FERG - Earnings call transcript Q4 2024

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Operator

Good morning, ladies and gentlemen. My name is Lydia, and I will be your conference operator today.

At this time, I'd like to welcome you to Ferguson's fourth quarter conference call.

[Operator Instructions]

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

call. may begin conference your You

Brian Lantz

to announcement call some uncertainties I of welcome forward Good to announcement today. our available available Hopefully, website Recording cause and chance Call projected want various morning, is and page. the you've filings those web and may be subject everyone the to a that including website. actual Fourth from statements to made be Investors everyone, corporate XX-K risks our and available Ferguson's in on Quarter section morning. SEC's issued we later this uncertainties Earnings will looking to the remind today Conference certain had on that results are in this review and The discussed materially Form the SEC risks earnings of of differ Webcast. and could our our

and as statements Also, represent forward-looking today, statements. update any any expectations the only obligation these to of we company's disclaim

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

to With over our Kevin. CEO; today CFO; me on turn are Brundage, call the our and and now Bill call Kevin Murphy, the I will

Kevin Murphy

questions the expand We'll the On today's for track before our call in end. our cover we're markets our Brian, everyone, and on of performance and over I time your longer come quarter at I'll welcome, locally. conference I'll term. growth to the call, and 'XX our our Bill to you, call. of fourth fiscal then against financials have Thank performance. fourth take scale over both Ferguson's how highlights deploying year to back full quarter then to record our results and turn improvement

X%. of million, well, prior were delivered customers. quarter. of resulting operating deflation the well. going over operating associates managed year Once and billion, needs professional take increase grew increase $X.X again, of in $XXX above Adjusted and of our $X.XX. project an the to executed We profit care of sales share expert despite beyond approximately specialist adjusted margin complex were margins of X.X% an with diluted fourth X.X% an Starting our Gross and We XX.X%. resilient X.X% of earnings per costs to adjusted delivered of

going scale are and balanced that us position these well pleased mix locally results confident are forward. our to ability business with deploy We and

performance. Turning to full our year

line with to Our $XX.X team flat was deflation. resilient delivered broadly last of and challenging with results faced in year. billion our while Revenue expectations markets

over delivered points Our XX.X%, gross prior year. margins teams improving the of basis XX

adjusted returned $X.X deliver our XX% We to earnings year approximately us of our representing and reduction fragmented against year. X.X% acquisitions, in strategy We on the strong repurchases operating our share for billion we associates be continuing during $X.X XX investing adjusted consolidating continued welcoming operating priorities. operating billion markets. overall of our continued the also capital via expenses, against proactively per operating to managed business And shareholders our cash executing from allocation billion, to capital to return of in profit this prior and came $X.XX, dividends while strong Cash cash year. with margin. at a Adjusted share diluted continue $X.X of delivering delivery flow, enabled a X.X% generation

expanded volume our and growth delivered market headwinds solid We margin gross we markets. and to deflation, Despite operating returned we performance. margins we outperformed

markets Next, our year. performance against the broader the for end

resilient by a our new residential half revenue take serve to markets continued business and and but share both believe down markets. to construction slightly continues balanced due X%. nonresidential. The in X%. end well improvement in with Our more end to across down markets And We about us weak outperformed our half end declined Nonresidential residential, combination market X% were organic with exposure we've residential repair, and markets. approximately than softer We maintenance were of approximately

particularly performance We multi-customer the unique were where of is our in market. pleased nonresidential with customer capital large across the groups, approach group projects, our

Our disciplined generated strategy, and a organic was grown as above-market of we If we've our revenue past we recent and nonresidential diluted by share everything of our of by XX% over in time. consolidate performance, do. our at nearly Taking growth longer adjusted more look history XX%. operating per driven We've profit execution, operating by the flat which basis through improvement has through revenue fragmented the years, consistent by X bolt-on growth, And implementation deals. improved XX% combined organic with term, model the margins and XXX capability business operating year. foundation is growing adjusted back, points geographic complemented growth our that margins the over earnings over the with for a step we our markets acquisitions our has

improvement growth We to believe we're as record long-term this well positioned the to future. look and we track continue of

Now go hand through let me over the to financials. to Bill

Bill Brundage

Kevin, everyone. Thank morning, good and you,

start a a rates, by acquisitions. impacts decline contribution were from X.X% me offset additional results. with some sales detail organic X.X% exchange the on driven Let from quarter of X.X% and X.X% ahead fourth last adverse by a of the year, further Net foreign decline

price organic quarter. deflation at expected, the X% As volume nearly X%, in approximately growth continued in of resulting

reserves. was points increase over value of decrease last customers, XX Gross well our the basis provide to driven year, our a we an by as as margin XX%, to inventory

