Core & Main Inc Q1 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Matthew Bouley - Barclays Bank PLC - Analyst : Hey, good morning, everyone. Thanks for taking the questions. Wanted to pick up on that gross margin commentary, it sounds like you said that for the effect of normalizing inventory costs is now behind y ou. But now you're speaking to some kind of potential competitive pressures on. I just kind of wanted to clarify all of that at the 30 to 50 basis points. Is that kind of the guide for the full year? I guess that's number one. And number two, just can you kind of put a little additional color on what you're seeing with these kind of competitive pressures and how that should affect your gross margin cadence through the year? Thank you REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 04, 2024 / 12:30PM, CNM.N - Q1 2024 Core & Main Inc Earnings Call

Question: Matthew Bouley - Barclays Bank PLC - Analyst : Got it. Okay. That's helpful. And then secondly, I mean, I guess following up on the deflation commentary, I mean, you just said in a lot of areas, it sounds like market pricing is stable on. But I think in the guide, you spoke the sort of slight price deflation for the year and maybe that's a slight change from the last quarter. So I guess some way, where are you seeing some deflationary headwinds? It looked like in the quarter there was a little bit and fire protection, but not to put words into your mouth on where are you seeing a little bit a deflationary pressure? And if there's any offsets on the inflationary side, would be curious to hear that as well. Thank you

Question: Matthew Bouley - Barclays Bank PLC - Analyst : Got it. Thanks, Mark. Thanks, Steve. Good luck, guys.

Question: Nigel Edward Coe - Wolfe Research, LLC - Analyst : Great. Thank you very much for the question. J ust wanted to maybe pick up off that last question on the presentation. It seems if you could you sort of plug in the numbers on it looks like price down maybe 1% or so this quarter. I'm just wondering what kind of visibility you have as we get into the kind of the more meaningful quarters? And what how would you gauge the risk of broader price to face me impressions and perhaps that modification becoming a bit more kind of severe?

Question: Nigel Edward Coe - Wolfe Research, LLC - Analyst : That's great color. Thank you. And then on the on the margins, and so I'm just typically we see 2Q 3Q EBITDA margins picking up sequentially on the strong volume kind of leverage on SG&A. But given the sort of the inflationary pressures you're seeing on SG&A, mainly on investment spend, and just wondering how we should think about SG&A growth over the remainder of the year until we could expect to get good SG&A leverage in 2Q 3Q?

Question: Nigel Edward Coe - Wolfe Research, LLC - Analyst : Okay. Thanks, Mark.

Question: Michael Dah - RBC Capital - Analyst : Morning. Thanks for taking my questions, s orry to harp on the gross margin here, but I guess I'm still not fully clear, Mark, back to Matt's question, the 30 to 50 basis points, is that a full year '24 versus full year '23? Or is that you'll see 30 to 50 basis points then hold stable from there? And that's the second part is, is that a net number? Because obviously, as you articulated, you've done a very good job of finding offset through your internal initiatives so far, so that the net headwind do you expect for margins? Or is that kind of gross headwind and the that may be somewhat less than that?

Question: Michael Dah - RBC Capital - Analyst : Got it. And our [SQL] potentially stable or better from there on the Gothenburg -- (multiple speakers) And second question, just around kind of the M&A capital deployment leverage on your obviously front loaded a lot of the buyback last last year and $0.09 decent that on M&A on. So the first part on M&A, you know, it seems like just back-of-the-envelope, I know the Dana Kempner deal was was private equity competitive makes sense, though the higher margin, but it seems like the combined you might be speaking to a multiple on these recent deals. That's more like an 11 to 12 range, which would be kind of higher than what you've been doing on from the smaller tuck-ins and maybe just speak to that and what you're seeing in the market for multiples on what you can drive on kind of a post-synergy basis as well. And that with your leverage now in the high twos, it sounds like you're pivoting in the near term to kind of deemphasize the buyback and focus your capital mainly on M&A and ultimately the deleveraging that maybe just speak a little more towards how you're thinking about priorities for this year? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 04, 2024 / 12:30PM, CNM.N - Q1 2024 Core & Main Inc Earnings Call

Question: Michael Dah - RBC Capital - Analyst : That makes sense very helpful. Thanks. Stephane and Mark.

Question: Kathryn Thompson - Thompson Research Group, LLC - Analyst : Okay, thanks. And just a few clarifications based on presentation and Q&A, prepared guidance. On the municipal side, you can keep that steady, low single digit growth in that end market and implied in guidance. But it could you just clarify again on the non-res and residential end market, PDC. set non-license can be flattish on unless he had said single digit to mid-single digit growth. But any update on compliance team and market share guidance?

Question: Kathryn Thompson - Thompson Research Group, LLC - Analyst : And on annualized revenue contribution from acquisitions you gave the percentage change that could be could you frame the acquisition contributions from our from a revenue standpoint and a clarify this a little bit more in his script? I believe that our margins but help us think about it a finer and finer point on follicular spectrum margins more on an annualized basis fund this acquisition?

Question: Kathryn Thompson - Thompson Research Group, LLC - Analyst : Okay. And then just another clarification on your fire protection on self declined due to lower selling prices on offset somewhat by acquisitions. What are you seeing in terms of just volume is really to decline in that segment more and due to pricing? Or are you seeing any on changes in volumes?

Question: Kathryn Thompson - Thompson Research Group, LLC - Analyst : Any update on just private label as a percentage of magazine article square to 10-15 competing in and around 10%? Any any update there?

Question: Kathryn Thompson - Thompson Research Group, LLC - Analyst : Okay, great. Thanks so much.

Question: Joe Ritchie - Goldman Sachs Group, Inc. - Analyst : Hi, thanks. Good morning, everyone. And so I won't ask the gross margin question and good morning. I maybe just going back a bit deflation for a second high. So I'm just curious, there's been some some talk of on a large municipal pipe expansion from from companies like Westlake. I'm just wondering, is that is that happening any kind of impact on thethe deflationary comments that you guys are making are expected to have an impact going forward?

Question: Joe Ritchie - Goldman Sachs Group, Inc. - Analyst : Okay, great. That's good to hear. And I just wanted to circle back on the M&A at the M&A commentary and also the -- how it relates to the guidance increase. And I guess we were roughly thinking that the new acquisitions were roughly about $100 million sale in revenue. So even at that kind of below company-wide margins, probably higher EBITDA contribution than the $5 million increase that you have at the midpoint. Just want to understand like how that how M&A with like contributed to the guidance and then what are my numbers are close to correct?

Question: Joe Ritchie - Goldman Sachs Group, Inc. - Analyst : Okay. Got it. Thank you REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 04, 2024 / 12:30PM, CNM.N - Q1 2024 Core & Main Inc Earnings Call