Earnings call transcript Q3 2023

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, ladies and gentlemen. My name is Elliot, and I'll be your conference operator today. At this time, I would like to welcome you to Ferguson's Third Quarter Conference Call. All lines have been placed on mute to prevent any interference with the presentation. At the end of the prepared remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator

like Ferguson's the Relations Vice now Mr. and over Brian Lantz, President to would call turn to Communications. I of Investor

begin may your call. You conference

Brian Lantz

this call Ferguson's Good our to chance corporate will section available our is earnings call this on quarter morning, available welcome issued the Hopefully, SEC to website later we A The everyone, earnings had and and review recording conference made filings of morning. and announcement a in webcast. you've Investors of third be webpage. today. announcement the

risks section we our everyone I expectations want to some to that discussed obligation disclaim to the including today statements statements and may entitled and available various from on risks forward-looking any remind in and could website. subject company's to uncertainties that represent these the are Risk today materially XX-K of specifically actual results Factors projected, differ SEC's of our Form Also, and forward-looking cause statements. uncertainties any be update as those certain in only the the

call non-GAAP will to most on our today's and directly for GAAP on financial regarding our earnings we refer reconciliations addition, also presentation announcement non-GAAP discuss website information financial measures. additional measures. measures, In including Please those certain to comparable their

on call CFO. and today our the me Brundage, With are CEO; Kevin our Bill Murphy,

to over call the turn Kevin. now will I

Kevin Murphy

and brief On fiscal today's group view give call end and end I'll provide cover by Brian, you, also markets Bill questions. turning our Bill at of come by I on everyone fundamental I'll our third of quarter XXXX. and before to welcome call, year the a some the residential and your and of then customer performance Thank end drivers the updated take call. from outlook non-residential back financials for to update for conference market our to detailed over performance. the our results highlights more a I'll before QX Ferguson's

following has and that fiscal our associates delivered again year in the solid step in XXXX. year as performance in The continued up we expectations expected significant were results our with line delivered

beyond and Our to help successful dedicated associates serve sustainable. simple make above our and projects their to more go customers continue and

have We become serving to customers' help our our business scale, consultative As balanced sheet global our mix and balance market is challenging, us more our our projects. leveraged conditions our supply chain well. strong improve approach,

with XXXX. at on As of by we pleased the modest revenue $X.XX. earnings in cost share but disciplined expected, from of and over compared decline growth equivalent adjusted years significant ago a This represents We XX%, adjusted revenue remain the delivering two operating XX% up per year diluted fiscal saw in respectively. quarter, XX% million to profit stepping and we're quarter $XXX

by program over us of and generative consolidating fragmented to the when strategy of to our increased for allows of Our came repurchase proud execute growth declared strength markets our cash organic these model balance which model increase million. and of the annualized we results, have $X.XX prior as and investing the acquisition remains sheet additional We've business and dividend quarterly capital strong a to our an X% we also a year share go dividend, in confident our returning expected through $XXX shareholders. forward. sustainable growth, per as are implying share We're in our continue of

States. by strong the market performance growth United lap became Overall as in end Turning we and more challenged. to markets our comparables moderated

and markets, end resilient. impacted core in Whereas by the significantly in construction trade more our particularly maintenance remodel residential an high serving expected, slowdown markets new were area professionals and repair, residential consumer. improvement the project As more minded and proved with

quarter the half revenues, revenue, just decline. comprise to residential of U.S. during slowed which a over Our X%

the half related saw nearly with markets good growth representing the in our markets It in nonresidential and pace our a end taking residential industrial line third revenue sales continue were in Despite was X% to U.S. ease we activity higher quarter, markets. end guidance. than prior both Overall business, markets of year nonresidential in tough share of across our the on of outperform and slowdown sequential top non-residential end comparables.

As seek we've and expect time, balance maintaining continue to we balance. discussed market will maintain over on rates previously, to this mix fluctuate we end growth we our will healthy focus while

States. in customer remodel prior continued top our and new softening of Digital United XX% trade comparables building activity. to against Turning XX% Commerce now due principally by to in comparable consumer construction due groups demand. year to prior residential declines higher declined plumbing Residential XX% end revenue on growth a across the by remodel projects. year XX% Residential grew Residential with X% in resilience declined growth,

residential a majority where market year resilient works business on group and residential two between prior our revenues comparable nonresidential with growth. a XX% and HVAC, demand. stack Waterworks advantage the by of The X% serves public diversification us of business more were XX% flat mix the our year end Waterworks of commercial allowed within good take of balanced declined growth. to and top of ensures has work

commercial The X%. mechanical group declined customer

the industrial plant serve and nine industrial market comparable, customer growth increased driven and such Our trends is needs turnaround in holistic nonresidential It and delivered end our more This total and groups activity. onshoring, a work to quarter way more to bring us of a general as exposure. supply combined that against platform the we achieved broad fire a our fabrication XX% businesses balanced by in project. facility customers value growth XX% allows through and

a to bit in hand take you financials who will Let me more over little the detail. through Bill, now

