.4%, respectively. Our effective tax rate for fiscal twenty twenty four reflects a more normalized ongoing rate and the increase over the prior year was due to exchanges of partnership interest in fiscal twenty twenty three resulting in a reallocation of taxes to Corn Maine, Inc. Adjusted EBITDA for fiscal twenty twenty four increased 2% to $930,000,000 and adjusted EBITDA margin decreased 110 basis points to 12.5%. Moving to our balance sheet and cash flow. We ended the year with net debt of roughly $2,300,000,000 and net debt leverage of 2.4 times.

[Mark Witkowski, Chief Financial Officer at Core & Main]

Total liquidity was over $1,100,000,000 consisting primarily of availability under ABL credit facility. We generated $621,000,000 of operating cash flow during the year and allocated it to priorities that resulted in growth and value creation for shareholders. We spent $741,000,000 on 10 acquisitions and returned $176,000,000 of capital to shareholders, buying back approximately 4,000,000 shares at an average price of approximately $44 a share. We have now returned over $1,500,000,000 of capital to shareholders through share repurchases in the past two years. And as of today, we still have $324,000,000 remaining under our current repurchase authorization.

[Mark Witkowski, Chief Financial Officer at Core & Main]

Turning to our outlook for fiscal twenty twenty five. We expect another year of growth in both sales and profitability. While there are uncertainties surrounding interest rates, federal funding, tariffs and their potential impact on construction activity, we are confident in our ability to navigate these challenges and deliver strong results, especially given our exposure to nondiscretionary municipal water infrastructure projects and the long runway of opportunities we have to drive above market growth and margin expansion. We remain bullish on the long term fundamentals for residential lot development. With mortgage rates trending lower in recent weeks, we have yet to see that materialize into a release of pent up demand that could accelerate growth.

[Mark Witkowski, Chief Financial Officer at Core & Main]

We anticipate an inflection point in residential demand as mortgage rates fall and sustain at lower levels. But given the uncertainty around timing, we are not factoring that into our outlook. We believe nonresidential construction starts will be relatively flat in 2025. The broader macroeconomic environment may continue restraining investment in construction in the nonresidential sector, but some businesses remain cautious about starting new capital projects. Our broad exposure within this market, spanning traditional commercial through heavy industrial and even highway and street projects, generally provides stability as demand for these projects can happen on different cycles.

[Mark Witkowski, Chief Financial Officer at Core & Main]

Municipal spending on water infrastructure is expected to remain resilient with end market growth projected in the low single digit range for 2025. This stability is driven by necessary investments in water and wastewater systems as municipalities continue to address aging infrastructure and comply with environmental regulations. To help fund these initiatives, municipalities have raised water and wastewater utility rates at a mid single digit average annual increase over the last decade. We are optimistic about the growth of this end market in 2025 and beyond. We anticipate that prices will remain sequentially stable through 2025, resulting in a roughly neutral sales impact for the year.

[Mark Witkowski, Chief Financial Officer at Core & Main]

We offer a strong value proposition of the industry and expect to achieve another two to four points of above market volume growth by expanding our presence in underpenetrated geographies, driving the adoption of new products in the industry and acquiring and developing new sales talent. We expect two points of sales growth from the acquisitions that have already closed. We have a good pipeline of high quality targets, and we expect to add more companies to the Core and Main family throughout the year. We benefited from a fifty third selling week in fiscal twenty twenty four, contributing approximately 2% of our total sales growth. We expect a sales impact of roughly the same amount in fiscal twenty twenty five due to fewer selling days in the fourth quarter.

[Mark Witkowski, Chief Financial Officer at Core & Main]

We expect to drive gross margin expansion in 2025 supported by our private label, sourcing optimization and pricing initiatives. With these factors in mind, we expect fiscal twenty twenty five net sales to range from $7,600,000,000 to $7,800,000,000 reflecting year over year growth of 2% to 5% or 4% to 7% on an average daily sales basis. We expect adjusted EBITDA to range from $950,000,000 to $1,000,000,000 reflecting year over year growth of 2% to 8% or 4% to 10% on an average daily sales basis with adjusted EBITDA margins ranging from 12.5% to 12.8%. We expect to generate strong operating cash flow and our capital allocation priority is to invest in the growth of the business, both organically and through the execution of our M and A strategy. We expect to have excess capital after delivering on these objectives, which will allow us to return capital to shareholders, likely through share repurchases.

