CNM - Earnings call transcript Q1 2022

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

Operator

Hello everyone and warm welcome to the Core & Main Q1 2022 Earnings Call. My name is Melissa, and I will be operator. [Operator Instructions]. I now have the pleasure of handing over to your host, Robyn Bradbury to begin. Robyn, over to you.

Robyn Bradbury

you. Thank welcome call. & and first fiscal the earnings quarter to morning Main Core XXXX Good Robyn Vice is Core This Bradbury, & FP&A Relations Main. for and President of Investor Officer Steve I today Financial LeClair, and Mark our Officer. am Witkowski, by Chief joined Chief our Executive lead we brief update Steve categories. in penetrated are a targeting today's followed an and with growth products our growth of strategy call example by a will business review of how under outlook followed will and year Mark discuss our quarter our a results financial by then first session. Q&A full

the will We a section We morning earnings Steve's issued Relations our call website. posted conclude with release closing fiscal presentation and quarter Investor our remarks. to the XXXX first of this

statements. our presentation, expectations Securities to press earnings release, subject Commission. uncertainties press release reminder actual made risks with forth and and a in factors Exchange uncertainties during filings Such the may projections. earnings include those statements include the from These the differ and materially set our and are statements As and forward-looking risks results and the this and call in

can A during of discuss operating and and LeClair. measures useful business. Officer, non-GAAP presentation. of financial to will which found the be results earnings call our now Additionally, Executive we the our XXXX Thank press believe turn in will Chief assess we measures fiscal certain release the these in today’s & earnings in Steve I efficiency Main. are appendix over reconciliation you quarter interest first our of Core for your call to

Steve LeClair

This our to start XXXX our XXth market rate prices average our We expansion margin brief our earnings across and begin the growth acquisitions. the along When first passed strong delivered across but across Growth Thank delivered marks as you XX% by achieved X, with update. persisted supply for in quarter a cost Thanks first over EBITDA. markets, as gross demand us sales be call. to an I year. Robyn, execution based remarkable and relative was Page XXX% quarter the average Market results. leverage, and daily quarter we quarter to and growth higher joining growth. selling and quarter end demand each solid EBITDA achieved with delivered both Inflation rising everyone. through XXXX combined and fiscal prior net adjusted extraordinary consecutive of the execution chain in another material initiatives gains, good sales costs, welcome will of resilience share our strong today we broad challenges to country. net driven adjusted to quarter. fiscal remained growth and business sales continues Starting We strong sales on elevated of the for morning we a drive

trended all the We by activity and building and strength times favorably and rates residential inflationary the and construction to are continue quarter the through quarter pressures us residential the nonresidential very first in the Product despite through strong. replacement confidence through lead demand year. and land material orders through interest of municipal the remained persisted We backlog, quarter encouraged saw in sector. first activity rising activity, fiscal of and shortages impact first costs. repair Bidding pace lot the giving across end accelerate development

product and to industry scale by a from We leading value availability, our maintaining continue our to size benefit testament proposition.

to we on have efficient while are maintaining access also the their ensuring our to We inventory customers and support to right installation products stay focused schedules.

job bidding is be Most we and the any or quickly. We product inventory hand of that for have commonly moved are project activity is closely our be to to have a market. we fulfillment the a changes maintain can on but increasing inventory for been prepared used monitoring levels either in reserved

remained agreement Supply based and Engineered significant for Engineered City single sustainable Products Control. acquisitions returns inventory strategies a in We Dodson the and growth branch, on the service business. Lock agricultural, We signed and M&A Earthsavers generating a supply drainage, and acquire to to wastewater, our water, of investments full closed the through during Control water irrigation are distributor Supply full definitive in quarter XX acquisitions. is and be Products active branch has Erosion single almost drive Dodson highlighting market. Our commitment wastewater chain to including York. a in materials is experience subsequent a in a products storm choice in Lock City and of itself Lock distributor straw and California of service Erosion of geotextile of proven blankets control wattles, products. City based products distributor array full and a is service its broad and geosynthetics local Colorado. With erosion erosion Western control in distributor years New Earthsavers operates branches three industry to of

preferred to Western feedback decade, and and a in our are businesses these of examples what been customer Arizona talent. The great. forward and markets of over engagement We Employee region. serve surrounding progressing and access resource Each the suppliers forces are in from according addition new geographies, further and offering great an our leading plan. been to has a customers expanding look into Nevada, base has product we expansion acquisitions, integrations expertise of Earthsavers in for and combining and For positive look areas. new California, is to to lines, the key

we acquisition pursue to considerably highly performing the synergy pipeline working for large Our are optimize which acquisitions potential to We ourselves sustainable business. growth. to position and we're continue each and for a will well diverse maintain

our the focus developing, talent attracting, tight retaining also on market. we focused on and to top M&A in addition remain In labor

competitive We and our believe branches. for our performance people programs is result Our health, associates important to culture, facing the and valuable compensation of especially customer in support roles pay for first performing our are in have high culture consistent performance based our that earn competitive rates We retain management teams. compensation turnover are lower through our asset a and most associates Sales offer the pay our to people associates. investment success. the development to among and our and within attract essential well-being, and This structure. opportunity branch