Bill Brundage

morning below largely foreign X.X%. one afternoon, acquisition declined and last X.X% Net were exchange. and year, the principally and everyone. revenue X.X% good by X% was Thank driven by you, Organic fewer or sales growth Kevin, day offset of sales impact of

margin QX. inflation comparable. of price XX% by prior deflation modest in was principally XX% expected, in certain The driven from against decline in was year points Gross basis X% As down commodity categories. QX stepped XX a strong down to

seasonally managed revenue to the XX% year's diluted remains an as increased was Adjusted XX% X.X%. million remains quarter, proactively of by a operating the fiscal record third into of fiscal keeping Adjusted to quarter. adjusted XX%, $XX well it margin or deliver compressed prior compared operating QX, flat profit, compared enabled XXXX. with EPS basis levels. operating $XXX but our stronger to We This down profit cost third ahead us base, adjusted million on in of line but reduction above in XXXX sequential

both tools systems, capabilities, office call and and upgraded buy million modernization investing Ferguson approximately and to charge took productivity. online, decision based branches Also, X,XXX finance as to the base and end journey, on and technology, in XX in areas have benefits branch review additional omni-channel to to to branches. portfolio market We capabilities delivered the drive continue we and our We conditions IT of make facing center capabilities forward. automation cost customer right progress closure end going We've of cost we contact overall good our underperforming related our pickup evaluated Systems. the this network we and in customer such back modern proof $XX systems fleet and During of HR with robotics control and warehouse base. store with delivery within smaller steps recorded key front quarter, and a and ensure back build

a our branch the efficiency results requirements to speed associate the and of After experience component did of our at handful processes determined the not software the piloting transactional modernization enhance we non-cash with $XXX A targeted proceed to and and in we service, recorded solution investment customer of locations, Accordingly, a productivity. million meet customer the certain quarter. chose charge not of impairment we upgrade.

processes associate our low our guidance adjusted what leverage intend customer X the at that our balance remains strong and to building to improving debt times our while we IT stated on on to EBITDA overall range. journey, has focused in modernization productivity. towards good of we systems times on end And invest will deliver maintain remain X.X an to times unmatched enhance areas finally, continue been experience net We and X to sheet momentum and

strong The X.X%, delivered X.X%, by million, performance declined Organic contribution by delivering fewer operating down Moving acquisitions. year, $XXX the We day. X.X% sales X.X% adjusted X.X% U.S. over profit to revenue declined against offset sales Net a one segment results. margin. by from our business of delivered prior operating comparables. driven solid another adjusted a

X.X%. sustained rates resulting to Turning of fewer XX.X% exchange from from X.X% a challenging day. comparable decline markets adverse rates quarter. declined by of X.X% a sales in our one further X.X% declined Canadian exchange against the foreign Total foreign a impact the and Organic with softened impact revenue revenue strong decline segment, from some growth. pressure

was markets of U.S., below million the better operating quarter. Adjusted with Consistent nonresidential residential down $XX end than year. last performed profit million this $X

done While longer in we to the over return will there business in invest the the of is capabilities to Canada, profile be term. improve more work to continue

against year rates of by and prior during foreign contributed sales offset growth days. from acute last chain inflation price year revenue, a X.X% XX a X.X%. the of disruption. Acquisitions down comparable to to points Net XX.X%, strong period organic impact results. to were Turning and as commodity with basis sales rapid X.X% supply was expected Gross margin year date exchange partially above X.X% adverse

labor while the non-labor proactively have business. down natural attrition allowing to and the without operating We throughout year, managed reduce FTEs both number managing temporary expenses backfills and is the overtime of labor

by quarter targeted headcount reduced our headcount equivalent these as the actions over implemented full In discussed last year. time X,XXX during addition, have certain Selectively, we reductions.

to by we resource operating diluted year, X.X% was of prior a flat X%, operating continue first strong in to delivered operating months flow, and grew billion delivering prior flow benefiting than the the nine which the billion business year We from billion more evaluate base generating year. forward. cost as allocation profit $X.X program. Adjusted repurchase Adjusted cash during margin. was The cash will EPS $X.X compared the adjusted our $X.X decisions move our of share

billion supply in adjusted reduce acquisitions, flow the was we date continue excluding Year year. as of first nine to months chain ease. fiscal constraints as to $X.X $XXX the capital with benefiting Inventory, working cash million was down EBITDA inventory

to our rollout branch to technology The market distribution increase CapEx to the in year attributable multiyear of center market We invest is principally investments through continue in programs. related organic strategy. network principally growth distribution centers, and invested prior timing over our