[Mark Witkowski, Chief Financial Officer at Core & Main]

In the near term, we will continue evaluating our pipeline of priority targets while maintaining liquidity and leverage levels within our stated objectives. As I wrap up, I want to reiterate that we are confident in the fundamentals of our industry and in Core Maine's leadership position. Our sector has strong fundamentals, and we have a unique and proven business model to continue strengthening our position. The long term underlying trends of our end markets are favorable and our products and services play a critical role in advancing reliable infrastructure. We expect to outperform the market even as the broader economic environment evolves.

[Mark Witkowski, Chief Financial Officer at Core & Main]

Our business is well positioned to capitalize on opportunities for growth, both organically and inorganically, and we remain committed to building on our track record of delivering value to shareholders. With that, let's open it up for questions.

[Operator]

Thank you.

[Operator]

Our first question for today comes from David Manthey of Baird. Your line is now open. Please go ahead.

[David Manthey, Managing Director at Robert W. Baird & Co]

Yes. Thank you. Good morning and congrats to everyone on the role changes within the company. First question this morning, probably not unsurprising on pricing. Could you tell us what percentage of COGS is PVC today and what expectations are baked into the guidance you provided?

[David Manthey, Managing Director at Robert W. Baird & Co]

And then if maybe you could comment on price expectations in any other category, whether it's commodity products or engineered products like valves, meters, fire protection, etcetera?

[Mark Witkowski, Chief Financial Officer at Core & Main]

Yes. Thanks, Dave. It's Mark. Appreciate the question. On pricing, I would tell you that municipal PVC pipe, that's less than 15% of our COGS.

[Mark Witkowski, Chief Financial Officer at Core & Main]

We've seen over the course of this past year some of that come off at its high levels that we saw in 2022 and 2023. So that's played into some of the slight headwind that we saw in 2024. I would tell you as we go forward, as we're thinking about the price environment right now, we believe that's going to be an overall neutral environment. We're not going to necessarily guide to specific product categories, but you can assume baked into that that we expect to see some of the price increases that we've seen recently from suppliers stick in the market and we could have some other categories like we've seen pressure and steel piping throughout 2024 continue to be a headwind for us at the beginning of the year. But overall, we've been pleased with the resilience of municipal PVC pipe, which is another reason why we think overall the price environment is going to be neutral into 2025.

[David Manthey, Managing Director at Robert W. Baird & Co]

Thank you for that. Second, is there any way you could provide some insight into first quarter trends so far? I mean, there's been a little bit of weather early in the year and any other factors that are influencing the current environment. It doesn't sound like you're expecting conditions to improve too much through 2025 in your outlook. I just wanted to reconfirm that.

[David Manthey, Managing Director at Robert W. Baird & Co]

And then relative to that also, unannounced acquisitions, there's nothing in guidance for deals you haven't done yet, correct?

[Mark Witkowski, Chief Financial Officer at Core & Main]

Yes, that's correct, Dave. Nothing in the guidance for deals that aren't announced, but we do have about two points of carryover from the acquisitions that we did complete in 2024. As it relates to the start of 2025, I'd say we're very pleased with how things have gotten off here early in the year. I'd say we're kind of right in line with expectations. There was a little bit of weather in January as kind of we finished up the fourth quarter that we experienced there, but wasn't necessarily unexpected given the time of year.

[Mark Witkowski, Chief Financial Officer at Core & Main]

So good to see some of the momentum. Our bidding activity is strong. Backlog is looking good and really pleased with how things are starting off in the first part of this year.

[David Manthey, Managing Director at Robert W. Baird & Co]

Perfect. Thank you very much.

[Operator]

Thank you. Our next question comes from Matthew Bouley of Barclays. Your line is now open. Please go ahead.

[Anika Dholakia, AVP - Equity Research at Barclays]

Good morning. You have Anika Dlathia on for Matt today. Thank you for taking my questions and congrats to you guys on the new rules. So first off, I wanted to talk about the end market outlook. It assumes resi flat, non res flat, muni low single digit.

[Anika Dholakia, AVP - Equity Research at Barclays]

I'm wondering between resi and non res, where you guys see more upside

[Anika Dholakia, AVP - Equity Research at Barclays]

into taking into account some of

[Anika Dholakia, AVP - Equity Research at Barclays]

the choppier market trends today?

