Q2 2025 Core & Main Inc Earnings Call

Alex: Hello and welcome to the Core & Main Q2 2025 earnings call. My name is Alex, and I'll be coordinating today's call. If you'd like to ask a question at the end of the presentation, please press star, followed by 1 on your telephone keypad. I'll now hand it over to Glenn Floyd, Director of Investor Relations. Please go ahead.

Hello and welcome to the core and Main Q2 2025 earnings call. My name is Alex, I'll be coordinating, today's call.

if you'd like to ask a question at the end of the presentation, please press star followed by 1 on your telephone keypad,

I'll now hand it over to Glenn, Floyd director of investor relations. Please go ahead.

Glenn Floyd: Good morning and thank you for joining us. I'm Glenn Floyd, Director of Investor Relations at Core & Main. We appreciate you taking the time to be with us today for our fiscal 2025 second quarter earnings call. Joining me this morning are Mark Witkowski, our Chief Executive Officer, and Robyn Bradbury, our Chief Financial Officer. On today's call, Mark will begin by sharing an overview of our business and recent performance. Robyn will follow with a review of our second quarter results and our outlook for the rest of fiscal 2025. We'll then open the line for Q&A, and Mark will wrap up with closing remarks. As a reminder, our press release, presentation materials, and the statements made during today's call may include forward-looking statements. These are subject to various risks and uncertainties that could cause actual results to differ materially from our expectations.

Good morning, and thank you for joining us. I'm Glenn Floyd director of investor relations at Quorum main. We appreciate you taking the time to be with us today for our fiscal 2025 second quarter earnings call.

Joining me this morning are Mark with Kowski, our chief executive officer, and Robin Bradberry, our Chief Financial Officer.

On today's call, Mark will begin by sharing an overview of our business and recent performance.

Robin will follow with the review of our second quarter results and our outlook for the rest of fiscal 2025.

We'll then open the line for Q&A and Mark will wrap up with closing remarks.

As a reminder, our press release presentation materials in the statements made. During today's call may include forward-looking statements.

Glenn Floyd: For more information, please refer to the cautionary statements included in our earnings press release and in our filings with the SEC. We will also reference certain non-GAAP financial measures during today's discussion. We believe these metrics provide useful insight into the underlying performance of our business. Reconciliations to the most comparable GAAP measure are available in both our earnings press release and the appendix of today's investor presentation. Thank you again for your interest in Core & Main. I'll now turn the call over to our Chief Executive Officer, Mark Witkowski.

These are subject to various risks and uncertainties that could cause actual results to differ materially from our expectations.

For more information, please refer to the cautionary statements included in our earnings press release and in our filings with the SEC.

We will also reference certain non-GAAP financial measures during today's discussion.

We believe these metrics, provide useful insight into the underlying performance of our business.

Reconciliations to the most comparable GAAP measures are available in both our earnings press release and the appendix of today's investor presentation.

Thank you again, for your interest in core and Main, I'll now turn the call over to our chief executive officer mark witowski.

Mark Witkowski: Thanks, Glenn, and good morning, everyone. We appreciate you joining us today. If you're following along with our second quarter earnings presentation, I'll begin on page 5 with a business update. I'm proud of our associates' dedication to supporting customers and delivering critical infrastructure projects. Our teams drove nearly 7% net sales growth in the quarter, including roughly 5% organic growth. Municipal demand remained healthy, supported by traditional repair and replacement activity, advanced metering infrastructure conversion projects, and the construction of new water and wastewater treatment facilities. Our non-residential end market was stable in the quarter. Highway and street projects remain strong, institutional construction has been steady, and we're seeing continued momentum from data centers.

Thanks, Glenn, and good morning, everyone. We appreciate you joining us today.

If you're following along with our second quarter earnings presentation, I'll begin on page 5 with a business update.

I'm proud of our Associates dedication to supporting customers and delivering critical infrastructure projects.

Our teams drove nearly 7%, net sales growth in the quarter, including roughly 5% organic growth.

Municipal demand remained healthy, supported by traditional repair and replacement activity, advanced metering infrastructure, conversion projects, and the construction of new water and wastewater treatment facilities.

Our non-residential and market was stable in the quarter.

Mark Witkowski: While data centers represent a small portion of our sales mix today, customer sentiment points to continued growth in this space, and we expect it to become a larger portion of our sales mix over time. On the residential side, flat development for single-family housing, which accounts for roughly 20% of our sales, slowed during the quarter, especially in previously fast-growing Sunbelt markets. We believe higher interest rates, affordability concerns, and lower consumer confidence are weighing on demand for new homes. Until these macro headwinds ease, we expect activity in this end market will continue to soften through the second half. As a result, we are factoring in a lower residential outlook into our full-year expectations, which Robyn will speak to in more detail.

Has been steady and we're seeing continued momentum from data centers.

While data centers represent a small portion of our sales mix today, customer sentiment points to continued growth in the space, and we expect it to become a larger portion of our sales mix over time.

On the residential side, flat development for single-family housing, which accounts for roughly 20% of our sales, slowed during the quarter, especially in the previously fast-growing Sunbelt markets.

We believe higher interest rates, affordability concerns, and lower consumer confidence are weighing on demand for new homes.

And until these macro headwinds ease, we expect activity. In this end Market will continue to soften through the second half

Mark Witkowski: Against this market backdrop, we drove significant sales growth and market share gains across key initiatives, including treatment plant and fusible high-density polyethylene projects, where our technical expertise and consistent execution continue to differentiate Core & Main in the industry. We're also deepening relationships with large regional and national contractors, especially those pursuing critical infrastructure projects across the country. These customers increasingly value our ability to support them with consistent service, scale, and product availability wherever their projects take them. Sales of meter products declined year over year, primarily due to project delays in the current year and a difficult comparison to last year's 48% growth rate. However, we have a growing backlog of metering projects we expect to release in the second half of the year, supporting our expectation for strong full-year metering sales growth.

As a result, we are factoring in a lower residential Outlook into our full year expectations, which Robin will speak to in more detail.

Against this Market backdrop, we drove significant sales growth and market share gains across key initiatives.

Including treatment plants and fusible high-density polyethylene projects, our technical expertise and consistent execution continue to differentiate Core & Main, Inc. in the industry.

We're also deepening relationships with large Regional and National contractors the special, those pursuing critical infrastructure, projects across the country.

These customers inly value our ability to support them with consistent service.

Scale and product availability, wherever their projects take them.

Sales of meter products declined year-over-year, primarily due to project delays in the current year and a difficult comparison to last year's 48% growth rate.

Mark Witkowski: Additionally, a healthy pipeline of bids and continued project awards gives us confidence in both the near and long-term outlook for metering upgrade projects. Gross margins performed well in the quarter at 26.8%, up 10 basis points sequentially from Q1, and up 40 basis points year over year. Our gross margins reflect strong execution of our private label and sourcing initiatives, while our local teams continue to capture market share. At the end of the day, our performance is largely driven by how well we support our customers, making sure they have the right products at the right time with the service they need to keep projects on schedule and on budget. At the same time, our operating costs were elevated this quarter. We've experienced unusually high employee benefit costs and inflation in other categories like facilities, fleet, and other distribution-related expenses.

However, we have a growing backlog of metering projects. We expect to release in the second half of the Year supporting our expectation for Strong, full year, metering sales growth, additionally a healthy pipeline of bids and continued project Awards. Gives us confidence in both the near and long-term outlook for metering. Upgrade projects.

Gross margins performed. Well in the quarter at 26.8% up 10 basis, points sequentially from q1 and up 40 basis points year-over-year.

Growth margins reflect strong execution of our private label and sourcing initiatives. While our local teams continue to capture market share,

At the end of the day, our performance is largely driven by how well we support our customers. Making sure they have the right products at the right time with the service, they need to keep projects on schedule and on budget.

Mark Witkowski: We have also carried higher costs from recent acquisitions, which have contributed to sales growth but have not yet reached their full synergy potential. Although we anticipated some of these pressures, certain costs were more pronounced than expected. To address these factors, we have implemented targeted cost-out actions to improve productivity and operating margins. We expect a portion of the savings to be realized in the second half of this year, with a larger annualized benefit in 2026. We expect to achieve additional synergies tied to recent acquisitions. Our integration approach is phased and growth-oriented, starting with people, sales, and operations to position each business for success. Once that foundation is in place, we evaluate opportunities in terms of costs and resources and develop plans to drive SG&A synergies.

At the same time, our operating costs were elevated this quarter. We've experienced unusually high employee benefit costs and inflation and other categories like facilities, Fleet and other distribution related expenses.

We have also carried higher costs from recent acquisitions, which have contributed to the Sales Group but have not yet reached their full synergy potential.

Although we anticipated some of these pressures, certain costs were more pronounced than expected.

To address these factors. We have implemented targeted, cost out actions to improve productivity and operating margins.

We expect a portion of the savings to be realized in the second half of this year with a larger annualized benefit in 2026.

We expect to achieve additional synergies, tied to recent acquisitions. Our integration approach is phased and growth oriented.

Starting with people sales and operations to position each business for success.

Mark Witkowski: Our approach to cost management will be measured and focused on realigning the business with the demand environment without jeopardizing future performance, growth opportunities, or the ability to serve our customers. We remain confident in the long-term growth and profitability prospects of Core & Main, including our ability to drive SG&A improvements and generate substantial value for shareholders. We continue to be balanced in how we allocate capital. During the quarter, we generated $34 million of operating cash flow and deployed approximately $24 million across organic growth initiatives, share repurchases, and debt service. Year to date, we have repurchased $47 million of shares, reducing our share count by nearly 1 million. Our growth strategy is driven by organic growth and complementary acquisitions. After the quarter, we announced the acquisition of Canada Water Works, a three-branch distributor of pipe, valves, fittings, and storm drainage products in Ontario, Canada.