As a billion, year. $X.X the nearly cash increase of a result, $X billion free over prior was significant flow

the a four maintain resilient well to end advantage balance of growth priorities. ensure of We as clear through capacity capital as times. sheet to we to take X.X adjusted leverage low Our net times X strong And to net debt EBITDA is to the times. intend position balance operate towards of We target X a have with of to sheet. cycle across range range we the allocate opportunities

to First, business we're growth. organic investing in the above drive market

had this As cash positive mentioned, date. on working previously a capital impact flow year to

Our focused rollout. were CapEx on principally market our center investments distribution

sustainably Second, we dividend. to grow ordinary continued our

a declared X% cash confidence per increase board that in annualized implies an our generation. over share year, quarterly dividend reflecting $X.XX the Our business and prior the when

five fourth consolidating is of definitive revenue purchase our close markets quarter. annualized acquisitions. and approximately through We have the year, fragmented fiscal on agreement expected of distributor in in million and capability geographic S.G. HVAC location bolt-on Northeast, bringing Third, Torrice. a incremental the the since which we're the start purchased in $XXX to XX businesses signed

our the to strategy. will to below we to shareholders Our returning low leverage we finally, end capital are remains execute and surplus we healthy continue when And of consolidation range. are deal our target committed pipeline

balance We to $XXX repurchase by resulting additional of And million quarter. the repurchases approximately $XXX share our have end million, X.X the in date, extended at via count reducing by we've share of $XXX million. share to program million remaining an the year approximately a returned shareholders

The to Turning to fiscal guidance. expected. XXXX of year our progress as view continues

operating the Our and with we tightened of unchanged. range midpoint adjusted have range guidance the revenue on unchanged the remains guidance, margin

basis low set adjusted the on the growth, of acquisitions expect up of the top the to the digit out guidance. adjusted to digits some between last expected single normalization. We've share and two we've $XXX trimmed and tightened completed in we deliver XXX unchanged operating As benefit to million points to of margin year, driven X.X%, by After to stepping market margins which our over years, range the we between midpoint the guidance previous the million. X.X% $XXX decline markets, to year. at for of single revenue top continue gains and beginning We've interest expense operating expect by low we end organic with to bottom continued

adjusted remain our approximately rate Finally, of of tax to CapEx XX% effective $XXX guidance and $XXX unchanged. million million

focused remain us well performing and the expectations. executing believe on the strong our is positions balance with and of So business in sheet model business well. to line flexible combination our summarize, We I strategy. our

Thank you to Kevin. back you. I'll pass And now

Kevin Murphy

you, Bill. Thank

drive our longer to while We the investing further advantages continue outperformance on term. end for to build competitive market

continue This business ensures scale with and in and a maintain will model. to cyclical, residential a balance We pools and improvement non-residential broad to maintenance also new construction. repair, a of business exposure durable we profit balanced attractive can more leverage with and both less

Turning fundamentals residential to in the markets.

and and we rebuilds and revenue construction. be residential and will Aging term believe new should market a And exposure be new is repair, near challenged, reduces medium very stocks greater maintenance an continue repair, streams markets construction maintenance residential of remodels. term. supportive cyclicality. of our remain housing both attractive residential of combination demand low of The to improvement improvement with While fundamentals over homes combination to the of supportive rates vacancy the undersupply with

nonresidential to end markets. Turning

ahead on of towards five view construction over unchanged. continues projects spend to mega next opportunities volumes with the large significant The remains scale the data years. Our megaproject point

our As from across one our value the all sell up capabilities, and on construction to focusing ground to of years. of over over we just total the our the over Ferguson, with billion project solutions services our to We this, the we're million five value have $XX our do selling add market businesses. platform be products next able and ability projects estimate for rather leverage entire than We products. our across $XXX addressable

from our these infrastructure provide acts We legislative multiyear projects. onshoring to meaningful and tailwind. will scale these We trends believe aging recent megaproject significant us supported continue capture by platform believe growth position strongly to activity, the and a

Additionally, gravitate our where towards nonresidential work customers the is.

typically move or growth to segments retail, contractor where For airport ability means the customers construction our This of a education, between healthcare, office, to example, opportunities can terminal. like flex a are. have new the

me build expected. on to track for investing we overall market our and associates to let key while again to future we comps customers. our position for strengths against dedication thank To strong close, as and to growth. serving their challenging performance date been has year continues The continue our our The leading

environment, between and balanced are residential and Despite construction mix with well nonresidential, a more challenging macroeconomic maintenance positioned business and improvement. a repair, we new

conditions. We allows model have flexible that to and cost changing an agile business us base to adapt market

opportunities end to leverage for order at focusing us in the strong operating And low and growth across allows of markets. platform in while position allows through our balance to on This our cash a customer from to our invest capital our nine changes structural advantage and to return organic we're consolidate maintaining end shareholders. scale target competitive leverage markets acquisitions, Our strong groups continue range us growth, generation. to capture sheet fragmented

take and term. We're attractive confident to questions. your your in position our happy are markets competitive medium for that the today. over Thank time Bill in are you now I