XX.X% of continue sheet performance as adjusted add cost base particularly at to enabling The and that projects. a EBITDA. and are was customers' net repurchases. margin. to operating managed, ahead million of ahead strong has profit operating prior impact $XXX $XX share provide been last debt $X.XX us X.X% our year. driven to increase adjusted well of We to operating up the per earnings deliver this balance diluted the our share adjusted million or our X.Xx by value of in year, services solutions was And Adjusted teams Adjusted X.X% with pleased profit, of remains

by end our construction fourth of sales continue markets fourth quarter. in X.X%, markets markets, slightly new and half RMI. Overall, revenue, to and approximately were to flat residential resilient, to by quarter Residential Turning both U.S. end remained the revenue we softness grew Net perform the U.S. in muted which in comprise and performance due residential was Nonresidential well. more

with revenue levels continued of X% capital commercial, large quarter growth infrastructure pivotal activity see bidding We've and in projects. good grew to on Our across industrial. by the nonresidential

exposure well. growth expect us time, over rates our end we fluctuate to While market intentional balanced positions

to remodel quarter remodel, flat. Residential in with and market we up the be trade and grew as groups continues quarter, dual in resilience of plumbing sequentially replace trade strengths higher-end X% to Residential to service consistent XX%, and commerce consumer by regional the on builders. portion by the customer better grew from growing weak. somewhat contractor. declined market. national our Residential trade construction. local of customer digital and were with building Pressure revenues the groups the new by the consistent by to our third been third residential broader build as continue outperforming U.S. HVAC On of HVAC the X% amongst Moving with repair larger the demand builders plumbing has remodel offset continues than hold

in in works, were public X%, and residential. municipal offsetting with up commercial strength revenues Waterworks softness

drive continue efforts centers. commercial growth X%, data diversification and mechanical in focused large areas as such and Our customer such meters grew in part technology. geosynthetics, by projects to as group The driven capital

pipe businesses delivered facility supply Our growth and heavily industrial, against deflation X%, comparable. of decline a commodity and steel Fabrication by Fire net X% sales a combined impacted

Our end intentionally a market positions us total exposure. breadth and of balanced maximize groups bring the the value customer to while project broad to also maintaining we

adverse operating increased segment year. contribution In net Moving X.X%, the year, over ahead rates, and profit that XX.X%, Adjusted by profit sales quarter, of points to grew U.S. the from of Markets to the decline in an results. last XX last Canada, of Net operating year. our impact with were acquisitions. organic offset year. an of X.X% have from contribution was of a similar exchange United million foreign the States. by $XXX decline from acquisitions. broadly million operating ahead adjusted flat prior organic margin to X.X% X.X% X% an basis in X% offset been delivering $XX a X.X% a sales with of Adjusted X.X% of last

Offsetting to this contribution year additional X.X% was full X.X% results. X.X% rates. an X.X% last and from uplift Turning X.X% with year, the one Net below a of organic and sales day. exchange from sales foreign impact a acquisitions from adverse were a decline

provide value-added year categories. Deflation strategy X% points to driven Gross continue customers. basis our to for and our certain XX.X%, XX year, ahead by margin was commodity execute prior the as we approximately of solutions was

expenses labor During operating proactive the respond to in to environment. the volumetric and managing year, prevailing were we both nonlabor

$X.X operating year. of fiscal a by $X.XX, with As a the X.X% line for slightly set in year. profit beginning result, of adjusted billion adjusted share adjusted at down was margin And expectations earnings the with out we per diluted X.X% was the operating

pleased market headwinds performance the We deflation this and year. with are given we the experienced during

as have growth inventory cash to in Moving $X.X and CapEx, which generation Interest to continued generated with strong typical year of in flow, the performance. normalization of our organic year, operating came a through million billion. and returned last of outsized cash investing in more After flow expected, we $XXX flow year. the we cash cash invest to tax we

was As year for fiscal $X.X cash result, a 'XX. free billion flow

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

into to CapEx invested business and the in on growth. we organic million advantages drive $XXX First, competitive above-market our build

automation, to as as extensive We're and to efficiency network chain invest of technology and supply and tools combination through branch digital continue expansion, we optimize investing network. well in our our a

sustainably continue we Second, to ordinary grow dividend. our

quarterly dividend our year full $X.XX a declared $X.XX dividends, 'XX Board representing to our a X% in reflecting declared share cash business fiscal increase Our declared per and over and generation. the bringing our confidence dividend,

fragmented acquisitions. our geographic bolt-on markets and through capability consolidating we're Third,

approximately revenue. year. we million, $XXX in outlined, $XXX associates to have XX this from million pleased incremental Kevin high-quality bringing of As annualized invested welcomed businesses We are

Our deal our and continue remains to pipeline consolidation we strategy. healthy, execute will

leverage shareholders we reducing the are we current the million end $X.X finally, capital are share committed surplus year, share and to when target $XXX shareholders the with this approximately approximately share And our $XXX low via repurchase of count under by returning to program. outstanding we ended repurchases million, returned year our range. We below million to

our with expectations. in Now let's seen turn growth Organic the of softness revenue our ongoing market gradual in attention QX to which improvement We've despite sequential line trends and and performance to trending the growth QX. is returned business, organic deflation. volume in

progress comparables year guidance. part 'XX, challenges from in market which will we next anticipate the our we the year, fiscal near-term full X-year While continued deflation, as through to me early and particularly leads ease headwinds of

market Given range various revenue range year challenging will uncertainties ongoing ahead. for this believe we of outcomes reflecting market near-term potential low single-digit of year, are account, grow the environment. the a backdrop, for there the into an broad Taking the in

which a basis acquisitions, tail the market by are sales assume revenue, of year. deflation, based year, we $XXX in declining expect XXX offset single-digit one from to we the part already as fewer generate We particularly down by outperformance driven of end the commodity on points, slightly continued markets in being range, for third assumptions completed approximately in pricing the Our day in our enter quarter. approximately low XXX inclusive continued million to

for operating have We range margin X.X%. adjusted X.X% a provided to between

consistent invest previously market to interest we exposure market $XXX to you, rate will delivering between combination between million CapEx. and to be And our as remain resilient strong business adjusted Kevin. we of model Thank sheet, continue balanced expect million. million year strong approximately the effective $XXX the ongoing to to and $XXX We support of back noted, positions our We million 'XX. broadly in XX% to I'll our $XXX tax execution, as fiscal us a After business balance expect believe well pass outperformance. in move into end we and invest now to flexible results,