Once that Foundation is in place, we evaluate opportunities in terms of costs and resources and develop plans to drive sgna synergies.

Our approach to cost management will be measured and focused on realigning the business with the demand environment.

Without jeopardizing future performance growth opportunities, or the ability to serve our customers.

We remain confident in the long-term growth and profitability prospects of Core & Main, including our ability to drive SG&A improvements and generate substantial value for shareholders.

We continue to be balanced in how we allocate capital.

During the quarter, we generated 34 million of operating cash flow and deployed approximately 24 million across organic growth initiatives, share repurchases, and Debt Service.

Year to date. We have repurchased, 47 million dollars of shares. Reducing our share count by nearly 1 million. Our growth strategy is driven by organic growth and complimentary acquisitions

Mark Witkowski: We expect the transaction to close later this month, further enhancing our position in the multi-billion dollar Canadian addressable market. With this acquisition, we now have five locations in Ontario, all established through value-enhancing M&A. This has created a platform for meaningful growth in Canada. On the organic side, we're making prudent investments to enhance our capabilities and better serve customers. We recently opened new locations in Kansas City and Wisconsin, strengthening our presence in priority markets. We are also evaluating additional high-growth markets for future expansion. These investments are designed to generate long-term growth, strengthen our market share, and support our goal of delivering above-market growth over the coming years. We have plans to open several more locations this year, and I look forward to sharing updates on these initiatives.

Drainage products in Ontario, Canada.

We expect the transaction to close later this month. Further enhancing our position in the multi-billion dollar Canadian addressable Market.

With this acquisition, we now have five locations in Ontario, all established through value-enhancing M&A.

This has created a platform for Meaningful growth in Canada.

On the organic side, we're making prudent investments to enhance our capabilities and better serve customers.

We recently opened new locations in Kansas City and Wisconsin. Strengthening our presence in priority markets.

We are also evaluating additional high growth markets for future expansion.

These investments are designed to generate long-term growth.

Strengthen our market share and support our goal of delivering above market growth, over the coming years.

Mark Witkowski: Before turning the call over to Robyn, I want to reiterate my confidence in Core & Main's growth and margin expansion opportunity. We are well-positioned to benefit from future investments in aging U.S. water infrastructure. We have the right team in place to execute on the opportunities ahead, and we look forward to delivering even greater value to our customers, suppliers, communities, and shareholders. Thank you for your continued support and trust in our vision. With that, I'll turn the call over to Robyn to walk through our financial results and outlook for the remainder of the year. Go ahead, Robyn.

We have plans to open several more locations this year, and I look forward to sharing updates on these initiatives.

Before turning the call over to Robin, I want to reiterate my confidence in core means growth and margin expansion opportunity.

We are well positioned to benefit from future investments and aging U.S. water infrastructure.

we have the right team in place to execute on the opportunities ahead and we look forward to delivering even greater value to our customers suppliers, communities, and shareholders,

Thank you for your continued support and trust in our vision. With that, I'll turn the call over to Robin to walk through our financial results and outlook for the remainder of the year. Go ahead, Robin.

Robyn Bradbury: Thanks, Mark. I'll start on page 7 of the presentation with some highlights from our second quarter results. As Mark mentioned, we grew net sales nearly 7% in the quarter to $2.1 billion. Organic sales were up roughly 5%, with the balance of growth coming from acquisitions. Prices continued to be flat overall, and our teams worked diligently to sustain pricing in an evolving tariff and end-market environment. In total, we estimate that our end markets grew in the low single-digits range. We outperformed the market with significant sales growth and market share gains in our treatment plant and fusible high-density polyethylene initiatives. Gross margin came in at 26.8%, up 10 basis points from the first quarter, and up 40 basis points year over year. The sequential and year-over-year improvement were both largely driven by continued execution of our private label and sourcing initiatives and contribution from accretive acquisitions.

Thanks, Mark. I'll start on page 7 of the presentation with some highlights from our second quarter results.

As Mark mentioned, we grew net sales nearly 7% in the quarter to $2.1 billion.

Organic sales were up roughly 5% with the balance of growth coming from acquisitions.

Prices continue to be flat overall, and our teams worked diligently to sustain pricing in an evolving tariff and end market environments.

In total, we estimate that our end markets grew in the low single digits range. We outperformed the market with significant sales growth and market share gains in our treatment plant and fusible, high-density polyethylene initiatives.

Gross margin came in at 26.8% up 10 basis points from the first quarter and up 40 basis points year-over-year.

The sequential and year-over-year Improvement were both largely driven by continued execution of our private label and sourcing initiatives.

And contribution from a creative acquisition.

Robyn Bradbury: SG&A expenses increased 13% this quarter to $302 million. Roughly half of the $34 million increase was related to incremental costs from acquisitions and timing of one-time and other non-recurring costs. The remainder was made up of volume-related growth, inflation and distribution-related costs, and investments to drive future growth and market share gains. We implemented certain productivity and cost-out measures earlier this year, but with higher costs and inflation continuing to pressure our operating margins and our expectation of softer residential demand, we will be taking additional targeted cost reduction actions in areas that won't impact our ability to serve customers. Importantly, we will continue to make strategic investments to strengthen the business. We're seeing strong results from our sales initiatives, and we have opportunities to accelerate that with additional investment.

SG&A expenses increased 13% this quarter to $302 million, roughly half of the $34 million. The increase was related to incremental costs from acquisitions and the timing of one-time and other non-recurring costs.

The remainder was made up of volume related growth, inflation and distribution related costs and Investments to drive future growth and market share gains.

We implemented certain productivity and cost-out measures earlier this year, but with higher costs and inflation continuing to pressure our operating margins, and our expectation of softer residential demand, we will be taking additional targeted cost-reduction actions in areas that won't impact our ability to serve customers.

Importantly, we will continue to make strategic Investments to strengthen the business.

Robyn Bradbury: We intend to keep expanding through greenfield locations to better serve customers and capture share, while also investing in technology solutions that improve efficiency and support long-term margin expansion. Interest expense was $31 million in the second quarter, down from $36 million in the prior year. The decrease was primarily driven by lower fixed and variable interest rates on our senior term loan credit facilities and lower average borrowings under our ABL credit facility. Our provision for income tax was $41 million compared to $42 million in the prior year. Our effective tax rate was 22.5% for the quarter versus 25% a year ago. The decrease in effective tax rate was primarily due to tax benefits associated with equity-based compensation. Adjusted diluted earnings per share increased approximately 13% to $0.87 compared to $0.77 in the prior year.

We're seeing strong results from our sales initiatives, and we have opportunities to accelerate that with additional investments.

We intend to keep expanding through Greenfield locations to better serve customers and capture share, while also investing in technology solutions that improve efficiency and support long-term margin expansion.

Interest expense was $31 million in the second quarter, down from $36 million in the prior year.

the decrease was primarily driven by lower fixed and variable interest rates on our senior term loan credit facilities and lower average, borrowings under our abl credit facility

Our provision for income tax was 41 million compared to 42 million in the prior year.

Our effective tax rate was 22.5% for the quarter versus 25% a year ago.

The decrease in the effective tax rate was primarily due to tax benefits associated with equity-based compensation.

Robyn Bradbury: The increase reflects higher adjusted net income, as well as the benefit of a lower share count following our share repurchase activity across fiscal years 2024 and 2025. We exclude intangible amortization because a significant portion of it relates to the formation of Core & Main following our leveraged buyout in 2017. We believe adjusted diluted EPS better reflects the results of our operating strategy and the value creation we're delivering for shareholders. Adjusted EBITDA increased 4% to $266 million in the quarter, while adjusted EBITDA margin declined 40 basis points to 12.7%. The decline in adjusted EBITDA margin was driven by higher SG&A as a percentage of net sales, which we are taking actions to optimize. Turning to the balance sheet and cash flow, we ended the quarter with net debt of $2.3 billion and net debt leverage of 2.4 times within our stated goals.

Adjusted diluted earnings per share increased, apply 13% to 87 cents compared to 77 cents in the prior year.

The increase reflects higher adjusted net income, as well as the benefit of a lower share count following our share repurchase activity across fiscal years 2024 and 2025.

We exclude intangible amortization because a significant portion of it relates to the formation of the core. Mine following our leveraged buyout in 2017.

Reflects the results of our operating strategy and the value creation, we're delivering for shareholders.

Adjusted EBITDA increased 4% to $266 million for the quarter, while adjusted EBITDA margin declined 40 basis points to 12.7%.

The decline in adjusted EBITDA margin was driven by higher SG&A as a percentage of net sales, which we are taking actions to optimize.

Turning to the balance sheet and cash flow.

Robyn Bradbury: Total liquidity was $1.1 billion, consisting primarily of availability under our ABL credit facility. Net cash provided by operating activities was $34 million in the quarter, down from $48 million in the prior year. The decline was primarily due to higher investment in working capital, partially offset by higher net income, lower tax payments, and timing of interest payments. During the second quarter, we returned $8 million to shareholders through share repurchases, bringing our total for the first half of fiscal 2025 to $47 million and reducing our share count by nearly 1 million shares. As of today, we have $277 million remaining under our share repurchase program. Next, I'll cover our revised outlook for fiscal 2025 on page 9. We are very pleased with our sales growth, gross margin expansion, and capital allocation efforts through the first half of the year.

We ended the quarter with net debt of 2.3 billion and net debt, leverage of 2.4 times within our stated goals.

Total liquidity with 1.1 billion, consisting primarily of availability under our abl credit facility.

