Q2 2025 Core & Main Inc Earnings Call

September 4, 2024

Robin Bradbury: Hello and welcome to the call and main Q2 2020 24 earnings call. My name is Alex and I'll be causing it in the call today. If you'd like to ask a question of once the presentation is finished, please press star, I'll upload by one on your telephone keypad. And I'll head out to your host, Robin Bradbury, so we're getting. Please go ahead.

Alex: As Alex, I'll be coordinates in the call today.

Alex: If I'd asked a question once the presentation has finished, please press star, followed by one on your telephone keypad.

Robyn Bradbury: And I'll hand it over to your host, Robyn Bradbury's, begin. Please go ahead.

Robyn Bradbury: Thank you.

Robyn Bradbury: Good morning, everyone. This is Robin Bradbury, Senior Vice President of Finance and Investor Relations for Core & Main. We are happy to have you join us this morning for our fiscal 2024 second quarter earnings call.

Robyn Bradbury: Thank you. Good morning everyone. This was Robyn Bradbury, Senior Vice President of Finance and Investor Relations for Corps in Maine. We are happy to have you join us this morning for our fiscal 2024 Second Quarter earnings call.

Robyn Bradbury: I am joined today by Steve LeClair, our chair and chief executive officer, Mark Witkowski, our chief financial officer, and Brad Cole's president.

Speaker Change: I am joined today by Steve LeClair, our chair and chief executive officer, Mark Witkowski, our chief financial officer and Brad Cole's president.

Steve LeClair: Steve LeClair, today's call with a business update in an overview of our recent acquisitions. Brad will then discuss the evolution of our smart utility solutions and how we drive the adoption of the latest and most effective technologies to improve efficiency for our municipal customers. We will then turn it over to Mark to discuss our second quarter financial results in the updated fiscal 2024 outlook, followed by a Q&A session.

Speaker Change: Steve O'Lee today's call with a business update in an overview of our recent acquisitions.

Wrathel: Wrathel then discuss the evolution of our smart utility solutions and how we drive the adaption of the latest and most effective technologies to improve efficiency for our municipal customers.

Speaker Change: We will then turn it over to Mark to discuss our second quarter financial results in updated fiscal 2024 outlook followed by a Q&A session. We will conclude the call to Steve's closing remarks.

Steve LeClair: We will conclude the call with Steve's closing remarks. We issued our earnings press release this morning and posted a presentation to the Investor Relations section of our website. Our press release presentation and the statements made during this call may include forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. Such risks and uncertainties include the factors set forth in our earnings press release and in our filings with the Securities and Exchange Commission. We will also discuss certain non-GAAP financial measures, which we believe are useful in assessing the operating results of our business.

Speaker Change: We issued our earnings press release this morning and posted a presentation to the investor relations section of our website. Our press release presentation and a statement made during this call may include forward-looking statements.

Speaker Change: These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections.

Speaker Change: Such risks and uncertainties include the factors set forth in our earnings press release and in our filing with the Securities and Exchange Commission.

Speaker Change: We will also discuss certain non-gap financial measures which we believe are useful in assessing the operating results of our business. A reconciliation of these measures can be found in our earnings press release and in the appendix of our investor presentation.

Steve LeClair: A reconciliation of these measures can be found in our earnings press release and in the appendix of our investor presentation.

Robyn Bradbury: Thank you for your interesting core and main.

Steve LeClair: I will now turn a call over to Chair and Chief Executive Officer Steve LeClair. Thanks, Robin. Good morning, everyone, and thank you for joining us today.

Speaker Change: Thank you for your interest in quarantine. I will now from the call over to chair and chief executive officer, Steve LeClair.

Steve LeClair: I'll begin with a brief company overview and business updates for the quarter, followed by an overview of our recent acquisitions. Beginning with our company overview, Core and Main is a leading specialty distributor of water, wastewater, storm drainage, and fire protection products. We serve municipalities, private water companies, and professional contractors across municipal, non-residential, and residential markets. Our specialty products and services are used in the maintenance, repair, replacement, and construction of water and fire protection infrastructure. Our footprint consists of more than 350 branches across 49 states, which serves as a critical link between 5,000 suppliers and a diverse base of over 60,000 customers, none of which account for more than 1% of our annual revenue.

Steve LeClair: Good morning everyone and thank you for joining us today. I'll begin with a brief company overview and business update for the quarter followed by an overview of our recent acquisitions.

Steve LeClair: beginning with our company overview.

Speaker Change: Corn Maine is a leading specialty distributor of water, wastewater, storm drainage, and fire protection products.

Speaker Change: We serve municipalities, private water companies, and professional contractors across municipal, non-residential, and residential end markets.

Speaker Change: Our specialty products and services are using the maintenance, repair, replacement, and construction of water and fire protection infrastructure.

Speaker Change: Our footprint consists of more than 350 branches across 49 states, which serves as a critical length between 5,000 suppliers and a diverse base of over 60,000 customers.

Steve LeClair: We are an industry leader, yet we estimate we have only 17% share of a fragmented $39 billion addressable market. Therefore, we believe our long-term growth opportunity is significant. Our products and solutions play a critical role in improving water quality, reducing water scarcity, and preventing floods, all in support of ensuring quality of light in the communities in which we live, work, and play. Water, U.S. Water infrastructure is in a fragile state with aging pipes, treatment plants, and other systems increasingly prone to failure. In 2023, for example, 20% of water mains across the U.S. and Canada were beyond their useful lives, up from 16% in 2018.

Speaker Change: 9 of which account for more than 1% of our annual revenue.

Speaker Change: We are an industry leader, yet we estimate we have only 17% share of a fragment $39 billion

Speaker Change: Therefore, we believe our long-term growth opportunity is significant.

Speaker Change: Our products and solutions play a critical role in improving water quality, reducing water scarcity, and preventing floods, all in support of ensuring quality of life and the communities in which we live, work and play.

Speaker Change: U.S. water infrastructure is in a fragile state, with aging pipes, treatment plants, and other systems increasingly prone to failure.

Speaker Change: In 2023, for example, 20% of water means across the U.S. and Canada were beyond their useful lives, up from 16% in 2018.

Steve LeClair: There are approximately 260,000 water main breaks every year, representing the equivalent of a water main break every two minutes. It is also estimated that the water utilities lose 2.1 trillion gallons of water annually from leaky pipes and aging infrastructure, equivalent to roughly $8 billion of lost revenue. Many of our existing water systems, built decades ago, are now struggling to meet modern demands and environmental standards. Without significant investment in modernization, the risk of service disruptions, water contamination, and inefficiencies will continue to grow.

Speaker Change: There are approximately 260,000 water-ming breaks every year, representing the equivalent of a water-ming break every two minutes.

Unknown Executive: If I'd asked a question once the presentation has finished, please press star, followed by one on your telephone keypad.

Speaker Change: It is also estimated that the water utilities lose 2.1 trillion gallons of water annually from leaky pipes and aging infrastructure.

Robyn Bradbury: And I'll hand it over to your host, Robyn Bradbury's begin. Please go ahead. Thank you. Good morning, everyone. This is Robin Bradbury, Senior Vice President of Finance and Investor Relations for Core & Main. We are happy to have you join us this morning for our fiscal 2024 second quarter earnings call. I am joined today by Steve LeClair, our chair and chief executive officer, Mark Witkowski, our chief financial officer, and Brad Cole's president.

Speaker Change: equivalent to roughly $8 billion of lost revenue.

Speaker Change: Many of our existing water systems build decades ago, are now struggling to meet modern demands and environmental standards.

Speaker Change: Without significant investment in modernization, the risk of service disruptions, water contamination, and any efficiencies will continue to grow.

Steve LeClair: Core & Main supports these growing needs by providing modern materials, innovative technologies, and expertise to repair, strengthen, and maintain critical infrastructure.

Speaker Change: Coren main supports these growing needs by providing modern materials, innovative technologies, and expertise to repair, strengthen, and maintain critical infrastructure.

Steve LeClair: Turning now to our business update, starting first with the leadership changes we announced in July. After serving as president of Core & Main for the last six years, Jack Schaller has now transitioned into his new role as Executive Vice President. Jack will continue to support the integration of newly acquired businesses, leading supplier relations, and assisting with the organizational transition. Brad Cole is expanding his role to lead more of the core water works product line, which was previously led by Jack. Brad has more than 18 years of leadership experience in the organization, most recently leading the fire protection product line.

Speaker Change: Turning that word business update.

Speaker Change: Starting first with the leadership changes we announced in July.

Speaker Change: After serving as president court main for the last six years, Jack Schaller has now transitioned into his new role as executive vice president.

Speaker Change: Jack will continue to support the integration of newly acquired businesses, leading supplier relations.

Speaker Change: and Assistant with the Organizational Transition.

Unknown Executive: We issued our earnings press release this morning and posted a presentation to the Investor Relations section of our website. Our press release presentation and the statements made during this call may include forward looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. Such risks and uncertainties include the factors set forth in our earnings press release and in our filings with the Securities and Exchange Commission.

Speaker Change: Brad Cole is expanding his role to lead more of the core waterworks product line, which was previously led by Jack.

Brad Cole: has more than 18 years of leadership experience in the organization, most recently leading the fire protection product line.

Steve LeClair: In addition to bringing new expertise and a fresh perspective to our water works product line, Brad will continue to have responsibility for several of our growth and margin enhancement initiatives.

Speaker Change: In addition to bringing new expertise and a fresh perspective to our waterworks product line, Brad will continue to have responsibility for several of our growth and margin enhancement initiatives.

Steve LeClair: I am also excited to have Mike Hubert join the company as president, overseeing fire protection and certain other high growth initiatives. Mike most recently served as executive vice president of sales for Advanced Drainage Systems, where he oversaw field sales and engineering, national accounts, and retail sales teams. He brings a wealth of experience, having led business development, commercial operations, and sales strategies and prior leadership roles. We are thrilled to have Mike on board, and we believe his proven track record and new perspective will be critical in helping us capture the long-term growth opportunities that exist for Core & Main.

Speaker Change: The End of the World

Speaker Change: I am also excited to have Mike Hubert join the company as president over seeing fire protection and certain other high growth initiatives.

Unknown Executive: We will also discuss certain non-gap financial measures which we believe are useful in assessing the operating results of our business. A reconciliation of these measures can be found in our earnings press release and in the appendix of our investor presentation.

Speaker Change: Mike most recently served as executive vice president of sales for advanced drainage systems.

Speaker Change: [inaudible]

Speaker Change: He brings a wealth of experience, having led business development, commercial operations, and sales strategies and prior leadership roles.

Unknown Executive: Thank you for your interesting core and main.

Steve LeClair: I will now turn a call over to chair and chief executive officer Steve LeClair. Thanks Robin. Good morning everyone and thank you for joining us today.

Speaker Change: We are thrilled to have Mike on board and we believe his proven track record and new perspective will be critical in helping us capture the long-term growth opportunities that exist for corn made.

Steve LeClair: I'll begin with a brief company overview and business updates for the quarter followed by an overview of our recent acquisitions. Beginning with our company overview, core and main is a leading specialty distributor of water, wastewater, storm drainage and fire protection products. We serve municipalities, private water companies and professional contractors across municipal, non-residential and residential and markets. Our specialty products and services are used in the maintenance, repair, replacement and construction of water and fire protection infrastructure.

Steve LeClair: By aligning our strengths and opening new opportunities for profitable growth, the ongoing evolution of our leadership team is key to our strategy to drive shareholder value.

Speaker Change: and John LeClair, Robyn Bradbury.

Speaker Change: By aligning our strengths and opening new opportunities for profitable growth, the ongoing evolution of our leadership team is key to our strategy to drive shareholder value.

Steve LeClair: We achieved an important milestone in August, expanding our operations into Canada through the acquisition of HM Pike Products. This move marks our first venture into the Canadian water works market, allowing us to broaden our footprint and enhance our service offering to a new customer base. His acquisition underscores our commitment to becoming a leading provider of water, waste water, storm drainage, and fire protection solutions. Operations. And it expands our addressable market opportunity by roughly $5 billion. The integrations of recent acquisitions are progressing as anticipated, with acquisitions contributing approximately 9% of our top-line growth for the quarter and the year.

Speaker Change: We achieved an important milestone in August.

Speaker Change: Explaining our operations into Canada through the acquisition of HM pipe products.

Speaker Change: This move marks our first venture into the Canadian waterworks market, allowing us to broaden our footprint and enhance our service offering to a new customer base.

Steve LeClair: Our footprint consists of more than 350 branches across 49 states, which serves as a critical link between 5,000 suppliers and a diverse base of over 60,000 customers, none of which account for more than 1% of our annual revenue. We are an industry leader, yet we estimate we have only 17% share of a fragmented $39 billion addressable market. Therefore, we believe our long-term growth opportunity is significant.

Speaker Change: is Acquisition underscores our commitment to becoming a leading provider of water, wastewater, storm drainage and fire protection solutions.

Speaker Change: and it expands our addressable market opportunity by roughly $5 billion.

Speaker Change: The integrations of recent acquisitions are progressing as anticipated with acquisitions contributing approximately 9% of our top line growth for the quarter and the year.

Steve LeClair: Our integration process and playbook are well-defined, scalable, and highly flexible based on the needs of each company we welcome into the core and main family. We have been successful in driving synergies with nearly all of our acquisitions, and more importantly, we have also been able to successfully attract strong talent and gain access to new platforms to compound growth.

Steve LeClair: Our products and solutions play a critical role in improving water quality, reducing water scarcity and preventing floods, all in support of ensuring quality of light in the communities in which we live, work and play. Water, U.S. Water Infrastructure is in a fragile state with aging pipes, treatment plants and other systems increasingly prone to failure. In 2023, for example, 20% of water mains across the U.S, and Canada were beyond their useful lives, up from 16% in 2018.

Speaker Change: Our integration process and playbook are well-defined, scalable, and highly flexible based in the needs of each company we welcome into the core and main family.

Speaker Change: We have been successful in driving synergies with nearly all of our acquisitions and more importantly, we've also been able to successfully attract strong talent in gaining access to new platforms to compound growth.

Steve LeClair: Moving to our end markets, our second quarter results were below our expectations, primarily due to project delays from wet weather conditions and comparably lower end market volumes. Heavy rain and flooding blanketed many parts of the country during the quarter, complicating the operation of heavy machinery and making underground construction a challenge for contractors. Persistent precipitation and flooding often requires underground utility contractors to stop operations until job sites can be secured and dewatered, inevitably leading to project delays, which is what we experienced on the quarter. During last quarter's call, we indicated we were experiencing wet weather in May, and the wet weather and saturated grounds persisted into June.

Speaker Change: Wilmingcore and Markets.

Speaker Change: Our second quarter results were below our expectations, primarily due to project delays from wet weather conditions and comparably lower and market volumes.

Steve LeClair: There are approximately 260,000 water mains breaks every year, representing the equivalent of a water main break every two minutes. It is also estimated that the water utilities lose 2.1 trillion gallons of water annually from leaky pipes and aging infrastructure, equivalent to roughly $8 billion of lost revenue. Many of our existing water systems build decades ago are now struggling to meet modern demands and environmental standards. Without significant investment in modernization, the risk of service disruptions, water contamination, and inefficiencies will continue to grow. Core & Main supports these growing needs by providing modern materials, innovative technologies, and expertise to repair, strengthen, and maintain critical infrastructure.

Speaker Change: Heavy rain and flooding blanketed many parts of the country during the quarter, complicating the operation of heavy machinery and making underground construction a challenge for contractors.

Speaker Change: Persistent precipitation and flooding often requires underground utility contractors to stop operations until job sites can be secured and de-watered. Inevitably leading to project delays, which is what we experienced during the quarter.

Speaker Change: During last quarter's call, we indicated we were experiencing wet weather in May and the wet weather and saturated grounds persisted into June. We included a page in the appendix of our investor presentation to highlight the severity of the wet weather and the geographies that were impacted.

Steve LeClair: We included a page in the appendix of our investor presentation to highlight the severity of the wet weather and the geographies that were impacted. July returned to a more typical weather patterns, but we did not see a recovery of the sales we lost in May and June. Generally, the labor capacity of our customers is not allowed for an immediate surge of construction activity when weather patterns improve, but we may see a benefit if we experience a longer selling season in the fourth quarter. Otherwise, we expect some of these projects when we push into 2025.

Speaker Change: July returns to a more typical weather patterns, but we did not see a recovery of the sales we lost in May and June.

Speaker Change: Generally, the labor capacity of our customers is not allowed for immediate surge of construction activity when weather patterns improve. But we may see a benefit be experienced a longer selling season in the fourth quarter. Otherwise, we expect some of these projects when we push into 2025.

Steve LeClair: Residential law development continued as a positive momentum for most of the quarter, but it began to weaken in July. We began to see residential projects delayed or divided into smaller phases, likely due to the anticipation of potential for lower interest rates. Given the significant pent-up demand for housing and the growing need for developed land to support that demand, we remain optimistic that the trends we saw late in the quarter are temporary. Municipal volumes have been slightly lower than expected, primarily due to project delays at the local level. We remain optimistic about this end market given our current bidding activity, project backlogs, and the existing state of the aging infrastructure.

Speaker Change: Residential Lot Development Continued its positive momentum for most of the quarter, but began to weaken in July.

Steve LeClair: Brad Cole is expanding his role to lead more of the core water works product line, which was previously led by Jack. Brad has more than 18 years of leadership experience in the organization, most recently leading the fire protection product line. In addition to bringing new expertise and a fresh perspective to our water works product line, Brad will continue to have responsibility for several of our growth and margin enhancement initiatives.

Speaker Change: We began to see residential projects delayed or divided into smaller phases.

Speaker Change: Like we do to the anticipation that the potential for lower interest rates.

Speaker Change: Given the significant pent-up demand for housing and the growing need for development land to support that demand.

Speaker Change: We remain optimistic that the trends we saw late in the quarter are temporary.

Speaker Change: Municipal volumes have been slightly lower than expected, primarily due to project delays at the local level.

Steve LeClair: I am also excited to have Mike Hubert join the company as president, overseeing fire protection, and certain other high growth initiatives. Mike most recently served as executive vice president of sales for advanced drainage systems, where he oversaw field sales and engineering, national accounts, and retail sales teams. He brings a wealth of experience, having led business development, commercial operations, and sales strategies and prior leadership roles. We are thrilled to have Mike on board, and we believe his proven track record and new perspective will be critical in helping us capture the long-term growth opportunities that exist for Core & Main. By aligning our strengths and opening new opportunities for profitable growth, the ongoing evolution of our leadership team is key to our strategy to drive shareholder value.