Operator, I'll call you. over the to hand back

Operator

Bouley question you. Barclays. with [Operator Matthew comes First from Instructions] Thank

open. is line Your

Matthew Bouley

you Thank to the near taking term. just on start everyone. one for Maybe morning, Good the questions.

assuming guide a of the year get full a QX to to I bit guide. revenue deceleration your is think

year I think is stack relatively similar the two sequentially. comp

of just color kind color maybe So around volume quarter any you. what to that price any you've date, on been please? QX? into underlying Thank seeing what's deceleration, And

Bill Brundage

Yes. one. Matt. I will start It's Bill. Good that with morning,

are You correct.

digit mid-single expect mid implying -- decline of our organic implied single If at compress. look high for it's be roughly comprised revenue to with mid-single continuing digit a to that price would We digit guidance QX, inflation you decline. to

year price but to move we've So just we and was the will with be down seen compressing. where step all price really that in likely it continuing quarter inflation sequential through to inflation trend continuing fairly QX, volume similar as

what much May. single with that dropping terms was low in down seen down mid inflation line in with May we've In of high right digits digits. pretty to single the into

So of we'd play to kind expect finish the continue through up to QX year. that out to

Matthew Bouley

Perfect.

Okay. for you Thank Bill. that,

Really Second color one, helpful mega level project. the there. on higher

that? market capture looking $XX one, billion Ferguson's your the of of that Or did And at number guys. Thanks, market? sort thinking groups you arrive your do and estimates curious, two, addressable at that? do your I'm of think be $XX we share how about nonresidential market. your we then we of how estimate? gave about applying Should You market current that billion to think how share customer number ability

Kevin Murphy

mechanical, Matt. as you, up work we And fire forth. fabrication, and tighten we our and like Thank in so last waterworks really addressable be went market areas commercial through industrial, quarter, to try what could and

the we of that up of was in from we with so, manufacturing to movement activity of started perspective and look a tighten like. And terms because that that and number that expanded the that include some in happening, industrial to start fact area particularly and onshoring that in would technology of sustainability projects the the

And best customers network network product as that like trade that pull water same look chain time. provide general as to sure on mechanical and strategy a we've required. think our we pools with what fire beyond use utilize the and of What's then customer think branch everything generational what decent that and the owners and that product that got the that activity. quarter, from time on-site perspective can really we represent to we're the we excited product to around to can is profit associated supply a specifications our So from make commercial idea the engage with during are categories at as and pretty as with to contractors exciting about our industrial is, And really project deliver revenue as our in nonresidential PVF. across thing with in construction last a and what time, then we can discussed base. that And on terms start shift we and

large well complexity these that of And of overall the the what platform. so really think serve we in projects the and are terms capabilities us of

we our types shares share in of these think overachieve So market projects. traditional a we from can perspective

Matthew Bouley

Got it. All luck, guys. Bill. Good right. Well, thanks, Kevin. Thanks,

Kevin Murphy

Matt. Thanks,

Operator

We now turn to Ng Philip Jefferies. with

line open. Your is

Philip Ng

Hey, guys.

a in quarter choppy Solid environment.

mega I'm potentially certainly we've excited you're typically the I conditions. just enough Kevin, on lending commercial, and these opportunity projects. So trends lags that tighter resi is like about mean, offset some of in softer certainly seen curious, that to

to XXXX? these the just progresses us side how out kind help markets think commercial on through look So two as we want of end to

Kevin Murphy

perspective, our more From Yes. Thanks, timing issue it's a anything Phil. really else. than

we on activity or as be there that office deflation iron is it progress before, As a like of these discussed also may a commercial we've nonresidential we in natural of way in commodity low. product and because pressure additional complexity size knock like space, retail the even product is that at going There's out perspective. really just issue chance period for on and the because to from look certainly their areas build cast the steel. terms see categories But gestation timing a projects the

during indicative of non-residential mere order of low a what bidding low And what a we in activity fact, the is, of In terms saw activity that quarter. commercial a that is our in and looks just bit the not mechanical like. business timing

we plus The believe believe suspect. We will it that next provide years. five will timing may So the over a be do natural tailwind. do be

Philip Ng

Got you.

think think with year, you to are through? it's down more up flipside, investors. this once Okay. And quite among R&R, a sales your Directionally bit, that's And resi The existing see when home business, you on actually that come starting again, patterns talked questions homebuilders picking order have up I certainly balanced. helpful. about the

kind you're us in hung It's about resilient. the been business pretty there thinking [indiscernible] pretty walk through Your you're well. how Can actually seeing resi? of you in