Our operations nationwide local and be making our customer team business to force both decisions sales our approach. entrepreneurial, incentivizes philosophy grounded in centric

other smaller drivers. scale. cycles different historically for varying a and our better through relative business non-residential have a operated markets business product benefit from stability demand history team footprint construction navigating leadership We on resilient operating model our have markets, base, distributors a The to of diversified economic and and customer nature end municipal, residential, with offerings, on cycles. provides a The geographic and various of

Additionally, previous replacement roughly repair of XX% downturns. proving is of during the non-discretionary consists and our resilient economic which business municipal activity

We record strong flow have of track established a cash generation. long

Our and to event optimization both in build yet growth seasonal counter working capital of capital economic the provides invest during of periods remain stability allowing an counter and working us cyclical agile decline.

business common us the costs market sharing in declines. characteristics variable of to of structure discussion the take market quickly times in compensation We're economic of uncertainty Our allows now. certain out is topic right also these because

end confident resilience of markets in as earlier, the the the business, operate. environment, demand our in and in However we're which we current mentioned very

could until from shortages, of may those Infrastructure and we be current beyond While labor that event the volume incremental chains expectation in believe Bill not is accessed funds we the or constrained due XXXX sustainable our downturn. sooner supply drive projects utilized enable likely projects that Materials the and an On X growth. could levers municipal today on be the economic labor accelerate to us sector. and private outlined Page in redeployed water construction to we

our strengthen Over capabilities the to years growth. we've last invested several to people ability in drive and

look to we continue we As see multiple ahead avenues pursuing.

We gaining that share allow competitive markets underlying at our to continue demonstrated believe we than that the faster local have our us can grow advantages and level.

drive underpenetrated greenfield expansion to through geographies organic continue locations. new We in

companies We private and which to share our contractors. have large meaningful runway through include strategic accounts national increase water

us to HDPE Our other the size of in and meters, erosion number products a technology, categories. fusible technology and scale geosynthetics and accelerating solutions, such adoption our developing and industry smart control as of continue product position

have growth earlier to long industry. strategy acquisitions and I we fragmented As component key our of are runway a our a mentioned consolidate

Finally, procurement sourcing to through opportunity including enhancing we label pricing gross initiatives. margins have and private continue global and

spend to internally opportunity an ancillary to have We sourced products. transition

analysts team able data who margins decisions proactively have by to to and updating have pricing our branch been network. using to drive price of visibility increase enhance product pricing We a through changes

of growth management and our these are programs opportunities payment drive we Additionally, path team an market category and continue long to X optimize to in many addressable suppliers highlight the our to constantly as we see shifting We're pricing best of spend on the evaluating of with sustainable ahead. On opportunities executing margins. expand and example early innings gross the initiatives growth. how of a Page

and to share runoff. we market. wildlife. long above is prevent to presence environmental cause reduce will increase X% geosynthetics and but and our is geosynthetics control our and in highly market the and estimate current large, pollution billion market roughly be during erosion increased risk erosion that products biodegradable this reduce used a Land erosion friendly native but erosion our that of products soil products $X in in soil displace growth We and of only erosion development fragmented, likelihood recently control tends come this We blankets, We fall. L&M used integration have control billion geogrids, earth developed to Geotextiles, after They're and inorganic runway related of to opportunities last control Supply Resources growth other market and Bag a erosion Geosynthetics disruption options. erosion primarily successful in stormwater estimated organic Erosion and construction. and and soil for a Supply platform addressable XXXX and which the are acquisition $XX ahead. have

and and to agreement Our pipeline geosynthetics on maintain see of our illustrates Earthsavers acquire We opportunities we fragmented Erosion this high ahead. recent market. priority targets consolidate Control large large meaningful a ability bolt to

branch customers. multiple in organic hands have and growth to addition we these network M&A we as pull growth through products erosion national existing geosynthetics into the In pursuing of control of our our and avenues

to recent label us regulated Supply. regulations locally for more to on increase demand. Environmentally water capabilities brought and prevention the prevalent and We that to conscious acquisition L&M of driven our runoff we are efforts capitalize our offering private are from our storm nationwide Bag fabrication becoming sales have the aligning ability in

specific product approach is sales service regulatory associate the Our and solutions. provide using local specifications, customer their requirements taking and knowledge consultative of

customers provides competitive deeply involved by enabling significant planning us our comply advantage. them and with local customers with to ability to process our are in support We a regulations,

and cross-selling expertise, We are talent customer existing base. incentives utilizing to drive acquired trainings, our and our with

consolidated Lastly, we capabilities from enhance geosynthetics our margin profile categories. sourcing and product of erosion to are certain buying control and benefiting the

is underway. Our roll-up strategy

call areas deepening come acknowledge inflation, has product, highly up to for fiscal not success. of these rising translate have we the rates, nationwide. team capabilities I be building our XXXX, share our as we gaining long-term a continue execute service with Earlier interest associated team strategies, and talked war advantage, made position demand. our this yet together portfolio Financial growth. customers on and year, in high deliver with great customer and but the profitable deliver Ukraine, remain we into executing value wrap focus our we delivering expect progress first and company Mark. to Furthermore, have product to geographic full outlook. to lower We expand uncertainty the financial Chief seen to over continue market To this customer, and our the our in a expansion results. on Mark and results priorities remarks, experienced best-in-class now how competitive We about on these growth impressed initiatives. and working discuss focused our to We've each turn areas our my of great foundation key continue to amount our experience. Witkowski, operating of year to ahead, Go for our quarter on Officer, I and our will We