Net cash provided by operating activities was 34 million in the quarter down from 48 million in the prior year.

the decline was primarily due to higher investment and working capital partially offset by higher net, income, lower tax payments and timing of interest payments,

During the second quarter, we returned $8 million to shareholders through share repurchases, bringing our total for the first half of fiscal 2025 to $47 million and reducing our share count by nearly 1 million shares.

As of today, we have 277 million remaining under. Our share, repurchase program.

Robyn Bradbury: However, higher operating costs and softer residential demand have resulted in operating margins coming in below our expectations. As a result, we are lowering our guidance to reflect current market conditions and higher operating expenses. We now expect net sales of $7.6 to $7.7 billion, adjusted EBITDA of $920 to $940 million, and operating cash flow of $550 to $610 million. We expect end market volumes to be slightly down for the full year. Municipal end market volumes are expected to grow in the low single digits, non-residential volumes are expected to be roughly flat, and residential lot development is expected to decline in the low double digits. Residential volumes were soft in the quarter and have weakened further through August, consistent with our updated guidance.

Next, I'll cover our revised outlook for fiscal 2025 on page 9. We are very pleased with our sales growth, gross margin expansion, and capital allocation efforts through the first half of the year.

However, higher operating costs and softer residential demand have resulted in operating margins. Coming in below our expectations.

As a result, we are lowering our guidance to reflect current market conditions and higher operating expenses.

We now expect

Net sales of $7.6 billion to $7.7 billion.

Adjusted EBITDA of $920 million to $940 million and operating cash flow of $550 million to $610 million.

We expect and Market volumes to be slightly down for the full year, Municipal and Market volumes are expected to grow in the low. Single digits, non-residential volumes are expected to be roughly flat and residential. Lot development is expected to decline in the low double digits.

Residential volumes were soft in the quarter and have weakened farther through August consistent with our updated guidance.

Robyn Bradbury: We still expect pricing to have a neutral impact on full-year sales, and we remain on track to deliver 2% to 4% of above-market growth. We expect adjusted EBITDA margins in the second half of the year to be slightly lower than the first half, reflecting continued gross margin performance offset by a softer residential market and a higher SG&A rate. In summary, we continue to execute our growth initiatives, expand gross margins, and make the strategic investments needed to position the business for long-term success. We have favorable long-term demand characteristics across each of our end markets, many levers to drive organic above-market performance, a healthy M&A pipeline, and numerous opportunities to improve operating margins. We are taking targeted actions to align the business with current demand trends and deploying capital to accelerate growth and enhance shareholder returns.

We still inspect pricing to have a neutral impact on full year sales and we remain on track to deliver 2 to 4, percentage points of above market growth.

We expect adjusted EBITDA margins in the second half of the year to be slightly lower than the first half, reflecting continued gross margin performance offset by a softer residential market and a higher SG&A rate.

In summary, we can continue to execute our growth initiatives, expand gross margins, and make the strategic investments needed to position the business for long-term success.

We have favorable long-term demand characteristics across each of our end markets, many levers to drive organic above-market performance, a healthy M&A pipeline, and numerous opportunities to improve operating margins.

Robyn Bradbury: We are confident in our ability to execute on the opportunities ahead, and we look forward to delivering even greater value to our customers, suppliers, communities, and shareholders. With that, we'll open it up for questions.

We are taking targeted actions to align the business with current demand Trends and deploying Capital to accelerate growth and enhance shareholder returns.

We are confident in our ability to execute on the opportunities ahead, and we look forward to delivering even greater value to our customers, suppliers, communities, and shareholders.

With that, we'll open it up for questions.

Alex: Thank you. As a reminder, if you'd like to ask a question, please press star followed by 1 on your telephone keypad. If you'd like to remove your question, that's star followed by 2. Our first question for today comes from Brian Biros of Thomson Research Group. Your line's now open. Please go ahead.

Thank you. As a reminder, if you'd like to ask a question, please press star 3 on the telephone keypad. If you'd like to remove your question, please press star 5.

Our first question for today comes from Brian Barrios of Thompson research group.

Your line is now open. Please go ahead.

Brian Biros: Hey, good morning. Thank you for taking my questions today. On the guidance changes, I guess the adjustment to the RESI outlook from flat to down low double digits looks to account for maybe a little bit more than the adjustment to total sales overall. It seems like maybe there's something at least positive partially offsetting that RESI impact. Maybe that's slightly better in the municipal market. Maybe it's just recent M&A being added in. Can you just touch a little bit more on the puts and takes to the revenue guidance there? It seems like there's more than just the RESI impact in the top line.

Hey, good morning. Thank you for

your questions today on the, on the guidance changes, I guess the adjustment to the resi Outlook from Flat to download double digits.

Looks to account for maybe a little bit more than the adjustment to total sales overall.

Um, so it seems like maybe there's something at least positive partially offset that resi impact. Maybe that's slightly better Municipal Market. Maybe it's just recent m&a being added in. Can you just touch a little bit more on the puts and takes to the revenue guidance there? Because it seems like there's more than just the resi impact to the Top Line.

Robyn Bradbury: Yeah, thanks, Brian, for the question. You're right. Residential lot development is kind of the main driver for the reduction in the sales guide. We were expecting that to be flat kind of earlier in the year. It has declined during the quarter, continued to soften after the quarter, and we're expecting that to be in the low double digits range now. That's the majority of the decline there. We do have some other areas of bright spots on the top line that are offsetting some of that. Some of our sales initiatives continue to perform really well, like things like treatment plants. Some of our fusible high-density polyethylene product lines are performing well. The municipal market remains strong with ample funding, and we're seeing a lot of demand there too. Those are kind of the puts and takes on the top line with the revised guide.

Other areas of of bright spots on the top line that are offsetting some of that. So, some of our sales initiatives continue to perform really well, like things like treatment plants, some of our fusible high density, polyethylene product, lines are performing well, uh, the municipal Market, uh, remains strong with ample funding, and we're seeing a lot of demand there, too. So, those are kind of the puts and takes on the on the top line with the revised guide.

Brian Biros: That's good. Second question for me, I guess just the water category overall is kind of getting a lot of attention now. It used to kind of be a green initiative angle. Now it's seemingly a crucial part of the AI infrastructure build-out and kind of just the general reindustrialization trend. You highlighted in some of your prepared remarks and I think in the press release things about your technical expertise, your consistent execution, leading to share gains, focusing on the larger contractors. I guess just bigger picture here going forward, where do you see, I guess, the biggest opportunities for growth with the way the water market is evolving? Thank you.

Understood and then second question for me, I guess just the, the water category overall kind of getting a lot of attention. Now you just kind of be a green initiative Angle. Now it's seemingly a, a crucial part of the AI infrastructure build out and kind of just the general reindeer Trend, um, you know, how that in some of your prepared, remarks. And I think in the press release,

Things about, you know, your technical expertise, your consistent execution. We needed to share gains focusing on the larger contractors. So, I guess just bigger picture here, kind of going forward.

Where do you see, I guess the biggest opportunities for growth with the way the water Market is evolving. Thank you.

Mark Witkowski: Yeah, thanks, Brian. Great question. I would tell you we're obviously very favorable in the overall water market. We've really seen more and more demands for water. You've seen these data centers going up in certain areas that need energy and water to satisfy those types of projects. We're seeing the demands with projects like that. I think the value of water has improved. You're seeing rates passed at the local level more and more so that the municipalities are very healthy right now. That's giving them more opportunities to get projects designed and ultimately improve the aging infrastructure, which is really the key piece that's really behind the multi-year tailwinds that we have in that municipal market.

Yeah. Thanks Brian. You know, uh, great question and I would tell you where obviously very favorable and the overall water market, and we've really seen more and more, uh, demands, uh, for water, as you've seen these, uh, data centers going up in certain areas, uh, that need energy and water, uh, to satisfy uh,

You know, those types of projects. So we're seeing, you know, the demands with projects like that. I think the value of water has has improved. You're seeing uh rates passed at the local level.

Mark Witkowski: When you throw on top of that some of the demands now for water, which are even more with some of these projects that are going on, it obviously sets us up really well. That's a big part of why we continue to invest in this business, invest in resources, invest in facilities. Those tailwinds are there. We're capturing a lot of those, as you're seeing in the municipal results. We're obviously facing some temporary headwinds here with the residential market being softer. We're on the front end of a lot of this with lot development. Our results obviously go into the July period. I think we're facing some of this a little earlier than some are seeing it on the residential side.

More and more, so that the municipalities are are very healthy right now, uh, and that's giving them more opportunities to, to get projects, uh, designed and and ultimately improve the Aging infrastructure, which is really, uh, the key piece that's really behind the multi-year Tailwind that we have, and that, that Municipal Market. But then when you throw on top of that, some of the, the demands, now, for water, uh, which are even more. Uh, with some of these projects that are going on, obviously sets us up really well and that's a big part of. You know, why we continue to invest in this business and best and resources and best in facilities? Uh, you know, those, those Tailwinds are there. We're capturing a lot of those as you're seeing in the, in the municipal, uh, results. Uh, you know, we're obviously facing some temporary headwinds here with the residential Market being softer. Uh, you know, we're on the front end of a lot of this uh, with lot development, uh, you know, our results, obviously, go into the

Mark Witkowski: That municipal strength and then that strength that we're seeing with some of these projects in the non-residential space, like data centers, is definitely helping offset some of that weakness.

Why period? So I think we're facing some of this a little earlier that and some are seeing it on the residential side but uh, that Municipal strength. And then that strength that we're seeing with some of these projects in the in the uh, in the non-residential space, like data centers is uh, definitely helping offset, some of that that weakness.

Brian Biros: Yeah, thank you. I'll pass it along.