Speaker Change: We remain optimistic about this and market given our current bidding activity, project backlogs, and the existing state of the aging infrastructure, but given the wet weather in the quarter, it is difficult to assess the timing in the near term.

Steve LeClair: But given the wet weather and the quarter, it is difficult to assess the timing in the near term.

Steve LeClair: As we expected, non-residential construction activity has seen mixed performance recently. Tow the end of the quarter, we began to see fewer non-residential projects break ground and the start date of existing projects get pushed back, which is reflected in our fire protection performance for the quarter. We believe some of this trend could relate to the prospect of an easing interest rate environment, where project owners and developers are assessing the macroeconomic landscape and waiting for financial conditions to improve before starting new projects.

Speaker Change: As we expected, non-residential construction activity has seen mixed performance recently. Towards the end of the quarter, we began to see fewer non-residential projects break round and start dates of existing projects get pushed back, which is reflected in our fire protection performance for the quarter.

Speaker Change: We believe some of this trend could relate to the prospect of adeasing interest rate environment, their project owners and developers are assessing the macroeconomic landscape and waiting for financial conditions to improve before starting new projects.

Steve LeClair: Despite the challenging weather and market conditions, we saw our meter initiative continue to outpace the growth of our end markets, highlighted by the 48 percent growth we achieved in meter sales this quarter. We are thrilled with the number of new projects being bid on and awarded this year, as well as the improved supply chain that is supporting the volumes we are driving. Gross margins in the second quarter were in line with our expectations, driven primarily by solid performance of our private label and sourcing initiatives, as well as the synergies we've been able to realize through M&A.

Steve LeClair: We achieved an important milestone in August, expanding our operations into Canada through the acquisition of HM Pike products. This move marks our first venture into the Canadian water works market, allowing us to broaden our footprint and enhance our service offering to a new customer base. His acquisition underscores our commitment to becoming a leading provider of water, waste water, storm drainage, and fire protection solutions.

Speaker Change: Despite the challenging weather and market conditions, we saw a meter initiative continue to outpace the growth of our end markets.

Speaker Change: Highlighted by the 48% growth we achieved in meter sales this quarter.

Speaker Change: We are thrilled with a number of new projects being bid on and awarded this year.

Speaker Change: as well as the improved supply chain that is supporting the volumes we are driving.

Speaker Change: Gross margins in the second quarter were in line with our expectations, driven primarily by solid performance of our private label and sourcing initiatives, as well as the synergies we've been able to realize through M&A.

Steve LeClair: Operations. And it expands our addressable market opportunity by roughly $5 billion. The integrations of recent acquisitions are progressing as anticipated, with acquisitions contributing approximately 9% of our top-line growth for the quarter and the year. Our integration process and playbook are well-defined, scalable, and highly flexible based on the needs of each company we welcome into the core and main family. We have been successful in driving synergies with nearly all of our acquisitions, and more importantly, we have also been able to successfully attract strong talent and gain access to new platforms to compound growth.

Steve LeClair: Turning to our recent acquisitions, we maintain a deep and expanding pipeline of actionable M&A opportunities that we expect will drive sustainable growth over the long term. We acquired five new businesses during and shortly after the quarter, each of which offers expansion to new geographies, access to new product lines, or the addition of key talent.

Speaker Change: Turning to our recent acquisitions.

Speaker Change: We maintain a deep and expanding pipeline of actionable M&A opportunities that we expect will drive sustainable growth over the long term.

Speaker Change: We acquired five new businesses during and shortly after the quarter, each of which offers expansion to new geographies, access to new product lines, or the addition of key talent.

Steve LeClair: EGW Utilities is an distributor of products and services to underground utility contractors and municipalities operating out of a single location in Texas. The team at EGW has been providing underground infrastructure products and services since 2001. Their commitment to delivery value added solutions and maintaining strong customer relationships has enabled them to provide customers with the resources and support needed to complete projects successfully. We are happy to have the EGW team as part of the core and main family. We look forward to the additional private label capabilities and capacity this acquisition brings us.

Speaker Change: EGW utilities are distributor products and services to underground utility contractors, immunizapalities, operating out of a single location in Texas.

Steve LeClair: Moving to our end markets, our second quarter results were below our expectations, primarily due to project delays from wet weather conditions, and comparably lower end market volumes. Heavy rain and flooding blanketed many parts of the country during the quarter, complicating the operation of heavy machinery and making underground construction a challenge for contractors. Persistent precipitation and flooding often requires underground utility contractors to stop operations until job sites can be secured and dewatered, inevitably leading to project delays, which is what we experienced on the quarter.

Speaker Change: and John LeClair, Robyn Bradbury,

Speaker Change: The team at EGW has been providing underground infrastructure products and services in 2001.

Speaker Change: They're commitment to delivery value added solutions and maintaining strong customer relationships. Has enabled them to provide customers with the resources and support needed to complete projects successfully.

Speaker Change: We are happy to have the EGW team as part of the core main family and we look forward to the additional private label capabilities and capacity this acquisition brings us.

Steve LeClair: Geothermal supply company is a distributor of fabricator of high density, polyethylene pipe, and other related products. They primarily serve the geothermal, water, and sewer industries from a single location in Kentucky. Adding GSE to the core and main family will create exciting new opportunities and important and expanding area of usable HDPD. Their expertise in the industry fits well with our existing fusible HDPD product offering. We are excited about the positive impact this partnership will have on both new and existing customers.

Speaker Change: Geothermal Supply Company is a distributor, a fabricator of high density, polyethylene pipe, and other related products.

Steve LeClair: During last quarter's call, we indicated we were experiencing wet weather in May, and the wet weather and saturated grounds persisted into June. We included a page in the appendix of our investor presentation to highlight the severity of the wet weather and the geographies that were impacted. July returned to a more typical weather patterns, but we did not see a recovery of the sales we lost in May and June. Generally, the labor capacity of our customers is not allowed for an immediate surge of construction activity when weather patterns improve, but we may see a benefit if we experience a longer selling season in the fourth quarter.

Speaker Change: They primarily serve the geothermal, water, and sewer industries from a single location in Kentucky.

Speaker Change: Adding GSC to the current main family will create exciting new opportunities and important and expanding area of usable HDPE.

Speaker Change: and I hope that the experts in the industry fits well with our existing usable HTTP product offering. We are excited about the positive impact this partnership will have, both new and existing customers.

Steve LeClair: HMPI Products is a distributor of water and wastewater products operating from two locations in London and Kitchener, Ontario. The team at HMPI is extensive market knowledge and excellent reputation in the industry and strong customer connections. By utilizing our collective resources and combined expertise, we can help address Canada's water and wastewater infrastructure needs. This acquisition provides an initial catalyst into Canada, which we believe we can leverage to drive significant growth opportunities in a new, roughly $5 billion addressable market.

Speaker Change: HM pipe products is a distributor of water and wastewater products operate in two locations in London in Kitchener, Ontario.

Steve LeClair: Otherwise, we expect some of these projects when we push into 2025. Residential law development continued as a positive momentum for most of the quarter, but it began to weaken in July. We began to see residential projects delayed or divided into smaller phases, likely due to the anticipation of potential for lower interest rates. Given the significant pent-up demand for housing and the growing need for developed land to support that demand, we remain optimistic that the trends we saw late in the quarter are temporary.

Speaker Change: The team at HM Pike has extensive market knowledge and excellent reputation in the industry in strong customer connections.

Speaker Change: By utilizing our collective resources and combined expertise, we can help address Canada's water and wastewater infrastructure needs.

Speaker Change: This acquisition provides an initial catalyst into Canada, which we believe we can leverage to drive significant growth opportunities in a new roughly $5 billion restable market.

Steve LeClair: Grow Green Solutions is a leading provider of erosion control and geotextile products for professional and industrial projects. They consistently deliver value-added solutions to meet their customers' construction site needs from four locations. Two in Georgia, one in Florida, and one in Mississippi. Their industry expertise and product offering complement our portfolio exceptionally well. Grow Green shares are commitment to being a dependable partner, and we look forward to partnering with them to accelerate growth in the South East. East.

Speaker Change: Grogerian Solutions is a leading provider of erosion control and geotextile products for professional and industrial projects.

Steve LeClair: Municipal volumes have been slightly lower than expected primarily due to project delays at the local level. We remain optimistic about this end market given our current bidding activity, project backlogs, and the existing state of the aging infrastructure. But given the wet weather and the quarter, it is difficult to assess the timing in the near term.

Speaker Change: They consistently deliver value add solutions to meet their customer's construction site needs from four locations.

Speaker Change: 2 in Georgia, 1 in Florida, and 1 in Mississippi.

Speaker Change: Their industry expertise and product offering complement our portfolio exceptionally well. Grogering shares are commitment to being a dependable partner and we look forward to partnering with them to accelerate growth in the Southeast.

Steve LeClair: As we expected, non-residential construction activity has seen mixed performance recently.

Steve LeClair: Green Equipment Company is a distributor of underground utility protection equipment operating at a single location in Fort Worth, Texas. Since 1982, the team at Green Equipment Company has served contractors, municipalities, and utilities across eight states, offering customers a variety of damaged prevention products, along with ongoing support, industry-leading training, and comprehensive repair services. There are strong client relationships and expertise and enhances our ability to provide customers with robust solutions to their underground utility needs, and we are excited to welcome them to the Core & Main team.

Steve LeClair: Tow the end of the quarter, we began to see fewer non-residential projects break ground and the start date of existing projects get pushed back, which is reflected in our fire protection performance for the quarter. We believe some of this trend could relate to the prospect of a easing interest rate environment, where project owners and developers are assessing the macroeconomic landscape and waiting for financial conditions to improve before starting new Projects.

Speaker Change: Green equipment company is a distributor of underground utility protection equipment, operating out of a single location or work Texas.

Speaker Change: Since 1982, the team at Green Equipment Company has served contractors, municipalities, and utilities across eight states, offering customers a variety of damage prevention products along with ongoing support, industry-leading training and comprehensive repair services.

Speaker Change: The strong client relationships and expertise enhances our ability to provide customers with robust solutions to their underground utility needs. We are excited to welcome them to the corn main team.

Steve LeClair: For wrapping up, I want to address some recent reports about pricing in our industry. As we've discussed on previous calls, we operate in a highly fragmented and competitive industry where supply and demand characteristics are the primary drivers of the pricing dynamics. Most of our sales are project-based, and our customers often look to us for a full suite of products delivered in sequence to efficiently complete the project. These products must meet local specifications and are subject to various local, state, and federal requirements. Our bids are nearly all completed by the local field teams, and they are provided to the customer with fair, competitive, and transparent pricing.

Steve LeClair: We are thrilled with the number of new projects being bid on and awarded this year, as well as the improved supply chain that is supporting the volumes we are driving. Gross margins in the second quarter were in line with our expectations driven primarily by solid performance of our private label and sourcing initiatives, as well as the synergies we've been able to realize through M&A.

Speaker Change: For wrapping up, I want to address some recent reports about pricing in our industry.

Speaker Change: As we discussed on previous calls, we operate in a highly fragmented and competitive industry where supply and demand characteristics are the primary drivers of the pricing dynamics.

Speaker Change: Most of our sales are project-based, and our customers often look to us for full-sweet or products delivered in sequence to efficiently complete the project.

Steve LeClair: Turning to our recent acquisitions, we maintain a deep and expanding pipeline of actionable M&A opportunities that we expect will drive sustainable growth over the long term.

Speaker Change: These products must meet local specifications in our subject to various local state and federal requirements.

Steve LeClair: We acquired five new businesses during and shortly after the quarter, each of which offers expansion to new geographies, access to new product lines, or the addition of key talent.

Speaker Change: Thank you for watching!

Speaker Change: are bitter nearly all completed by the local field teams.

Speaker Change: and they are provided to the customer with bare, competitive, and transparent pricing.

Steve LeClair: Pricing can be based on many different factors, including demand and competition in the local market, the complexity of the project, local specifications, and the price for which we procured the product. Over the course of the last few years, we have experienced price increases in various product categories as a result of supply chain disruption, strong demand, and increasing operating costs. Our municipal pipe products are made specific for our industry. They must meet specific water industry regulations and specifications, and we typically sell them as part of an overall water infrastructure solution. In our experience, municipal pipe pricing is more resilient than what we consider to be true commodity products like steel pipe and copper tubing, which are not as highly specified or regulated as municipal pipe and are often sold across different industries.

Speaker Change: Pricing can be based on many different factors, including demand and competition in the local market, the complexity of the project, local specifications.

Steve LeClair: EGW utilities is an distributor of products and services to underground utility contractors and municipalities operating out of a single location in Texas. The team at EGW has been providing underground infrastructure products and services since 2001. Their commitment to delivery value added solutions and maintaining strong customer relationships has enabled them to provide customers with the resources and support needed to complete projects successfully.

Speaker Change: and the price for which we procure the product.

Speaker Change: Over the course of the last few years, we have experienced pricing creases in various product categories as a result of supply change disruption, strong demand, and increasing operating costs.

Speaker Change: Our municipal pipe products are made specific for our industry. They must meet specific water industry regulations and specifications. And we typically sell them as part of an overall water infrastructure solution.

Steve LeClair: We are happy to have the EGW team as part of the core and main family. We look forward to the additional private label capabilities and capacity this acquisition brings us.

Speaker Change: In our experience, municipal pipe pricing is more resilient than what we consider to be true commodity products like steel pipe and copper tubing, which are not as highly specified or regulated as municipal pipe.

Steve LeClair: Not only do we provide fair and transparent pricing, but we also provide our customers with alternative products to help them reduce their overall project cost.

Speaker Change: and are often sold across different industries.

Speaker Change: Not only do we provide fair and transparent pricing.

Steve LeClair: Adding GSE to the core and main family will create exciting new opportunities and important and expanding area of usable HDPD. Their expertise in the industry fits well with our existing fusible HDPD product offering. We are excited about the positive impact this partnership will have on both new and existing customers.

Speaker Change: We also provide our customers with alternative products to help them reduce their overall project cost.

Steve LeClair: Some of you may have seen the statements made against some of the PVC manufacturers regarding PVC pipe pricing. We are not aware of any price fixing going on in our industry, and to be clear, any statements made suggesting that corn main was involved are baseless. We take great pride in our commitment to working with our customers to be a valued member of their supply chain. This includes providing prices in a fair and ethical manner.

Speaker Change: Some of you may have seen the statements made against some of the PVC manufacturers regarding PVC pipe pricing.

Speaker Change: We are not aware of any price fixing going on in our industry and to be clear, any statements made suggesting that corn main was involved are baseless.

Steve LeClair: HMPI products is a distributor of water and wastewater products operating from two locations in London and Kitchener Ontario. The team at HMPI is extensive market knowledge and excellent reputation in the industry and strong customer connections. By utilizing our collective resources and combined expertise, we can help address Canada's water and wastewater infrastructure needs.

Speaker Change: We take great pride in our commitment to working with our customers to be a valued member of their supply chain.

Steve LeClair: We will not comment further on any unsubstantiated claims or statements made against Corn Main related to this matter.

Speaker Change: This includes providing prices in a fair and ethical manner.

Speaker Change: We will not comment further in any unsubstantiated claims or statements made against court-mane related to this matter.

Steve LeClair: As we look ahead to the remainder of 2024, we will be focused on executing against our long-term strategy. This quarter presented us with many challenges from disruptive weather to sluggish end markets, but despite those challenges, our teams rose to the occasion, and I'm proud of their resilience and ability to stay focused the next-CQ. We are confident in our ability to leverage our strengths to drive long-term growth; we will continue to do so regardless of near-term economic conditions.

Steve LeClair: This acquisition provides an initial catalyst into Canada, which we believe we can leverage to drive significant growth opportunities in a new roughly $5 billion addressable market.

Speaker Change: As we look ahead to the remainder of 2024, we will be focused on executing against our long-term strategy.

Speaker Change: This quarter presented us with many challenges from disruptive weather to sluggish and markets.

Steve LeClair: Grow green solutions is a leading provider of erosion control and geotextile products for professional and industrial projects. They consistently deliver value added solutions to meet their customers' construction site needs from four locations. Two in Georgia, one in Florida, and one in Mississippi.

Speaker Change: but despite those challenges, our team's rose to the occasion and I'm proud of their resilience and ability to stay focused and execute.

Speaker Change: We are confident in our ability to leverage our strengths to drive long-term growth, we'll continue to do so regardless of near-term economic conditions.

Steve LeClair: Thank you for your continued support and trust in our long-term vision.

Brad Cowles: I will now turn it over to Brad Coles to discuss our position as one of the nation's leading providers of advanced metering solutions. Thanks, Steve. Good morning, everyone.

Speaker Change: Thank you for your continued support and trust in our long-term vision.

Steve LeClair: Their industry expertise and product offering complement our portfolio exceptionally well. Grow green shares are commitment to being a dependable partner and we look forward to partnering with them to accelerate growth in the South East.

Brad Cole: I will now turn it over to Brad Cole's and discuss our position as one of the nation's leading providers of advanced metering solutions.

Brad Cowles: My name is Brad Coles, President of Core & Main. A quick introduction for those who have not yet met. I started my career as an engineer and spent over a decade with the missile entire company. Then, over 18 years ago, I began my journey with Core & Main when I joined the Home Depot to lead the technology integration of more than 30 acquisitions during the formation of HD Supply, eventually becoming the company's chief information officer. I had the opportunity to return to my operating routes in 2017 when Core & Main became an independent company. Since that time, I've led several initiatives that have allowed us to grow faster than our underlying end markets, including several product line extensions, national account relationships, and the extension of our presence in new geographies.

Brad Cole: Thanks to you. Good morning everyone. My name is Brad Cole's president of Corin Manion.

Steve LeClair: East.

Steve LeClair: Green Equipment Company is a distributor of underground utility protection equipment operating at a single location in Fort Worth, Texas. Since 1982, the team at Green Equipment Company has served contractors, municipalities, and utilities across eight states, offering customers a variety of damaged prevention products, along with ongoing support, industry leading training and comprehensive repair services. There are strong client relationships and expertise and enhances our ability to provide customers with robust solutions to their underground utility needs, and we are excited to welcome them to the Core & Main team.

Brad Cole: The quick introduction for those who have not yet met, I started my career as an engineer and spent over a decade with the Michelin tire company.

Speaker Change: Then, over 18 years ago, I began my journey with cornmane when I joined the Home Depot to lead the technology integration of more than 30 acquisitions during the formation of HD supply. Eventually, becoming the company's chief information officer.