Kevin Murphy

that residential fourth in construction trade pressure get contractor construction residential quarter principally to with think place into plumbing kind bidding new find business actually been through to and new started begin a reasonably that saw The for historically we million of And residential to our a and somewhat particular, was quarter, is grow activity of has X.X good fiscal we us if you plumbing as it, and bright the state Yes. in from. spot. starts, a steady and about our

pressure was was. that where of So the the bulk

activity that the a as actually, RMI bidding to in higher-end is with perform side, side, fact, sits of remodel That medium-sized exposure activity small good bulk which I better to we supportive is residential and their year bit remodeler our business local showroom X% a activity continue of subdivision did prior comp. said, XX% We're the builder and with business like. for consumer-related our on looks on where what seeing said, the growth And activity. performed which see what of that in Waterworks top well is knock-on

market balance our just of that of it, supportive call think under res of, So is residential and business being that we the what RMI being XX% just like. XX% new looks

Philip Ng

you. ripple the you bidding side, that inflection can you standpoint from volume guys? long take does Got Kevin, how on called actually a to it remind through us activity for out

Kevin Murphy

Yes.

side of activity time see months would So so. the business wouldn't it construction lag six appear trade would as for that take a bit water side before residential we the a or likely the on our have and still then bidding activity of in it

we And the into side improvement year, could look really quarters to a question like so start as you start of world. next residential look on what of as the at it's to look

Philip Ng

you. color. the Okay. Appreciate Thank

Operator

Thompson Group. Research We turn with Thompson to Kathryn now

Your line open. is

Brian Biros

activity is Hi. a like year. bit Biros Good Sticking taking for everyone. the the for looking Brian beginning of last similar kind my of the little of expected theme of obviously, actually it's at on residential, than This questions. stabilizing, stronger with state the question Thank bidding it on morning, Kathryn. seems you down,

looking we just of going new sometime a can today we of return growth we're what bit and So about to continue are forward stable to where you normal? expecting is this at soon. little kind talk Or from kind here sit

briefly on would little bit be last helpful. think a the more you on touched I but it question,

Kevin Murphy

knew comps be point. as third we Yes, going very Brian, our that up was residential had new were we into against. walked construction We a strong to you. And we thank pressure quarter, that coming

commodity-based a a And saw a there we into comparable side some residential which in that deflation. QX product, PVC have continues of the headwind. knew plumbing That like world, perspective residential of with could bit also out that from play in be that revenue QX. even headwind we our particularly and product into areas pressure We causes

X that We this good expectation. historic But And that country, in starts number. equilibrium. need starts so of back We under perspective, arguably to of know from we're we see X.X again, million and reasonably X.X what our some frames terms starting a million looks spark like to we're activity. know units, X that in get to is built, million degree million so to in new construction residential

Brian Biros

Got an also on out federal there. it. you Thank Ferguson just that how you. all are Can provide update with initiatives wins spending the

what IIJA, [indiscernible] just Act, is on come? still the to from What what ground benefiting are seeing You Maybe are you. Reduction you Inflation now Thank and you today? got currently Act.

Kevin Murphy

that take really on And in firstly, two I'll the Brian, question parts. residential side.

some product strategically in especially As exist sustainable Inflation of growth, areas We inside heating, the particularly tailwind, do market. that that when to HVAC you see we at Act. look and structurally having the Reduction as can a tailwind water look

water think heating technology we contractor to take HVAC continues sustainable repair as And going well in trade capabilities to that trade so, across perspective, and skill solution that the sure as plays plumbing replace really build M&A heat solutions start and from dual we're set nation plumbing to for out pump look an to both well an marketplace. organic we as our grow hold as the best dual like invest, contractor, we're to that to the HVAC that and look make really

if tremendous supply that science, And disruption. look There's if work take that, with that at contractor, to just nonresidential to be of then mechanical utilizing for same for activity projects. you non-res intend multiple mega or and the the and infrastructure protection time, Reduction Act, manufacturing advantage commercial Inflation the following owner industrial general happening the the onshoring fitting. on look you again, the chain solution chips general the pipe at the a a and We just individual contractor, the being side, work amount doing the while may provision, best utility fire at customer site who or provide or of groups valve solution

capabilities it's think to customer So those groups we a leverage to across good and begin non-res. time

Brian Biros

you. Thank

Kevin Murphy

Thanks, Brian.