Yeah, thank you pass along.

Alex: Thank you. Our next question comes from Matthew Booley of Barclays. Your line's now open. Please go ahead.

Thank you.

Our next question comes from Matthew Bully of Barclays. Your line is now open. Please go ahead.

Brian Biros: Hey, good morning, guys. Thank you for taking the questions. Just a question on the, I guess, the makeup of the guide. At the midpoint, I guess revenue cut by $50 million and EBITDA cut by $45 million. I hear you on the higher operating expenses, but then you're also taking these targeted cost actions as well. Is it more just, you know, it just simply takes a lot of time to get these cost actions into place? You mentioned more of a 2026 impact, I believe. Is the kind of, you know, maybe changed mix of business with residential a lot weaker impacting the margin as well? I guess just what else would explain that kind of larger decremental EBITDA margin? Thank you.

Uh, hey, good morning, guys. Uh, thank you for taking the questions. Um, so just a question on the, I guess, uh, the makeup of the guide. So,

Robyn Bradbury: Yeah, thanks, Matt. Yeah, we are taking costs out. We have already taken some costs out. We started taking some out in the first quarter. We continue to do so in the second quarter. There is some kind of stubborn inflation and other higher cost areas that are continuing to offset some of that. We will continue to do additional cost-out actions. We will see some of that in the second half, but the larger majority of that will be seen into FY2026. Some of the cost-out actions that we made earlier in the year were in our fire protection product line that was experiencing some softness given some of the market pressures on non-residential at that time and also the steel pricing pressures that we were seeing in the fire protection. That has since rebounded. We took some costs out earlier in the year.

Um, you know, at the midpoint, I, I guess Revenue cut by 50 million and ebit Dot cut by by 45 million. Um, so I I guess I hear you on the higher operating expenses, but then you're also taking these targeted cost actions as well. So is it more just you know just simply takes a lot of time to get these cost actions um into place that you mentioned more of a 2026 impact I believe. Um, or is the kind of, you know, maybe change mix of business with residential a lot weaker, impacting the margin as well. I guess, just, what else would explain that that kind of larger uh decremental, leave at that margin.

Yeah, thanks Matt. Yeah, we are taking costs out. We have already taken some costs out. We started taking some out in the first quarter we continue to do so in the in the second quarter. Um there is some kind of stubborn inflation and other higher cost areas that are continuing to offset some of that. So uh we will continue to um do additional cost out actions. Um, we will see some of that in the second half but the, the larger majority of that will be seen in to fy6

Robyn Bradbury: It was very targeted to certain areas that we knew wouldn't disrupt the business. Now we're seeing that recovery, and we're well positioned for that. We will continue to do additional cost-out targeted actions that won't impact our ability to service our customers or service growth. We'll continue to make investments in growth. Mark and I have been around the business for a long time, so we kind of know where those cost actions can come out and where we need to make investments.

In the fire protection that has since rebounded. So we took some cost out earlier in the year. It was a very targeted to certain areas that we knew wouldn't disrupt the business. And now we're seeing, uh, that recovery and we're well positioned for that. So we'll continue to do additional cost out, targeted actions that, uh, won't impact our ability to, um, you know, service our customers or, uh, service growth. We'll continue to make investments in growth and uh, you know, Mark and I have been around the business for a long time. So we kind of know where, where those cost actions can come out and and where we need to make investments.

Brian Biros: Okay, got it. Thank you for that, Robyn. Then secondly, just on residential specifically, you know, obviously a fairly substantial change to the outlook over the past, you know, relative to 90 days ago. I guess what I'm trying to get at is sort of, you know, A, your visibility into that end market, and B, maybe how did residential look during both Q1 and Q2? You're talking about kind of low double digits. I'm wondering if the expectation is that it would weaken a lot further in the second half. Yeah, just any color on that kind of cadence of residential and then just more specifically what you're hearing from customers in that group. Thank you.

Okay, got it, got it. Thank you for that Robin. And then, um, secondly, just on on residential specifically, you know, obviously a fairly substantial change the Outlook over the past, uh, you know, relative to 90 days ago. Um, so I guess the, the, what I'm trying to get at is, is sort of, you know, a, your your visibility into that end market and B. Maybe how, how did residential look during both q1 and Q2 you're talking about kind of low double digits. Um, I'm wondering if if the expectation is that, um, it would weaken a lot further in the second half. And so, um, yeah. Just any color on that kind of, cadence of residential and then just more specifically, what, what, what you're hearing from customers in, in that group, thank you.

Mark Witkowski: Yeah, thanks, Matt. You know, on the residential side, as we kind of worked our way into 2025, it really felt like that market was going to be flat overall as we got into the first quarter. We actually saw some pretty, I'd say, decent residential performance in Q1. Obviously, it wasn't great, but we at least saw some projects going earlier in the year and obviously had a really good first quarter. Some of that was just, I'd say, better performance there than we expected. If you go back to Q1, we were well over our consensus and expectations on the top line. What we saw as we got into Q2, we really saw residential weaken really throughout the quarter.

Mark Witkowski: We definitely started to hear some of those signs at the end of the first quarter, but it was more of scaling back some projects and frankly just continued to weaken as we got throughout Q2 and definitely into August, as Robyn had mentioned. That residential really kind of whipsawed from Q1 into Q2. We do think low double digit is the right way to look at it from here through the end of 2025. Obviously, we're expecting some kind of rate cut here in September. I think that's starting to be reflected a little bit on the mortgage rate side, but we're definitely not seeing the investments in the infrastructure from the builders. That's kind of been a mixed bag. Some are investing in land, some aren't. Definitely, we're not seeing the level of lot development going into those at this point.

Yeah, thanks Matt. You know on the residential side as we kind of worked our way into 2025 uh really felt like that that market was going to be flat. Uh overall as we we got into the the first quarter and we actually saw, you know, some pretty uh I'd say you know decent residential performance and and q1 obviously wasn't wasn't great. But uh we at least saw some some projects going uh earlier in the year and you know, obviously had a really good first quarter and some of that was just, you know, I'd say better uh, performance there than than we expected. If you go back to to q1. Uh, you know, we were we were well over our our consensus and expectations on the on the top line and really what we saw as we got into Q2, uh, really saw a residential weekend really throughout the quarter. Uh, we definitely started to hear some of those signs at the end of the, the first quarter, but it was more of like scaling back some projects. Uh, and and frankly, just

Continue to weaken as we got throughout, uh, Q2. And, uh, you know, definitely in the into August, as, as Robin had mentioned. So, uh, that residential really kind of whips out from, from q1 and into Q2, uh, we do think low double digit, is the right way to look at it, um, you know, from here, through the end of 2025. Obviously, you know, we're expecting some kind of rate cut here in September, I think that's starting to be reflected.

Mark Witkowski: The results that we're seeing, I think, are kind of reflective of what obviously we're hearing from the customers, and the scaling down is definitely what we felt in Q2. We'll work through that. Obviously, we think there's continued significant pent-up demand that that's just creating. At some point, that's going to release, and we want to be well positioned to capture that when it does.

A little bit on the mortgage rate side, but we're definitely not seeing the investments in the infrastructure, uh, from the builders, uh, that's kind of been a mixed bag. Uh, some are investing in land, some aren't. Um, definitely, you know, we're not seeing the level of lot development going in, uh, to those at this point. So, you know, it's uh, the the, the results that we're seeing I think are kind of reflective of of what obviously we're hearing from the customers. And uh, the the scaling down is, is definitely, you know what, we felt and, and Q2. So, we'll, we'll, we'll work through that. Um, obviously we think there's continued significant pent-up demand that that's just creating, uh, at some point. That's going to release and, and we want to be well, positioned to capture that uh, when it does.

Brian Biros: Got it. Okay, thanks, Mark. Good luck, guys.

Mark Witkowski: Yep.

Got it. Okay. Thanks Mark. Good luck, guys.

Yep.

Alex: Thank you. Our next question comes from David Manthey of Baird. Your line's now open. Please go ahead.

Thank you. Our next question comes from David Manty of Bed. The lines are now open, please go ahead.

David Manthey: Thank you. You might have just answered this in relation to one of Matt's questions there, but what was the residential market in the first half in terms of growth rate? Your down low double-digit outlook, what does that imply for the back half?

Thank you. You might have just answered this in relation to one of Matt's questions there. But what was the residential market in the first half, in terms of growth rate? And then your double-digit outlook, what does that imply for the back half?

Mark Witkowski: Yeah, thanks, Dave. I'd say for the first half of the year, it was kind of down low or down mid-single digit to high single digit. In the second half, I think that's overall going to be low double digit, slightly worse just to get to the low double digit over the full year.

Yeah, thanks Dave. Uh, I'd say for the, for the first half of the year, it was kind of down, uh, low low or down mid single digit to high single digit.

And in the second half, you know, obviously think that's overall going to be low, double digit, uh, slightly worse. Just to, you know, to get to the low double digit, over the full year.

David Manthey: Got it. Okay, thank you for that. Maybe back on the SG&A side, I think last quarter you said that your organic revenues were up mid-single digits and organic same-store SG&A was up 4% year over year. Could you provide those organic figures for this quarter as well so we can compare that?

Last quarter, you said that your organic revenues were up mid-single digits and organic same-store SG&A was up 4% year-over-year. Could you provide those organic figures for this quarter as well so we can compare that?

Robyn Bradbury: Yeah, Dave, when you think about how M&A impacted us in the quarter, it contributed about 2% of growth to the top line. If you think about our growth in SG&A for total company, it contributed about 3% of that overall growth.