Kevin Murphy

a some areas the he expand our few discussed Thanks, wanted to on differentiate take to key we Bill. believe us that mentioned performance Bill I now as that market. in time

the from supply global manufacturing Quite to breadth of it. the we're and chain simply, chain our the point when of of First, point our us the where apart. best inventory depth scale connect and customers supply set and We to driving entire need aim install.

our places we We network in deliver delivery. of This and efficiency network our mile on a facilities XX% expansion. of North us final network vast optimizing miles of of through further of within Building are extensive XX for fleet scale this automation, advantage, locally combination our America. vehicles competitive through and our customers

We invest in combination and associates capabilities The best our solutions. to implementing technology supply service local the deliver to and industry. allow continue chain in distribution of facilities the us our our expert

Next, opportunities in the dual significant trade plumbing we HVAC. continue to on focus and

market-leading Our ability to years and with market professionals HVAC this us for capabilities bring a both from to competitive and together in come. for serving provide advantage plumbing capturing growth these

this dual billion, billion And be plumbing the We markets of HVAC of plumbing estimate estimate market market by than growing. HVAC combined serviced XX,XXX approximately and which to $XXX the and segment professionals. is is that trade $XX nearly the residential trade of we more

expanding executing pickups this acquisitions. services geographic plumbing branch capabilities and differentiating the through combination we building as We're harmonize HVAC those branch of service our further single and our dual match pricing offering of presence a provide to trade are deliveries. processes, professionals We coordinate a simplify point further expansion to while our expansion of our density conversions, and to

core Turning ahead projects projects, activity, several the sell centers. the and of by to the to and structural addressable to from selling through construction our acts the just XXXX. these the infrastructure. to be total years, have over estimate supported leverage from groups, we next products. continues aging opportunities nonresidential value on focusing large not the products our markets $XX and and region for add large towards we view the of customer When entire legislative point solutions, ground-up ability with data project, our billion across tailwinds services data We onshoring strengths, our fiscal in projects the market capital

gives traditional of this has type tailwind. in activity, helped We In solid structural scale multiyear the this to us short see weakness bidding and activity we which term, to as offset nonresidential continue our believe meaningful significant thank group multi-customer capture to for to term. and their growth us To approach the me specialist serving let from professional close, over again projects strongly our our dedication customers. positions medium associates these complex confidence

team's our as for with the in year pleased quarter are We execution whole. a and the

solid we We Despite market to expanded we headwinds consolidate returned the we our operating during year, volume margins deflation and gross markets. continued and to growth, delivered margin performance.

guidance market environment. 'XX growth in near-term reflects Our challenging full fiscal an year modest ongoing

to and Our maintaining fragmented consolidate of cash-generative end range. our allows the sheet, model capital target continue to at to low to for balance invest We a us organic growth, our this while markets intend return leverage strong through shareholders. do operating acquisitions

hand Operator, over dual our to your of you and as We to the the underbuilt your now such Bill to take call and time and housing, take scale U.S. will happy with opportunity I'll you. to continue today. large I advantage tailwinds questions. Thank in structural capabilities contractor. capital projects, invest nonresidential are trade HVAC plumbing multiyear for back

Operator

Instructions] [Operator

with today from Our Lovallo first question John UBS. comes

John Lovallo

might maybe is so and what August deflation deflation far when occur an a finished a if of on is And what mean, in at does might the inflection one inflection, view? confirm expectation it can goods in look specifically in little that I thinking some that for bit more like year. just are like first sounds -- commodities. color positive and half guys be the September point and you your second The the you mean for

Bill Brundage

question. that Yes. for one. is start Thanks Thanks, Bill. This I'll John. the with

as of an which for back driven go deflation overall the to was talked about drove for overall X% we you deflation the commodity-based by 'XX, if about, So year. products, year fiscal

'XX, that do through as entered from pretty numbers over comparable fiscal expect, and that, as that move ease year We we was year somewhat. last in consistent. year the exited the we we roll that As those could deflation commodities

as sit price don't calling a on But have crystal we we difficult. and pretty today, here ball is commodities the

first driving call deflation, year had as full ease part expect for today that's the do guidance. would down slightly somewhat we pricing the in the throughout that We overall the year, we within move our to the included year. that particularly we So expect of but

John Lovallo

the Understood. decrease the what your each operating X% the margin in was And terms outlook the thinking then how are of those? and benefit upper reserve? may for full in margin lower of And gross to you what X.X%, range and of then about quarter, sort of inventory of from year drive in the end

Bill Brundage

Yes, sure.

value the in underlying teams pleased of very very performance, off, in XX% We have normal our our our provide gross quarter fourth to quarter as margin on marketplace service gross up first great had fourth both the continue did performance true but the inventory well with to billion deliver as we strong margin we So a customers. in as fiscal margin were $X inventory the process. gross the and overall year, reserve as