Operator

We turn with JP Patrick to Morgan. now Baumann

Your is open. line

Patrick Baumann

had color quarter-to-date for questions. then just on wondering morning, any Good On morning, the the kind then to acquisition I X%? website how Thanks haven't on of versus OEM yet. through May's you third the the chance quarter partners. any the on Good charges. Kevin. and look a decline could taking or couple I detail kind the of of on one And a if HVAC of Hi. Bill. looked my there, and revenue on give the had HVAC, size

So color any be would helpful. on that additional

from ongoing it just impairment And as maybe impairments, the there's just seemed IT assume closure, pretty curious of branch sizable. impact charge, then on in savings I cost the terms some the business. but on small sales well. And

loss on, would color that benefits item you perhaps? detail just specific I can Or be give any guess, some Thanks. productivity maybe on So additional helpful.

Kevin Murphy

and morning you. thank good Patrick,

to England trade $XXX-plus organic for residential our New plumbing acquisition together as inside as an from Torrice, a it's with side business perspective. in and us, perspective the Really step England an a clearly of if On million solution the marketplace growth S.G. an take pleased sign with M&A from area HVAC real for back, bring powerful investment customers. HVAC I our business, well again, to that them New of provide both

from in terms U.S. softer bit market, perspective. the HVAC of landscape. a what the we're The Western as was little we In at an look seeing

we're quarter, when was effect in like candidly, at overall people. not an third the the the from that then got quarter. weather And and residential pleased base looks be an looked look business what the you we've as like the had build-out what HVAC the with we're supportive. M&A solution revenue our to level a activity very provide that so the And cooling on great trade in But with combination generally to perspective. in But not plumbing our necessarily speaking, days business, here what

Bill Brundage

these perspective, And branch a charges, from smaller Yes. mostly the think on closure of as Patrick, branches.

from a of impact loss right revenue the forward. So ensure the right opportunity we clearly cost But the branch to entirety as be taking and a review it's minimal base there will moving the have structure the cost portfolio we perspective.

$XX a of period looking roughly savings, probably million at with terms amount by a of again, In payback, year two on actions. those three offset payback charge, lost cost a sales small probably to you're

said over And investing IT on an in five over roughly component significant a And focused quite I'll in the that a transactional that CapEx it of journey. a years years. We've different a and pieces. perspective, in on number multiyear our the go then piloted basis didn't third areas where just as lot been of successes meet quite remarks, modernization IT quarter back locations. the of was we as to invested and an frankly, it quite said, to several we've as our And last annual This pleased to we service journey. from last needs delivery customer had expectations. those prepared over branch part our of we with handful pleased, a And in our we've four of

to service project-driven last We ethos. do business. that is the thing jeopardize are a very And complex customer customer service we're going

forward. IT move look and charge about good the take journey to decision on we and our the made very feel So as

Patrick Baumann

Thanks it. the time. for Appreciate

Kevin Murphy

Patrick. Thanks,

Operator

Our with from John Lovallo next UBS. question comes

Your open. line is

John Lovallo

Thank the mean, the fourth seeing you what now, imply confirm here, guys. would through upside X% question And Maybe morning, maybe digits, right in could what Good the I you're to should of first growth revenue on about which and Yes. downside? the my as here. market sort just be taking quarter down of the year? sort one, given we currently thinking mid-single for changes well

Bill Brundage

Yes, that's right.

in guide, growth you range. that would of at If mid-single-digit revenue total that down our imply look midpoint the

As said earlier. through I quarter, to said the rather, or step of that. as compressing anticipate the inflation a through organic being high I year, we mid- as single-digit with we step as as We price that component decline

points us the QX. of similar in a acquisitions pick So a decline decline bring where QX. it up we'll to And volume then for in back to stays in mid-single-digit was couple range that to

John Lovallo

would high imply margin on end a and end? fourth quarter low margin. of the maybe you pretty that end Okay. That's current that of your It think change What it notable high do then the sort just in at And helpful. and of the end, drivers trend. implied seems the low

Bill Brundage

X.X% I you the year. midpoint And range, the being having the for delivered think on focus mean the three us I through first if full of quarters. X.X% Yes. midpoint

the is midpoint in with right delivered for the So where we've line really year-to-date.

If In towards we've there, pressure terms same there's But a deflation that bit or talked commodities that or moved of the total, the QX. about about, to in we've all commodity moving seen that although what which of up could commodity certainly, of flex compress lower time. the in little continued prices, to the downward in direction flat more pressure continued that put down, have inflation not could at impact same end range.

commodity it, On continue the changes two, call us that out have delivery. over point in we Any volumes on round to the while more a as could of the next, environment, we if don't we dramatic stabilization, an X.X the impact to the months the that, there range. side the could then float quarter. midpoint or certainly, of have expect flip change the And see up to high towards trading

John Lovallo

Got guys. Thank it. you,

Kevin Murphy

John. Thanks,

Operator

turn RBC Capital now Markets. Dahl We to Mike with

open. line Your is

Unidentified Participant

taking Mike. [Indiscernible] questions. Thanks for Hi. Chris It's on for actually our