Mark Witkowski

you, Good everyone. Steve. morning, Thank

passed The acquisitions. XX% to begin were X, the first and increase higher first year. quarter costs, driven operating rising by the of along covering sales I'll Page nearly average was selling increase volume growth, prior we Turning over results. strong as material quarter approximately in prices by $X.X Net our an billion,

activity growth benefited our accelerate, of fittings benefited construction volume non-residential Our from strong to and sales land activity drainage average replacement higher pipe, storm market strong. repair to continues lot see strength product across in acquisitions, municipal end valves, end and markets. We've across most each and residential continued and lines. for prices Net remained selling products has from growth, sales and development,

benefited protection construction higher from strong commercial a prices. Our fire market average products and selling

improvement certain our in for and chips, geographic meter components expect meter remainder growth of along sales drove in to of Roughly end markets meter product, smart slower seen due fourth our customer, quarter our shortage to to our and grew net average year. and that the pace costs. due Our the team's products execution quarter products. and We've our availability pass We driven at continue above-market product by primarily of the outperformed trend the prices industry-leading to sequential of last of higher a volume which are was semiconductor material initiatives. due rising first three expansion ability to selling since

added to and We our thirds on fuel shipments and reduced categories. well, from working inflationary in inflationary first in suppliers, environment conflict challenges, margin rising has year, global imposed in was but have of iron the of industry-wide less experience our our XXX growth in the XX.X% imported compared as further We're due shortage sales are approximately from supportive $XXX Ukraine created conflict to profit million. five Gross two Russia prior steel increased navigating Similar continue from certain our investments initiatives. recent exceptionally year pick came give the supply and XX% supplier price inventory an points and to the XX.X% immediate in U.S. prices, profit improvement recently with costs product with customers profit we quarter has of Gross gross percentage challenged product by price our notice we a the to of approximately the experienced last to in and increases months. cost chain advanced of to was Ukraine, first these impacted When increases market recent by surcharges teams the our shortages, of surcharges. and Despite Acquisitions environment coupled benefited a a of inventory ahead with sales quarters, levels. iron. Nearly sensitive basis points. net operating which the margin positively contributed due gross quarter. enhancement

make to expansion great rate margin We initiatives year. prior relative margin continue strides sustainable gross our to the delivering across

adjusted we compared benefiting quarter increased in The of accretive tax for due quarter $XXX reflects compared senior costs. million interest operating effective year, effective whole. manage generally achieved our structure improvement strong income and general fixed rate first $XXX as a income, the cash we EBITDA by increase acquisitions, with quarter. cost due taxable gross cash which we portion as the cash offset by margin period for sheet and higher also operating year. operating our million. net was from percentage increase year navigating non-controlling anticipate interest of the adjusted as EBITDA to each historically was attributable in XX% net attributable times. interest quarter, higher XX.X% XXXX this half was expect tax and to of cash to of margin at lower offset $XX year-over-year taxes. sequentially of year expenses Page Income XXXX SG&A the expansion, ability was of We $XXX to prior to higher We We expect expense, prior this points. year to the cover rate the with and million for long the increase of only cash taxes. of first operating grew rate the $XX basis first approximately the an growth, an fixed a improving primarily this cash a synergies administrative net for cash $X capital The increased The we to optimize for income reflecting gross and expense highlights leveraging we margin quarter notes. the we on an in leverage no Selling, to the year, XX% percentage XXX support margin that XXX our XX, points. On and balance the particularly attributable XX.X%. of our second and build SG&A of exception million for expense from available as The recent of the net flow the by demand sales of in net the income period, for year. an outflow growth. XX.X% growth, in compared sales first million, that in from our net quarter. rate our and to was inventory a an million $XX the an I'll the the profitability EBITDA prior both to preparing outflow majority levels. and lead with sales million outflow exclude support income moving we inventory and million, $XX was ensure while same quarter in to to work lower now in In had have adjusted trend forward. operating the The to decrease to basis continue sales products Adjusted is higher We've Adjusted as in partially evaluate our than approximately entities. was generated to XXX% effective redemption The business $XX effects Interest million continue as primarily and expense prior result more the decrease and was and was was our customers

credit meet of facility end an quarter. by times needs, increase million to working $X.XXX down borrowings senior to the capital was improvement our operations, of ABL $XX the X.X our execute last at M&A. attributable adjusted bringing billion, to was in leverage our offset debt debt quarter times, X.X net Our since under and partially an of EBITDA, net fund improvement The

value the a loan into of entered a lock of hedge basis at points hedge. LIBOR portion points. the carries million. the notional plus $XXX LIBOR rate rate facility. XXX first cash on with million of five-year in billion interest in hedge current at of the value stands $XX total term We end fixed the at the the $X XX basis excluding cash liquidity, quarter, we of value The to At interest unhedged the Our had

flow, fiscal our fund sufficient our strategies. with into near-term wrap discussion backdrop, continue liquidity, in heading current summer on and with combined great macroeconomic operations our growth pursuing season. of that will cash now I'll XX anticipated outlook up our have expect the we momentum for to the the operating We a current Page XXXX. selling Despite be