[Mark Witkowski, Chief Financial Officer at Core & Main]

Yes, sure. Thanks for the question. You're right on the end markets. The way we're thinking about them right now, just given a lot of the uncertainty that we've been seeing and hearing about in the market, some of the commentary from the homebuilders has been a little mixed. So we're going into 2025 kind of assuming we see continued steady construction on the private side, both resi and non residential.

[Mark Witkowski, Chief Financial Officer at Core & Main]

We have seen though, I would say mortgage rates start to creep down a little bit. If we start to see a little bit more relief there, I think on the mortgage side, you'll see good release of a lot of the pent up demand that we experienced on the lab development side. There's been we exited '25 with a little momentum there, but we're definitely going to be cautious on that as we get out into the early part of twenty five until we see some of those rates start to tick down. Non residential, I would say we've got a lot of still good stability in that end market for us with a lot of the road bridge work continues to be solid. There's a lot of good mega projects that we're involved with that are going strong.

[Mark Witkowski, Chief Financial Officer at Core & Main]

And expect that momentum to continue and help kind of buffer any softness on more of the commercial side, which tends to follow the residential release after twelve or eighteen months or so. So there's upside, I'd say, on both. If we see some of the residential release, you'll start to see the commercial side of that non residential tick up as well. And then from a municipal standpoint, it's been really strong. It exited the year in 2024 with really good activity and we continue to make really strong investments in that part of the business and expect that to be very steady and resilient all throughout 2025.

[Anika Dholakia, AVP - Equity Research at Barclays]

Great. Thank you for that. And then on your expectation for gross margin expansion through fiscal 'twenty five, I'm wondering on the key levers driving this growth, you have private label, sourcing, pricing. You guys can just bucket that in terms of what's driving it the most. And then should we assume the cadence is similar to historic or if there's any differences to consider on that margin expansion through the year?

[Anika Dholakia, AVP - Equity Research at Barclays]

Thanks.

[Mark Witkowski, Chief Financial Officer at Core & Main]

Yes, sure. From a gross margin expansion standpoint, I would say private label continues to be one of our best levers for expansion there. We made a lot of really good progress on that in 2024. We increased our penetration of private label from 2% to 4% of revenue and really pleased with the continued investments we've made there and the margin that that's producing. Sourcing optimization, I'd probably categorize as second.

[Mark Witkowski, Chief Financial Officer at Core & Main]

Really good progress in 2024 as we build scale, especially with some of the acquisitions that we did. And then still pretty early innings on price optimization, but we got some really good results in 2024 that really helped offset some of the gross margin normalization that we expected and we're able to outperform that.

[Robyn Bradbury, Senior Vice President of Finance & Investor Relations at Core & Main]

Thanks. I'll pass it on.

[Anika Dholakia, AVP - Equity Research at Barclays]

Great. Thank you.

[Operator]

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

[Joe Ritchie, Managing Director at Goldman Sachs]

Hey, good morning, everyone, and echo everybody's congratulations. Well deserved, Mark and Robin, and thanks so much for all the help throughout the year, Steve. Just the, my first question, I guess, would be just on margins and thinking through this guidance of zero to up 30 relative to the long term expectations and what you had previously stated at Investor Day. I think you guys had historically been planning for 30 to 50 basis points. Just wondering like whether anything has kind of changed on the margin regarding your ability to expand margins in this environment?

[Mark Witkowski, Chief Financial Officer at Core & Main]

Yes, Joe. Thanks for the comments and appreciate the question there. So I would tell you nothing's really changed in terms of our expectations and the ability to expand margins through these cycles. I would say, obviously, the ability to get some additional productivity out of SG and A in a relatively soft end market is probably the bigger component that's going into our 2025 guide. As we get closer to the kind of the mid single digit expectations on revenue allows us to be much more productive from an SG and A standpoint.

[Mark Witkowski, Chief Financial Officer at Core & Main]

And we continue to make investments to grow revenue and be more productive, but we'll start seeing those pay off as we get into a little bit better market environment.

[Joe Ritchie, Managing Director at Goldman Sachs]

Okay. That's helpful, Mark. And then I guess maybe just sticking with the SG and A piece, thanks for laying out how much SG and A was actually up. I think what you said 1% year over year when you excluded the impact from the fifty third week in acquisitions. I guess just in terms of the acquisition and your ability to get after some of that SG and A, can you just maybe just give us some contextualize like what the opportunity is here in 2025 from the recently announced M and A?