We had end had the the year. a at there little impact on bit a quarter. of an of a outsized bit of pickup the That

deflation the would take about margin adjustments. modest particularly to into then margin reflects X% inventory the QX on prior As and those And guidance remain to operating that step an with absent gross and challenged, margins, the our in year operating margin year, term the as back, as from flat perspective the spoke in we continued a I I guidance, pretty both about. of terms reserve markets our X.X% short I that in pressure just step continued think operating of as

on what this past term, leverage to terms SG&A in leverage some deflation So driving in to saw of pretty that's of SG&A pressure. year pressure the put going we short a bit similar

from that a that get finished certainly, goods could go operating stabilization in we're anticipating upside reverse. and margin, on top Certainly, year, in more we go price benefit the which than top higher recover that would And new resi inflation, flow we an a we as some really of we our If also is the of we terms of throughout for In year, get that operating the additional as price the line, and markets margin. the slower commodity a lasts could if and a year, operating overall on throughout recovery and get through of could pressure benefit on to bit commodity supportive the if are bit if line. short-term a drive and the faster pressure margin. longer, upside downside particularly downside that perspective, bit the

Kevin Murphy

as John, this year, some both still And we to in the to we're ] battling residentially come because we into macroeconomic look pressure, continue new mine we construction clearly, But pretty [ as markets battling still the are some term, near-term invest non-residentially both and deflation. medium attractive. business R

You in X the million X look underbuilt million U.S. the housing at of units. to

look also and a what's the infrastructure You seeing housing happening we're XX intelligence key nonresidential water, with in taking at investment of not seeing, infrastructure data in projects the at seeing that we're look with investments water, aging power what years. the form wastewater, the we in at part United the we're with as the stock center, what we're in but lot and artificial just of storm generation. States,

we as going markets markets look in really so because to continue those at invest accelerate to as walk recovering, with -- we and And we're recover need tailwind. that to our

Operator

Bouley comes next Barclays. question from Our with Matthew

Matthew Bouley

about that an there you decline update within those an also for building on curious I persisting eases kind end market From the up next has are growth quarter-to-date. growth the even organic of if how bit. you And think the expectations stack single-digit for kind some started perspective what 'XX? market, follow little of blocks FY specifically I year year. from of guess, end can a challenges spoke us as around kind low X-year I'll Maybe around perspective, each

Bill Brundage

Matt. sure, Yes,

maybe expecting So we to resi we the split today, roughly from we're if nonresi in best range an see down be the perspective, low low between as and expect can for and range. our single-digit that mid-single-digit down, overall flat, in to it flat. roughly slightly to be be but down year, full to resi markets non-resi, the you

lion's side, seen total less we've the of up business of XX% resi making new which, the share our XX% for side, again, resi rest it, On Arma is, on business. call the the of our than of with us, the resi

certainly On of see we started starts the Certainly, revenue. of through to seen permits further our side, bleed some in the our little or last a start. we've new majority into over starts and the that and as X the We've weakening permits X revenue resi trails get bit months.

So year. until on and towards some we to we part the a throughout resi second as hopefully of turnaround bit we easing pressure side get of step going think that there's year. be new the some the

be on RMI the continues certainly, And consumer the to side, pressured.

As year continues hold remodel with prepared which pleased seen portion business, we we're challenging a prior up performed to the some softness. that relatively said in The to and has market. residential remarks, flat high-end our market we've of in really our continued but building better.

challenged, we existing back be particularly of year. half first bit our to until some likely get the fiscal again, additional are markets home through the So a turnover, to RMI

performance side, to the talking we've the outlining those large past it call at non-res of, the the delivered be it, underlying year, and this just projects for non-resi our in good that weak. see results pressured we've But and business, continue ABI our mechanical about, look seen was side certainly, capital you to and quarter. that flattish and business comes Kevin really indicators commercial reflected On when expectation like the of

a there'll we of think be we So bit pressure the there as throughout little year. step

some that the organic has of of a how similar still been growth working mentioned down. earlier, August deflation. we're as question And with slightly still on terms pretty In year John's soft Look, bit through to QX, started.

stepped early the part real expect we year, pressure, fiscal would of we the year. a the change which as of no bit into So in

Kevin Murphy

world, to new itself at for you homes this Matt, caution you it's or talk local much look as that's something Yes, the still side regional but like good, a single-family builder, the on spec of of enter production, the out. about the moved pretty pacing year, bit side. we just when fiscal construction production

it you look so the the of activity a the we've And caution as world, in talked at of that embedded side replace has HVAC bit even business. repair about

And what to more looks that replace is to repair. it means moving

side, that pretty we HVAC standard have the and where supply And today then so work, nonres large our seeing a we of capital as growth, is offsetting business, Bill unitary you big the sit for hospitality outpacing we're parts more distribution in equipment project as look environment. indicated, but warehouse, box and that's some inside that's see good slowdown at on bit and we work. traditional the nonres growth And

Matthew Bouley

Got helpful. it. Very

lot permits around soft you and seems the like of and at guess just data So the It interest relatively picking right? of around cross on clearly speaking starts lot there's same I mentioned, 'XX, as of as time, some of kind I up you're of current currents, now sounds are kind being it a the moving to views ABI, mentioned, mean, like you a lower. rates

of market from kind rates, How first? does curious, around you optimism is do where to have play see own if any in out confirm, number experience, are number sort your I to guess be just you basically I'd two, tend do you related And assuming current number That's guidance that want that much one. one, And you're your lower when interest rates. to improvement really conditions there of So that? is assuming hearing in potential your business? lower what not it interest customers that I