We demand market expect demand we remain the remainder slowdown costs no to Material climb due project stable to and first a the for in the end sustained in capacity. fiscal XXXX. strong to to pricing have a chain not supply environment of activity little robust, remain or continue is bidding activity in quarter improvement Project observed and through cancellations. rise and to

now pricing higher we anticipated. to year be the originally of result, As second the a than expect in half

the and be residential demand to as year, pressure year. half expect in though we volumes We second anniversary non-residential the the prior we in positive expect strong full for

replacement from construction and continue entered municipal through the end to benefiting a expect the market positive, activity we strong stable summer backlog. and season We Overall, with repair remainder year. is sentiment of a

of growth and growth from now we in for net expect the the more together, high half second both annualize all difficult volume year, as Taken sales comparisons in pricing. of moderating we the stronger XXXX, first half fiscal teens consisting

leverage, slightly expect year costs, range, margin the XXXX. expect benefit the gross margin achieve be At fiscal to be year. and our we we midpoint now rate the flat we from to above with sustained full our rising adjusted roughly material anticipate Given of SG&A will the prior EBITDA price realization

we are year-over-year million With be to our EBITDA raising these XX% adjusted to in of representing million, XXXX fiscal factors mind, to growth of the expectation $XXX range for XX%. $XXX in

second with to year. typically as our optimize expect growth of to balances to to capital in product EBITDA customers. XX% cash flow We of cash being of invested convert our operating and XXXX We XX% ensure fiscal in into support convert work and XX% we as to in half roughly exception to the fiscal EBITDA our XXXX adjusted adjusted the XX% inventory working operating an flow for we availability our heavily

we of Our price thrilled close quarter expectation for anticipated originally our out operating chain to sustained inventory supplier our investing supply results. and than -- cash are conversion challenges with ahead in first continue decision less prepared to our To cost due increases. is remarks,

sustainable resilient our business questions. remain flow. call of market quickly generating a capable operator improving gains, like At to a concludes cash I'd over and strong operating That adjusting and prepared focused We this time, model have in to team delivering the market. remarks. We turn the changes for leadership the profitability, share to on

Operator

[Operator Instructions]. you. Thank

you. from Matthew Our Bouley over Matthew, to of first comes Barclays. question today

Elizabeth Langan

of the wondering could expectations this Hi, strength if And Matt higher? I macro? within us on given of idea touch seen markets is the kind those respective you any an your a end those for on Elizabeth notable Langan you you're and where markets Congratulations today. driving results. on what's you of within give could was uncertainty change in have seeing if -- the

Steve LeClair

this Elizabeth, Steve. is

your So been have to be Municipal seen we've all through really demand strong. quarter thanks question. these end across robust very continued first has of for markets. What

build bid been lot and municipal. is as about been rates it And what concerned has strong, the that closely. sales. really, look through the a that other with be build. happens The continues quarters residential. residential, it the as really really our we've land too development to of then to I strong But drive all Obviously, seem fire continues be quarter we're to we last continues has look forward. for dynamics demand and impacting well the be to think and activity watching interest several in continuing to we Non-residential very continued strong at area, protection to in looks

across end to through really we all all saw markets at quarter as we of this performing I well them So got continue and would extremely just say three bid a of activity point. first see that lot

Elizabeth Langan

do the how do think some you're market thinking driven the your touch also you'll sticky been your was gains with or loosening I helpful. really of expect to that That's to products? share chain? reversion about hoping supply that on access you And you. by have those you you maintaining could be Thank see

Steve LeClair

Yes, a seeing in anticipated. to challenged than lot our time tighter we capacity is continues frame. of now and right supply try type just to manufacturers, it any of The short been increase be or what we're chain tight, for they've medium-term

So as smaller that we continues continue to to preferred to to product tight, many get aren't our be get. that of competitors access able

a think when We high continue serve gained continue support some customers them to long them access been to continue newer supply of serve that's product, level. And by that that chains at we as I ease. opportunity we'll get the important to part can as we've these to to getting

able point that hopeful at chain in some that even starts So ease continue we're the we'll the after supply momentum be to future. to

Operator

answer that does Okay, your question.

Elizabeth Langan

Yes, you. thank

Steve LeClair

Thanks Elizabeth.

Operator

today question over from Research. Coe next of comes Nigel Our Nigel, Wolfe to you.

William Vranka

This on is Will for Vranka Nigel.

Steve LeClair

Good morning Will.

William Vranka

rolling the the I just contribution talk could about and if of price see good wondering through quarter the wondering how I morning. cost -- of rest it you just year? was was you the

Mark Witkowski

Thanks Thanks, the Yes. for question. Will.

As gross so contributed that quarter with basis synergies points being for margins about, you basis and XX call basis mostly saw, points, acquisitions there. cost spread. from XXX benefiting say about it, were another from XXX really accretive up strong, the of I'd that's points price

and to continue there. this of with good to margin results we favorable see gross in buying place ahead initiatives environment, then inventory, the benefit and both that we've pricing So had continue

William Vranka

provide and about how Got you any earnings color the it. thinking color also maybe wondering you're second if seasonality could on And setup? any the on this quarter was year I of

Steve LeClair

see also up to we see volume. Yes. to say going Well, second typically, we into would sequentially be due the nice continue quarter ramp accelerate. I'd pricing what a

growth Typically, we'd down QX from QX. to sequential QX QX in QX that those have typically expect and would I their sequentially construction and primarily line top the regions season. off So slowing the level be would down we levels colder due in see that of kind at then

remainder expect, say, the levels kind So XXXX. of of normal here to through return I'd seasonality a

William Vranka

Thank helpful. you. very that’s it, Got

Operator

Will. you Thank

question of next Joe, comes Ritchie Joe today over Our Sachs. to from Goldman you.