Just this going you've the reductions now the XX It and actions of been announcement branches. this to year. the since implemented February so have back far headcount looks underperforming like cost-cutting paused

we that are be today completed? And of terms when to where your cost-cutting should we Just journey? expect largely in

Bill Brundage

date. taken to feel we've about very We good Yes. actions that the

down a it then from a in of FTEs on, some the X,XXX QX. attrition combination addition actions, headcount and If natural is that's you think about perspective, targeted organic And to we and we in of QX overtime the actually commented total which about took in temp year-to-date. labor count just by head which and

So play we think stronger in from good seasonal months our summer we're as a in we the a season. headcount perspective, certainly, through place

as don't we we watch market the under from environment perspective. have close right evaluate any we'll now additional going headcount always Certainly, do plans action So as forward. keep a we that

we we move earlier, from right that standpoint structure ensure branch have And an cost the infrastructure talked that then closures to as as opportunity about forward. the taking we

that no and significant additional this quarter but fiscal year. them about at to the actions through advisement, continue we So fourth plans reductions feel into under We'll we the have we've good point, as for keep next move taken.

Unidentified Participant

said that deflation you then that to flesh any up on you that? being in drag. digits. be to Got pricing it. comp still guys pricing there that power How outlook a of about what terms the single keep you Appreciate just year to essentially? expecting are Was that. just pricing drove think able you a in moderate is And to with a low may just then flat Could up into pricing follow-up to out thinking to changes marketplace? offset the price largely And when with dynamic? Or next

Bill Brundage

line in been And about inflation just our finished rollover X% QX, how the comprised some going But moved quarters, that set QX significant to really through said, we If in up of in we with pricing flat. think beginning we a range goods the XX% more with from as of single-digit you Yes. being high years. XX% right at that the in out as has year, that in price at prior expectations mid- QX. of from of natural commodities, was the to QX to look it's

finished QX. a difficult for We touch finished a the, good more would deflation basket, call -- Moving forward. very single-digit inflation normalized commodities happens to we'd of be And being low which to variable But to industry, what move that's those the expect we in it, goods range. for with that as into QX then forward, thing our through levels return obviously, see a and as move as could us predict. we

Kevin Murphy

and you commercial as itself forward. projects we PVC of pressure more as from look then steel the will steel And think supportive that's trade relatively a markets commodity that residential market. becomes manifested a today, by been the supported has bit the remain we perspective, as PVC the mega nonresidential principally plumbing area Waterworks move in at And

terms the deflation inside what's pressures with been bag happened in expected, a as So of it's mixed commodity-based products.

Unidentified Participant

Understood. Appreciate all the color.

Operator

McClaran Our with Hayes Zelman next question & Associates. comes from

is line open. Your

McClaran Hayes

Hi, Thanks. morning, guys. good

thing, mix down? roll-off to prior besides are trade year the build any or I impacts guess, pricing on of the seeing you increases, that, On any

Kevin Murphy

aren't natural mix balance you of but also movement the business, our gross our down. have construction business, gross would impact groups a seeing serve. a margin RMI, trade From new given perspective of from inside any a customer a We will cost res, nonresidential slightly to as perspective see a margin non-res lower slightly lower

has a from but tip so see And margin, be of downward you in gross margin bit as operating a may a should little of unchanged. tailwind growth, non-res bit a

McClaran Hayes

there commodity Got Thanks. could was And percentage brands, there's I brands headwind growth overall how as revenue. isn't update on a of us trending of inflation that the is it. an own to also if much you any hoping now that strategy give own your year-to-date, your

Kevin Murphy

product well been product We've products together the particularly been HVAC under pleased the our growth overall rollout side a what both on of commodities been of they're own today, do. we very plumbing unitary exclusive that from with very strategy, our of our product. ductless products, But pleased been with our do the We've of with residential part pleased of vendors sector. vendors. we branded the Yes. It XX% right, in roughly very with areas the branded in they've and just expansion as of brand. tick revenue. as our XX% And to DuraStar in commodity like we've down, start trade It's of as is you're what XX% historically

got out adoption several play and good we quarters. that the So in think growth next it's through we as will marketplace, the good go and

McClaran Hayes

you. Thank

Operator

We now Keith with Truist. to Hughes turn

Your line is open.