Speaker Change: I had the opportunity to return to my operating routes in 2017 when Coran May became an independent company.

Speaker Change: Since that time, I've learned several initiatives that have allowed us to grow faster than our underlying in-market, including several product-line expansions, national account relationships, and the extension of our presence in new geographies.

Brad Cowles: Today, I will discuss the evolution of our smart utility offering. We are one of the nation's largest distributors of water meters with access to top meter manufacturers, products, and technologies, which we complement with local, regional, and national resources to drive innovation to thousands of municipalities across the United States. Many municipalities still rely on manual read or drive-by water meters, which require technicians to physically check or get very close to each meter, record usage, and input that data into their billing system. This process is not only labor intensive but also prone to errors, leading to inaccurate or delayed billing, customer dissatisfaction, and potential revenue loss for the municipality.

Speaker Change: Today, I will discuss the evolution of our smart utility offering.

Speaker Change: We are one of the nation's largest distributors of water meters with access to top meter manufacturers, products and technologies, which we complement with local, regional, and national resources to drive innovation to thousands of municipalities across the United States.

Speaker Change: Many municipalities still rely on manual read or drive by water meters, which require technicians to physically check or get very close to each meter, record usage, and input that data into their billing system.

Steve LeClair: Our bids are nearly all completed by the local field teams, and they are provided to the customer with fair, competitive, and transparent pricing. Pricing can be based on many different factors, including demand and competition in the local market, the complexity of the project, local specifications, and the price for which we procured the product. Over the course of the last few years, we have experienced price increases in various product categories as a result of supply chain disruption, strong demand, and increasing operating costs.

Speaker Change: This process is not only labor intensive, but also prone to errors leading to inaccurate or delayed billing, customer dissatisfaction, and potential revenue loss for the municipality.

Brad Cowles: We estimate that manual read meters are still used by roughly one-third of U.S. municipal customers, and drive-by systems are in place at another one-third. As communities grow, water demand increases; these outdated systems become even more challenging to manage effectively.

Speaker Change: We estimate that manual readmeters are still used by roughly one-third of US municipal customers and drive by systems are in place at another one-third. As communities grow, water demand increases, these outdated systems become even more challenging to manage effectively.

Brad Cowles: For over a decade now, we have been selling advanced metering solutions to our municipal customers that automatically and wirelessly transmit water usage data in real time. Once implemented, these solutions save labor and improve accuracy, but as these solutions have become more advanced and also more complex, we found that our customers' based challenges implementing and integrating the metering technology into their own operations. Our smart utility strategy is changing the game by delivering turnkey solutions and by directly tackling those challenges of execution and integration on behalf of the customer. Our capabilities start with project management, installation, and software integration, and ensure that these projects are completed quickly and efficiently.

Steve LeClair: Our municipal pipe products are made specific for our industry. They must meet specific water industry regulations and specifications, and we typically sell them as part of an overall water infrastructure solution. In our experience, municipal pipe pricing is more resilient than what we consider to be true commodity products like steel pipe and copper tubing, which are not as highly specified or regulated as municipal pipe, and are often sold across different industries. Not only do we provide fair and transparent pricing, but we also provide our customers with alternative products to help them reduce their overall project cost.

Speaker Change: For over a decade now, we've been selling advanced metering solutions to our municipal customers that automatically and wirelessly transmit water usage data in real time.

Speaker Change: Once implemented, these solutions say labor and improve accuracy. But as these solutions have become more advanced and also more complex, we found that our customers face challenges implementing and integrating the metering technology into their own operations.

Speaker Change: Howard Smart Utility Strategy is changing the game by delivering turnkey solutions and by directly tackling those challenges of execution and integration on behalf of the customer.

Speaker Change: Our capabilities start with project management, installation, and software integration, and ensure that these projects are completed quickly and efficiently.

Brad Cowles: They then deliver immediate benefits to the municipality, including more accurate billing, real-time monitoring, and the ability to proactively detect and address issues like leaks or unusual water usage patterns.

Speaker Change: They then deliver immediate benefits to the municipality, including more accurate billing, real-time monitoring, and the ability to proactively detect and address issues like leaks or unusual water usage patterns.

Brad Cowles: Insurance. Proactive monitoring of this timely meter data helps reduce water loss, lowers operational costs, and improves overall service delivery to the end users. The on the meter hardware and installation services we provide, we also offer advanced data analytics that empower municipalities to make informed decisions about their water infrastructure. By analyzing usage and pressure patterns and trends, a municipality can optimize resource allocation, plan for future growth, and implement targeted conservation efforts. This data-driven approach not only extends the life span of existing infrastructure, but also supports sustainability goals, ensuring water systems are resilient and reliable for generations to come.

Speaker Change: Proactive monitoring of this timely meter data helps reduce water loss, lowers operational costs, improves overall service delivery to the end users.

Steve LeClair: As we look ahead to the remainder of 2024, we will be focused on executing against our long-term strategy.

Speaker Change: Beyond the meter hardware and installation services we provide, we also offer advanced data analytics that empower municipalities to make informed decisions about their water infrastructure.

Steve LeClair: This quarter presented us with many challenges from disruptive weather to sluggish end markets, but despite those challenges, our teams rose to the occasion, and I'm proud of their resilience and ability to stay focused the next- CQ.

Speaker Change: By analyzing usage and pressure patterns and trends, a municipality can optimize resource allocation, plan for future growth and implement targeted conservation efforts.

Steve LeClair: We are confident in our ability to leverage our strengths to drive long-term growth will continue to do so regardless of near-term economic conditions.

Speaker Change: This data-driven approach not only extends the lifespan of existing infrastructure but also supports sustainability goals, ensuring water systems are resilient and reliable for generations to come.

Steve LeClair: Thank you for your continued support and trust in our long-term vision.

Brad Cowles: I will now turn it over to Brad Coles to discuss our position as one of the nation's leading providers of advanced metering solutions. Thanks, Steve. Good morning, everyone.

Brad Cowles: One of the standout features of our smart utility offering is its scalability. Whether a small town in rural America or a large metropolitan area, the products and technology included in our offering can be tailored to meet the needs of each water utility. The system can easily expand as communities grow, ensuring the necessary infrastructure is in place to support the increasing demand without compromising accuracy or efficiency. By way of illustration, Pokémon City, Maryland, with a population of 4,000, and Fort Lauderdale, with a population of nearly 200,000, are two recent examples of communities we are helping adopt the newest metering technology.

Speaker Change: One of the standout features of our smart utility offering is its scalability.

Brad Cowles: My name is Brad Coles, president of Core & Main. A quick introduction for those who have not yet met. I started my career as an engineer and spent over a decade with the missile entire company. Then over 18 years ago, I began my journey with Core & Main when I joined the Home Depot to lead the technology integration of more than 30 acquisitions during the formation of HD supply, eventually becoming the company's chief information officer.

Speaker Change: Weather a small town in rural America or a large metropolitan area, the products and technology included in our offering can be tailored to meet the needs of each water utility.

Speaker Change: The system can easily expand as communities grow, ensuring the necessary infrastructure is in place to support the increasing demand without compromising accuracy or efficiency.

Speaker Change: By Way of Illustration, Pokemon City Maryland with a population of 4,000 and forlaterdale with a population of nearly 200,000 are two recent examples of communities we are helping adopt the newest metering technology.

Brad Cowles: I had the opportunity to return to my operating routes in 2017 when Core & Main became an independent company. Since that time, I've led several initiatives that have allowed us to grow faster than our underlying end markets, including several product line extensions, national account relationships, and the extension of our presence in new geographies.

Brad Cowles: Despite their different size and complexity, both of these communities partnered with Core & Main because of our local presence and value-added project management capabilities. Our metering product specialists have become a trusted partner to simplify installation, integrate software, and even manage their metering networks for the life of the product. We are proud to be helping Fort Lauderdale become the first community in the nation to equip 100% of their meters with pressure sensing technology, a cutting-edge solution that helps identify leaks and other system issues faster and more accurately than ever before. Solutions like these ultimately save municipalities time, protect their revenues, ease the burden of system management, and increase community satisfaction.

Speaker Change: Despite their different size and complexity, both of these communities partnered with Coran Maine because of our local presence and value added project management capabilities.

Brad Cowles: Today, I will discuss the evolution of our smart utility offering. We are one of the nation's largest distributors of water meters with access to top meter manufacturers, products, and technologies, which we complement with local, regional, and national resources to drive innovation to thousands of municipalities across the United States. Many municipalities still rely on manual read or drive by water meters, which require technicians to physically check or get very close to each meter, record usage, and input that data into their billing system.

Speaker Change: Our Metering Products Specialists have become a trusted partner to simplify installation, integrate software, and even manage their metering networks for the life of the product.

Speaker Change: We are proud to be helping Fort Lauderdale become the first community in the nation to equip 100% of their meters with pressure sensing technology.

Brad Cowles: This process is not only labor intensive but also prone to errors leading to inaccurate or delayed billing, customer dissatisfaction, and potential revenue loss for the municipality. We estimate that manual read meters are still used by roughly one-third of US municipal customers, and drive by systems are in place at another one-third. As communities grow, water demand increases, these outdated systems become even more challenging to manage effectively. For over a decade now, we have been selling advanced metering solutions to our municipal customers that automatically and wirelessly transmit water usage data in real time.

Speaker Change: and cutting edge solution that helps identify leaks and other system issues faster and more accurately than ever before. Solutions like these ultimately save municipalities time, protect their revenues, ease the burden of system management, and increase community satisfaction.

Brad Cowles: Historically, metering manufacturers would sometimes sell directly to large municipalities. However, our turnkey solutions, unique service offering, and local presence enable us to be on-site throughout the life of these projects, which builds trust with our municipal customers. As a result, we are seeing many more examples of these large solutions sold through Core & Main. We have done a lot of work over the years to align ourselves with the top-meter suppliers across the nation, and those relationships help us gain access to premier meter lines in key geographies that will enable long-term growth. Our comprehensive solutions that have been built by directly listening and responding to the needs of our customers have provided us significant growth opportunities.

Speaker Change: Historically, meterman factors would sometimes sell directly to large municipalities. However, our turnkey solutions, unique service offering, and local presence enables us to be on-site throughout the life of these projects, which builds trust with our municipal customers.

Speaker Change: As a result, we're seeing many more examples of these large solutions sold through core and main.

Speaker Change: We have done a lot of work over the years to align ourselves with the top meter suppliers across the nation, and those relationships, Helitus gain access to premier meter lines in key geographies that will enable long-term growth.

Brad Cowles: Once implemented, these solutions save labor and improve accuracy, but as these solutions have become more advanced and also more complex, we found that our customers-based challenges implementing and integrating the metering technology into their own operations. Our smart utility strategy is changing the game by delivering turnkey solutions and by directly tackling those challenges of execution and integration on behalf of the customer. Our capabilities start with project management, installation, and software integration, and ensure that these projects are completed quickly and efficiently. They then deliver immediate benefits to the municipality, including more accurate billing, real-time monitoring, and the ability to proactively detect and address issues like leaks or unusual water usage patterns.

Speaker Change: Our comprehensive solutions that have been built by directly listening and responding to the needs of our customers have provided us significant growth opportunities.

Brad Cowles: As we win these projects and provide the install base, we then, as the exclusive distributor of the meeters, generate recurring revenue as the communities grow and expand and demand more services.

Speaker Change: As we win these projects and provide the install base, we then as the exclusive distributor of the meters generate recurring revenue as the communities grow in expand and demand more services. This has resulted in a net sales cager of 9% over the last decade.

Brad Cowles: Businesses. This has resulted in a net sales CAGR of 9% over the last decade. We are very encouraged by our success on projects that range in size from Pokemon City to Fort Lauderdale, and expect we will continue to drive above-market growth well into the future.

Speaker Change: We are very encouraged by our success on projects that range and size from Pokemon City to Fort Lauderdale and expect we will continue to drive above Market Grove's well into the future.

Mark Witkowski: With that, I will now turn it over to Mark Witkowski to discuss our second quarter financial results and updated fiscal 2024 outlook. Go ahead, Mark. Well done, Brad, and thanks for joining us today. Good morning, everyone. I'll begin with the highlights of our second quarter results. We grew net sales at approximately 6% to a new quarterly record of $1.96 billion, driven by nine points of growth from acquisitions. The disruptive weather, Steve mentioned in his remarks, coupled with comparably lower activity in our end markets, partially offset the growth we achieved from acquisitions. Pricing was sequentially stable from the first quarter, which was consistent with our expectations.

Mark Witkowski: With that, I will now turn it over to Mark Witkowski to discuss our second quarter financial results in updated fiscal 2024 outlook. Go ahead, Mark.

Brad Cowles: Insurance. Proactive monitoring of this timely meter data helps reduce water loss, lowers operational costs, improves overall service delivery to the end users. The on the meter hardware and installation services we provide, we also offer advanced data analytics that empower municipalities to make informed decisions about their water infrastructure. By analyzing usage and pressure patterns and trends, a municipality can optimize resource allocation, plan for future growth and implement targeted conservation efforts. This data-driven approach not only extends the life span of existing infrastructure, but also supports sustainability goals, ensuring water systems are resilient and reliable for generations to come.

Mark Witkowski: Well done Brad and thanks for joining us today. Good morning everyone. I'll begin with the highlights of our second quarter results.

Mark Witkowski: We grew net sales approximately 6% to a new quarterly record of $1.96 billion driven by 9 points of growth for acquisitions.

Speaker Change: The disruptive weather's deep mention in his remarks, coupled with comparably lower activity in our end markets, partially offset the growth we achieve from acquisitions.

Speaker Change: Pricing was sequentially stable from the first quarter, which was consistent with our expectations.

Mark Witkowski: Gross margin for the quarter finished at 26.4%, compared with 26.9% in the prior year, a difference of about 50 basis points and in line with our expectations. Gross margins were impacted by a higher average cost of inventory this year compared to last year when we were optimizing inventory levels and still selling through lower-cost inventory. We have now anniversary supply chain and demand dynamics that drove unusual fluctuations in our gross margins. Going forward, we will continue to focus on driving gross margin enhancement through the execution of our initiatives. Selling, general, and administrative expenses increased 13% in the second quarter to $268 million.

Speaker Change: Rose margin for the quarter finished at 26.4% compared with 26.9% in the prior year, the difference of about 50 basis points and in line with our expectations.

Brad Cowles: One of the standout features of our smart utility offering is its scalability. Whether a small town in rural America or a large metropolitan area, the products and technology included in our offering can be tailored to meet the needs of each water utility. The system can easily expand as communities grow, ensuring the necessary infrastructure is in place to support the increasing demand without compromising accuracy or efficiency. By way of illustration, Pokémon City, Maryland, with a population of 4,000 and Fort Lauderdale, with a population of nearly 200,000, are two recent examples of communities we are helping adopt the newest metering technology.

Speaker Change: Gross margins were impacted by a higher average cost of inventory this year compared to last year, when we were optimizing inventory levels and still selling true lower cost inventory.

Speaker Change: We have now anniversary supply chain and demand dynamics that drove unusual fluctuations in our gross margins.

Speaker Change: Going forward, we will continue to focus on driving gross margin enhancement through the execution of our initiatives.

Speaker Change: Following General Administrative expenses increase 13% in the second quarter to $268 million.

Mark Witkowski: Excluding acquisitions, S-GNA expenses were essentially flat compared to last year, as investments in growth were offset by lower variable compensation costs. S-GNA growth moderated sequentially from the first quarter as we experienced a reduction in organic revenues and margins, both resulting in immediate reductions in personnel expenses. Our variable compensation structure allows for reduction in personnel expenses, which enables us to quickly take costs out of the business. Interest expense in the second quarter was $36 million compared with $22 million in the prior year. The increase was primarily due to the addition of $750 million term loan to 2031, higher borrowings under our senior ABO credit facility, and an increase in interest rates on our variable rate debt.

Speaker Change: Excluding acquisitions, SGNA expenses were essentially flat compared to last year, as investments in growth were offset by lower variable compensation costs.

Brad Cowles: Despite their different size and complexity, both of these communities partnered with Core & Main because of our local presence and value added project management capabilities. Our metering product specialists have become a trusted partner to simplify installation, integrate software, and even manage their metering networks for the life of the product. We are proud to be helping Fort Lauderdale become the first community in the nation to equip 100% of their meeters with pressure sensing technology, a cutting edge solution that helps identify leaks and other system issues faster and more accurately than ever before. Solutions like these ultimately save municipalities time, protect their revenues, ease the burden of system management, and increase community satisfaction.

Speaker Change: STNA growth moderated sequentially from the first quarter as we experienced a reduction in organic revenues and margins, both resulting in immediate reductions in personal expenses.

Speaker Change: Our variable compensation structure allows for reduction in personnel expenses, which enables us to quickly take costs out of the business.

Speaker Change: Interest Expansion, the second quarter, was $36 million compared with $22 million in the prior year.

Speaker Change: The increase was primarily due to the addition of $750 million term loan to $231. Higher bar wings under our senior ABO credit facility and an increase in interest rates on our variable rate debt.

Mark Witkowski: Provisioned for income taxes in the second quarter was $42 million compared with $40 million in the prior year. Our effective tax rates this year and last year were 25% and 19.6%, respectively. The increase in effective tax rate was primarily due to the exchange of partnership interests in conjunction with the secondary offerings and repurchase transactions we completed in fiscal 2023. We recorded $126 million in net income in the second quarter compared with $164 million in the prior year. Decrease in that income was primarily due to lower operating income and an increase in interest expense. Diluted earnings per share decreased approximately 8% to 61 cents.

Brad Cowles: Historically, metering manufacturers would sometimes sell directly to large municipalities. However, our turnkey solutions, unique service offering, and local presence enables us to be on-site throughout the life of these projects which builds trust with our municipal customers. As a result, we are seeing many more examples of these large solutions sold through Core & Main. We have done a lot of work over the years to align ourselves with the top-meter suppliers across the nation, and those relationships help us gain access to premier meter lines in key geographies that will enable long-term growth.

Speaker Change: Prevision for income taxes in the second quarter was $42 million compared with $40 million in the prior year. Our effective tax rates this year in last year were 25% and 19.6% respectively.

Speaker Change: The increase in effective tax rate was primarily due to the exchange of partnership interests and conjunction with the secondary offerings and repurchase transactions we completed in fiscal 2023.

Speaker Change: We recorded $126 million in that income in the second quarter compared with $164 million in the prior year.