Yeah, Dave when you think about how m&a impacted us in a quarter, it contributed about 2 points of growth to the Top Line. And then, if you think about our our growth in sgna for total company, it contributed about 3 points of that overall growth,

David Manthey: Okay. Also, last quarter, thinking about operating expenses, I believe you sort of implied you were expecting to see improving SG&A as a percentage of sales each quarter as we move through the year, which on the old forecast, I think sort of implied lower dollars each quarter. Assuming no major M&A from here, do you think that the second quarter would be the high watermark for SG&A dollars this year as you implement these cost-out actions and normal seasonality impacts those numbers?

Okay.

Um, and then also last quarter thinking about operating expenses, I believe you, uh, sort of implied, your expecting to see improving sgna as a percentage of sales, each quarter, as we move through the year, which on the old forecast, I think sort of implied lowered dollars each quarter. But um assuming no major m&a from here. Do you think that the second quarter would be the high water mark for sgna dollars this year as you implement? These costs out actions and normal seasonality um impacts those numbers.

Robyn Bradbury: Yeah, Dave, we do. We've got, you know, as we talked about M&A and the record year we had in M&A that we did in the prior year, we've got a lot of opportunities there on the synergies. Those are things that we're working through. We expect to continue to work through those and get some of those synergies recognized in the back half of the year and into FY2026. There were some one-time items in the second quarter that we don't expect to continue. That's contributing to a little bit higher SG&A kind of rate and dollars in the quarter. With those things combined, we do expect to start seeing some progress on SG&A.

Robyn Bradbury: We do have some seasonality in there, but when you look at the SG&A rate year over year each quarter, we do expect that to kind of improve sequentially as we go throughout the rest of this year.

Yeah, Dave we do, we've got, you know, as we talked about um m&a and the record year we had and um and m&a that we did in the prior year. We've got a lot of opportunities there on the synergies. Those are things that we're working through, so we expect to continue to work through those and get some of those, um, synergies recognized in the back half of the year and into, um, FY. 26, there were, you know, some 1-time items in the second quarter that we don't expect to continue. So, um, that's contributing to a little bit higher sgna, kind of rate and dollars in in the quarter. Um, and so, you know, with those things combined, we do expect to start seeing some progress on sgna, and we do have some seasonality in there. But when you look at the sgna rate year-over-year each quarter, we do expect that to kind of improve sequentially as we go throughout the rest of this year.

David Manthey: Okay. I'd like to sneak one more in here as we're talking about all this seasonality and 2025 being an unusual year in terms of lack of acquisitions versus all the deals you've done historically. When you think about normal seasonality, ex-acquisition, sort of the organic progression, how do you think about that? Do you think about it in terms of % of total full-year sales per quarter? Do you think of quarter-to-quarter growth rate? How do you think about the seasonality? If you could just give us an idea of what we should expect this year because of the fact that you're very few or no acquisitions other than this Canada Water Works deal you just announced.

Yeah. Okay. And it's like, I can make 1 more in here, as we're talking about all this, the seasonality and, um, 2025 being an unusual year, in terms of lack of Acquisitions versus all the deals you've done. Historically, when you think about normal, seasonality X acquisition sort of the organic progression,

Robyn Bradbury: Yeah, Dave, I'll give you some color around that. I would think about the second and the third quarter are typically similar size-wise, and then we typically see about a 15% to 20% decline in the top line from the third quarter to the fourth quarter. You know, we can see a little bit of uplift in the first quarter from the fourth quarter, but those are typically pretty well in line. It is a pretty kind of standard bell curve of the second and third quarter being the highest with it being a 15% to 20% decline from there ex-any M&A activity.

How do you think about that? Do you think about it in terms of percentage of of total full year sales per quarter? Um, do you think of sort of you know quarter to quarter um growth rate? How do you think about the seasonality and if you just give us an idea of what we should expect this year because of the fact that you you you're very few or or no Acquisitions other than this candidate deal you just you just uh announced

Yeah, Dave, I'll give you some color around that so the I would think about the second and the third quarter are typically similar size wise. Um and then we typically see about a 15 to 20% decline in the top line from the third quarter to the fourth quarter. Um, you know, we can see a little bit of uplift in the first quarter from the fourth quarter, but those are typically pretty well in line. So it is a, a pretty kind of standard bell curve of the second and third quarter, being the highest with it, being a 15 to 20% decline, um, from their ex any, you know, m&a activity.

David Manthey: Got it. Thank you very much.

Thank you very much.

Alex: Thank you. Our next question comes from Sam Reid of Wells Fargo. Your line's now open. Please go ahead.

Thank you. Our next question comes from Sam Reed of Wells Fargo; your line is now open. Please go ahead.

Brian Biros: Awesome. Thanks so much. I wanted to touch on your updated guide, perhaps from a slightly different perspective, just on the second half EBITDA margins. It sounds like you're still expecting favorable year-over-year gross margin, if I heard correctly, Robyn. Can you talk about what that looks like sequentially on the gross margin line relative to Q2? Just basically the guide path for gross margin as we look into Q3 and Q4.

Awesome. Thanks so much. I wanted to touch on your updated guide. Perhaps from a slightly different perspective just on the second half ibida margins.

Robyn Bradbury: Yeah, we're expecting it to be stable, which would imply, you know, up in the 20 bps range for the second quarter for gross margins. Our gross margin initiatives are performing very well. Private label's been performing well. Sourcing's been performing very well. We expect to continue to make improvements on gross margins. I would say as we think about the back half of the year, we're thinking about it as stable to the second quarter. We've made a lot of progress in gross margins already in the first half of the year and expect to see those trends continue and be stable in the second quarter or second half.

So it sounds like you're still expecting favorable year-over-year gross margin, if I heard correctly, Robyn. But can you talk about what that looks like sequentially on the gross margin line relative to Q2? So just basically the guide path for gross margin if we look into Q3 and Q4.

Kind of already in the first half of the year and expect to see those Trends continue and and be stable in the second quarter.

Or second half.

Brian Biros: That helps. As a follow-up, could you just give us a rough sense as to the size of private label today, perhaps how much you were able to grow that in the second quarter relative to the first quarter? Just to follow up on the SG&A optimization initiative, could you offer up some perspective on sizing those just so we have a rough sense as to where you're going to exit the year into 2026? Thanks.

That helps, and then there's a follow-up. So, 1, you know, could you just give us a rough sense as to the size of the private label today? Perhaps how much you were able to grow that in the second quarter relative to the first quarter? And then, just to follow up on the SG&A, optimization initiatives, you know, could you just offer up some perspective on sizing those? Just so we have a rough sense as to where you're going to exit the year into 2026. Thanks.

Mark Witkowski: Yeah, on the private label piece, as Robyn mentioned, we made some really good progress there. Continue to drive that through the business. Right now, it's about 4% of our revenue, but I'd say steadily growing and expect that to be even more as we exit 2025. Very pleased with the new products we've introduced. The pull-through to the branch network has been strong. If we get a little help from the volume in the second half, we'll make even more progress on pulling some more private label through. I'll let Robyn cover the SG&A question.

Yeah, I'm a private label piece, uh, as Robin mentioned, we made some really good progress. Uh, their continued to, to drive uh, that through the business. Uh, right now, it's about 4% of our Revenue, but I'd say steadily growing and expect that to be, uh, be even more as we, we exit 2025. So, very pleased with the new products we've introduced. Uh, the pull through to the branch network has been strong and uh, if we get a Little Help from the the volume and the second half, we'll get it, we'll make even more progress on pulling some more private label through and I'll let uh, what Robin cover the sgna question.

Robyn Bradbury: I think, Sam, your question was on the sourcing side, right? We've made a lot of progress there too.

Brian Biros: It was on the sizing of the SG&A expenses initiative.

I think Sam your question was on the sourcing side, right? We've we've made a lot of progress there, too, so if it was on the

Robyn Bradbury: Okay. Sorry about that. Let me give you a little bit of color on that, on the cost-out actions. Acquisition synergies is a big part of that and a big area that we have begun taking costs out there. We've got a lot of opportunity. We've talked about that taking quite a bit of time to get through as we integrate these businesses. We've got a lot of controllable spend reductions that we've been working on with things like travel and overtime. One thing that we've done a really good job on as a business is managing headcount and any of those controllable expenses. The sizing of it is really inflation-related. Some of our incentive comp increases are a little bit larger given the improvement on gross margin. Those are some of the big areas that we're looking at.

it was on the sizing of sg&a and it's just

Robyn Bradbury: As you look at the back half of the year, the SG&A rate is a little bit higher than the first half, just given some of these inflationary trends that we're seeing there.

Oh, okay, sorry about that. Yeah, let me give you a little bit of color on that on the cost out action. So um, you know, acquisition synergies is a big part of that and a big area that we have begun taking cost out there and we've got a lot of opportunity. We've talked about that taking quite a bit of time to get through as we integrate these businesses. Um, we've got a lot of controllable, spend reductions that we've been working on with things like travel and overtime, 1 thing that we've done a really good job on, um as a business is um managing headcount and any of those controllable expenses. So um you know, the sizing of it is um really inflation related. Um, some of our incentive comp increases are a little bit larger, given the Improvement on on gross margin. Um and so those those are some of the big areas that we're looking at. And as you look at the back half of the year, the sgna rate is a little bit um, higher than than the first.

Have just given some of these inflationary trends that we're seeing there.

Brian Biros: That helps. Thanks so much. I'll pass it on.

Thanks so much. I'll pass it on.

Alex: Thank you. Our next question comes from Mike Dahl of RBC. Your line's now open. Please go ahead.

Thank you. Our next question comes from Mike gal of RBC. Your line is now open. Please go ahead.