Keith Hughes

you. commerce. Thank digital Question the on

did there, the one closest have you talk that you trend about in the to How like products -- trends to trend May? did that consumer. that's would As the that's of and only there how quarter? How

Kevin Murphy

balance business digital It's pro and better principal right. much the Keith, That pressure. the project-minded like exactly of project-minded which a consumer between driver up pro the holding decline. commerce you're consumer, the the decorative than was saw residential with the

if the the pressure and it digital we in is of at then exists so, market, residential on look trade that plumbing commerce residential the project-minded new construction side residential on in business. consumer where the the And really side

Keith Hughes

change that DIY? went did particular May? to of quarter quarter that Or that And XX% on most as change of Is the quarter the it as went was the along? end down

Kevin Murphy

It wasn't a It fairly Keith. step down. consistent, was

Keith Hughes

the and Okay. And -- you kind Can saw how about in much in commodity forward. deflation quantify move on the final of talked potentially you period? question you quarter deflation

Bill Brundage

plastic on Kevin's offset and Well, perspective. point, territory in being copper, fittings pipe flat year-on-year carbon waterworks up about again, basket. Keith, moving the business side steel steel we slight the pipe a total, it saw was deflationary into of plumbing as to again, still a plastic by and and With, from

from was plumbing slight basket, about So a pressure it the cast on orders inflation iron perspective. as iron on on Slight side the and flat. ductile side

Keith Hughes

-- And we assume, particularly to year. just PVC, fiscal that's as on I new head Is stay are, going into going that's the they correct? that to turn where negative prices turn

Bill Brundage

of where a sits pricing rollover the given chance just good there's today. Yes, of that

Keith Hughes

Okay. Thank you.

Bill Brundage

Thanks, Keith.

Operator

Our with (ph) from Baird. comes [Glenn final question Richardson]

open. is line Your

Unidentified Participant

consumers, build relative holding right way higher-end and of that broadly, on made versus about more exposure and thinking remodel to there, Wanted earlier Kevin, guys. morning, good the think the to Just digital the and up Hi, trying exposure you the to guys? for that better. relative the business business? Is just of question to quantify showroom on digital think to you about the how higher kind end comments

Kevin Murphy

at That challenging. price. That's inside has right, piece again, as to principal as you sizable activity. the showroom be building skew that between The project in the continues in remodel project-minded pro more which well residential the showroom business traffic group like the to that Glenn, been a in customer commerce group, a higher and side, When fairly a remodel consumer towards very be balance is a project consumer. to supportive our being look has digital supportive, well new and does end, that continues tend construction and as bit growth in decorative of both as driver

showroom team not Now to our digital that residential the experience good with bring capabilities experience digital around that those that a also omnichannel help that that the with but is our make showroom. together part only us for in customer exists energizes build that Ferguson utilizing mix, to better to in commerce balance connected and

we've through as that's so, the gone supportive And past been year. very

Unidentified Participant

of the secondly, especially mismatch that just about you. HVAC. go first quarter change, then we you [CR] then but your DuraStar talked rollout, get strand if be you inventory Thank bit it can specifically little inventory inventory? could an or Or I Thanks. business, the on before, in the (ph) question following if that this a And that any discuss just wondering fairly would Okay. smoothly? state update on being helpful. full And did a

Kevin Murphy

take positive rollout in be a ductless. and then both unitary well I'll to as for DuraStar backwards. part first as thing The very us, last continues the Yes. work

one made right we We as have roll that be we choice out in of a perspective, we product we've offers take that. offering OEMs. continue make that but and supply how mindful got for to us to Again, geographically the about from plan we product a place good for our multi-brand sure also discussed, that our again from as customers,

the no DOE gone think on. has DOE that overall and trapped change the inventory as have we market As about we little to is that changes,

perspective, right great positioning chain supply generally normalized good much then good into customers the We a still take of and the to is supply move into a of do have pretty the ready product our as speaking, good inventory pressures, job as that supply inventories areas season. the summer of care place. cooling cooling into chain from frankly, we think our some individual categories board, we quite summer we months. So teams across a have did some for but season And get

Unidentified Participant

very Thank you Okay. much.

Operator

Murphy, I'll Kevin This to hand closing for CEO, Q&A. remarks. concludes back our any now

Kevin Murphy

deliver year thank let non-res, it which again res, Very serves -- projects us you. complex more RMI, and customers' expected, balanced continue our take for construction. your close today. don't to and as our the thank We then for granted. strong began, who you to And continued much appreciate sustainable. saying business me you and The new make mix much. well, our you for Thank it. we them unfold very simple, we time by successful is does and way a associates And Thank to

new over residential medium $XXX medium Our projects nature business. favors markets term. good then And opportunities balanced the is advantage which And attractive over the activity, of really over of taking and of underbuilt an from construction across mega space. our growth housing the remain the perspective, non-res supportive supply unprecedented remodel term million that a in of non-res

those sustainable continue the we solutions HVAC Especially plumbing in to dual our to provide contractors. to work of customers. So and trade, residential area

remainder great you for thank time. your a of again, So Have your day.

Operator

Ladies and to gentlemen, for We'd like today's has call you now participation. your concluded. thank

now lines. disconnect You your may

Ferguson (FERG) 6 Jun 232023 Q3 Earnings call transcript