Kevin Murphy

Customers remain optimistic. cautious but

that see movements play that to our what out would preparation over at and and time. being we start we'll particular at happens as at with to interest given that are It we're activity, of time. a for out terms business see. And many going Waterworks and sections look see how You as lots and in lot look you would subdivision portions happened, different developed paces what rate example,

of seeing we're looks activity activity, like steady single-family subdivision work. in bidding now, terms pretty flat in what that pretty Right

because employment sale. turnover the world, existing and employment, what we pre pick side associated starting although for point On is data would as to the is has turnover home as the Existing remodel love up for best home well post with RMI RMI solid continued activity see activity to of us. clearly data

to of to business. see see and that we a And we start pickup home existing our turnover, so as we to start see rate easing in expect inside interest that some

and construction and frankly, on industrial fitting care mechanical work the together again, to then Waterworks, around the take all needed power just needs with of the pipe And center and generation some multicustomer fire on power on of group fabrication, quite X, this side, data of even, nonres care continuing to of that's the valve build-out. grid center working take that and data commercial

as through So optimistic. we're we looking at remain go that customers and cautious but

Operator

Our next question Jefferies. with comes from Phil on

Philip Ng

Congrats like margin on been here, compression kind Bill. for your calling a If it's last the solid kind your X% of of it question stabilizing at is I but quarters, a commodity for So guess pricing XXXX. down and quarter. of margins, about few look feels I dynamics for your headwind strip gross right? kind if was the inventory out flattish, you're you

are margins perhaps and margin it start the sounds further deflation half? side half on Is more you're that little then gross degradation from first here? more Because accelerate a cautious first to on and pockets any you And or the seeing commodity in like price the SG&A?

Bill Brundage

that you Yes. margin We Phil. haven't is where step working to gross you've performance when Thanks, short past the into And sometimes movements It's year-over-year to see of the deflation. But do and goods on term the And you your year. year. in of higher on been mind, gross where through. margin in we the been faster sell as throughout that. been we've inventory seen deflation continue sold we've keep more that cost shorter, pressure get really that deflation business is steady the -- obviously, got to through as we you expect deflation that with deflation. the point, battling pleased have

majority, next of again, margin we year of SG&A the expect that that And to moderation that going the operating equation. is pressure side on be

you points XX gross year. grew we In if margins look fiscal at by basis for 'XX, our fact, back the

basis on X% and XX XX were points. that really roughly the deleveraging -- our SG&A delevered At top driven Our line. points, by it's operating SG&A deflation down margins basis

our of of price worth worth off X% take it's because came that of Just revenue $XXX that deflation. revenue last about year, for million

You did the math around that.

Your SG&A to flat of will as fiscal 'XX. percentage a 'XX fiscal roughly be sales

'XX, of pressure we term. little deflation a both part the So year. as the that and we step that in short fiscal the through that we as to as bit year. more bit still markets year pressure ease step of fact into well That again, as going more in just are a the as We bit from we're our first would to expect expect puts SG&A negative more step the pressure be the difficult into a

Kevin Murphy

And move roughly look worth to in move that at iron, of steel, products. all don't direction it's everything at at commodity-based They iron, ductile the would you from that, same copper, cast Phil, fittings. pipe and the if all our the same with would And same PVC, don't they consider polyethylene, same time. time. velocity the revenue commodity be XX% that basket, we remembering the

side In movement fact, world, tubing the the direction. some in upward an in of copper seen we've

the referenced. commodity-based but So points X speaking, what product that Bill generally they're moving at that pressure drove different places, is

Philip Ng

Am compression holding margin half. The is margins driven you So first up relatively S&A should gross more we hearing right? the and in assume largely well. I guys

Bill Brundage

Yes.

expect this been reasonable. year, quarter, There roughly last at years, I that's Certainly, not look is on given of to that going dead bit margins, the in our leverage have over that the are broadly, our to still on down. pressure pretty But slightly year. a gross negative we've going that factors markets with consistent margin if side growth deflation you last low the consistent up and think X.X% We'd gross more a world. gross heartbeat. in be environment been or be a margin. X I relatively SG&A any XX.X% man's mean, move look,

Philip Ng

your things, there. side things It you're Kevin, And like of then continued seeing into your you commercial projects investments the pivoting and are these been like momentum things side stabilization? has things, about commercial obviously, traditional side projects of your shoots continued the you're sounds and of there? side is seeing a of light capital business, your It seeing of Any Bill, seems any the guy. green capital that head good there. the momentum mega What on pivot nonres guys

we some of the covered on cuts. but holding of project called any sound you're seeing any stuff I the contractors Some ahead out companies didn't ahead of delays helpful. the back like have of election, rate of would be color that,

Kevin Murphy

So we seeing are that.

at portion biggest has nonresidential impact. traditional the of the Probably the look traditional commercial been That you the business, pressured. build-out. If

distribution warehouse working service a more out back customers talk at the based space e-commerce of hospitality we If market, as a week. every big even X great building beyond you area. largely deal That traditional remember, or in to box look ago, would every been some expansion on you into about a year has mitigated office

business fire projects good our of our see about large even pipe encouraging. Waterworks to in is face been mechanical does our as commercial the our steel to that, to X% capital growth have business business deflation offset as quite business has growth X-plus it performing well strong our news the groups customers But in percent as our able been a to in pivot those customer see to

customer same As unique they're work. that the they to that needs encouraging large That's capital but traditional that together, of work the on offset been at making time, non-res. focused on sure

Operator

question Anthony next Pettinari from Citi. Our comes with

Anthony Pettinari

could markets progress maybe in categories product sort fiscal needle? in of label to And move brands you Can your about thumb morning. what rule -- And owned or that about benefits? that on private 'XX? on any talk where margin think 'XX terms of in of of way rough targeting could the where Good kind end