Joseph Ritchie

Thanks, everybody the a morning nice and to good start congrats to year.

Steve LeClair

Joe. Thanks. Appreciate that

Joseph Ritchie

growth first tougher? guys to question we for the year? around my because, obviously, I it, for I lot say can the you heard And the comps half expecting second don't guys that of -- how think get guess of the what like commentary, then in my you are but I thinking the part is just follow-on is be about equation as pricing your a year pricing pricing

Steve LeClair

Yes. the Thanks, say mid-teens Joe. year, guide, pricing, we I'd in I'd the that low look Yes, in that pricing mid-single-digit back We've to now the half, say the the of I'd on our say range. as previous anticipating assumes we half. of mid-single-digit within kind to our in back range were increased gave full which for pricing you at kind

trying to uncertainty some coming in the year So just potentially this I'd back reflect and we've got commodities the the commodity year. of a, say, starting stabilize to on side and then later potentially the of some later

Joseph Ritchie

obviously, is guys for gross guide -- And year first that mean Mark, the mean great margin Got equation that start it. you of because then, pressure to gross does margins what for the a the there naturally some so quarter, but embedding to from margin, the are kind or gross in then flat necessarily forecasting those I dynamics? guess does obviously,

Mark Witkowski

Yes, quarters of I'd Joe, margin XX% now, basis Nothing temporary this several margin. north benefiting kind in in talked XX do given of just really of of in. We've there we we're from our XXX had environment some expect XX%, expectation. points terms benefit say, changing that we're to about, about as we've the

-- that how thinking that's I about XX think rate off to we're So run XXX kind of this it. coming is

expect subside that that XXXX the the finish if of off as were I of the in that So level potentially at year prices into year, and that those kind benefit seeing back we then prior stabilize remainder in we really to [ph]. temporary

Joseph Ritchie

it. Got

little more sneak it Okay. supply some one from a I for you until the is Steve, see a expecting much up not in truly there And more XXXX? chain just all the really of spent provide maybe that the and a color you, that maybe or at you -- bit Can on is then of just risk could holding that being spending benefit here, into also doesn't if some oriented. mentioned to XXXX, deferral bill, just of this get you're infra what's

Steve LeClair

of looking utilize of tabled Joe, simply availability these it's constraints that would product. just that now limited time the some projects and right because being of these are funds the really

the So in in that projects diameter go pipe world, can larger of the weeks. cases, these some -- almost and like some XX time out, out municipal there, the that lead pipe some for the of are products things

until believe capacity starts applied. just going being bit that lot we a these funds a we're that freeing up of whole So see to not little

Now start if maybe demand the that. to it half today the looking some if just year, and we're needed the continue I these we back the municipal to to how of pipelines may last for that change, at for we've momentum not quarters. our are this pull and everything just That's kind funds be municipal soften that in seeing of now. several point robust start this we're seeing things of some that of at been very right But backlog in in able seeing do think offset residential some

Joseph Ritchie

both. Okay, you that’s great to hear. Thank

Steve LeClair

Thanks Joe.

Operator

Jamie move on now to of you. We'll Joe. line over Suisse. Credit comes Cook question, our from which to the next from you Thank Jamie,

Jamie Cook

Hey, good flow. questions. of couple just the operating cash a I morning. One, Nice guess quarter.

adjusted XX% XX% versus about quarter, EBITDA rate conversion sorry, to talking XXX%. of -- to you XX% to lowered I XX% XX% your think were You to last to

and these you my give you're you non-commodities color moderate is other of or question, on it what seeing could if back just pricing just pricing expect And then there, well? commodities back PVC on So just half and again. you to year to second pricing in talk whether the what the on some Can or Thanks. inventory? as

Mark Witkowski

Thanks, year it's more cash high the expecting full We've now Jamie. that growth year. of On the up operating on raised higher flow, teens. full in really we that for now a the We single-digit. were expect factor the for our growth into

higher. support rate, is need think So the of capital we to that growth working kind

we'll expect say it to maybe So on reduced little growth our more have hold on that's guide flow. the really but that inventory, those longer, investments in to related what is anticipate. we a bit operating we of cash our I'd we the for

quarter. the to we prices our guide, the the continued that, pricing through side, if through haven't got there. coming which assuming price the primarily and commodities, if uncertainty But those we in the first hold the of as some we've pricing backdrop the end remainder see kind bit kind reflected seen. slowdown, of do do across really, year. some the again, as well, of the macroeconomic do commodities for of we're we've increases on we've little a On pricing the we non-commodities those see accelerating And reflecting back that Non-commodities of get year. In we demand through see have we that's seen the

Jamie Cook

you. Thank

Operator

take Mike our Jamie. Capital you Dahl today next to We'll Thank from over question Markets. Mike, you. of RBC