Speaker Change: The decrease in that income was primarily due to lower operating income and an increase in interest expense.

Brad Cowles: Our comprehensive solutions that have been built by directly listening and responding to the needs of our customers have provided us significant growth opportunities. As we win these projects and provide the install base, we then, as the exclusive distributor of the meeters, generate recurring revenue as the communities grow and expand and demand more services.

Mark Witkowski: The reduction in diluted earnings per share was due to the decline in that income, partially offset by lower share counts following our repurchase of 45 million shares during fiscal 2023. Adjusted EBITDA on the second quarter decreased to approximately 5% to $257 million, and adjusted EBITDA margin decreased to 140 basis points to 13.1%. The decrease in adjusted EBITDA margin was primarily due to lower gross profit as a percentage in that sales and higher SGNA expenses.

Speaker Change: I've looked at earnings per share decreased approximately 8% to 61 cents.

Speaker Change: The reduction in diluted earnings per share was due to the decline in that income, partially offset by lower share counts following our repurchase of 45 million shares during fiscal 2023.

Brad Cowles: Businesses. This has resulted in a net sales cager of 9% over the last decade. We are very encouraged by our success on projects that range in size from Pokemon City to Fort Lauderdale, and expect we will continue to drive above market growth well into the future.

Speaker Change: Adjusted EBITDA on the second quarter decreased approximately 5% to 257 million dollars, and adjusted EBITDA margin decreased 140 basis points to 13.1%.

Speaker Change: The decrease in adjusted EBITDA margin was primarily due to lower gross profit as a percentage in that sales and higher SG and I expenses.

Mark Witkowski: Now I'd like to provide an update on our cash flow and balance sheet. That cash provided by operating activities in the second quarter was $48 million, and we're pleased with this result in what is typically a lower cash generation quarter. Given the seasonal pattern of working capital needs for our business, we typically generate most of our cash in the second half of the year, and our expectation for this year is no different. With year-to-date operating cash flow of $126 million, we are on pace to exceed our target of 60 to 70% conversion from adjusted EBITDA for the full year.

Speaker Change: Now I'd like to provide an update on our cash flow and balance sheet.

Speaker Change: That cash provided by operating activities in the second quarter was $48 million. And we are pleased with this result in what is typically a lower cash generation quarter.

Speaker Change: Given the seasonal pattern of working capital needs for our business, we typically generate most of our cash in the second half of the year and our expectation for this year is moved different.

Speaker Change: With year-to-date operating cash flow of $126 million, we are on pace to exceed our target of 60-70% conversion from adjusted EBITDA for the full year.

Mark Witkowski: Pricing was sequentially stable from the first quarter, which was consistent with our expectations. Gross margin for the quarter finished at 26.4% compared with 26.9% in the prior year, a difference of about 50 basis points and in line with our expectations. Gross margins were impacted by a higher average cost of inventory this year compared to last year when we were optimizing inventory levels and still selling through lower cost inventory. We have now anniversary supply chain and demand dynamics that drove unusual fluctuations in our gross margins.

Mark Witkowski: We continue to maintain a disciplined capital allocation strategy, balancing investments and growth with returning capital to shareholders. We paid over $65 million to complete the EGW geothermal supply and HM product acquisitions during and shortly after the quarter, having now deployed over $650 million to complete six acquisitions. We announced two additional acquisitions after the quarter, Grow Green Solutions and Green Equipment Company, and expect to pay nearly $100 million in the third quarter to complete those. In June, our Board of Directors approved a $500 million share repurchase program, reflecting our commitment to generating returns for shareholders. We repurchased approximately 430,000 shares during the second quarter, and we currently have $479 million remaining under the authorization.

Speaker Change: We continue to maintain a disciplined capital allocation strategy balancing investments in growth with returning capital to shareholders.

Speaker Change: We paid over $65 million to complete the EGW, Geothermal Supply, and HM product acquisitions during and shortly after the quarter having now deployed over $650 million to complete six acquisitions.

Speaker Change: We announced two additional acquisitions after the quarter, Grogerine Solutions and Green Equipment Company and expect to pay nearly $100 million in the third quarter to complete those.

Mark Witkowski: Going forward, we will continue to focus on driving gross margin enhancement through the execution of our initiatives. Selling general administrative expenses increased 13% in the second quarter to $268 million. Excluding acquisitions, S-GNA expenses were essentially flat compared to last year as investments in growth were offset by lower variable compensation costs. S-GNA growth moderated sequentially from the first quarter as we experienced a reduction in organic revenues and margins, both resulting in immediate reductions in personnel expenses.

Speaker Change: and June, our Board of Directors approved a $500 million share we purchase program, reflecting our commitment to generating returns for shareholders.

Speaker Change: We repurchased approximately 430,000 shares during the second quarter, and we currently have $479 million remaining under the authorization.

Mark Witkowski: Excluding the pro-form effective acquisitions, net debt leverage at the end of the quarter was 2.7 times, and our current available liquidity is nearly $1 billion. We closed on the refinancing of our senior term loan due 2028 and May, where we reduced our applicable margins from 260 basis points to 200 basis points, resulting in annual interest savings of approximately $9 million. There were no other changes to terms or maturities for the facility.

Speaker Change: Excluding the pro-form effective acquisitions, that that leverage at the end of the quarter was 2.7 times, and our current available liquidity is nearly $1 billion.

Speaker Change: We closed on the refinancing of our senior term loan due 2028 in May, where we reduced our applicable margins from 260 basis points to 200 basis points resulting in annual interest savings of approximately $9 million.

Mark Witkowski: Our variable compensation structure allows for reduction in personnel expenses, which enables us to quickly take costs out of the business. Interest expense in the second quarter was $36 million compared with $22 million in the prior year. The increase was primarily due to the addition of $750 million term loan to 2031, higher borrowings under our senior ABO credit facility and an increase in interest rates on our variable rate debt. Provisioned for income taxes in the second quarter was $42 million compared with $40 million in the prior year.

Mark Witkowski: Before we head to Q&A, I'll wrap up my prepared remarks with a discussion on our new outlook for fiscal 2024. We expect that some of the growth we anticipated in the second half of the year will likely be pushed into 2025 as project owners and developers continue to assess the macroeconomic landscape before starting new projects. As such, we now expect our end markets to be flat to slightly down for the year compared to our expectation of flat to slightly up last quarter. We remain very optimistic, though, about the long-term demand characteristics of our end markets and our ability to drive above-market growth.

Speaker Change: There were no other changes to terms or maturities for the facility.

Speaker Change: Before we head to Q&A, I'll wrap up my prepared remarks with a discussion on our new outlook for fiscal 2024.

Speaker Change: We expect that some of the growth we anticipated in the second half of the year will likely be pushed into 2025 as project owners and developers continue to assess the macroeconomic landscape of our starting new projects.

Assutsch: Assutsch, we now expect our end-market to be flat to slightly down for the year, compared to our expectation of flat to slightly up last quarter.

Mark Witkowski: Our effective tax rates this year and last year were 25% and 19.6% respectively. The increase in effective tax rate was primarily due to the exchange of partnership interests in conjunction with the secondary offerings and repurchase transactions we completed in fiscal 2023. We recorded $126 million in net income in the second quarter compared with $164 million in the prior year. Decrease in that income was primarily due to lower operating income and an increase in interest expense.

Assutsch: We remain very optimistic though about the long-term demand characteristics of our end markets and our ability to drive above market growth.

Mark Witkowski: Our bidding activity and project backlogs are positive, and the sentiment from our field is that volumes are poised to accelerate in the second half of the year. We achieve strong sales growth in August, which also supports that optimism. We expect the M&A we completed through today will contribute 8 to 9% of our total sales growth this year. We maintain a strong pipeline of acquisition opportunities and expect to remain acquisitive as we progress throughout the year. Gross margins have sustained well through the first half, and our expectation is that the 100 to 150 basis points of gross margin normalization that we've referenced previously is behind us on a sequential basis.

Assutsch: are bidding activity and project backlogs are positive and the sentiment from our field is that volumes are poised to accelerate in the second half of the year.

Assutsch: Reachies Strong Sales Grant and August, which also supports that optimism.

Assutsch: We expect the M&A we completed through today. We'll contribute 8 to 9% of our total sales growth this year.

Mark Witkowski: Diluted earnings per share decreased approximately 8% to 61 cents. The reduction in diluted earnings per share was due to the decline in that income, partially offset by lower share counts following our repurchase of 45 million shares during fiscal 2023. Adjusted EBITDA on the second quarter decreased to approximately 5% to $257 million and adjusted EBITDA margin decreased to 140 basis points to 13.1%. The decrease in adjusted EBITDA margin was primarily due to lower gross profit as a percentage in that sales and higher SGNA expenses.

Assutsch: We maintain a strong pipeline of acquisition opportunities and expect to remain a positive as we progress throughout the year.

Assutsch: Gross margins have sustained well through the first half and our expectation is that the 100 to 150 basis points of Gross margin normalization that we've referenced previously as behind us on a sequential basis.

Mark Witkowski: We've done a fantastic job structurally enhancing gross margins over the years through the addition and expansion of our private label strategy, synergies achieved through M&A, and sourcing initiatives. These initiatives have allowed us to sustain gross margins in the mid-26% range, and they are the primary levers that will allow us to continue driving gross margin enhancement in the future. As a result of lower than expected end-market volumes, we are lowering our full-year net sales range to $7.3 to $7.4 billion, and we are lowering our full-year adjusted EBITDA range to $900 to $930 million. We are raising our operating cash flow conversion range to 65 to 75% of adjusted EBITDA as a result of our disciplined working capital management.

Assutsch: We've done a fantastic job structurally enhancing gross margins over the years, through the addition and expansion of our private label strategy, synergies achieved through M&A and sourcing initiatives.

Assutsch: These initiatives have allowed us to sustain gross margins in the mid-26% range and they are the primary levers that will allow us to continue driving gross margin enhancement in the future.

Mark Witkowski: Now I'd like to provide an update on our cash flow and balance sheet. That cash provided by operating activities in the second quarter was $48 million and we're pleased with this result in what is typically a lower cash generation quarter. Given the seasonal pattern of working capital needs for our business, we typically generate most of our cash in the second half of the year and our expectation for this year is no different. With year-to-date operating cash flow of $126 million, we are on pace to exceed our target of 60 to 70% conversion from adjusted EBITDA for the full year.

Speaker Change: As a result of lower than expected in market volumes, we're lowering our full year net sales range to 7.3 to 7.4 billion dollars. And we're lowering our full year adjusted even to 930 million dollars.

Speaker Change: We're raising our operating cash flow conversion range to 65 to 75% of adjustivity, but that is a result of our discipline working capital management.

Mark Witkowski: As we wrap up our comments this morning, we are reiterating our focus on managing the business through the current economic backdrop while continuing to invest in opportunities that enable long-term growth, superior operating performance, and attractive shareholder returns.

Speaker Change: As we wrap up our comments this morning, we are reiterating our focus on managing the business through the current economic backdrop while continuing to invest in opportunities at an able long-term growth, superior operating performance and attractive shareholder returns.

Mark Witkowski: We continue to maintain a discipline capital allocation strategy, balancing investments and growth with returning capital to shareholders. We paid over $65 million to complete the EGW geothermal supply and HM product acquisitions during and shortly after the quarter having now deployed over $650 million to complete six acquisitions.

Alex: At this time, I'd like to open it up for questions. Thank you. As a reminder, if you'd like to ask a question, please press star, followed by 1 on your telephone keypad.

Speaker Change: and this time I'd like to open it up for questions.

Speaker Change: Thank you. As a reminder, if you like our last good question, please press star for my one on the telephone keypad.

Catherine Thompson: Our first question for today comes from Catherine Thompson of Thompson Research Group. Your line is now open; please go ahead. Hi, just my first question is a little bit more housekeeping around SG&A in the quarters. I know that it was mostly related to your M&A activity, which has been very active in the quarter.

Mark Witkowski: We announced two additional acquisitions after the quarter, grow green solutions and green equipment company and expect to pay nearly $100 million in the third quarter to complete those.

Speaker Change: Arthur's question for a day comes from Catherine Thompson of Thompson Research Group. You'll like it so open, please go ahead.

Mark Witkowski: In June, our Board of Directors approved a $500 million share repurchased program reflecting our commitment to generating returns for shareholders. We repurchased approximately 430,000 shares during the second quarter and we currently have $479 million remaining under the authorization. Excluding the pro-form effective acquisitions, net debt leverage at the end of the quarter was 2.7 times and our current available liquidity is nearly $1 billion.

Catherine Thompson: Hi, just my first question is a little bit more housekeeping around SGNA in the quarters. In self-higher, you have noted that it was mostly related to your emanate activity, which has been very active in quarter.

Cushie Parsett: A Cushie Parsett, a little bit of engraated detail, the puts and takes for SGNA for the quarter, that's related to that and other factors and what we should expect for the remainder of the year. Thank you.

Mark Witkowski: This is Mark. On the SG&A for the second quarter, we grew SG&A by about $30 million. That was basically entirely due to acquired SG&A. When we acquire SG&A, as we work through these acquisitions, we definitely identify some synergies there. These have been a little higher cost structure than our average. And we expect to work through some of those synergies over a period of time as we scale those businesses, add new products, and find new ways to enhance margins. So that's not something we usually take out immediately, but we're able to scale that pretty significantly as we grow.

Mark Witkowski: We closed on the refinancing of our senior term loan due 2028 and May, where we reduced our applicable margins from 260 basis points to 200 basis points, resulting in annual interest savings of approximately $9 million. There were no other changes to terms or maturities for the facility.

Cushie Parsett: Thank you for watching!

Cushie Parsett: Yeah, thanks, Katherine. This is Mark. You know, on the SGA for the second quarter, we grew SGA by about $30 million, that was...

Cushie Parsett: basically entirely due to acquired SGNA.

Cushie Parsett: and then when we acquire SGNA, as we work through these acquisitions, we definitely identify some synergies there. These have been a little higher cost structure than our average, and we expect to, you know, work through some of those synergies over a period of time as we scale those businesses, add new products.

Cushie Parsett: Find Me Waste and Hans Margins, so that's not something we usually take out immediately, but we're able to scale that pretty significantly as we grow.

Mark Witkowski: From an organic SG&A standpoint, it was roughly flat for the quarter. We have continued to make investments in growth. Those were largely offset by some of the immediate reductions that we've experienced with some of our variable compensation. Those are really the main drivers. I'd say, as we look forward on SG&A, as we absorb some of that acquired SG&A, identify some synergies. You'll start seeing that SG&A get much more back in line with typical growth patterns.

Cushie Parsett: You know, from an organic SG&A standpoint, it was roughly flat for the quarter. We have continued to make investments in growth.

Mark Witkowski: We remain very optimistic though about the long-term demand characteristics of our end markets and our ability to drive above market growth. Our bidding activity and project backlogs are positive, and the sentiment from our field is that volumes are poised to accelerate in the second half of the year. We achieve strong sales growth in August, which also supports that optimism. We expect the M&A we completed through today will contribute 8 to 9% of our total sales growth this year.

Cushie Parsett: Those were largely offset by some of the immediate reductions that we've experienced with some of our variable compensation. Those are really the main drivers, I'd say, as we look forward.

Cushie Parsett: and SGA as we absorb some of that acquired SGA, identify some synergies. You'll start seeing that SGA get much more back in line with typical growth pattern.

Unknown Executive: You had quite a handful of headwinds. You had to navigate from your pricing, commodity pricing, softened demand whether it's still outperforming the industry, you know, from a margin standpoint, although obviously not meeting expectations just for the quarter.

Mark Witkowski: We maintain a strong pipeline of acquisition opportunities, and expect to remain acquisitive as we progress throughout the year. Gross margins have sustained well through the first half, and our expectation is that the 100 to 150 basis points of gross margin normalization that we've referenced previously as behind us on a sequential basis. We've done a fantastic job structurally enhancing gross margins over the years through the addition and expansion of our private label strategy, synergies achieved through M&A and sourcing initiatives. These initiatives have allowed us to sustain gross margins in the mid-26% range, and they are the primary levers that will allow us to continue driving gross margin enhancement in the future.

Cushie Parsett: but still outperforming the industry, you know, from a margin standpoint although, but I'm seeing not meeting expectations just for the quarter.

Unknown Executive: How are you, what are the puts and takes you're doing to manage and they're facing the current market realities and just a reminder, are you seeing any meaningful shifts in commodity type products as a percentage of the cost of goods sold in any commentary about how you're managing those more commodity type products. Thank you.

Speaker Change: How are you, what are the puts in takes you're doing to manage and they're facing the current market realities and just a reminder, are you seeing any meaningful shifts?

Speaker Change: and Commodity type products as a percentage of classical sold and any commentary about how you are managing those more commodity type products. Thank you.

Unknown Executive: Yeah, Captain, this is Dave. Yeah, as you mentioned, there were a lot of external factors really impacting performance in this quarter, some of which we really view as temporary. You know, there was certainly the weather situation; you know, that was a real challenge, and we put a chart in there. We don't generally talk about weather, but it was so pervasive and wide scale, really in that second quarter. And, you know, we shared a little bit about this in May, about the May results in the last quarter. We really caused a bit of an alarm for us.

Mark Witkowski: As a result of lower than expected end-market volumes, we are lowering our full-year net sales range to $7.3 to $7.4 billion, and we are lowering our full-year adjusted EBITDA range to $900 to $930 million. We are raising our operating cash flow conversion range to 65 to 75% of adjusted EBITDA as a result of our discipline working capital management.

Speaker Change: Yeah, I can't believe it's the state, yeah, you mentioned there were a lot of external factors, really impacting performance in this quarter, some of which we really view is temporary. You know, there was certainly the weather situation, you know, that was a real challenge and we put it chart in there, we don't generally talk about weather, but it was so pervasive.

Speaker Change: and White Scale, really in that second quarter and, you know, we shared a little bit about this in May, about the May results in the last quarter that really caused a bit of an alarm for us.

Unknown Executive: And, you know, just from the weather standpoint, we saw close to 70 of our branches from Texas all the way up to the upper Midwest that were impacted by this, and some of those branches are top performing branches. So that amplified the impact that we had in May and June, for sure. You know, you couple that we were estimating that was somewhere around a $50 million headwind; there about 3% of sales or so. So we're anticipating that, you know, some of that will come back. We're already starting to see that take shape in Texas, but there's a little longer non-construction season.