Kevin Murphy

Thanks the question. Yes. for

also about product think own If to it a working appropriate want of of context guiding the them our I business about be help service shy with brand of for project and but in their vendor then revenue. at own would sure grow the our customers to only XX% brand, as you product broader that that's we on what over navigate strategy. product look their is make haul. company our a just we're projects, application the to our and we is beneficial partners our long look as to look to the to, we needs them not going

to faster brand be growth grow market. we and only within able not And branded our own growth, have than we we've path do have partners to but best been where market so their

the all important. growing business own today really is about would And residential nonres, faster all context. inside It's broader brand our but across so groups in inside company. I think customer It's of than aspects and the

Anthony Pettinari

you tax That's did above call one I but you'd if think, sorry the in there any or on guide, missed driver rate, very anything point out? this, -- just helpful. what fiscal then And the I 'XX

Bill Brundage

both decision structure, where XX%. past U.S. going an flagged rates of middle up go made as I corporate corporate that rates if tax were we of when part U.K. evaluating were we were we effective Actually, experience and marginally tax Swiss we we the this and the in to corporate that to in Yes. to our was kind year, to move to fiscal back the well -- rate as increase to going go about tax had

merger plus U.S. solidified we're to what given now When the rate government about current be rate state on good expect, year, it, move this certainly XX% is should a any corporation, and corporate absent U.S. federal you a for changes -- that so we X.X%. today's our space should XX% XX% of transaction the the in our domiciled rates. And rate call through of,

Operator

from comes question next Fargo. Our with Sam Wells Reid

Unknown Analyst

of? below business. either finished part of or your to commodity other sort commentary we should wanted Any be side touch goods notable about here. the I pricing Any the potential outliers appreciate pricing. again mindful finished to the expectations I your call-outs of talk above on on We category wanted goods. all the on business, But of

Bill Brundage

Yes, sure.

which, for again, share our flat, is If over maybe have price slightly little bit we what see on goods. up Normally, would a finished what call year. year. in a below That's the us, finished fiscal single-digit you or at low inflation just over for to goods the broadly we your revenue, look lion's I XX% the point, goods 'XX typical of fiscal finished past year,

last As price that a year. those more quarters, few see. we through bit than we spotty increases we flagged And finished would this calendar had seen continued being throughout traditionally goods the little

here would year. have more happened expect for But today, the normalized increases sit a crystal the calendar has monitor that, don't typically on at a we and 'XX we'll we closely. so again, that calendar as beginning bit we ball So price of

As calendar work for with we plans price are our suppliers and their understand what increase

Kevin Murphy

Yes, where in as price been as happened. it's increases flat. customer surgical Bill you look at been the it's said, terms categories, different product of have And groups, very broadly

imagine, manufacturing for up, potentially as down but gone deflated. partners costs our supplier labor can you have As costs has have gone input their commodities

as through to as across And they've very increases much surgical of categories. year. broad their expect we And so in been calendar go fiscal opposed same different -- this different price in their product we approach areas this the

Unknown Analyst

helpful. maybe That's talking then And switching gears, SG&A.

bucket on at SG&A up bit the basis, on including and that Maybe absolute line an quarter, improvement growth of and kind during excluding that's a the generating just and was you perhaps in Just looking versus it it out of those efficiencies some looks of through SG&A talk maybe an acquisitions. are X% quarter. like the SG&A last

Bill Brundage

and of impact back base. full a as the your I acquisitions whole. take say, a perspective, a probably pressure. from not acquisitions bit large given what better maybe performance through quarter, step as our were a first the came we bit had with little the from of look of put year a fourth But point, SG&A than an expense little that leverage size we kind would anticipated. at pleased the I But from To Yes. we overall,

Again, movements can margin quarter, gross because have on some we in both quarterly and SG&A. on given any

look look that bit cost again, our base year, and a XX% to the a cost deflationary as Labor of deleveraging, marketplace. relationships. And full you intellectual had largely pressure. you when that whole, by win at in us so our And we we're hold of little are at again, the driven associates labor. base then They the our our give of is and capability capacity all nearly when

QX seen we're growth return we've we managing we in and So about, precise about past the is to marketplace. in against the seen we've talked we've when the way think trends manage QX. that And volumetric done this as that year volume pretty -- labor

line our at headcount, look with that. equivalents, you full-time that's been And pretty our closely managed in

markets growth step And we a lower year, I pressure. and So we in that really as that, first ourselves growth. short-term that top on the to business bit the fact fiscal in of back particularly have of of environment, little the up terms the year, for investing that. Kevin our we of a wage But headcount combined return into certainly what said we'll with, part be put will a the go little a little the bit of on to focused positioning when inflation bit, in is are again,

Kevin Murphy

And that advantage Bill technology organization And in business. at of have what greenfield SG&A from that echo especially expense We're like way chain business really capabilities. base, the of with supply building said. We teams facilities in we're plumbing especially the across have. if of we what Yes. pleased dual look as locations, out our field We're HVAC with and we look to United the investing in our a position the take we pleased deflation. and and looks face the in managed in the then out the you to really what our as in in perspective States the growth area look forward, expand trade counter investing the building HVAC position the

today. good really to looking that take is recover begin markets organization we're to then investment of preserving work So normalize. when level those care at the the that continuing tailwinds and that doing and for