David Manthey: Good morning. Thanks for taking my questions. Sorry to keep harping on the SG&A, but in terms of the actual variance versus your expectation, you've noted some things were even more pronounced. Can you just be more specific on what came in worse than expected? Back to the question of kind of segmenting out actions, when you think about all those different actions, do you have a good way of giving us kind of roughly how much is headcount-related versus kind of fleet and infrastructure-related in terms of the cost stats?

Morning, thanks for taking my questions. Um, sorry to keep harping on the SCA. Um, but in terms of the actual variance versus your expectation, you’ve noted some things were even more pronounced. Can you just be more specific on what came in worse than expected? And then back to the question of, um, kind of segmented out actions. When you think about all those different actions, do you have a good way of giving us kind of roughly how much is...

Headcount related versus kind of Fleet and infrastructure related. And in terms of the cost us

Robyn Bradbury: Yeah, thanks, Mike. Let me break down a little bit for you the kind of the contribution in the quarter. If you think about the 13% increase in SG&A over the year, what we talked about was about half of that was M&A-related, kind of one-time non-recurring items. If you think about that 13% growth, about three points of that was M&A, and that's an area, like I said, we've got synergy opportunities there. About one point of that growth was related to some one-time items, some changes that we're making to improve performance over time. Those are things like, you know, retention and severance and relocations. We had about two points of a, I would call it a surge in the quarter related to just some higher medical claims, insurance costs, things like that that are a little bit unusual and had some timing impacts in the quarter.

Yeah, thanks Mike. Um, let me break down a little bit.

About the 13% increase in SG&A over the year, what we talked about was that about half of that, um, was M&A related—kind of one-time non-recurring items. So if you think about that 13% growth, about 3 points of that was M&A, and that's an area, like I said, we've got.

Robyn Bradbury: That's kind of the first half. The second half of the SG&A increase year over year was a lot of items related to increased volume, inflation, and investments that we're making into the business. I mentioned incentive compensation. That's up more than our sales, just given our gross margin enhancement and the nature of those compensation plans. That's worth about a point. We've seen a lot of inflation on our facilities and fleet. That's worth about a point. On the medical side and some of those insurance claims, we've seen a lot of inflation in that area. We've seen some higher cost claims. That's worth about two points. We've got a little bit of a difference in the way that the equity-based compensation is showing up. We've just got a new run rate there with three years of vesting. That's worth about a point.

Synergy opportunities there. Um, about 1, point of that growth was related to someone time items, some changes that we're making to improve performance over time. Those are things like, um, you know, retention and Severance and relocations. And then we had about 2 points of, I would call it a surge in the quarter related to just some higher medical claims insurance costs, things like that, that are a little bit unusual and had some timing impacts in the quarter.

Robyn Bradbury: Like Mark and I said, we're going to continue to make investments in growth. We feel good about the long-term dynamics of this business. We're continuing to make investments in greenfields, investments in growth initiatives, investments in technology, and that's worth about, you know, a couple of points as well. That kind of gives you the breakdown for that 13% growth that we saw in the quarter versus what we consider M&A and one-time versus kind of more structural related to volume and inflation. Some of those inflation items were a lot higher than we were expecting. That's what we need to work to offset. We've got several million dollars of cost-out actions that have been executed in the first half of the year. I would say we've got a meaningful amount of actions that are in process that we're working through. We've already managed headcount very well.

Ation. Um, that's up more than our sales just given our um, gross margin enhancement in the nature of those compensation plans. That's worth about a point. Um, we've seen a lot of inflation on our facilities and Fleet that's worth about a point, um, on the medical side. And some of those insurance claims we've seen a lot of inflation in that area. We've seen some higher cost claims that's worth about 2 points. Um, and then we've got a little bit of a difference in the way that, um, the equity based compensation is showing up. We've just got, um, a new run rate there with 3 years of vesting, so that's worth about a point. And then like, Mark and I said, we're we're going to continue to make investments in growth. So we feel good about the long term Dynamics. So, this business, we're continuing to make investments in Green Fields, Investments and growth initiatives, investments in technology and that's worth about, you know, a couple points as well. So, that kind of gives you the breakdown for that. 13% growth that

we saw in the quarter versus what's what we can consider m&a and 1 time versus kind of more structural related to value and inflation. Um, some of those inflation items were a lot higher than we were expecting. And so that's what we need to to work to offset. So we've got several million dollars of cost out actions that have been executed in the first half of the year. I would say we've got a, a meaningful amount of actions that are in process that, um, we're working

Robyn Bradbury: It's not up much on a year-over-year basis. It's kind of more in that flatter range. We'll take a look at that. We're looking at areas where we can maybe not backfill, where we can have some selective hiring, where we have underperforming areas where we can take some cost out there. We've got a lot of levers to pull here on the SG&A side. We're going to get it under control and offset some of this inflation, but we're also going to continue to make some of those investments for growth because of the long-term market dynamics.

Through and we've today we've already managed headcount very well. Um, it's not up much on a year-over-year basis, it's it's kind of more in that flat or range and we'll take a look at that. But, you know, we're, we're looking at areas where we can maybe, uh, not backfill where we can have some selective hiring um, where we have underperforming areas where we can take some cost out there. Um but you know, we've got to we feel like we've got a lot of levers to pull here on the sgna side. We're going to get it under control um and offset some of this inflation. But we're also going to continue to make some of those Investments for growth because of the the long-term market dynamics.

David Manthey: Okay. Got it. Thank you for that. My second question just on pricing, I think you said it was neutral. Can you just give us a better sense of kind of how the commodity side trended through the quarter into Q3? As you think about kind of neutral and better for the year, just elaborate a little more on what you're seeing on finished goods versus commodity right now?

Okay, got it. Thank you for that. My second question, just on pricing—I think you said it was neutral. Can you just give us a better sense of kind of how the commodity side trended through the quarter into Q3? And as you think about kind of neutral and better for the year, just elaborate a little more on what you're seeing on finished goods versus commodity right now.

Mark Witkowski: Yeah, Mike, I'll take that one. On the pricing side, it kind of played out exactly the way we thought it would, neutral for the quarter. We did see some increases come through related to some of the, I'd call them the non-pipe related products, some of which are imported by our suppliers. There's a little bit of tariff probably increased there into some of those prices that some of the suppliers passed along to start the year, which ultimately offsets some of the moderating of the, you know, water, larger diameter water PVC pipe that we have. We saw some moderation of that pricing through the first half of the year.

Yeah, Mike, I'll take that 1, you know, on the pricing side, you know, kind of played out exactly the way we we thought it would neutral, uh, for the quarter, we did see some increases uh, come through uh, related to some of the call them the 9 pipe related products. Some of which are uh, imported by our supplier

Mark Witkowski: That'll be likely a little bit of a headwind into the second half, but these other product categories that have seen increases have effectively offset that and expect that to continue to be stable, like we've talked about for a while.

There's a little bit of tariff. Uh, probably increase their into some of those prices that, uh, some of the suppliers passed along, uh, to start the year, uh, which ultimately offsets some. Some of the moderating, uh, of the of the, you know, water, uh, larger diameter, water PVC pipe that we have. We saw some, some moderation of that, uh, pricing through the first half of the Year that'll be, uh, likely a little bit of a headwind into the second half. But these other products categories that have seen increases as effectively offset that and, uh, expect that to continue to be stable. Like, like we've talked about for a while.

David Manthey: Okay. Thanks, Mark.

Mark Witkowski: Yep.

Okay, excellent.

Yep.

Alex: Thank you. Our next question comes from Colin Veron of Deutsche Bank. Your line's now open. Please go ahead.

Thank you. Our next question comes from Colin Veyron of Deutsche Bank the lines now open. Please go ahead.

Brian Biros: Good morning. Thank you for taking my question. First, I just wanted to touch on the meter sales. It was a bit surprising just given the magnitude. You called out some project delays. I guess, how much of the decline do you think was due to project delays, and what are your expectations for meter sales through the rest of the year and sort of how you're thinking about long-term growth in that category still?

Good morning. Yeah, thank you for taking my questions. My first, I just wanted to touch on the meter sales. Um, it was a bit too surprised, I'll just give you the magnitude, you called, out some project, delays? I guess how much of the decline do you think was due to project delays and what are your expectations for meteor sales through the rest of the year and sort of how you're thinking about long-term growth in that category? Still?

Mark Witkowski: Yeah, sure. Thanks for the question. I would tell you on the meter side, the primary driver of the, you know, somewhat small decline in the quarter was the substantial growth we saw last year. We were up 48% in a quarter on meter sales. That just gives you the magnitude of the initiative that we're driving there, and that performance last year was really, really strong. We did have some meter delays in the quarter, but really, I think the way to think about that is it really just created a nice backlog for us that we expect to ship out in the back half of the year.

Yeah, sure. Thanks for the question. I, I would tell you on the meter side, the the primary driver of of the, you know, somewhat small decline in, in the quarter was the substantial growth. We saw last year, we were

That we expect to ship out in in the back half of the year.

Brian Biros: That was a little color. You guys also talked about some greenfield opportunities here. I guess, how should we think about the decision between greenfield and M&A, and the expenses associated with opening these branches and how quickly they ramp to the company average metrics?

And you guys also talked about some green field opportunities here. I guess how should we think about the decision, between greenfield and m&a and sort of the expenses associated with opening these branches and how quickly they ramp to sort of the company, average metrics.

Mark Witkowski: Yeah, sure. When we think about greenfield expansion, we think about those in conjunction with M&A. As we look across the U.S. and Canada for priority markets, we're evaluating both of those opportunities. Is there an M&A opportunity? Is there a greenfield opportunity? Both are very attractive to us. We've been able to generate really strong returns, whether we do a greenfield or an acquisition. Obviously, if you do an acquisition, you're going to pick up that revenue and profitability much quicker. Greenfield expansion will take a little longer, but typically, we're breaking even within the first couple of years and expect to be at kind of the company average in three to five. There is a little bit of ramp-up in cost when you do greenfield expansion. We're definitely accelerating our greenfield strategy with, I'd say, a renewed focus on driving our organic core growth in the business.