Speaker Change: and you know just from the weather standpoint we saw close to 70 of our branches from Texas all the way up to the Upper Midwest that were impacted by this and some of those branches are our top performing branches.

Unknown Executive: At this time, I'd like to open it up for questions. Thank you. As a reminder, if you'd like to ask a question, please press star flood by 1 on your telephone keypad.

Speaker Change: So that amplified the impact that we had in May and June for sure.

Speaker Change: You know, you couple that week, we're estimating that with somewhere around a $50 million headwind there about 3% of sales or so.

Catherine Thompson: Our first question for today comes from a Catherine Thompson of Thompson Research Group. Your line is now open, please go ahead. Hi, just my first question is a little bit more housekeeping around SG&A in the quarters. I know that it was mostly related to your M&A activity, which has been very active in quarter.

Speaker Change: So we're anticipating that some of that will come back where I already started to see that take shape in Texas, where there's a little longer construction season. We're going to have to see how that takes shape up in the upper Midwest.

Unknown Executive: We're going to have to see how that takes shape up in the upper Midwest. In regards to a couple of the other areas, a little bit of market softness, as we talked about in non-residential, and that really impacted really our fire protection product line. And, you know, they've been working on sizing appropriately for that. The commodity impact with steel pipe, you know, those are at historic lows. So some of that's had a drag down in the business. But, you know, I go back to a lot of the controllables that we've had in our space and our ability to really drive a lot of the M&A performance, continue to harness our gross margin initiatives and be able to drive in and accelerate some of the private label piece.

Speaker Change: and regards to a couple of the other areas, a little bit of some market softness as we talked about in non-residential and that really impacted.

Speaker Change: really are a fire protection product line and they've been working on sizing appropriately for that. The commodity impact with steel pipe, those are at historic lows, so some of them had a drag down on the business.

Mark Witkowski: Could you parse out a little bit in greater detail the puts and takes for SG&A for the quarter that's related to that and other factors in what we should expect for the remainder of the year? Thank you. Thanks, Catherine. This is Mark. On the SG&A for the second quarter, we grew SG&A by about $30 million. That was basically entirely due to acquired SG&A. When we acquire SG&A, as we work through these acquisitions, we definitely identify some synergies there.

Speaker Change: But you know I go back to a lot of the controls that we've had in our space and our ability to really drive a lot of the M&A performance, continue to harness our gross margin initiatives and be able to drive in and accelerate some of the private label piece.

Unknown Executive: I've all helped offset a lot of that.

Unknown Executive: We do believe a lot of this is temporary. In the long term, look at our end markets and what we're seeing right now in positivity coming from the field in terms of bidding activity, and backlogs still look incredibly strong. So we feel we feel solid about that. And, you know, top quarter for some of the headwinds, but we were certainly able to offset a good portion of those and build for the long term.

Speaker Change: have all helped doc that a lot of that. We do believe a lot of this is temporary in the long-term, look at our end markets and what we're seeing right now in positivity coming from the field in terms of bidding activity and backlog still look incredibly strong. So we feel we feel solid about that.

Mark Witkowski: These have been a little higher cost structure than our average. And we expect to work through some of those synergies over a period of time as we scale those businesses, add new products, find new ways to enhance margins. So that's not something we usually take out immediately, but we're able to scale that pretty significantly as we grow. From an organic SG&A standpoint, it was roughly flat for the quarter. We have continued to make investments in growth.

Speaker Change: and you know, it's a tough quarter for some of the headwinds but we were certainly able to offset a good portion of those and build for the long term.

Unknown Executive: Okay, great. Thank you. Thanks, Stafford.

David: Thank you. Our next question comes from a David at Monthly or Bad. Your line is now open. Please go ahead. Thank you. Good morning.

Speaker Change: Okay, great, thank you.

Speaker Change: Thanks, Stafford.

Speaker Change: Thank you. Our next question comes from a David at Monthly of Bad. Your line is so open. Please go ahead.

Mark Witkowski: A couple of quick questions on the PVC pipe, approximately what percentage of sales and gross margin dollars or PVC pipe today and related to that. And again, regardless of whatever happens with suppliers or anything else, do you have some sort of contingency plan to right-size the business. If you were to see a material dropped further from here in PVC pipe pricing. Yeah, thanks, David.

Mark Witkowski: Those were largely offset by some of the immediate reductions that we've experienced with some of our variable compensation. Those are really the main drivers. I'd say as we look forward on SG&A as we absorb some of that acquired SG&A, identify some synergies.

David: Thank you. Good morning.

David: Um...

David: A couple of quick questions on the PVC pipe, approximately what percentage of sales and gross margin.

Speaker Change: Dollars are PVC pipe today and

Speaker Change: Related to that, and again, regardless of whatever happens with suppliers or anything else, do you have some sort of contingency plan to right-size the business if you were to see a material drop for their from here in PVC pipe pricing?

Mark Witkowski: You'll start seeing that SG&A get much more back in line with typical growth patterns.

Catherine Thompson: You had quite a handful of headwinds. You had to navigate from your pricing, commodity pricing, softened demand whether it's still outperforming the industry, you know, from a margin standpoint, although obviously not meeting expectations just for the quarter.

Mark Witkowski: This is Mark. You know, in terms of the PVC contribution, I think I'd go back to previous, you know, comments we've made regarding the categories that we've talked about, you know, about 5% of our business is related to commodity type products, which should be steel, pipe, copper tubing, things of that nature. About 25 to 30% of our business is related to municipal pipe. And I'd say that's split roughly evenly between municipal PVC pipe and municipal ductile iron pipe, with the balance of our business being those more highly specified, you know, fire hydrants, valve spittings, you know, things of that nature.

Speaker Change: Yeah, thanks, David. This was more, you know, in terms of the PVC contribution, I think I'd go back to previous, you know, comments we've made regarding the categories that we've talked about, you know, about 5%.

Speaker Change: of our business as related to commodity type products which would be steel.

Speaker Change: Pipe, Capur tubing, things of that nature, about 25 to 30% of our business is related to municipal pipe. And I say that's split roughly evenly between municipal PVC pipe and municipal back to iron pipe.

Steve LeClair: How are you, what are the puts and takes you're doing to manage and they're facing the current market realities and just a reminder, are you seeing any meaningful shifts in commodity type products as a percentage of the cost of goods sold in any commentary about how you're managing those more commodity type products. Thank you. Yeah, Captain, this is Dave. Yeah, as you mentioned, there were a lot of external factors really impacting performance in this quarter, some of which we really view as temporary, you know, there was certainly the weather situation, you know, that was a real challenge and we put a chart in there.

Speaker Change: with the balance of our business being those more highly specified.

Mark Witkowski: You know, in terms of, you know, contingency planning or anything like that, as we've talked about, you know, this business is highly flexible. You know, our cost structure is largely variable with a lot of the personnel expenses that we have. So, you know, we do a lot of planning in this company for various scenarios of growth, moderation, or decline and feel, you know, like we've got an incredible amount of experience operating the business through various cycles. So really, you know, continue to do, you know, as we plan, but right now, the way we feel like the long-term demand characteristics of this business are intact. You know, we continue to invest in our growth initiatives and opportunities for margin enhancement, and that's our focus right now.

Speaker Change: Firehide Transpals, fittings, things of that nature.

Speaker Change: In terms of contingency planning or anything like that as we've talked about, this business is highly flexible.

Speaker Change: You know, our cost structure is largely variable with a lot of the personal expenses that we have. So, you know, we do a lot of planning in this company for various scenarios of growth.

Steve LeClair: We don't generally talk about weather, but it was so pervasive and wide scale, really in that second quarter and, you know, we shared a little bit about this in May, about the May results in the last quarter. We really caused a bit of an alarm for us. And, you know, just from the weather standpoint, we saw close to 70 of our branches from Texas all the way up to the upper Midwest that were impacted by this and some of those branches are top performing branches.

Speaker Change: Maderation over decline and feel like we've got an incredible amount of experience operating the business through various cycles, so really, you know.

Speaker Change: Continue to do, you know, as we plan, but right now the way we feel like the long-term demand characteristics of this business are intact, you know, we continue to invest in our growth initiatives and opportunities for margin enhancement, and that's our focus right now.

Steve LeClair: So that amplified the impact that we had in May and June for sure. You know, you couple that we were estimating that was somewhere around a $50 million headwind there about 3% of sales or so. So we're anticipating that, you know, some of that will come back. We're already starting to see that takes shape in Texas, but there's a little longer non-construction season. We're going to have to see how that takes shape up in the upper Midwest.

Mark Witkowski: Okay, thanks, and second, can you quantify the strong sales growth that you saw in August, just to differentiate that versus what you saw during the quarter. And then I'm trying to square that with your belief that you will not recover the weather-related shortfall later this year, and I'm just trying to put those two things together to help you with that. Yeah, sure, Dave. I'd say in August, what we experienced was a trend back to what we experienced with some good solid organic volume growth that was on top of the acquisition contributions that we've expected. So felt good with the trend line kind of getting into August with, I'd say, a normal weather pattern; we got back into what we considered normal and unexpected growth patterns.

Speaker Change: Okay, thanks. And second, can you quantify the strong sales brunt that you saw in August just to differentiate that versus what you saw during the quarter? And then I'm trying to square that with your belief that you will not recover the weather-related shortfall later this year. And I'm just trying to put those two things together to help you with that.

Steve LeClair: In regards to a couple of the other areas, a little bit of market softness as we talked about in non-residential and that really impacted really our fire protection product line. And, you know, they've been working on sizing appropriately for that. The commodity impact with steel pipe, you know, those are at historic lows. So some of that's had a drag down in the business. But, you know, I go back to a lot of the controllables that we've had in our space and our ability to really drive a lot of the M&A performance, continue to harness our gross margin initiatives and be able to drive in and accelerate some of the private label piece.

Dave: Yes, sir Dave, I'd say in August what we experienced was a trend back to what we experienced with some good solid organic.

Speaker Change: Balloon Gross, it was on top of the acquisition contributions that we've expected.

Speaker Change: I felt good with the trendline kind of getting into August with, I'd say, a normal weather pattern. We got back into what we considered normal and unexpected growth patterns. So what we're not expecting is a kind of a surge beyond that just given the capacity at our customers.

Mark Witkowski: So what we're not expecting is a kind of a surge beyond that, just given the capacity at our customers. Unless we experienced maybe a longer seasonal year in certain northern geography, so we haven't necessarily baked in a, I'd say a more favorable end to the year. But, you know, that could be upside if we see a little longer season.

Speaker Change: and last we experienced maybe a longer seasonal year in certain northern geography. So we haven't necessarily baked in a, I'd say, a more favorable end to the year, but you know, that could be upside if we see a little longer season this year.

Steve LeClair: I've all helped offset a lot of that. We do believe a lot of this is temporary in the long term look at our end markets and what we're seeing right now in positivity coming from the field in terms of bidding activity and backlogs still look incredibly strong. So we feel we feel solid about that. And, you know, top quarter for some of the headwinds, but we were certainly able to offset a good portion of those and build for the long term. Okay, great. Thank you. Thanks, Stafford. Thank you.

Mark Witkowski: Thanks very much. Thank you.

Speaker Change: Got it. Thanks very much.

Matthew Bouley: Our next question comes from Matthew Bouley of Barclays. Your lines are open. Please go ahead. Morning, everyone. Thank you for taking the questions. On the gross margin side, it sounded like a lot of that normalization is now fully behind you. And I think the commentary was around really focusing from here going forward on the private label and your sourcing initiatives, etc.

Speaker Change: Thanks, Stephen.

Speaker Change: Thank you. Our next question comes from at Matthew Boone of Barclays. You're going to start open. Please go ahead.

Matthew Boone: Morning everyone. Thank you for taking the questions. On the gross margin side, it sounded like a lot of that normalization is now fully behind you and I think the commentary was around.

Mark Witkowski: Our next question comes from a David at monthly or bad. Your line is now open. Please go ahead. Thank you. Good morning. A couple of quick questions on the PVC pipe, approximately what percentage of sales and gross margin dollars or PVC pipe today and related to that. And again, regardless of whatever happens with suppliers or anything else, do you have some sort of contingency plan to right size the business. If you were to see a material dropped further from here in PVC pipe pricing.

Speaker Change: really focusing from here going forward on the private label and your sourcing initiative, etc.

Mark Witkowski: So is the implication, and forgive me if I missed this, but is the implication that you do expect gross margins to be stable or increasing going forward given these initiatives, or any additional color on that cadence with margins in the second half? Thank you. Yes, you're mad. Thanks for the question. You know, as we talked about last quarter, we did expect a sequential reduction from Q1 to Q2 that we experienced. It was right in line with our expectations. And then, as we go forward, you're right. You know, we expect to be able to grow those gross margins from where we finish Q2.

Speaker Change: So the implication, and forgive me if I miss this, but is the implication that you do expect gross margins to be stable or increasing going forward given these initiatives or, you know, any additional color on that cadence of margins in the second half. Thank you.

Speaker Change: Yes, you're mad. Thanks for the question. As we talked about last quarter, we did expect a sequential reduction from Q1 to Q2 that we experienced. It was right in line with our expectations.

Mark Witkowski: Yeah, thanks, David. This is Mark. You know, in terms of the PVC contribution, I think I'd go back to previous, you know, comments we've made regarding the categories that we've talked about, you know, about 5% of our business is related to commodity type products, which should be steel, pipe, copper tubing, things of that nature, about 25 to 30% of our business is related to municipal pipe. And I'd say that's split roughly evenly between municipal PVC pipe and municipal ductile iron pipe, with the balance of our business being those more highly specified, you know, fire hydrants, valve spittings, you know, things of that nature.

Speaker Change: and then as we go forward you're right, you know, we expect to.

Mark Witkowski: Given the gross margin initiatives that we have with private label sourcing optimization, among other things.

Speaker Change: Be able to grow those gross margins from where we finish Q2, given the gross margin initiatives that we have with private label.

Mark Witkowski: So, you know, our expectation is we'll be growing gross margins going forward, and the normalization that we were expecting and that we were aware of is now behind us. OK, got it. That's helpful. Thanks, Mark.

Speaker Change: Sourcing optimization among other things. Our expectation is we'll be growing grist margins going forward in the normalization that we were expecting and that we were aware of is now behind us.

Matthew Bouley: And then secondly, following up on the change to revenue guidance and the August commentary, I guess, you know, if we look at that 200 million reductions of the revenue guide for the year, I mean, could you kind of break out, you know, what were the largest or maybe even ranked the largest contributors to that, whether it be weather, you know, each individual and market. And, you know, if you can therefore tell, you know, or at least if there's a number around what you might be expecting for what is pushed into 2025. So that's part one, and part two is the for August: is the organic growth actually better, worse, the same as it was in Q2.

Speaker Change: Okay, got it, that's helpful, thanks Mark, and then secondly, following up on the change to revenue guidance and the August commentary. I guess if you look at that 200 million reductions of the revenue guide for the year, I mean, could you kind of break out, you know.

Mark Witkowski: You know, in terms of, you know, contingency planning or anything like that, as we've talked about, you know, this business is highly flexible, you know, our cost structure is largely variable with a lot of the personnel expenses that we have. So, you know, we do a lot of planning in this company for various scenarios of growth, moderation or decline and feel, you know, like we've got an incredible amount of experience operating the business through various cycles.

Speaker Change: and what were the largest, or maybe even the rank, the largest contributors to that.

Speaker Change: Whether it be weather, you know...

Speaker Change: and each individual and market.

Speaker Change: and if you can therefore tell, you know, or at least if there's a number around what you might be expecting for what is pushed into 2025.

Mark Witkowski: So really, you know, continue to do, you know, as we plan, but right now, the way we feel like the long term demand characteristics of this business are intact, you know, we continue to invest in our growth initiatives and opportunities for margin enhancement, and that's our focus right now. Okay, thanks, and second, can you quantify the strong sales growth that you saw in August, just to differentiate that versus what you saw during the quarter.

Speaker Change: That's part one and part two is for August is the organic growth actually better or worse the same as it was in Q2.

Mark Witkowski: Yeah, sure, Matt. You know, I think the first one, you know, on the change to the guidance, you're right, it was about 200 million or so at the midpoint, with about 100 million of that coming in the second quarter, you know, coming in below expectations. And that was, you know, kind of split roughly between the weather impact and, you know, lower market volume growth, and we anticipated. You know, as you looked into the back half then, I'd say that this is, you know, the balance of that is about 100 million in the second half of the year is entirely due to just lower expected volumes coming out of the end markets.

Speaker Change: Yes, you're mad. You know, I'll take the first one, you know, on the change of the guidance you write, it was about 200 million or so at the midpoint with about 100 million of that coming in the second quarter.

Speaker Change: You know, coming in below expectations and that was, you know, kind of split roughly between the weather impact and, you know, lower market volume growth that we anticipated.

Mark Witkowski: And then I'm trying to square that with your belief that you will not recover the weather related shortfall later this year, and I'm just trying to put those two things together to help you with that. Yeah, sure, Dave, I'd say in August, what we experienced was a trend back to what we experienced with some good solid organic volume growth that was on top of the acquisition contributions that we've expected. So felt good with the trend line kind of getting into August with, I'd say, a normal weather pattern, we got back into what we considered normal and unexpected growth patterns.

Speaker Change #100: You look into the back-up and I'd say that miss is the balance of that, about 100 million in the second half of the year is entirely.

Mark Witkowski: I'd say, probably split evenly across our end markets with what the mix is there. So, as a reminder, municipal is about 40% of the business, non resies about 40% of the business, and resie is about 20. So really that 100 million really kind of evenly across those end markets is the, you know, in terms of what are mixed percentages there. So we just seen, I'd say across all three of them come in a little lighter than what we were originally expecting. So we really brought that end market expectation down from flat to up a little, to flat to down a little bit for the full year.

Speaker Change #100: due to just lower expected volumes coming out of the end markets.

Speaker Change #100: I'd say probably let's evenly across our end markets with what the mix is there, so as a reminder, municipal is about 40% of the business, non-rezyze, about 40% of the business and rezee is about 20, so really that at 100 million really kind of evenly across those end markets is, you know, in terms of what are mixed percentages there. So we just seen, I'd say, across all three of them come in a little lighter than what we originally expecting.

Mark Witkowski: So what we're not expecting is a kind of a surge beyond that, just given the capacity at our customers. Unless we experienced maybe a longer seasonal year in certain northern geography, so we haven't necessarily baked in a, I'd say a more favorable end to the year, but, you know, that could be upside if we see a little longer season. Thanks very much. Thank you.