Michael Dahl

Good morning and thanks my questions. for taking

a the couple side. M&A on -- Just on

a you thought of framed kind embedded contribution I think out or already full give sales quarter. given for signed you've us Can that? what first for X% in on closed year the what's just the you contributing year-to-date, M&A as to

Mark Witkowski

Pacific X% for second of last the quarter, that did primarily the in to year, similar the our some Mike. Yes, about priced Bag anniversary and L&M Yeah, Supply. we We'll acquisitions quarter. Pipe larger and hey start

in range the that ones closed in I'd of year. closed, low Earthsavers new back half at that doesn't And the the with we've that we've not include to So got, say, is this the point. mid-single-digit

Michael Dahl

-- that, Earthsavers? know any I on three on branches is parameters said relative and you about to give sizing quickly service, just And you us but full of can there think

Mark Witkowski

provided in Yes, size million the $X kind past to in we've the range. of I'd $XX the branch million average say

somewhere that So looking area. in with probably branches, you're three

Michael Dahl

lot sticking And M&A. Obviously, public question, the helpful. there's follow-up in on capital markets disruption markets. of been a That's my Okay.

pipeline You're seeing whether assets, some changes today? But rising either competition funding that. is and incremental shake what costs of you're and are disruption assets, things this like in wondering loose has of M&A, it in seeing terms your M&A how you for affecting some seeing just

Steve LeClair

them the that be this what with of uncertainty be very of so. acquisition the you I'd seen the some past, to in been part lends year disruption our and certainly When to the going and that we've some would pretty to this continues is share first and targeting we robust, that's Yes. happened well that pipeline bring the this type itself targets in typically Mike, economic has really of of into table.

almost a -- So really whether industry pipeline of when uncertainty bolt-on branch some we area. they've that a really getting done, acquisitions a in you we've along Colorado. start our been look in favorable lot we're at the into Waterworks New that it or just at does as in situation that it you But assets lines, of the those help acquisitions in addition aid good they've different if the look been York where

just You couple some lines. robust consolidation us opportunities in the probably underway right for continue consolidate. out a very there geosynthetics, regard pipeline in have that we think of type to along any us control of and helps And economic to with those the we now erosion disruption

Michael Dahl

Okay, thanks that’s Mark. helpful. Steve, Thanks

Steve LeClair

you. Thank

Operator

Thank you Mike.

go Morgan. today next from ahead. Patrick, question comes Baumann Our J.P. Patrick please of

Patrick Baumann

commodity morning. bit good Alright, the then year mid-teens total price price granularity you sequentially. that Can like expect type on those for up pricing for pricing more seems little expect in lines, improved company? incrementally you within of the a pipe the that's along the we a this quarter embedded in contribution, what quarter, fourth it the first stepped And because versus give

helpful? would the other any that's be is that the pipe, that curious, than Just or other that pipe is on color the commodity you that sell products commodity

Mark Witkowski

Yes, Patrick.

was QX we pricing First, PVC the I factor see guess as I rising QX. would on that as it fast has have of of had lines product the an a is there. sequentially. wouldn’t did other a some had. run. good I say acceleration We say PVC to

contributor have across longer of that maybe the non-commodities, increase. terms which was get little a say it bit wouldn’t a taken we other necessarily I the really than So, price seen But of largest of to commodities. the the in level lot have the

benefit started a have out coming there. to we of So see

we guide non-commodity, In out really mid-teens guide it come the I'd terms say year, those back versus haven't some in commodity going our does kind of of full commodities the broken forward assume for on of that embedded pricing way. down. But

for to opportunity as there non-commodities long some recoup even the the their with stickier believe more as we there's continue costs suppliers some view and of those think that those incurred. some they've probably I to term much look try products to of really

way that's to So the about probably think that best right now.

Patrick Baumann

been resi Okay. And you're then in other on no the a step-up in you from I'm markets, that then comments yet comments just moderation project of seeing, your able demand more if there around non-res the you curious far haven't and too has give busy why comment? that non-res it's to just I'm with like you're -- that maybe see there you and infrastructure could was benefits the activity like comment, you're muni that been serve kind that around serve just to resi in so subsequent a you're curious, the stuff, is private that seeing or you ability in demand because color from made making could that. if perspective that

Steve LeClair

off lot rehabilitation given are holding Yes. at associated product, the lines, that projects challenges not really a is with pipes. just where this access to are just the geared of comment pipes, More municipalities from municipal further there point their of the getting towards of out

some are from than have available of projects projects, pipe, times lot at some lot lead from point. these really a of more others. pipe larger So of this right of with And projects a different some these these different characteristics the prohibited that diameters there's particularly municipalities be of diameter pursuing may aggressively that for now

they seeing more execute seeing a lead more shorter of and trade-off product in But can this projects it's are than happen. which in end with market the these most we better predictable some pricing. consistent, we we them manner that of so a delay predictable pending are more are availability part, not serving some for some of So in of times so

Patrick Baumann

Thank okay. Understood, you.