[Mark Witkowski, Chief Financial Officer at Core & Main]

Yes, Joe. As I mentioned, yes, when you exclude the fifty third week and the acquisitions, SG and A was up only about 1% for the full year and that really reflects a lot of continued investments that we've made in the business. In addition, there's been a lot of inflation flowing through a lot of the cost categories and then we were able to offset a lot of those costs with some other cost out actions. I would say on the M and A side, we're typically going to work to scale those businesses as we integrate them. The integration of those businesses from a cost standpoint can take a little bit longer and generally twelve to eighteen months to really start driving more of the revenue synergy to scale those.

[Mark Witkowski, Chief Financial Officer at Core & Main]

And if it turns out that we need to take some cost out actions to right size some of that, we'll certainly do that as part of the integration process. But I do expect that to be some potential upside as we go into 2025 to get some additional productivity.

[Joe Ritchie, Managing Director at Goldman Sachs]

Okay. Thanks. I'll get back in queue.

[Mark Witkowski, Chief Financial Officer at Core & Main]

Thanks.

[Operator]

Thank you. Our next question comes from Nigel Coe of Wolfe Research. Your line is now open. Please go ahead.

[Nigel Coe, Managing Director at Wolfe Research, LLC]

Good morning. Thanks. Steve, congrats on a great career. And Mark Robin, good luck with the next step. Steve, maybe starting with you.

[Nigel Coe, Managing Director at Wolfe Research, LLC]

I think you've been very involved in the M and A process for Core Main. Just wondering how that cultivation process changes as you sort of move on to the next steps?

[Steve LeClair, CEO, Board Chair & Executive Chair at Core & Main]

Thanks, Nigel. Obviously, we've had a really successful M and A year this last year in 2024. It was kind of lumpy honestly. We had a lot of deals that just came to fruition. Some of that is just typical of the way deals flow and when sellers are ready to go.

[Steve LeClair, CEO, Board Chair & Executive Chair at Core & Main]

So we continue to see a really strong pipeline of deals that are out there. As I transitioned into this role, one of the things I've offered to help with Mark is any type of relationships that we have from an M and A standpoint. I'll continue to be here as an Executive Chair and continue to support that, continue to work with him along those lines as he wants engagement from me on those and I'll continue to help in that facility.

[Nigel Coe, Managing Director at Wolfe Research, LLC]

Okay. Great. And then just want to dig into the large project pipeline. I think your large competitor talked about the acceleration, especially in some of the larger projects. So just wondering what you're seeing in both non res but also in municipal in terms of larger projects, especially with some of this IIG funding starting to come through.

[Nigel Coe, Managing Director at Wolfe Research, LLC]

And I'm wondering, on the larger projects, does the margin profile change at all versus MRO?

[Steve LeClair, CEO, Board Chair & Executive Chair at Core & Main]

What we've seen I'll talk a little bit about some of the larger municipal projects out there. We're starting to see a lot of some of the flow down coming through from the IIJA funds. About half of them have been allocated into the states and we're seeing about 10% of those now being allocated into specific projects. Those tend to be bigger long term projects. They tend to be water and wastewater treatment projects.

[Steve LeClair, CEO, Board Chair & Executive Chair at Core & Main]

Those fit right into our strike zone and the ability to leverage not only our local presence but our national scale on that. The bidding activity when we get involved with these, particularly when we get involved right upfront in these design build applications, we tend to have a lot of opportunity there to help set some of the specifications, help coordinate some of the activity. And margins can be real positive for us in those and can have a long tail of additional work that leads on the tails of those projects as well too when we get into some of the line work with those municipalities as well. So we're really encouraged by that. We're seeing some good traction in some of the large mega projects, a lot of the data center projects out there, particularly with the land development that's happening.

[Steve LeClair, CEO, Board Chair & Executive Chair at Core & Main]

That involves a lot of storm drainage material, a lot of water, wastewater material as well too. And so really well positioned for those as well.

[Nigel Coe, Managing Director at Wolfe Research, LLC]

That's great color. Thank you.

[Operator]

Thank you. Our next question comes from Patrick Baumann of JPMorgan. Your line is now open. Please go ahead.

[Patrick Baumann, Analyst at JP Morgan]

Thanks. Hey, can you hear me?

[Steve LeClair, CEO, Board Chair & Executive Chair at Core & Main]

Yes, we can.