Speaker Change #100: So we really brought that end-market expectation down from flat to up a little to flat to down a little bit for the full year.

Mark Witkowski: In terms of August, we probably saw a little bit of release coming in August with some of the better weather, but ultimately those organic volumes are kind of in line with where we were expecting them to be. So I think we got probably a little release coming out of the weakness we saw in the Q2 in August, but we're watching that closely. We got about a week or so in the books for our September fiscal month, and we're seeing some decent strength there.

Speaker Change #100: Joseph Arden, and then next episode, yep God.

Joseph Arden: Yeah, you know, this is the artist.

Speaker Change #102: and I'd say that we probably saw a little bit of release coming in August with some of the better weather, but...

Speaker Change #102: Ultimately, those organic volumes are kind of in line with where we were expecting.

Matthew Bouley: Our next question comes from Matthew Bouley of Barclays. Your lines are open. Please go ahead.

Speaker Change #103: I think we got pride, a little release coming out of the weakness we saw in the KQ and August. But we're watching that closely and it's a timbre. We got about a week or so in the books for our September fiscal month and we're seeing some decent strength there. So we're optimistic I'd say with what we're seeing so far early in the quarter, which is definitely different.

Mark Witkowski: Morning, everyone. Thank you for taking the questions. On the on the gross margin side, it sounded like a lot of that normalization is now fully behind you. And I think the commentary was around really focusing from here going forward on the private label and your sourcing initiatives, etc. So is the implication and forgive me if I missed this, but is the implication that you do expect gross margins to be stable or increasing going forward given these initiatives or any additional color on that cadence with margins in the second half.

Mark Witkowski: Thank you. Yes, you're mad. Thanks for the question. You know, as we talked about last quarter, we did expect a sequential reduction from Q1 to Q2 that we experienced. It was right in line with our expectations. And then as we go forward, you're right. You know, we expect to be able to grow those gross margins from where we finish Q2. Given the gross margin initiatives that we have with private label sourcing optimization among other things.

Mark Witkowski: So we're optimistic, I'd say, with what we're seeing so far early in the quarter, which is definitely a different position than we were feeling coming out of the first quarter on our last call. Got it. Thanks, Mark. Thanks everyone.

Speaker Change #103: Position, then we were feeling, you know, coming out the first quarter on our last call.

Mark Witkowski: Good luck, guys. Thank you.

Speaker Change #103: Got it, thanks Mark, thanks everyone, good luck guys.

Nigel Coe: Our next question comes from Nigel Coe of Wall 3 Search. Your lines are open. Please go ahead. Thanks. Thanks. Good morning, everyone. I just wanted to dig in a bit deeper on some of the comments you're already given.

Speaker Change #103: Back for my ex.

Speaker Change #104: Thank you. Our next question comes from Nigel Co. of Wolf Research. Your lines are open. Please go ahead.

Nigel Co.: Thanks, thanks for the money everyone.

Mark Witkowski: So on pricing, it sounds like pricing finished stable sequentially in the second quarter, but I'm curious what the second half outlook is for the price. So we're looking at fairly flat, you know, year view price in the back half of the year. IE, the deflation is more in the first half and then we're sort of stabilizing in the back half of the year.

Nigel Co.: I just wanted to dig in a bit deeper on some of the...

Nigel Co.: and some of the commentary already given. So on pricing, it sounds like pricing, then stable to

Speaker Change #106: and the second quarter, but I'm curious, you know what the second half outlook is the price. So we look at the very flat, you know, year by year, price in the back half of the year, the deflation is more in the third half and then we're sort of stabilizing in the back half of the year.

Mark Witkowski: So, you know, our expectation is we'll be growing gross margins going forward and the normalization that we were expecting and that we were aware of is now behind us. OK, got it. That's helpful. Thanks, Mark. And then secondly, following up on the change to revenue guidance and the August commentary, I guess, you know, if we look at that 200 million reductions of the revenue guide for the year, I mean, could you kind of break out, you know, what were the largest or maybe even ranked the largest contributors to that, whether it be weather, you know, each individual and market.

Mark Witkowski: And then, you know, Mark, the commentary you made on gross margins growing. I think your third quarter guide is still relatively tough. So are we talking about growing sequentially of that second quarter basis in the back half of the year? Yeah, sure, Nigel. First question on pricing, I would tell you sequentially, we saw a pretty stable, resilient pricing environment. Most of the year-over-year, I'd say headwind we saw was late in 2023. We're really in terms of a guide expecting kind of continued stable pricing from here throughout the end of the year, which, you know, kind of still results in a low, I'd say, low single digit.

Mark Witkowski: and then Mark the commentary you made on Gross Martins growing. I think you're a third-quarter guide is still relatively tough. So I will talk about growing sequentially off that second quarter basis at the back half of the year.

Mark Witkowski: Yes, sure, Nigel. First question on pricing. I would tell you, yeah, sequentially we saw a pretty stable resilient pricing environment. Most of the year over year, I'd say, headwind we saw was late in 2023. We're really in terms of a guide expecting kind of continued.

Speaker Change #107: Stable pricing from here throughout the end of the year, which, you know, kind of still results in a low, I'd say low single digit, very low single digit headwind for the full year guide that we have 810.

Mark Witkowski: And, you know, if you can therefore tell, you know, or at least if there's a number around what you might be expecting for what is pushed into 2025. So that's part one and part two is the for August is the organic growth actually better, worse, the same as it was in Q2. Yeah, sure, Matt, you know, I think the first one, you know, on the change to the guidance, you're right, it was about 200 million or so at the midpoint with about 100 million of that coming in the second quarter, you know, coming in below expectations.

Speaker Change #107: and then, you know, from a gross margin perspective, yeah, that's the way to think about it, you know, we'll continue to make progress on our gross margin initiatives. We had good progress.

Mark Witkowski: You know, in the second quarter that didn't really show up because we were expecting some other headwinds there, but ultimately expects some growth in Q3 and Q4 on the end. Great.

Speaker Change #107: in the second quarter that didn't really show up because we were expecting some other headwinds there, but ultimately, we have expect some growth and Q3 and Q4 at the end.

Mark Witkowski: And then a quick one on SGNA, you know, just obviously, you know, we're working with here with rock numbers, but it seems like the SGNA attached to the acquisition, you know, back into the contribution from acquisition revenue. It feels like SGNA is about 20 points of acquired revenues for the acquisitions. Number one, is that the right number? And secondly, what is the right level for SGNA for, you know, one of 40 pool basis for these acquisitions? Yeah. Nigel, I would tell you some of the acquisitions that we've got rolling through have had, you know, they've helped us at the gross margin level.

Mark Witkowski: And that was, you know, kind of split roughly between the weather impact and, you know, lower market volume growth and we anticipated. You know, as you looked into the back half then, I'd say that this is, you know, the balance of that is about 100 million in the second half of the year is entirely due to just lower expected volumes coming out of the end markets. I'd say, probably split evenly across our end markets with what the mix is there.

Speaker Change #108: and then a quick one on SGA, you know, just obviously, you know, we're working with here with rock numbers, but it seems like the...

Speaker Change #109: FG&A attached to the acquisition, you know, back in to the contribution from acquisition revenue. It feels like FG&A is about 20 points of acquired revenues for the acquisitions.

Speaker Change #110: Number one is at the right number and secondly, what is the right level for SNA, you know, on a 42 basis for these acquisitions?

Mark Witkowski: So as a reminder, municipal is about 40% of the business, non resies about 40% of the business and resie is about 20. So really that 100 million really kind of evenly across those end markets is the, you know, in terms of what are mixed percentages there. So we just seen, I'd say across all three of them come in a little lighter than what we were originally expecting. So we really brought that end market expectation down from flat to up a little to flat to down a little bit for the full year.

Speaker Change #111: Yeah, Nigel, I would tell you some of the acquisitions that we've got rolling through have had, you know, they've helped us at the gross margin level, they've had some nice, a creative gross margin, but they've had some, they carried some much higher.

Mark Witkowski: They've had some nice, accretive gross margin, but they've had some, they carried some much higher SGNA cost structure there. So, you know, there's some opportunity to take, you know, some of that out, get more efficient as we scale those businesses and everything. But, you know, they've been, I'd say, neutral from an EBITDA standpoint. And, you know, we've got some opportunities to drive some synergies there to expand that. So, that's what our focus has been on there, you know, not necessarily, you know, the rate that we acquired them at, but, you know, the ability to scale those.

Speaker Change #111: S.G. and a cost structure there. So, you know, there's some opportunity to take, you know, some of that out, get more efficient as we scale those businesses in every lane, but, you know, they've been, I'd say, neutral from an EBITDA.

Speaker Change #111: Stan Point, and we've got some opportunities to drive some synergies there to expand that. So that's what our focus has done on there. Not necessarily the rate that we acquired them at, but you know, the ability to scale those, and drive at EBITDA contribution through the P&O.

Mark Witkowski: In terms of August, we probably saw a little bit of release coming in August with some of the better weather but ultimately those organic volumes are kind of in line with where we were expecting them to be. So I think we got probably a little release coming out of the weakness we saw in the Q2 in August, but we're watching that closely. We got about a week or so in the books for our September fiscal month and we're seeing some some decent strength there.

Mark Witkowski: Anderson, and Drive Eddie, but our contribution through the P&L. Okay, thanks a lot.

Mark Witkowski: Yeah, thanks.

Speaker Change #112: Okay, bye-globe.

Joe Richie: Thank you.

Unknown Executive: Our next question comes from Joe Richie of Goldman Sachs. Your lines are open. Please go ahead. Hey guys, good morning. So I knew you talked a bunch. Good morning. Yeah, so I know we've talked a bunch about, you know, volume, but I want to kind of post it out a little bit further. See, I think you mentioned, you know, whether impacting volumes by approximately $50 million. We need to take into account the M&A contribution now expected 30 years. It still seems like there's about a 200 million dollar reduction in volume expectations for the year. And I recall last quarter, we talked about, you know, competition, you know, globalizing and the space.

Speaker Change #112: Yep, thanks.

Speaker Change #113: Thank you. Our next question comes from Joe Richie of Goldman Sachs. Good line. So open. Please go ahead.

Joe Richie: Hey guys, good morning.

Speaker Change #115: So I knew it was back there a bunch.

Speaker Change #116: Good morning, yet. I know we've talked a bunch about volumes, but I want to kind of parse it out a little bit further.

Speaker Change #117: Stephen, he mentioned whether impacting volumes by approximately 50 million dollars.

Speaker Change #118: When you take into account the M&A contribution, now expected for the year, it still seems like there is about a $200 million reduction in volume expectations for the year.

Nigel Coe: Our next question comes from Nigel Coe of Wall 3 Search. Your lines are open. Please go ahead. Thanks. Thanks, good morning, everyone. I just wanted to dig in a bit deeper on some of the comments you're already given.

Unknown Executive: I'm just wondering, like how much of this is really, you know, end market weakness versus, you know, you guys, you know, you're not going to be able to do that. You guys being a little bit more judicious about the projects that you're going after as we head into the back half of the year.

Speaker Change #119: and I recall last quarter we talked about, you know, competition, you know, going the lives and in the space. I'm just wondering, like how much of this is really, you know, and market weakness versus...

Speaker Change #120: You know, you guys being a little bit more judicious about the projects that you're going after as we head into the back after the year. Any commenter and that would be helpful.

Mark Witkowski: So on pricing, it sounds like pricing finished stable sequentially in the second quarter, but I'm curious what the second half outlook is the price. So we're looking at fairly flat, you know, year view price in the back half of the year. IE, the deflation is more in the first half and then we're sort of stabilizing in the back half of the year. And then, you know, Mark, the commentary you made on Gross margins growing.

Unknown Executive: Any commentary on that would be helpful. Yeah, Joe. No, we really haven't viewed it that way. You know, we are continuing to go after projects just the way we always have. And, you know, having success there as well, you're seeing. You know, we highlighted a couple projects that we're seeing in meters and some of these other specific product categories, I think, which give you an idea of kind of how, how we're tackling, you know, different opportunities out there. But, you know, the weather piece was challenging in a number of ways. You know, we started in the first quarter where we saw kind of favorable conditions that started in the spring that quickly became challenging in May and June.

Speaker Change #121: Yeah, John, we really haven't viewed it that way, you know, we are continuing to go after projects just the way we always have.

Speaker Change #122: You know, having success there as well, you're seeing, you know, we highlighted a couple projects that we're seeing in meters and some of these others, specific product categories I think would give you an idea of kind of

Mark Witkowski: I think your third quarter guide is still relatively tough. So are we talking about growing sequentially of that second quarter basis in the back half of the year? Yeah, sure, Nigel. First question on pricing, I would tell you sequentially, we saw pretty stable, resilient pricing environment. Most of the year over year, I'd say headwind we saw was late in 2023. We're really in terms of a guide expecting kind of continued stable pricing from here throughout the end of the year, which, you know, kind of still results in a low, I'd say, low single digit.

Speaker Change #122: and how we're tackling different opportunities out there. But the weather piece was challenging in a number of ways.

Speaker Change #122: You know, we started in the first quarter where we saw kind of favorable conditions that started in the spring that quickly became challenging in May and June.

Unknown Executive: And while we believe that we'll likely recover in Texas and some of these other bigger areas, as the weather has improved, and we'll continue to pull those projects forward. It's just a question mark about whether we're going to be enough time remaining to pull all of these projects in to create, you know, release the backlog and the upper Midwest in addition to tackling the other new projects out there before the season comes to a close. So that's really what we're seeing. You know, we're obviously, you know, been burned by the weather, and this will have quarter.

Speaker Change #122: and while we believe that we'll likely recover in Texas and in some of these other bigger areas as whether has improved and we'll continue to pull those projects forward. It's just a question mark about whether we're going to be enough time remaining to pull all of these projects in to...

Mark Witkowski: Very low single digit headwind for the full year guide that we have eight in. And then, you know, from a gross margin perspective, yeah, that's the way to think about it. You know, we'll continue to make progress on our gross margin initiatives. We had good progress. You know, in the second quarter that didn't really show up because we were expecting some other other headwinds there, but ultimately expects some growth in Q3 and Q4 on the end. Great.

Speaker Change #123: Creek, you know, released the backlog in the Upper Midwest.

Speaker Change #123: in addition to tackling the other new projects out there before the season comes to a close.

Speaker Change #123: So, that's really what we're seeing. We're obviously, you know, been burned by the weather in this last quarter. As we get into the back half of the year, particularly in the fourth quarter, it's always challenging of what weather's going to pose in particularly some of these areas that are very seasonal.

Unknown Executive: As we get into the back half of the year, particularly in the fourth quarter, it's always challenging of what the weather is going to pose, and particularly some of these areas that are very seasonal. Yeah, that's a couple of things. I mean, basically, you know, expect maybe some trappiness in the back half of the year, but that normalizes into 2025 and, you know, whether it's always a swing factor, but that's the expectation at this point. Yeah, that's correct.

Speaker Change #124: Yeah, and okay, that's just a couple of feet. I mean, basically, you know, expect, maybe some dropping is in the back half of the year, but that normalizes into, into 20, 25, and I mean, whether it is always a swing factor, but that's the expectation at this point.

Unknown Executive: Okay, and maybe just my one other question. I know that you don't want to talk about the lawsuit. There's a lot of there's a lot of noise in the market regarding pricing and capacity. And specifically, you know, it seems like you are you're planning on maintaining your, your pricing discipline as the year progresses, but there's been some commentary, you know, around third party providers and during the market and selling lower prices. Is that something that you are seeing today across from any of your specific, you know, product to be distributed? You know, I'm not fully familiar with what you're referencing there. Just to go back to the discussions that are happening with PBC, in particular, you know, we are not a defendant in that case, and we really aren't going to comment in any of the statements made that involve Core & Main, which we simply view as baseless.

Speaker Change #124: Yeah, that's correct.

Speaker Change #125: Okay, and maybe just my one other question. I know that you don't want to talk about the lawsuit. There's a lot of noise in the market regarding...

Speaker Change #126: Pricing and capacity, and specifically, you know, it seems like you are planning on maintaining your pricing discipline as a year progresses.

Mark Witkowski: Yeah. Nigel, I would tell you some of the acquisitions that we've got rolling through have had, you know, they've helped us at the gross margin level. They've had some nice, accretive gross margin, but they've had some, they carried some much higher SGNA cost structure there. So, you know, there's some opportunity to take, you know, some of that out, get more efficient as we scale those businesses and everything. But, you know, they've been, I'd say, neutral from an EBITDA standpoint.

Speaker Change #127: It's been some commentary around third party providers and during the market and selling lower prices, is that something that you are seeing today across any of your specific product to be distributed?

Speaker Change #128: You know, I'm not fully familiar with what you're referencing there, just to go back to the discussions that are happening with PVC.

Mark Witkowski: And, you know, we've got some opportunities to drive some synergies there to expand that. So, that's what our focus has been on there, you know, not necessarily, you know, the rate that we acquired them at, but, you know, the ability to scale those. Anderson, and Drive Eddie, but our contribution through the P&L. Okay, thanks a lot. Yeah, thanks. Thank you.

Speaker Change #129: in particular, you know, we are not a defendant in that case, and we really aren't going to comment in any of the statements made that involve a core name, which we simply view is baseless.

Unknown Executive: So, you know, I'm not, we're not going to comment anymore in any unsustainable claims or statements associated with that. Okay, fair enough.

Speaker Change #129: I'm not going to comment anymore in any unsustantiated claims or statements associated with that.

Unknown Executive: Thank you, guys. Thank you.

Joe Richie: Our next question comes from Joe Richie of Goldman Sachs. Your lines are open. Please go ahead. Hey guys, good morning. So I knew you talked a bunch. Good morning. Yeah, so I know we've talked a bunch about, you know, volume, but I want to kind of post it out a little bit further. See, I think you mentioned, you know, whether impacting volumes by approximately $50 million, we need to take into account the M&A contribution now expected 30 years.

Speaker Change #130: Okay, it's fair enough. Thank you guys.

Mike Dahl: Next question comes from Mike Dahl of RBC Capital Markets. The lines are open; please go ahead. Good morning, I'm sure it's taking my questions. One more follow up on the pricing conversation when we're thinking about the stability both into Q and expected through year and sequentially, can you break that out between commodity versus non commodity, because you know, I think obviously a lot of fear has been that some of the commodity baskets that people can track with seem to decline sequentially. So, are you seeing that, but you've been able to offset it with pricing opportunities on the non-commodity side, or you're just seeing a different trajectory on, you know, in the products that you're specifically serving.