Operator

Thank to Hughes Keith, Truist. you from Keith move is our the We'll yours. Patrick. floor of on now question

Keith Hughes

couple questions of the getting trials But issues list talked I guess availability supply for you. have Thank of you've in customers? Most about you my top continuing. terms answered. Can your problem off been product of

Steve LeClair

for Well, But some out supplier critical extended basics there, extended particularly to projects. obviously are strong product you're these looking I of lot some complete pipe, being to of times think I of want detail or the that's Fittings details. there's able the out. demand out. Those to -- give the specific a have have like at lead when

a well, country Those to are and the that may projects to big be some there those out into things and gaskets across now that as lot lines. have all along we're sometimes a balance down. we're primarily smaller and seeing, a restraints what right that like been one trying Meters can in too. get slow You components that, terms of of project fulfill

installations that to chips to that for continuing all be access still at to to where meters the we're and need. getting that still they're produce a of we So everything have we smart lot quantity the need with proper we struggling of need get challenged the the meter they

areas, of a constraints those the we're couple of So seeing those Keith, still. that some are

Keith Hughes

engineered more It you're products, of was some problems well? the areas seeing commodity not in just there's as there

Steve LeClair

Yes, correct. absolutely. Yes, correct. Yes,

Keith Hughes

Thank you.

Operator

Keith. you Thank

David, David you. comes Manthey from question next over Baird. of Our to

David Manthey

and land other trends. Good the today? you sets What key are data Steve, mentioned on you. development morning Thank that are dashboard your

Steve LeClair

of activity areas, closely. watching watching obviously We're lot these a our We're that in bid David.

the municipal prolonged residential watch some of it's a at we're Obviously, has we whether at the and time given constraints. when So labor lot which of pace and land projects looking or a development, these been are bid execution projects. these to these watching cases, happening, shortages a supply we're in execute

these. try fulfill and So fulfillment to little backlog we our projects lot a a of age are moving we as bit sure seen and the watch make We've through those execute aspects that along.

things our and at at able how think relook looking that, that couple we're key pricing. I happening assess that So provided there. have that at how the how seeing on been of as gone markets daily the weekly to out confidence you've and what year, a point. my we've those this at looking that the I we guidance And through look we're seen of and at rest end are are we're And in the have we've we and the in reflected what's

David Manthey

been and today But environment you overall GFC. which the XXXX, to unusual? But market that. more in that of like can versus clearly mix a may of HTS was the fan and the every company business I'm things the to Waterworks down rolls trough. than unstable big cycle predecessor XXXX environment, and peak And economic not muni tax and XXXX the discuss was that have Okay. XX% comparing in And

Steve LeClair

effort into positioned And with, nearly reposition and that built the one Yes. if of going seeing new in and try really way of the it. things of we products resources we focused a about I out time. long-term Certainly, XX% on residential with on to that now our to better is that smart Recession back going time we was And that time shift the aggressively challenged municipal. after happened growth. the Great sustainable on the and how were meters, serve to business for it's go within number business after Since business municipal board a you're at when a our and We what started sector. that opportunities came Mark frame, our lot much residential plays other frame, back We time that. different

say I as were would through of too, Supply sizable then two different two Waterworks integrations Hugh back players, well, what going we integration National and an also addition, is of in Waterworks. So

was that was a happening just well, that itself consolidation the lot internal there challenges So lent some to we some of was -- there which as faced.

that standpoint, better seen have that so -- of standpoint to from is on the growth. a a ourselves a to from product sustainable ways from many a of in different positioned we've standpoint, really drive and lot continue we those adoption what Now market sales

endured we thins the really generated we at cycles Secondly, David? some between in that's one cash of that reinvest even Does back of cornerstones adjust able help a cash ability of amount we our the and of as of And during lot use we've type different these look how to all, been that how economic business. to SG&A our through that our immense and at and off, adjust downturn. an downturn, investments were to

David Manthey

it's Yes, lot good. Steve. does. very a It Thanks

Steve LeClair

you. Thank

Operator

We'll question Pettinari you please our David. Anthony take ahead. Anthony, go of from next Thank Citigroup.

Unidentified Analyst

for coming [ph] Ashher Anthony. is this on Hi,

of from end think digit, sort I single-digit high to I last but your growth expecting case? of you still XXXX, mid-single double-digit you call, the on that think residential, pointed about to demand decelerate to in from markets is residential demand growth strong sort low talked in

Mark Witkowski

about the so think is as it QX. year into to Ashher, have really we strong Yes, especially last way got the later we demand and QX

development, say saw increases just lower there So terms last going of off we the rate not still in comps, double-digit demand, lot of and those that I'd against of strength growth expected we kind residential rate up a seeing but we're at year. coming of the

Unidentified Analyst

product even as Great, product With meaningfully on persist sort projects tight, municipal in challenges some product of funds thanks. And risk as then of around these flow availability availability these comments like just follow-up, XXXX the as your IIJA of availability. just year? throughout through projects, a the on hold sort that a quick is don't remains there

Steve LeClair

happen. a to do demand seen we've through XXXX. of going able flowing think you're But I lot that to in I funds could a be given that There's the these I to see chance, and say, would start desire the guess, those projects,

existing that's the the of markets, a I of a of think lot has lot happened funding that some lot self-funding the it bond happened of projects. a the with replace will municipals, bond the with and

will momentum So and we XXXX. anticipate continue it will be that utilized, demand and into