[Patrick Baumann, Analyst at JP Morgan]

Hello?

[Patrick Baumann, Analyst at JP Morgan]

Oh, great. Okay. Well, congrats Mark and Robin on the new roles. I guess I just wanted to drill down a little bit with Steve. Maybe if you could give any additional color on what made the timing right for this change?

[Patrick Baumann, Analyst at JP Morgan]

Obviously, I don't want to intrude too much, but curious if you can give any other color.

[Steve LeClair, CEO, Board Chair & Executive Chair at Core & Main]

Yes. Thanks, Patrick. So I've been with the business twenty years and leading it for the last decade and obviously have a real passion for the business and the industry. And as I've gone through all the changes that we've gone through here, just really proud of what the business has accomplished during that timeframe. And when I look at all of the accomplishments we've had, the thing I'm really most proud of is really the talent that we've developed here.

[Steve LeClair, CEO, Board Chair & Executive Chair at Core & Main]

We've got a special culture. I want to see that culture nurtured. I want to see it continue to evolve. And when I look at where we're positioned right now with the runway ahead of us and I look at Mark and Robin and our entire leadership team that we've had, just a real passion for the business. And it's the right time to make a transition for me and it's the right time for this business.

[Steve LeClair, CEO, Board Chair & Executive Chair at Core & Main]

And I wanted somebody that was really going to have that same level of passion for the industry, the passion for the associates and really the drive to take it to that next level. And I see that clearly with Mark, with Robin and our executive team. You've seen some of the changes that we made even last year going in to position our business for long term success with some of the additions that we made into our executive leadership team. And this is all part of a real planned, successful succession plan and real proud to be able to do that at this time.

[Patrick Baumann, Analyst at JP Morgan]

Helpful color. Thanks and congrats. A couple other quick ones. One on commodity product pricing outside of PVC. Are you seeing any suppliers reacting to recent moves in underlying commodities for those products?

[Patrick Baumann, Analyst at JP Morgan]

Maybe any color on that. And then separately on the SG and A side, any color I mean, I guess I could try to do the math, but the SG and A growth for 2025, how are you thinking about that relative to the 2% to 5% sales growth you're guiding?

[Mark Witkowski, Chief Financial Officer at Core & Main]

Yes, sure, Pat. First, on the commodity product side, I would say for us, it's primarily the steel pipe used in the fire protection product line portion of the business and then copper pipe that we distribute into some of the goes into some of the service lines that we sell to. I would say on both of those categories, we're seeing more positive announcements. We've seen some good positive movement more recently in those categories. So viewing those as some potential upside for us.

[Mark Witkowski, Chief Financial Officer at Core & Main]

And like I said on the non commodity side, we continue to see some price increases come through as well here early into 2025. So I would say on really all those fronts, it's been mostly positive in terms of the recent movements. What about ductile

[Mark Witkowski, Chief Financial Officer at Core & Main]

iron pipe?

[Mark Witkowski, Chief Financial Officer at Core & Main]

Ductile iron pipe, so that's municipal that we sell similar to municipal PVC pipe, I would say. And ductile iron pipe, we've seen good increases throughout 2024 and we expect that to be a very resilient product category moving forward. You asked too on SG and A. I'll answer Pat's question on SG and A for 2025. As we think about the 15 basis points of EBITDA margin expansion kind of at the midpoint.

[Mark Witkowski, Chief Financial Officer at Core & Main]

I'd say most of that we expect to come from the gross margin investments and initiatives that we have and guiding to a relatively, I'd say, flat SG and A for 2025.

[Patrick Baumann, Analyst at JP Morgan]

Okay.

[Operator]

Thank you. Our next question comes from Mike Dale of RBC. Your line is now open. Please go ahead.

[Analyst]

Hi. This is Chris calling on for Mike. Just going back to the pricing outlook for this year, what specifically being assumed for non commodity price inflation? And when you're thinking about tariffs and the conversations you're having with suppliers, is there any sense or any modification you provide on potential magnitude of tariff price increases we could see this year and timing of that implementation?

[Mark Witkowski, Chief Financial Officer at Core & Main]

Yes. I would tell you for non commodity and the commodity buckets that we sell, overall, we're expecting neutral. I mean, that's what we're going to provide in terms of the outlook. Overall. You can assume there's going to be puts and takes into some of those categories as we go forward.