Speaker Change #131: Thank you, I'm next question, come from Mike Bell of RBC Capital Markets. The lines are open, please go ahead.

Speaker Change #132: Morning, thank you for taking my questions. It's one more follow-up on the pricing conversation when we're thinking about the stability both into Q and expected.

Mike Bell: Through year and sequentially, can you break that out between commodity versus non-commanded savings? You know, obviously a lot of fear has been that some of the...

Joe Richie: It's still seems like there's about a 200 million dollar reduction in volume expectations for the year. And I recall last quarter, we talked about, you know, competition, you know, globalizing and the space. I'm just wondering, like how much of this is really, you know, end market weakness versus, you know, you guys, you know, you know, you're not going to be able to do that. You guys being a little bit more judicious about the projects that you're going after as we head into the back half of the year.

Mike Bell: Marty Vasquez said people in track would seem to have declined sequentially. So are you seeing that, but you've been able to offset it with?

Speaker Change #134: Prasing opportunities on the North Carolina side, or you just see a different trajectory in the products that you're specifically serving.

Mark Witkowski: Yeah, sure Mike, you know, I can give you a little bit of color on some of those categories. You know, one of the bigger impacts we've seen has been on the fire protection, you know, business, and you can see that in the results that we break out. But we've seen pretty sizable year-to-year declines with steel pipe, and that definitely tracks with that underlying commodity, and you know, we pass those price decreases along to our customers. So, we've seen an impact there. We do feel like it looks like it's now potentially at the bottom. We've seen it stabilize over the course of the last month or so.

Joe Richie: Any commentary on that would be helpful. Yeah, Joe. No, we really haven't viewed it that way. You know, we are continuing to go after projects just the way we always have. And, you know, having success there as well, you're seeing. You know, we highlighted a couple projects that we're seeing in meters and some of these other specific product categories, I think, which give you an idea of kind of how, how we're tackling, you know, different opportunities out there.

Speaker Change #135: Yes, you know, I'm giving you a little bit of color on some of those categories, you know, the...

Speaker Change #136: One of the bigger impacts we've seen has been on the fire protection, you know, business and you can see that and the results that we break out.

Speaker Change #136: We've seen pretty sizable year of year declines with steel pipe and that definitely tracks with that underlying commodity and we pass those price decreases along to our customers.

Joe Richie: But, you know, the weather piece was challenging in a number of ways. You know, we started in the first quarter where we saw kind of favorable conditions that started in the spring that quickly became challenging in May and June. And while we believe that we'll likely recover in Texas and some of these other bigger areas, as the weather has improved and we'll continue to pull those projects forward. It's just a question mark about whether we're going to be enough time remaining to pull all of these projects in to create, you know, release the backlog and the upper Midwest in addition to tackling the other new projects out there before the season comes to a close.

Speaker Change #136: We've seen an impact there, we do feel like it.

Speaker Change #136: Looks like it's now potentially at the bottom we've seen it stabilize over the course of the last month or so.

Mark Witkowski: So, feel like, you know, there's stability there, but it's at a pretty low level. You know, copper tubing's been bouncing around; we've seen some increases coming through on copper, so that's helped offset some of the impacts there. You know, as we've talked about, you know, PVC is off of its municipal PVC is off of its peak levels, but it's been stable here throughout 2024. And then, yes, you're correct on some of the other product categories. We have seen some other increases, or we've been able to pass along increases as we put those project solutions together for our customers.

Speaker Change #136: So I feel like there's stability there, but it's at a pretty low level. You know, copper, two being spent bouncing around, we've seen some increases coming to round, copper, so that's health offsets, some of that.

Speaker Change #136: The impacts there, you know, as we've talked about, you know, PVC is off of its, I'd say municipal PVC is off of its peak levels.

Speaker Change #136: but it's been stable here throughout 2024 and then you ask your correct on some of the other product categories we have seen some other increases or we've been able to pass along increases.

Joe Richie: So that's really what we're seeing. You know, we're obviously, you know, been burned by the weather and this will have quarter. As we get into the back half of the year, particularly in the fourth quarter, it's always challenging of what the weather is going to pose and particularly some of these areas that are very seasonal. Yeah, that's a couple of things. I mean, basically, you know, expect maybe some trappiness in the back half of the year, but that normalizes into 2025 and, you know, whether it's always a swing factor, but that's the expectation at this point.

Mark Witkowski: So, we've been able to manage through that, ultimately resulting in a fairly stable overall pricing environment, which is, again, what we expected for this year, and it's kind of holding true.

Speaker Change #136: as we put those project solutions together for our customers. So we've been able to manage through that now, ultimately resulting in a fairly stable overall pricing environment, which is again what we expected for this year, and it's kind of holding true.

Mark Witkowski: Okay, that's also a nice mark.

Unknown Executive: And then on the sale, on the sale discussion, you know, that obviously the weather is, you know, I think everyone can understand that in terms of the market weakness. I think some of your commentary characterized it as the furls and, you know, you suspect there are different things going on. I guess, can you just give us a little more insight into, if you don't get the project, what gives you the confidence that it's still out there? It's just being deferred versus it's just not moving forward. Give us insight into whether it's your back all of your conversations with the contractors or customers in the field.

Speaker Change #137: Okay, that's all folks, next Mark. And then I'm kind of a sail, I'm the sail's the session, you know, the...

Speaker Change #138: Obviously, the weather is, you know, I think everyone can understand that in terms of the market weakness. I think some of your commentary characterised it as these referrals.

Joe Richie: Yeah, that's correct. Okay, and maybe just my one other question. I know that you don't want to talk about the lawsuit. There's a lot of there's a lot of noise in the market regarding pricing and capacity. And specifically, you know, it seems like you are you're planning on maintaining your, your pricing discipline is the year progresses, but there's been some commentary, you know, around third party providers and during the market and selling lower prices.

Speaker Change #139: You know, you suspect there are different things going on. I guess, can you just give us a little more insight into if you don't get the project?

Speaker Change #140: What gives you the confidence that it's still out there, it's just being deferred versus it's just not moving forward. Give us insight into whether it's your back-all or your conversations with.

Unknown Executive: You know, recently in particular, because it seems like there was potentially a shift in July across and markets. So, you know, I think it would help if people had a little more confidence that that business is still out there. Yeah, you know, I'll talk first about residential and land development, and we certainly saw in, as we closed out July, that we started seeing a lot more of the phasing of some of the land development being chunked out a little bit differently and phased out into the back half of the year. So long term, we don't have much concern about that.

Joe Richie: Is that something that you are seeing today across from any of your specific, you know, product to be distributed? You know, I'm not fully familiar with what you're referencing there, just to go back to the discussions that are happening with PBC, in particular, you know, we are not a defendant in that case, and we really aren't going to comment in any of the statements made that involve Core & Main, which we simply view as baseless. So, you know, I'm not, we're not going to comment anymore in any unsustainable claims or statements associated with that. Okay, Fair enough. Thank you guys. Thank you.

Speaker Change #141: The contractor is a customer in the field recently, in particular because it seemed like there was potentially a shift in...

Speaker Change #141: in July across the market, so I think that would help if people have a little more confidence that business is still out there.

Speaker Change #142: Yeah, you know, talk first about residential and land development and we certainly saw and as we closed out July that we started seeing a lot more of the phasing of some of the land development being chunked out a little bit differently.

Speaker Change #142: and phased out into the back half of the year.

Unknown Executive: We know the impending demand that's out there. We're confident that some of these things are pushed and that will continue to see those evolve and take shape, you know, from the non-residential standpoint. But just something similar, but it's been a little bit more choppy and spotty throughout certain geographies where, you know, commercial construction has been delayed in some regards, pending a lot more of the financing capabilities for the owners of those facilities. So, you know, we'll see kind of how that one evolves. That went a little harder to track for us. And then, you know, on a positive side, we are seeing a lot of work moving with DOT and a lot of the work that we're doing with storm drainage and geosynthetics in that area that continue to be very strong.

Speaker Change #142: So long-term, we don't have much concern about that. We know the impending demand that's out there. We're confident that some of these things are pushed and that will continue to see those evolves.

Joe Richie: Next question comes from Mike Dahl of RBC Capital Markets. The lines are open, please go ahead. Good morning, I'm sure it's taking my questions. One more follow up on the pricing conversation when we're thinking about the stability both into Q and expected through year and sequentially, can you break that out between commodity versus non commodity, because you know, I think obviously a lot of fear has been that some of the commodity baskets that people can track with seem to decline sequentially.

Speaker Change #142: and take shape from the non-residential standpoint, just something similar, but it's been a little bit more choppy and spotty throughout certain geographies.

Speaker Change #142: where, you know, commercial construction has been delayed in some regards, pending a lot more of the financing capabilities for the owners of those facilities. So, you know, we'll see kind of how that one evolves, that one's a little harder to track for us.

Speaker Change #142: and then you know on a positive side we are seeing a lot of work moving with the DOT and a lot of the work that we're doing with storm drainage and geosynthetics and that area that continue to be very strong. So it's kind of a mixed bag as you'll look at it. Some of it we really view this temporary if we're going into that. Some of it being pushed and then obviously you have weather on top of that, which is kind of clouded some of the absolute, you know how to define exactly how much was weather and how much was market. So just I'd say it's kind of soft and sluggish, both from a ground standpoint and from some of the end markets.

Joe Richie: So, are you seeing that, but you've been able to offset it with pricing opportunities on the non commodity side, or you're just seeing a different trajectory on, you know, in the products that you're specifically serving. Yeah, sure Mike, you know, I can give you a little bit of color on some of those categories, you know, the one of the bigger impacts we've seen has been on the fire protection, you know, business, and you can see that in the results that we break out.

Unknown Executive: So it's kind of a mixed bag, as you'll look at it. Some of it we really viewed as temporary if we're going into that. Some of it being pushed, and then obviously you have weather on top of that, which is kind of clouded some of the absolute, you know, how to define exactly how much was weather and how much was market. So I just, I'd say it's kind of soft and sluggish both from a ground standpoint and from some of the end markets.

Unknown Executive: Okay. Thanks.

Joe Richie: But we've seen pretty sizable year-to-year declines with steel pipe, and that definitely tracks with that underlying commodity, and you know, we pass those price decreases along to our customers. So, we've seen an impact there. We do feel like it looks like it's now potentially at the bottom, we've seen it stabilize over the course of the last month or so. So, feel like, you know, there's stability there, but it's at a pretty low level.

Speaker Change #143: Okay, thanks, Stephen.

Anthony Pettinari: I'm like pushing comes from Anthony Petanari of City. Your lines are open. Please go ahead.

Speaker Change #143: Thanks.

Speaker Change #144: Thank you, our next pushing comes from an Anthony Petanari of Sissy, your lines are open, please go ahead.

Unknown Executive: Good morning. Just just falling up on the end market softness that you saw, you know, given your largest and market is muni. Can you talk about kind of maybe funding environments and appetite to spend among municipalities, you know, understanding you have, you know, hundreds, maybe thousands of customers is hard to generalize. But can you tell us what you're kind of seeing there in terms of underlying demand? Yeah, demand continues to be strong there. You know, and if you look at some of the projects that we've done. You know, if you look at some of the meter projects which Brad highlighted, you're seeing the investment continue to happen into infrastructure there.

Anthony Petanari: Good morning.

Anthony Petanari: Just just following up on the end-market softness that you saw, you know, given your war just and market is, is Muni, can you talk about kind of maybe funding environments and appetite to spend among municipalities, you know, understanding you have, you know, hundreds, maybe thousands of customers is hard to generalize, but, um,

Joe Richie: You know, copper tubing's been bouncing around, we've seen some increases coming through on copper, so that's helped offset some of the impacts there. You know, as we've talked about, you know, PVC is off of its municipal PVC is off of its peak levels, but it's been stable here throughout 2024. And then, yes, you're correct on some of the other product categories. We have seen some other increases, or we've been able to pass along increases as we put those project solutions together for our customers.

Speaker Change #146: If you tell us what you're kind of seeing there in terms of underwine the man.

Speaker Change #147: Yeah, demand continues to be strong there, you know, and if you look at some of the projects that we've done.

Speaker Change #148: You know, if you look at some of the meter projects which Brad highlighted, you're saying the investment continue to happen into infrastructure there.

Unknown Executive: For the repair and replacement aspect on that, you know, we believe that some of that softness was weather related and it's been pushed and. And we'll continue to see that evolve. And if it doesn't come in fully in 2024, we'll see it in 2025. That's where we have some confidence in the backlog and the type of projects that are in there. So that's generally what we're seeing. You know, I'd share with you that from an IIJ perspective, we're not seeing a lot of those funds flow really into anything into the repair and replace. Really not seeing it in meters.

Speaker Change #149: for the recurring replacement aspect on that, you know, we believe that some of that softness was whether related and it's been pushed.

Joe Richie: So, we've been able to manage through that, ultimately resulting in a fairly stable overall pricing environment, which is, again, what we expected for this year, and it's kind of holding true. Okay, that's also a nice mark. And then on the sale, on the sale discussion, you know, that obviously the weather is, you know, I think everyone can understand that in terms of the market weakness. I think some of your commentary characterized it as the furls and, you know, you suspect there are different things going on.

Speaker Change #150: and we'll continue to see that evolve and if it doesn't come in fully in 2024 we'll see it in 2025. That's where we have some confidence in the backlog and the type of projects that are in there.

Speaker Change #150: So, that's generally what we're seeing, you know.

Speaker Change #151: I'd share with you that from an I.I.J. perspective we're not seeing a lot of those funds flow, really into anything into the repair and replace.

Unknown Executive: We're seeing some of it in long-term projects scoping for, you know, the replacement and enhancement of treatment plant facilities for water and wastewater. Those are generally the areas that we're seeing some of that funding. So that could be a tailwind for us as we get into 2025. And we would like to see that start taking shape.

Speaker Change #151: really not seeing it in meters, it's it's

Speaker Change #151: We're seeing some of it in long-term projects coping for, you know, the replacement and enhancement of treatment plant facilities for water and wastewater. Those are generally the areas that we're seeing some of that funding. So that could be a tailwind for us as we get into 2025 and we would like to see that start taking shape.

Joe Richie: I guess, can you just give us a little more insight into, if you don't get the project, what gives you the confidence that it's still out there? It's just being deferred versus it's just not moving forward. Give us insight into whether it's your back all of your conversations with the contractors or customers in the field. You know, recently in particular, because it seems like there was potentially a shift in in July across and markets.

Anthony Pettinari: Okay, that's very helpful. And then just one last one if I could, and sorry if I missed this, but can you update what your private label percentage was in the quarter? And maybe, you know, is there some runway to maybe accelerate that in the back half as you worked on some inventory or just any thoughts on that private label penetration? Yeah, Anthony, our private label penetration's a little over 2% of COGS and, you know, expecting, you know, as you mentioned, some pretty good runways, we can have the back half of this year, a number of areas where we're seeing some more adoption of that product and expect to see that contribution increase between now and the end of the year.

Speaker Change #152: Okay, that's very helpful. And then just one last one, if I could, and sorry if I missed this, but can you update what your private label percentage was in the quarter and maybe, you know, is there some runway to maybe accelerate that in the back half as you worked on some inventory or just any thoughts on that private label penetration?

Joe Richie: So, you know, I think it would help if people had a little more confidence that that business is still out there. Yeah, you know, I'll talk first about residential and land development and we certainly saw in as we closed out July that we started seeing a lot more of the phasing of some of the land development being chunked out a little bit differently and phased out into the back half of the year.

Speaker Change #152: Anthony, our private label penetrations a little over 2% of Cogs and you know, expecting as you mentioned some.

Anthony Petanari: Pretty good runways. We get into the back half of this year, a number of areas where we're seeing some more adoption of that product and expect to see that contribution increase between now and the end of the year.

Joe Richie: So long term, we don't have much concern about that. We know the impending demand that's out there. We're confident that some of these things are pushed and that will continue to see those evolve and take shape, you know, from the non-residential standpoint, but just something similar, but it's been a little bit more choppy and spotty throughout certain geographies where, you know, commercial construction has been delayed in some regards, pending a lot more of the financing capabilities for the owners of those facilities.

Anthony Pettinari: Okay, that's helpful.

Unknown Executive: Alright, thanks.

Speaker Change #153: Okay, that's helpful. I'll turn it over.

Patrick Baumann: Thank you. Next question, Pennsylvania. Patrick Baumann of JP Morgan, your lines now open, please go ahead. Alright, thanks. A couple of cleanups, I guess. The second half expectations, can you help us with the cadence, third quarter, fourth quarter for sales growth in margins? And, you know, I know you have the extra week in the fourth quarter, which is part of the reason for asking this, just wondering what that. That how that impacts sales and EBITDAW, you know, for having that extra week in the fourth quarter. Yes, your path. Thanks for the question. You know, in terms of the cadence, you know, typically our Q3, I'd say it looks a lot like Q2, but, you know, obviously we have this big weather impact in Q2.

Eric: Eric Thanks.

Speaker Change #155: Thank you, I'm next question, control my apathetic doom in the of J.P. Morgan. Your lines sound open, please go ahead.

Speaker Change #156: Thanks so much.

Speaker Change #157: couple cleanups, I guess. The second half expectations can you help us with the cadence? The third quarter, fourth quarter for sales growth and in Marginsan.

Joe Richie: So, you know, we'll see kind of how that one evolves. That went a little harder to track for us. And then, you know, on a positive side, we are seeing a lot of work moving with DOT and a lot of the work that we're doing with storm drainage and geosynthetics in that area that continue to be very strong. So it's kind of a mixed bag as you'll look at it. Some of it we really viewed as temporary if we're going into that.

Speaker Change #158: I know you have the extra week in the fourth quarter, which is part of the reason for asking this, just wondering, what that?

Speaker Change #159: That's how that impacts sales and need to die for having that extra week in the fourth quarter.

Speaker Change #160: in the next episode.

Speaker Change #161: Yes, sir. Pathings for the question. You know, in terms of the cadence, you know, typically our Q3, I'd say it looks a lot light.

Joe Richie: Some of it being pushed and then obviously you have weather on top of that, which is kind of clouded some of the absolute, you know, how to define exactly how much was weather and how much was market. So I just, I'd say it's kind of soft and sluggish both from a ground standpoint and from some of the end markets. Okay. Thanks. Thank you.