Unidentified Analyst

over. it turn will I helpful. very that’s Great,

Steve LeClair

you. Thank

Operator

today question Thompson you. Group. We'll Ashher. you Kathryn, of Research to Thank over take from Thompson our Kathryn next

Kathryn Thompson

Hi, my today. thank you taking questions for

year-over-year inventory; those first, really inflation the And inventory volumes both much on the side. of putting on raised on pricing some versus outlook then more metrics? how the perspective on of second on driven is outlook and and by Focusing

shift a post-COVID up inventories terms in are And would is though a a are companies value world. greater we're going fill from just-in-time getting even over in today How starting the a see more skews some to that color managing of why little on helpful? a simply inventory. period Given because world, post-COVID carry versus some their this overall Keith’s in you suggesting rates forward, year-ago inventories bring strategy be

terms you. in also color inventories effectively, any your So you over Thank don't so skews? managing on of how get you plan

Mark Witkowski

it's the first. question Kathryn, thanks take inflation Alright, Mark. I'll

of a the is pricing. of to most and that would I said, the we QX. on lot On of we -- terms in through Like continue raise guidance, accelerate saw the accelerate you tell that

as raise, the that's terms expect, what in obviously, top in in had first is line we of those pricing. the anniversary of of that we primarily that, mid-teens And metrics some lower that year in XXXX. on full So rate at I'd had we quarter, kind inflationary continue to say a than we the it's I'd say, that and

would acceleration So XXXX. we take expect you rate do want to slow the that down throughout of Steve, inventory?

Steve LeClair

Sure.

talked about you just-in-case just-in-time inventory. bit a Kathryn, So and little

we One with so project-based. much of business the is watch our is that share closely things of I'd you

inventory And allocated is most and so We project a be in some inventory. we're different stocked do, do to of that tend looking ready-to-serve very The speculative part. buy items across that transferable for in type network essentially bringing to some the specific would our Those branches. at obviously for majority inventory. be

with it our So and that with of what our make closely sure activity. our watch now watch bidding and is balance to we backlog inventory obviously, get we're out both seeing, something, doesn't

that. So we're of very conscientious

able what inventory of real a on As strong that in we're understand predicate that you been terms like end last in and at quarters, being several we the looks yet markets. our projects to to these show backlog bidding coming the and fulfill in based these to in of And what's return. are us lot saw in activity a invest able we've that

with So very all to the inventory, particularly be be other we down allocated utilized have the lines. our of of our do retailers gone to that network projects etcetera. some along across But of obviously either those closely. challenges fungible writing inventory it some is or to We're aware able watch through of

Kathryn Thompson

you. what helpful. -- terms what for you this year the today of start really have types how That's and of versus changes volumes, of that from backlogs, are of is projects, a type you of seeing even in has type the changed year? Okay, in of Thank ago upcoming, but what say, or And great. projects are that which visibility terms then more,

Steve LeClair

I year commercial probably ago, construction area and certainly the growth some in we're is think in seeing non-residential a construction. continued one From

So has we're been area, seeing have strength in municipal part we've pull-through a for that was protection an seen our we're fire lot that just which the area this last product been most pretty some year. recovering after from see we stable and to been year. was and and That COVID, to compared as stronger what started encouraging. have Residential starting steady

Kathryn Thompson

Okay, great. Thanks much. very

Steve LeClair

Kathryn. you Thank

Operator

you Kathryn. Thank

Andrew last our Andrew, Obin today Bank please have ahead. We from question of of America. go

David Ridley-Lane

Thank you.

you just I is think something said on Andrew -- this Ridley-Lane Mark, clarify David earlier. Obin. wanted that for to I

So last of inventory. fiscal for year, benefit that lower is got full flat from your this points Is gross XX sell-through XXX margin expectation you to that, year? cost basis a

Mark Witkowski

Yes.

our I'd margin So points that XX rate I is the XXX up what would end been last, year, be XX% gross to the flat when say, basis three way for you off think margin you kind which XXXX. has the been apply has with about of would that the over that are low quarters, remainder in And that the of range. rates with of about

David Ridley-Lane

and Got it. hear from like you have anything maybe to question, And so Thank of then indicator forth. seen Have weakening, you pipeline any strength start the the happening? you. you the bidding the on other I project -- absolutely or seen time

Steve LeClair

point point indicators slowdown seen. of to we data the softness. internal our nothing times. at those continue that to any a we've suppliers, And our of no, really there's any that that question. Really, Yes, this thanks in points talk to look we our all at And not for at have this seen customers, any kind

David Ridley-Lane

Thank you very much.

Operator

Andrew. question was our today. you final That Thank

remarks. to So hand like to closing Steve I'd for back any

Steve LeClair

joining you hope you're a well. to you Thank again today. on, It's all for doing and us we pleasure have

areas quarter with on continue first our our to business. of are performance, focus We extremely the controllable pleased

ability economic While there the stakeholders strong continue to are XXXX many deliver in beyond. external to results confident to remain our in global factors that backdrop, our impact and we

Operator, experience, local that We local call. concludes customers committed our you your service for Main. our to Thank in interest & with nationwide. are knowledge, providing Core and local

Operator

concludes for This Steve. all Thank the today. joining. you, Thank call you

may now disconnect lines. your You

Core & Main (CNM) 14 Jun 222022 Q1 Earnings call transcript