[Mark Witkowski, Chief Financial Officer at Core & Main]

I'd say from a tariff standpoint, we've been closely monitoring that. We're in regular discussions with all of our suppliers about how they're being impacted. But overall, I would say, the import product in this sector is still relatively small. I'd say it's less than kind of 15% of the product category. So while there can be some impact related to tariffs where there are some import alternatives, we generally expect the overall impact there to be neutral to maybe slightly positive as we work through a lot of those dynamics.

[Mark Witkowski, Chief Financial Officer at Core & Main]

But as you know, that's evolving daily and we're focused on right now is close collaboration with our suppliers and then early communication with our customers to make sure they're as clear as can be and that we're being as transparent as we can on the potential impacts as we see them come in.

[Analyst]

Appreciate that. And just is there any change in the competitive dynamics you're seeing in your markets? How would you characterize any changes you've seen year to date with the broader macro uncertainty?

[Steve LeClair, CEO, Board Chair & Executive Chair at Core & Main]

Yes, really no changes that we've seen going into 'twenty five. I mean, everything that we've seen, we continue to gain share through this. There's still a ton of opportunity out there for us in so many different markets. So really nothing that's disrupted or changed the competitive environment.

[Operator]

Our next question comes from Brian Barros of Thompson Research Group.

[Brian Biros, Equity Analyst at Thompson Research Group]

I guess further on the end market kind of your your market outperformance and share gain expectations for this year, does that differ by end market at all? Maybe it's easier to take share in a slower market for resi or easier in a good market like municipal. I guess just wondering if there's any divergence there or difference to the historical trends given the outlook where we are today?

[Mark Witkowski, Chief Financial Officer at Core & Main]

Yes. Thanks for the question. I would tell you in terms of the outperformance, we do expect that we outperformed the market by a couple hundred basis points in 2024. I'd say it's generally similar across those end markets that we participate in. If I was going to wait a little bit, I'd say we probably took a little bit more share on the municipal side just given the strength of our smart meter performance and some of the success that we've had there.

[Mark Witkowski, Chief Financial Officer at Core & Main]

And then additionally, we saw some really good strength and growth by servicing treatment plants much better in 2024. So I probably waited a little bit more on the municipal side, but overall really good market performance across each of those end markets.

[Brian Biros, Equity Analyst at Thompson Research Group]

Got it. And then maybe on the municipal side or I guess really across the entire business, are you seeing any differences from the new administration on the ease of getting permitting or maybe just new projects going? I know rates aren't really helping on the financial part of the equation, but we have heard that some things are getting easier or quicker out there when it comes to regulation type of things, I guess. So just curious if you've seen any of that across your business? Thank you.

[Steve LeClair, CEO, Board Chair & Executive Chair at Core & Main]

Yes, Brian, we're hearing the potential for that, particularly the easing of some of the regulatory requirements for permitting. But I can't tell you I've got some real specific examples where that's happening just yet, so it's probably a little early to tell. But it does seem encouraging that we could see some acceleration of that in terms of the regulatory ease of getting some of the particularly the nonresidential construction up and running.

[Operator]

Thank you. I'll now hand it back to Mark Wykowski for any further remarks.

[Mark Witkowski, Chief Financial Officer at Core & Main]

Thank you again for joining us today. We are pleased to achieve another record sales year for corn main, marking our fifteenth consecutive year of growth. The long term underlying trends of our end markets are strong and our products and services play a critical role in advancing reliable infrastructure. We expect to continue outperforming our end markets even as the broader economic environment evolves. Our business is well positioned to capitalize on opportunities for growth, and we remain committed to building on our track record of delivering exceptional value to our shareholders.

[Mark Witkowski, Chief Financial Officer at Core & Main]

Thank you for your interest in Core and Main. Operator, that concludes our call.

[Operator]

Thank you all for joining today's call. You may now disconnect your lines.

Participants

Executives

• Robyn Bradbury, Senior Vice President of Finance & Investor Relations
• Steve LeClair, CEO, Board Chair & Executive Chair
• Mark Witkowski, Chief Financial Officer

Analysts

• David Manthey, Managing Director at Robert W. Baird & Co
• Anika Dholakia, AVP - Equity Research at Barclays
• Joe Ritchie, Managing Director at Goldman Sachs
• Nigel Coe, Managing Director at Wolfe Research, LLC
• Patrick Baumann, Analyst at JP Morgan
• Analyst
• Brian Biros, Equity Analyst at Thompson Research Group