Mark Witkowski: So, expecting a little better Q3 than typical, as you think about it, relative to, you know, the sequential growth in Q2. And then you have a 53rd week for asses in the fourth quarter. It's worth kind of one to two points for the full year. So, for the quarter, it's probably in that kind of 68% range for the quarter, so you should expect a higher sales growth figure in Q4 relative. Q3, but the absolute dollars are going to be down just due to the seasonal nature of Q4. So, I'd say no really unusual expectations outside of that 53rd week in the fourth quarter.

Speaker Change #162: Q2, but obviously we had this big weather impact in Q2. So expecting a little better Q3 than typical, as you think about it relative to the sequential.

Speaker Change #163: Grope and NQ2.

Speaker Change #163: and then, yeah, that's 53rd week for asses in the fourth quarter.

Speaker Change #164: That's worth kind of one to two points for the full year, so for the quarter that's probably in that kind of six to eight percent range for the quarter, so you should expect a higher sales growth figure in Q4 relative to Q3, but the absolute dollars are going to be down just due to the seasonal nature of Q4.

Mike Dahl: I'm like pushing comes from Anthony Petanari of city. Your lines are open. Please go ahead.

Anthony Pettinari: Good morning. Just just falling up on the end market softness that you saw, you know, given your largest and market is is muni. Can you talk about kind of maybe funding environments and appetite to spend among municipalities, you know, understanding you have, you know, hundreds, maybe thousands of customers is hard to generalize. But can you tell us what you're kind of seeing there in terms of underlying demand? Yeah, demand continues to be strong there.

Speaker Change #164: So I'd say no really unusual expectations outside of that, that's 53rd week in the fourth quarter.

Mark Witkowski: Do the sales from an extra week drop down at like a similar margin to normal sales, or is there, you know, the better. I think that's a fair way to think about it. You know, the gross margins will be the gross margins, and then, you know, we'll have to pick up extra STNA for the extra week as well that we have. Of course, so it's all very much just drop.

Speaker Change #165: The sales from extra wheat dropped down at like a similar margin to normal sales are there.

Speaker Change #166: You're better, you know, I think that's all.

Speaker Change #167: I think that's a fair way to think about it. You know, the gross margins will be the gross margins and then you know, we'll pick up extra S T and A for the extra week as well that we have.

Anthony Pettinari: You know, and if you look at some of the projects that we've done. You know, if you look at some of the meter projects which Brad highlighted, you're seeing the investment continue to happen into infrastructure there. For the repair and replacement aspect on that, you know, we believe that some of that softness was weather related and it's been pushed and. And we'll continue to see that evolve. And if it doesn't come in fully in 2024, we'll see it in 2025.

Mark Witkowski: Okay, and maybe on M&A in the quarter, what did that contribute in terms of sales growth and then the additional deals that have enclosed yet, like you said, $100 million of spend. How much extra sales are you getting from those deals? Are those the. Is the green name deals? Yeah, that's right. We did a lot of green acquisitions that, yeah, so pat for the quarter acquisitions were nine, nine points of the growth from the quarter and then go green is about four locations. And then green equipment was one location, so you kind of use the framework that we've provided historically, which is about 10 to 15 billion revenue per location.

Speaker Change #168: Sorry, so it's all I mean, that's just crap.

Speaker Change #169: Okay, and maybe on M&A in the quarter, what did that contribute in terms of sales growth, and then the additional deals that have includes, yeah, if you set a hundred million dollars of spend.

Anthony Pettinari: That's where we have some confidence in the backlog and the type of projects that are in there. So that's generally what we're seeing. You know, I'd share with you that from an iij perspective, we're not seeing a lot of those funds flow really into anything into the repair and replace. Really not seeing it in meters. We're seeing some of it in long-term projects scoping for, you know, the replacement and enhancement of treatment plant facilities for water and wastewater. Those are generally the areas that we're seeing some of that funding. So that could be a tailwind for us as we get into 2025. And we would like to see that start taking shape.

Speaker Change #170: How much extra sales are you getting from those deals or those are the, those are the, um...

Anthony Pettinari: Okay, that's very helpful.

Speaker Change #171: He has the green man deals.

Speaker Change #171: That's right, we did a lot of green acquisitions, yeah, so Pat for the quarter acquisitions were 9.9 points of the growth from the quarter and then go green is about four locations.

Speaker Change #172: and then green equipment was one location so he kind of used the framework that we've provided historically, which is about 10 to 15 billion revenue per location.

Mark Witkowski: Those two are not currently in the guide, in the guide. Okay, thank you.

Speaker Change #173: Those two were not currently in the guy in the guy.

Anthony Pettinari: And then just one last one if I could, and sorry if I missed this, but can you update what your private label percentage was in the quarter? And maybe, you know, is there some runway to maybe accelerate that in the back half as you worked on some inventory or just any thoughts on that private label penetration? Yeah, Anthony, our private label penetrations a little over 2% of cogs and, you know, expecting, you know, as you mentioned, some pretty good runways, we can have the back half of this year, a number of areas where we're seeing some more adoption of that product and expect to see that contribution increase between now and the end of the year.

Speaker Change #174: Okay, thank you.

Anthony Pettinari: Okay, that's helpful. Alright, thanks.

Speaker Change #175: Hello, everyone.

Speaker Change #175: Thank you for watching!

Andrew Open: Our next question comes from Andrew Open of Bank of America. The line is now open. Please go ahead.

Unknown Executive: Thank you.

Speaker Change #175: Thank you for watching!

Speaker Change #176: Thank you. Our next question comes from Andrew Obin of Bank of America. You'll like it so open. Please go ahead.

David Ridley: And this is David Ridley Lane on for Andrew Open. Just so I better understand the SGNA commentary, so exact positions that were effectively flat. I didn't necessarily hear you considering any over-and-above cost reduction actions in the second half. Is that right? Would you sort of seen as the normal fluctuation of variable comp? Is that the right interpretation? Yeah, that's the right way to think about it. We're obviously paying close attention to the unmarkets right now. Obviously, we feel like most of what we experience in the quarter with weather was temporary. We've seen some good activity here to start the third quarter, so I wouldn't say we're anticipating any sizable reductions at this point, but obviously watching SG&A closely, we're still investing for growth.

Speaker Change #177: and this is David Ridley Lane on for Andrew Hopen. Just so I'd better understand the SGA commentary. So, exact positions that were effectively flat.

Speaker Change #178: I didn't, it's early here, you've considering any.

Speaker Change #179: Over an above-cost reduction actions in the second half, is a great, what you've sort of seen is the normal fluctuation of variable cop. Is that a great interpretation?

Patrick Baumann: Next question, Pennsylvania Patrick Baumann of JP Morgan, your lines now open, please go ahead. Alright, thanks. A couple of cleanups, I guess. The second half expectations, can you help us with the cadence, third quarter, fourth quarter for sales growth in margins? And, you know, I know you have the extra week in the fourth quarter, which is part of reason for asking this, just wondering what that. That how that impacts sales and EBITDAW, you know, for having that extra week in the fourth quarter.

Speaker Change #180: Yeah, that's the right way to think about it. You know, we're obviously paying close attention to the, the, the, the unmarked right now, you know, obviously we feel like most of the, what we experienced in the quarter with, with weather was temporary, you know, we've seen some good activity here to start the third quarter. So I wouldn't say we're,

Speaker Change #180: and participating in any sizeable reductions at this point, but obviously watching SGN8 closely, you know, we're still.

Mark Witkowski: We have a lot of confidence in our long-term growth opportunities. And we want to be positioned very well to capture that. So we don't have any at say, you know, overly significant reductions, you know, baked into the guide in the second half because of those reasons.

Patrick Baumann: Yes, your path, thanks for the question, you know, in terms of the cadence, you know, typically our Q3, I'd say it looks a lot like Q2, but, you know, obviously we have this big weather impact in Q2. So, expecting a little better Q3 than typical, as you think about it, relative to, you know, the sequential growth in Q2. And then you have a 53rd week for asses in the fourth quarter. It's worth kind of one to two points for the full year.

Speaker Change #180: in Bustingford Road. We have a lot of confidence in our long-term growth opportunities, and we want to be positioned very well to capture that. So we don't have any, I'd say, you know, overly significant reductions, you know, baked into the guide in the second half because of those reasons.

Mark Witkowski: Got it. And then, you know, how do we think about the kind of ongoing pace of share of purchase? Are you guys going to be more optimistic? Should we take the second quarter level was a proxy for a run rate? How should we think about that? Yeah, you know, we'll continue to invest, you know, in our organic growth opportunities. You know, MNA is going to continue to be a priority; the pipeline's looking really good there. And then, you know, we expect to generate, I'd say, roughly $500 million of operating cash flow in the second half of the year.

Speaker Change #181: and then, you know, how should we think that the kind of ongoing pace of share of purchase, or you guys going to be more optimistic, should we take the second quarter level as a proxy for a run rate, how should we think about that?

Patrick Baumann: So, for the quarter, it's probably in that kind of 68% range for the quarter, so you should expect a higher sales growth figure in Q4 relative. Q3, but the absolute dollars are going to be down just due to the seasonal nature of Q4. So, I'd say no really unusual expectations outside of that 53rd week in the fourth quarter. Do the sales from an extra week drop down at like a similar margin to normal sales, or is there, you know, the better.

Speaker Change #182: Yeah, you know, we'll continue to invest, you know, in our organic growth opportunities, you know, M&A is going to continue to be a priority of the pipelines.

Speaker Change #183: Looking really good there, and then we expect to generate, I'd say, roughly $500 million. So if the operating cash flow in the second half of the year, so we should have...

Mark Witkowski: So we should have ample capacity to complete the MNA and invest in growth and potentially accelerate, you know, some of the share repurchasing that we did in the second quarter. You know, if you know, we can, you know, if we see a, you know, relative share price is attractive, and then we'll continue to look at our, you know, debt leverage and liquidity to balance that out. So I would think about it as, you know, likely just give any amount of cash that we expect to generate that we would accelerate the amount that we did in Q2.

Speaker Change #183: and Paul Capacity to complete the M&A in Vustin Growth.

Speaker Change #183: and Potentially Accelerate some of the share repurchasing that we did in the second quarter. If we see a relative share price as attractive and then we'll continue to look at our debt leverage and liquidity to balance.

Patrick Baumann: I think that's a fair way to think about it. You know, the gross margins will be the gross margins, and then, you know, we'll have to pick up extra STNA for the extra week as well that we have. Of course, so it's all very much just drop. Okay, and maybe on M&A in the quarter, what did that contribute in terms of sales growth and then the additional deals that have enclosed yet, like you said, $100 million of spend.

Speaker Change #184: Family set out, so I would think about it as likely just given the amount of cash that we expect to generate that we would accelerate the amount that we did in C2.

Mark Witkowski: I'm just to thank you very much. All right. Thanks, David. Thank you.

Speaker Change #185: Thank you very much.

Alex: At this time, we currently have no further questions.

Stephen: Alright, thanks, Stephen.

Patrick Baumann: How much extra sales are you getting from those deals are those are the. Is the green name deals? Yeah, that's right. We did a lot of green acquisitions that yeah, so pat for the quarter acquisitions were nine, nine points of the growth from the quarter and then go green is about four locations. And then green equipment was one location, so you kind of use the framework that we've provided historically, which is about 10 to 15 billion revenue per location. Those two are not currently in the guide, in the guide. Okay, thank you. Thank you.

Steve LeClair: So I'll hand back to Steve Lickler for any further remarks. Thanks. Thank you all again for joining us today. We have demonstrated our ability to generate strong cash flow and deploy that cash to areas that generate the best financial returns, including investing in growth and returning capital to shareholders. We were successful in adding several new businesses to the Core & Main family during and after the quarter, and our acquisitions continue to generate significant growth for the business. We capped into a new multi-billion dollar market offer opportunity in Canada through the acquisition of H.M. Pike products, expanding our geographic reach, and enabling us to capture a larger share of the growing demand for water and fire protection infrastructure in North America.

Speaker Change #187: Thank you. At this time we currently have no further questions, so I'll hand back to Steve LeClair for any further remarks.

Steve LeClair: Thank you all again for joining us today. We have demonstrated our ability to generate strong cash flow and deploy that cash area that generate the best financial returns, including investing in growth and returning capital shareholders.

Speaker Change #188: We were successful in adding several new businesses to the corn main family during and after the quarter. Our acquisitions continue to generate significant growth for the business.

Speaker Change #188: We tapped into a new multi-billion-dollar market opportunity Canada through the acquisition of HM Pike products.

Speaker Change #188: Expanding our geographic reach and enabling us to capture a larger share of the growing demand for water and fire protection infrastructure in North America.

Steve LeClair: Our margin initiatives are performing well, and we expect they will continue enhancing margins to support our long-term growth strategy. As we discussed throughout the call, our second quarter results were impacted by unusually wet weather and saturated grounds. However, our associates continue to demonstrate unwavering dedication to our customers and their critical projects. I'm proud of our ability to remain agile and focused, even when faced with adversity. We believe the market sluggishness experience in this quarter is temporary, and our outlook on the long-term demand characteristics of our end markets remains bullish. We continue to be encouraged by the sentiment from our field teams and our positive bidding activity and project backlogs.

Speaker Change #188: Our margin initiatives are performing well, and we expect they will continue enhancing margins to support our long-term growth strategy.

Speaker Change #188: As we discussed throughout the call, our second quarter results were impacted by an usually wet weather and saturated grounds.

Mark Witkowski: Our next question comes from Andrew Open of Bank of America. The line is now open. Please go ahead. And this is David Ridley Lane on for Andrew Open. Just so I better understand the SGNA commentary, so exact positions that were effectively flat. I didn't necessarily hear you considering any over and above cost reduction actions in the second half. Is that right? Would you sort of seen as the normal fluctuation of variable comp?

Speaker Change #188: However, our associates continue to demonstrate on wavering dedication to our customers and their critical projects.

Speaker Change #188: I'm proud of our ability to remain agile and focused.

Speaker Change #189: even went face with that verse today.

Speaker Change #189: We believe the market's logistic experience in this corridor is temporary and a route look in the long term demand characteristics of our end markets remains bullish.

Speaker Change #189: We continue to be encouraged by the sentiment from our field teams and our positive bidding activity and project backlogs.

Steve LeClair: We look forward to capitalizing in our long-run way of growth opportunities, particularly with new perspectives and the expertise resulting from the organizational realignment we completed this quarter. As we enter the second half of fiscal 2024, we remain confident in our ability to deliver industry-leading service to our customers, drive value creation, and execute our growth and capital allocation priorities now and into the future. Thank you for your interest in Core and Main. We look forward to talking with you again next quarter.

Speaker Change #189: We look forward to capitalizing in our long runway of growth opportunities, particularly with new perspectives and the expertise resulting from the organizational realignment we completed this quarter.

Mark Witkowski: Is that the right interpretation? Yeah, that's the right way to think about it. We're obviously paying close attention to the unmarkets right now. Obviously we feel like most of what we experience in the quarter with weather was temporary. We've seen some good activity here to start the third quarter, so I wouldn't say we're anticipating any sizable reductions at this point, but obviously watching SGNA closely, we're still investing for growth. We have a lot of confidence in our long term growth opportunities. And we want to be position very well to capture that. So we don't have any at say, you know, overly significant reductions, you know, baked into the guide in the second half because of those reasons.

Speaker Change #189: As we enter the second half of fiscal 2024, we remain confident in our ability to deliver industry leading service to our customers.

Speaker Change #190: Dry Value Creation and Executor growth and capital allocation priorities now and into the future.

Speaker Change #191: Thank you for your interest in corn, Maine. We look forward to talking with you again next quarter. Operator that concludes our call.

Operator: Operator, that concludes our call. Thank you all for joining us today, school.

Operator: You may now disconnect your lines.

Operator: Thank you all for joining the Slay School. You may now disconnect your lines.

Mark Witkowski: Got it. And then, you know, how do we think about the kind of ongoing pace of share of purchase? Are you guys going to be more optimistic? Should we take the second quarter level was a proxy for a run rate? How should we think about that? Yeah, you know, we'll continue to invest, you know, in our organic growth opportunities, you know, MNA is going to continue to be a priority that the pipelines looking really good there.

Operator: [inaudible]

Mark Witkowski: And then, you know, we expect to generate, I'd say, roughly, $500 million of operating cash flow in the second half of the year. So we should have ample capacity to complete the MNA and invest in growth and potentially accelerate, you know, some of the share repurchasing that we did in the second quarter. You know, if, you know, we can, you know, if we see a, you know, relative share price is attractive and then we'll continue to look at our, you know, debt leverage and liquidity to balance balance that out. So I would think about it as, you know, likely just give any amount of cash that we expect to generate that we would accelerate the amount that we did in Q2.

David Ridley: I'm just to thank you very much. All right. Thanks, David. Thank you.

Unknown Executive: At this time, we currently have no further questions.

Steve LeClair: So I'll hand back to Steve Lickler for any further remarks. Thanks.

Steve LeClair: Thank you all again for joining us today. We have demonstrated our ability to generate strong cash flow and deploy that cash to areas that generate the best financial returns, including investing in growth and returning capital shareholders. We were successful in adding several new businesses to the Core & Main family during and after the quarter and our acquisitions continue to generate significant growth for the business. We capped into a new multi-billion dollar market offer opportunity in Canada through the acquisition of H.M. Pike products, expanding our geographic reach, and enabling us to capture a larger share of the growing demand for water and fire protection infrastructure in North America.

Steve LeClair: Our margin initiatives are performing well and we expect they will continue enhancing margins to support our long-term growth strategy. As we discussed throughout the call, our second quarter results were impacted by unusually wet weather and saturated grounds. However, our associates continue to demonstrate on wavering dedication to our customers and their critical projects. I'm proud of our ability to remain agile and focused, even when faced with adversity. We believe the market sluggishness experience in this quarter is temporary and our outlook on the long-term demand characteristics of our end markets remains bullish.

Steve LeClair: We continue to be encouraged by the sentiment from our field teams and our positive bidding activity and project backlogs. We look forward to capitalizing in our long-run way of growth opportunities, particularly with new perspectives and the expertise resulting from the organizational realignment we completed this quarter.

Steve LeClair: As we enter the second half of fiscal 2024, we remain confident in our ability to deliver industry leading service to our customers, drive value creation, and execute our growth and capital allocation priorities now and into the future.

Steve LeClair: Thank you for your interest in core and main. We look forward to talking with you again next quarter.

Unknown Executive: Operator, that concludes our call. Thank you all for joining us today school.

Unknown Executive: You may now disconnect your lines.

Q2 2025 Core & Main Inc Earnings Call

Request a DemoDemo

CNM

Core & Main

Earnings