Operator

from Capital Mike Dahl comes with Markets. RBC question Next

Michael Dahl

be shape. be fiscal working good flow. rates, ask flow obviously, we wanted of cash cash any healthy contemplate The free and capital moving First cap, conversion cash produce pieces How then kind continue as you from in And to standpoint, thinking to in free allocation is should sheet capital about? about should 'XX. one thinking we I about you a balance allocation

your if think commentary You've the we characterize this lean we shapes about you're you in macro M&A got to and year, outcomes give pipeline your any years? way, kind a how the of look the How can up. willingness you healthier if how this kind that we're of more standpoint? on but would system up M&A is next the of an thinking different this for to kind skirting in in time through of cycle you when coming desire and end -- from through about Just

Bill Brundage

Yes.

flow from flow. off, the first Mike, billion cash a in with operating cash perspective, $X.X really So pleased

guidance CapEx million. range Our the our $XXX came middle about of in at in

We fiscal year So gave cash about that, slightly right that that to of us income We line above that in aim out. in, with flow. past to maybe XXX% this year. year were free net cash billion $X.X much deliver operating pretty in

expect step again as fiscal And next we through year. that I would

take fiscal that great our It's advantage core only of have And point, to that will in cash-generative balance a for resilience do. of to point, to able to not in a And sheet. we growth your case be really we but do we position to 'XX. shape. market some of strength your to good hard what maintain to balance have sheet Likewise, also we So is be in downturn, opportunities. worked

see allocation will us priorities. with consistent capital you our be So very

at now consolidate where at markets. M&A looking our as which at we leverage right are flexing X.Xx. depending we that buyback end that opportunities, we that at opportunities sustainably organic time, growing at great on of the over growth then low sit dividend and Looking range, absolutely

market So amount market of regardless of take advantage what fair a is. we the backdrop of the to capacity have

Kevin Murphy

you pipeline as like. valuations those on case and the Mike, mindful as synergy and look we acquisitions still are healthy. we can what also board. the sure can that making we you But our right is imagine, can bring Yes. as sell imagine, expectations and drive of

what XX do us that year. past saw looks We're proud You of really this like. deals

to the a side pretty forward, look residential balanced both in nonresidential side. going approach and you As

side, for to the that continue is customer to residential succession this that us a world, capability that nonresidential that a especially And those look deals, everyone medium-sized across we're growth capital like look that deals great then complements virtual going reminding to at independent as on a worth And available can an opportunity for M&A as that organic M&A. projects side design, making can of automation, small- at on first of groups, with we're what the help areas in side, large wholesalers. we're what growth company project sure HVAC are makes light that It's the the at BDC, opportunities with planning in growth of whole. valve lot the effective then us and continued fabrication, us things multiple looking and help we

Michael Dahl

great. That's

question, for X% second growth you. nice a both and may I organically but kind Just remained HVAC the picking and via the source you lot growth us what understand M&A to vertical of of there. in up things HVAC help a in XQ, have you're on good has this, comment, of a was Obviously, do trying can missed organic?

growth up, potentially, tailwinds And from HVAC then your the 'XX you've when fiscal set you're and market, some that there's got thinking about initiatives.

kind year? some got carryover of additional there. HVAC M&A coming expect of frame up the us Help from in obviously contribution type you'd You've

Bill Brundage

with the Yes, in both quarter for pleased Mike, are HVAC the we year. performance, that and really

the in X%, acquisitions of field So roll teams as you majority a the the organic are strategy. strong organic. the we but both our performance, out there, from from points was really a of at couple and if look that vast in expansion There

Kevin Murphy

representation best to they've We've go And to make we simply of going put, sure of what done we're plumbing products. XXX the the to north on over XXX as do through build next well like as far. counter forward, to as We're do couple continue as you so track out years. HVAC of we're renovations going our at to look going counter locations got products.

local lines you that the you market. in at as as we going we We're read-through equipment We in leverage at M&A, in as know, we don't as the then as that get some lines expansion to of make to well can the together are expertise can in as look And plumbing, our need that call company do currently have local HVAC grow do you M&A to both is well with which bring to to of relationships States. then greenfield great to markets equipment a HVAC. also it, we that scale everywhere where sometimes unitary everywhere rolling sure order together with United strengths

in at approach look to a as I year. it coming in growth the So HVAC X-pronged

Operator

Our Manthey next question Beth. comes from David with

David Manthey

Thanks here. the taking for time

assume here? Could economic year and into fiscal fiscal base look backdrop macro you're First as interest assumptions the budget year. next rough a you the we rate case new really off, have to discuss I your you general developing when conditions for year trajectory

Bill Brundage

of kind go to we I said what earlier. Dave, back Yes,

things business. new year, we planning of to RMI for at about Yes, but projections, the on and As those leading trying look then at GDP both the think and like budgets we're indicators resi look non-res the really resi we side our

and and embedded So go talked from to starts in about, at. look certainly as things that permits, of sources we those projections the as those back starts third-party we and permits well

to some nearest of business the the level the indicators traditional then We're Kevin side move expectation things ABI built that probably and to of resi earlier it challenged some improve trying that capital first the about There's down as to back side, nonres market, year. around that throughout our that our the the will talked both that's nonres build not should still throughout into particularly we for be budgets year, year. internally in guidance down expectation will come win into some models. pointing And I'll that precisely and get build also expectation rates think Certainly, still nonres softness, then XX% of outperform cuts. look rate on to that I market and that model expectations. that of cuts the of an like to half, at and we to are rate we our large while try ability areas projects while the into our But the some like full on those and our and And the but there's highlighted