Mark Witkowski: I expect that you'll continue to see greenfield expansion open up throughout the country in these priority markets as we review them and continue to have a nice, healthy pipeline of M&A as well that we're evaluating. We like having both of those levers as we look at those priority markets.

Yeah, sure. You know when we we think about uh green fields, we we think about those in conjunction with m&a. So as we look across the the US and Canada for priority markets, we're evaluating, you know, both of those opportunities is there. An m&a opportunity, is there a green field opportunity? Uh, both are very attractive to us. Uh, we've been able to generate really strong returns whether we do a green field or an acquisition. Obviously do an acquisition, you're going to pick up, uh, that Revenue, um, and profitability, much quicker, uh, Green Fields. Uh, we'll take a little longer, but typically, we're breaking even within the first, uh, couple of years and expect to be at, kind of the company average, and, and 3 to 5. So there there is a little bit of ramp up and, and cost, uh, when you do green fields, uh, we're definitely accelerating our Green Field strategy with. I'd say A Renewed focus on driving. Our organic uh, core growth in the business and uh expect

That you'll continue to see green fields open up, uh, throughout the country and and these priority markets as we uh review them. And uh you know continue to have a nice healthy pipeline of m&a as well that we're evaluating. So we we like having both of those levers as as we look at those priority markets.

Brian Biros: Great. Thank you for taking my questions.

Great. Thank you, uh, for taking my questions.

Mark Witkowski: Thanks.

Thanks.

Alex: Thank you. Our next question comes from Patrick Baumann of JP Morgan. Your line's now open. Please go ahead.

Thank you. Our next question comes from Patrick Bowman of JP Morgan the lines now open, please go ahead.

Brian Biros: Oh, hi. Good morning. Lots been covered already. Just wanted to go back to the RESI side quickly. The move from flat to down low double just seems like a bigger revision than what we've seen from the starts data. From that perspective, just trying to understand, was there like an overbuild of lots that are now being reduced to, you know, at a greater magnitude than what we're seeing in starts? Maybe just address where residential lot development stands today to provide some context versus history and for the revision.

Oh hi, good morning. Um, Lots been covered already. Just wanted to go back to the resi side uh quickly. Um,

So the move from flat to download double just seems like a bigger revision than...

What we've seen from the starts data. Um, so from that perspective just trying to understand was there like an overbuild of lots that are now being reduced to

You know, at a greater magnitude than what we're seeing in starts, um, maybe just address our lot development stands today to provide some context versus history and for the revision.

Mark Witkowski: Yeah, sure. If you go back to the early part of the year, we felt it was going to be flat. That did kind of worsen throughout the first half of the year. I would say we probably saw some build-up in developed lots in the earlier part of the year. Obviously, single-family starts have not really met that early expectation, even though it was only kind of guided to at flat. I think that's part of it. Obviously, we've seen a phasing down of a lot of these projects. We did see, in parts of the country where we perform really well, frankly, in parts of Florida and the Southeast, which were pretty hot markets for a while, which was helping keep residential kind of in at least that flat territory, really fall off as we got into late into Q2 and here to start Q3.

Yeah. Sure. You know, if you go back um you know, again to the early part of the Year, we We felt it was it was going to be flat. Um, that did kind of worsen throughout the first half of the year. I I would say we probably saw some uh, build up and and develop Lots, uh, in the earlier part of the year, you know?

Mark Witkowski: We've definitely seen the activity weaken on the lot side. We'll see ultimately when those developers decide to reinvest and get that going. I wouldn't say there's a significant amount of developed lots, but there's definitely been an increase there just given the slowdown that we've seen in single-family. Again, believe that is temporary. We'll work through this period of time. We're going to be really well positioned to capture that growth as it comes back. As these rates ease, you're seeing lumber prices drop. Some of these things may ultimately lend themselves to better affordability. We'll see that pent-up demand release.

Obviously, you know, single family, uh, starts is, is not really, uh, you know, met that that early expectation, even though it was, it was only kind of guided to it that flat. Um, so I think that's, that's part of it, you know, obviously, you know, we've seen a phasing down of a lot of these projects and then, you know, we did see, you know, in parts of the country, uh, where we, you know, have performed really well, frankly in parts of, you know, Florida and the southeast, uh, which were pretty hot markets for for a while, which was helping, you know, kind of keep resi kind of in at least that flat territory really fall off as, as we got into late into into the Q2 and here to start Q3. So we definitely seen the activity, uh, weekend on the lot side. And, you know, we'll see, uh, ultimately when those, uh, developers decide to to reinvest and get that going. I wouldn't say there's a, a significant amount of developed Lots but there there's definitely been a been an increase there, just given the Slowdown that we've seen in in

Single family, but again, believe that is temporary. You know, we'll work through that, uh, this period of time. And then I I we're going to be really well positioned to to capture that growth as it as it comes back. As these rates ease, you're seeing lumber prices drop. Uh, some of these things, uh, May ultimately lend themselves to, you know, better affordability and, and we'll see that pent-up demand release.

Brian Biros: Okay, thanks for the perspective. On the acquisition you did just to clean up here, I assume that's not in the guidance since it hasn't closed. Any perspective on, you know, size of that deal and any update on how the pipeline for M&A looks these days?

Um okay, thanks for the perspective and then on the um on the acquisition, you did just to clean up here. Um,

I assume that's not in the guidance since it hasn't closed. Any perspective on, you know, size?

Of that deal. And then any update on

Um, how the pipeline uh for m&a looks these days.

Mark Witkowski: Yeah, sure, Pat. You know, the acquisition we did in Canada was a three-branch acquisition with two locations around Toronto and another one in Ottawa. Those branches are typical kind of branch size for us in the $15 million range. Really excited about that one. It really builds a great platform for us to grow from in Canada. That's now the second acquisition we've completed there. I think it gives us a really good opportunity to not only build on the synergies there that we think we can bring, but start to put in some greenfields in Canada as well. Expect some continued growth there. One that we're really excited about. We got a great management team with that one, and it's really going to allow us to capture a lot of that addressable market in Canada that just hasn't been available for us before.

Mark Witkowski: The pipeline continues to be healthy. We've got a series of deals that we're looking at right now, I'd say, in various stages and varying sizes. We've got a lot of different opportunities that we're evaluating right now and really excited about it. Obviously, we absorbed a lot of M&A from the 2024 year. You saw us get this one announced in Canada and excited to continue to drive that part of our growth strategy as we go forward.

I would say those branches are typical kind of, uh, Branch size for us and kind of the 15 million dollar range and, uh, really excited about that 1. That really builds a great platform for us to to grow from in Canada. That's now the second acquisition. We've completed their, I think it gives us a really good opportunity, uh, to not only uh, you know, build on the synergies there that we think we can bring but, uh, start to, uh, put put in some, uh, you know, green fields in Canada as well. So expect some, uh, continued growth there. So 1 that we're really excited about, we got a great management team with that 1 and is really going to allow us to capture a lot of that, uh, stressful Market in Canada, that just hasn't been available for us before. And then the, the pipeline continues to be healthy. We've got a series of, uh, deals that we're looking at. Right now, I'd say in various stages and and then, uh, varying sizes, we've got a lot of different opportunities that we're evaluating right now.

And, uh, really excited about it. Obviously, we absorbed a lot of m&a from the 2024 year. Um, you see saw us get this 1 announcers

Brian Biros: Okay, thanks for the time.

Mark Witkowski: Yep, thanks, Pat.

Okay, thanks for the time.

Yeah, thanks Pat.

Alex: Thank you. Our next question comes from Anthony Petinari of Citi. Your line's now open. Please go ahead.

Thank you. Our next question comes from Anthony Pinari of City. Your line is now open. Please go ahead.

Brian Biros: Hi, this is Asher Stoneman on for Anthony. Thanks for taking my question. I just wanted to ask about the current kind of competitive environment, if that's changed at all from the prior quarter. Maybe there's industry response to kind of residential lot development demand slowing. Just any thoughts on the competitive environment?

Hi, this is Asher, son. And on for Anthony, thanks for taking my question. I just wanted to ask about the current competitive environment and if that's changed at all from the prior quarter. You know, maybe there's an industry response to the slowing residential demand. Any thoughts on the competitive environment?

Mark Witkowski: Yeah, thanks for the question. I would tell you there's been no real meaningful change in the competitive environment. It's been pretty typical for several quarters. I expect it to continue along those lines. We've had, I'd say, in some very limited markets across the U.S., we've had some regional competitors kind of going after each other pretty good, which, frankly, plays right into our hands. I think our customers like the stability that Core & Main brings, both in service and value. Overall, it's been a, I'd say, pretty typical kind of competitive environment for several quarters now.

Yeah, thanks for the question. You know, I would tell you, there's been no real meaningful change in the competitive environment. It's been pretty typical, uh, for several quarters. Um, expected to continue, uh, along those lines. Um, you know, we've had, I'd say in in some very limited, you know, markets across the us, we've had some, uh, Regional competitors kind of, uh, you know, going after each other pretty pretty good uh, which you know, frankly plays right into our hands. I think our customers uh like the stability that the corn Mane brings both in service and value and um you know overall you know it's been a been a, I'd say pretty typical kind of competitive environment. You know, for several quarters now

Brian Biros: Great, thanks. Can you just remind us which of your product groups are kind of most exposed to the RESI end markets? If that's not just as RESI's, you know, making any kind of, or that you anticipate kind of in the second half as well, kind of driving any shift in the mix or strategy around inventory positioning?