David Manthey

and from makes gain, That maybe a plus million points. revenue you're low a maybe that basis back markets the peeling then it. deflation, X guidance your sense. for XXX then XXX onion down typical like Got single-digit sounds And It to single-digit fiscal share here carryover probably point on acquisitions assuming 'XX. low

of wrong that. correct in if me any I'm Just

range in And to out, market then year maybe flattens I the year would you're above here up and kind kind guess, for trajectory, guidance? that is case? growth factoring Where picks of condition through if full your take secondarily, what that base your inflation, of fiscal 'XX deflation terms if you into

Bill Brundage

market the that of single we're framing Yes, fact around low given the digits. kind

first you So I right. think off, the have numbers

full day increase. tried the is only you that that the a our overly didn't I mention on sales around think in to but we in lost about a there's we've range, markets which we're certainly, given year that highlighted getting -- thing going the to lose X.X% low it us impact terms material, a the sales around single-digit range and of isn't drives some down single-digit fact outperformance frame the that some to but low range day,

faster the markets that pick up and the a that's today. reasonable a side for cuts But Sure. We the rate sitting that, if range as is here think bookends of us come through to than flip there above range? if get possibility is there well.

read, here out. it's reasonable XX as best today. range we it we pretty can today it, So sitting think months read trying call a to

Kevin Murphy

look you a market actually business we at profit And the and we a as I like And inflation, the build with quite stabilization could in Dave. to in remarks, guidance a that look faster, good you continued acceleration faster look should pretty result had think price to should for turn years, flat over deflation down starts can operating that if Yes, happen opening we've in bit X on our see accelerate from. the said broadly markets we see another total. if the year you step-up last And deflation, in performance. start to potentially back

Operator

question And with our today from Jones final Redburn Will comes Atlantic.

William Jones

please. A from me, couple

I Am point kind in you mentioned have Firstly, you of since kicked right or couple of judgment, is as through that maybe we $XX XX a And on $XX I And of how of about you the increase. market mind just say ago, had that? in are? years projects. today. billion far billion, around large talked off in addressable capital the that would projects and terms a the it

Bill Brundage

exact Well, billion for through trillion to Yes. a top large $X.X Analytics, as at to the When lot talking in project set, capital projects, data market continue now quantify the us. exactly started expectation. And We're about we addressable remember right. could we out data data. third-party best potential as with $XX was total line, out looking projects, you're it, we can't looking first at our look, like portfolio looking the of XXXX look at and that there continues there's build. that activity Dodge you pipeline,

So scale that us of was and that as for shift of center it the manufacturing, early projects alluded been example, indefinitely. we're that a across we there some that I'd to. progressed, if and that's relatively new of And still added a and multi-customer at look have look that. across moved pipeline data of deployed And to power is innings grown shelved or to U.S. has have in capital think generation there's approach, you that at optimism electric be working lot postponed you great concern say way group projects take ability vehicle a again, a that either for we how certain terms in being in would probably our towards yes, Bill advantage

for a look services a traditional fact we complex that the company that require up was was good us, area of we have it our multi-customer in nonresidential sets and as whole. in focus company those of in knock-on as But million our because we great That's projects but at importantly on knew commercial, the that of were those service care and commercial growth and for offset knock approach value. to going group activity originally, to north overall construction profile that a quite And good maybe deal projects our pressured. and even the saw well that $XXX more traditional be offers it

of in progressed. with projects to early still we're added And think seeing as days we're that's These how longer. we're pleased growth are So again, that. pipeline. that taking We are projects

William Jones

trying quick there? front? think to on either even the one, think when just are that second And one, similar are many trade, you that do able dual across but you hopefully, on landscape, you're do Or you there do you to a look or the distributors leader the

Kevin Murphy

more is to have us speak because we specifically Yes, obviously, industry very local. a fragmented quite also that

player trade our traditional of for a time. residential inside a If you We've plumbing nationwide player. business, quite some strong look been we're at

our HVAC. ramped and grown have We really growth up HVAC presence that rate across

you as we or a together that be so provider for to approach call are best-in-class for technician, XX,XXX-ish best service. going that the then at, it, trade plumbing, make And to sure is our the look full offering HVAC individual tie companies, but the

to and nationwide And out. landscape, and And trade we to roll-up we of think contractors, professional as the service that's offer for we're a best-in-class at look and the what continue plumbing in strategy, of unique you consolidation we're HVAC trying solution that a build technician. has really that's the

Operator

today's concludes This Q&A you. Thank session.

any remarks. for over hand I now to back So Kevin will Murphy closing

Kevin Murphy

for you and really you our well thank to full and pleased our time we're year. operator, that core you, associates is their thankful customer to We quarter in performance, appreciate specialist it business. Thank We're than the began, way the again in professional dedication with fourth serving quite today. we in I'll is that as the the and for both know. the more that as

capitalize expanded with balance performance. term, capitalized medium to over we model growth, because us U.S. invest And on in really our aging gross operating homes sheet as the dual that returned for growth, we to nonresidential are that country's continue to attractive both cash-generative on have And residentially, the margins we delivered the maintenance infrastructure the allows and the and going that we're underbuilt in markets improvement. investment infrastructure. we well to of non-residentially, solid a fact a overall we growth repair trade have The volume that construction HVAC this as housing new and infrastructure profit in strong contractor

We So you look again very to talking forward with your thank you for time. soon.

Operator

Ferguson the for you your conference call. concludes results This year-end participation. and Thank quarter fourth

now your You lines. disconnect may

Ferguson (FERG) 17 Sep 242024 Q4 Earnings call transcript