Great, thanks. And then um can you just remind us which of your product groups are kind of most exposed to the rician markets and if that softness is razees, you know, making any kind of or and that you anticipate kind of in the second half as well kind of driving any

shift in the mix or strategy around inventory, positioning?

Mark Witkowski: No, I wouldn't say there's a major difference on the RESI side outside of, you know, if you think about our fire protection product category that we have, it is much more focused on, you know, kind of non-RESI for us, which includes that multi-family piece. Most of that is kind of steel pipe, you know, on that piece of it. The rest of the end markets for RESI, non-RESI, and municipal really have a kind of a standard mix for the most part of all of our product categories. It's obviously very local. It depends on what those local specifications are. Really, for us, it's really an assessment of where we're aligning some of those resources. If RESI gets softer in an area, we may move some of that headcount and resources into other areas that are driving growth.

Mark Witkowski: When we think about resource allocation, that's really more of how we think about the moves that we've got to make. As part of the kind of the targeted actions that Robyn was referring to that we're making and putting in place, we can continue to invest in the business where we're growing. Where there's market headwinds or underperformance, we're shifting some of those resources and ultimately managing the costs that way to make sure we continue to capture the growth that's there.

No, I I wouldn't say there's a major, you know, difference on the resi side, um, outside of, you know, if you think about our, our fire protection product category, that we have is much more focused on, you know, kind of non-res for us which includes that multi-family piece. And, and most of that is kind of steel pipe, you know, on that piece of it, but the but the rest of the end markets for resi, uh, non-res and, and Municipal really have a kind of a standard mix for the most part of, um, all of our product categories. It's it's obviously very local. It depends on what those local specifications are really for us. You know, it's really an assessment of, you know, where we're aligning some of those resources. So if resi gets softer in an area, we may move some of that headcount and and resources and other areas that are that are driving growth. Uh, so, you know, we think about resource allocation that, that's, that's really more of how how we think about the the move.

We've got to make and as part of the kind of, the targeted actions that Robin was referring to that, we're making and putting in place. So we can continue to invest in the business where we're growing, uh, where there's Market, headwinds or underperformance. We're shipped in some of those resources and, uh, ultimately ultimately managing the cost that way to, uh, make sure we continue to capture the growth. That's their

Brian Biros: Great, thanks. I'll turn it over.

Great thanks. I'll uh, I'll turn it over.

Alex: Thank you. Our next question comes from Keith Hughes of True Securities. Your line's now open. Please go ahead.

Thank you. Our next question comes from a key to Hughes of trust security.

Your lines are open. Please go ahead.

Brian Biros: Hey, this is Julie and I know you already touched on it a little bit, but how should we think about the cumulative pricing in Q3 versus Q4?

Hey, this is Julie and I, I know you already touched on it a little bit, but how should we think about pricing in third quarter, versus fourth quarter?

Robyn Bradbury: For pricing, we're expecting it to be flattish for the remainder of the year. I would think about that for both the third quarter and the fourth quarter. Pricing's been very stable over the last few quarters now, and we're expecting that to continue. I would say no notable changes expected there.

Of the year and I would think about that for both the third quarter and the fourth quarter. Um you know that pricing has been very stable over the last few quarters now and we're expecting that to continue. No notable changes expected there.

Brian Biros: Got it. Thanks. That's all for me.

Got it. Thanks. That's all for me.

Alex: Thank you. Our next question comes from Nigel Coe of Wolf Research. Your line's now open. Please go ahead.

Thank you. Our next question comes from Nigel Co of All Research. Please go ahead.

David Manthey: Oh, thanks. Good morning. Yeah, look, we've touched on a lot of the stuff here, but just want to circle back to SG&A, if I may. Just so I understand the guides, you know, if gross margins are going to be fairly flat to second quarter, it seems like SG&A dollars stepped down versus $302 million in Q2. Just want to make sure that's correct. I'm just wondering what the impact of the 53rd week has on SG&A specifically.

Oh, thanks. Good morning. Um, yeah. Like we touched on a lot of the stuff here, but uh, just to just want to Circle back to sgna. Um, if I may just so, I understand the guide, um, you know, if if ghost margins are going to be fairly flat to second quarter, um it seems like sgna dollars step down versus a 302 uh, in 2q just want to make sure that's correct. And I'm just wondering what the impact of the 53rd week has on sgna specifically.

Robyn Bradbury: Yeah, thanks, Nigel. You're right. The SG&A dollars are going to step down quite a bit in the second half compared to the first half. That's related to cost-out actions and also just the lower volumes that we're expecting, which then creates a little bit of pressure on the rate in the second half because of the lower volumes. You're thinking about that the right way. The way that we're thinking about the 53rd week, that's an extra or one less week of sales. We categorize it in the fourth quarter in that January timeframe. Obviously, there's some variable SG&A related to that that will come out. When you think about it from an EBITDA perspective, it should be in that kind of $8 to $10 million range.

Yeah, thanks. Nigel. You're right. The, the sgna dollars are going to step down quite a bit in the second half compared to the first half. And that's, um, you know, related to cost out actions and also just the the lower values that were expecting, which then, you know, creates a little bit pressure on the rate and the second half because the lower values. But you're, you're thinking about that the right way. And then the way that we're thinking about the 53rd week, um, you know, that's, uh, an extra or 1 last week of sales, kind of, we categorize it in the fourth quarter.

Order in that January time frame. Um, you know, obviously there's some variable sgna related to that that will come out. But when you think about it from a IBA perspective, it should be in that kind of, um, 8 to 10 million dollars range,

David Manthey: Okay, that's helpful. Thanks. Obviously, I think we understand the drivers of the residential weakness, and maybe the flat outlook was a tad optimistic in hindsight. Non-RES, I think, is the big debate, though. It seems it could go in two directions here. We've got a weakening economy, but we've got a lot of these mega projects, data centers, etc. I'm just curious, Mark, Robyn, how you see, based on feedback from the field, customers, what sort of direction do you think this breaks into as we go into 2026? Do you think non-RES as a category gets stronger, or is there some risk there as we go into 2026?

Okay, that's helpful. Thanks. And then,

And then, um, obviously, you know, uh,

I think we understand that the drivers of the residential weakness and maybe the flat outlook was a tad optimistic, you know, in hindsight. Um, non-res, I think, is the big debate though, and it seems it could go in two directions here. You know, we've got a weakening economy, but then we've got a lot of, you know, these mega projects, data centers, etc. So I'm just curious, you know, Mark and Robyn, how you see, you know, based on, I don't know, feedback from the field, customers, what sort of direction do you think this breaks into as we go into 2026? Do you think non-res as a category gets stronger, or is there some risk there as you go into '26?

Mark Witkowski: Yeah, thanks, Nigel. I think that, you know, it's definitely how we're seeing the non-residential area right now. There's a lot of puts and takes in that market, both by project types and, you know, frankly, by geography as well. We're seeing a lot of variation there. I do think there's a lot of good things there to be excited about, in particular in this, you know, highway work, street work, that we get a lot of storm drainage product put in place on those types of projects. That's been really strong. The data center activity seems like that's got plenty of legs to it yet.

Yeah, thanks Nigel. I think that, you know, that's definitely how we're seeing the non-residential area right now. There's a lot of puts and takes in that.

In that market, both by project types and, frankly, by geography as well. So we’re seeing a lot of variation there.

Mark Witkowski: We pick up, I'd say, more than our fair share of that work, which has really helped cushion some of the softer commercial and retail kind of development in that area, which I wouldn't expect that we're going to see any near-term return of that really until we see some of the pent-up residential start to release. I'd expect probably more of the same out of non-residential kind of, you know, for us, just given our exposure there and how those work. It's going to kind of just the broad project types that we service, it's going to kind of flatten out, which is what we've experienced in 2025. I wouldn't see a lot of upside or downside as we think about that one, you know, going forward, at least in the very near term.

Um, do you think there's, uh, a lot of good things there to be excited about, in particular on this, you know, Highway work Street work that we get a lot of storm drainage, uh, product. Uh, you know, put in place on those types of projects that's been really strong. Uh, you know, the the data center activity, seems like that's got plenty of legs, uh, to it yet. And we pick up, I'd say more than our fair share of that work, uh, which is really helped cushion. Some of the softer, uh, commercial and Retail kind of development and and that area, which I wouldn't expect that. We're going to see any near-term return of that, it really, until we see some of the, the pent up residential, uh, start to release. So, um, I'd expect probably more of the same out of non-res kind of, you know, for us just giving our exposure, uh, there and and how those work. It's going to kind of just the broad project types. That we service. It's going to kind of flatten out, which is what we've experienced in 25.

So I wouldn't see a lot of upside or or downside as we think about that 1, you know, going forward at least in the, in the in the very near term.

David Manthey: Okay, thank you.

Mark Witkowski: Yep.

Okay, thank you.

Alex: Thank you. At this time, I'll now hand back to Mark Witkowski for any further remarks.

Yep.

Thank you, and it's time to hand it back to Mark Wachowski for any further remarks.

Mark Witkowski: Thank you all again for joining us today. I wanted to close out by recognizing our associates for their dedication and commitment to delivering exceptional service to our customers. This quarter, we delivered solid sales growth driven by resilient end-market demand, stable pricing, and continued market share gains. We're seeing strong results from our growth initiatives, and we believe there's an opportunity to accelerate that momentum with additional investment. We recently expanded our presence with new locations in priority markets and announced an acquisition that broadens our footprint in Canada. These actions reflect our disciplined approach to investing in the business to drive long-term growth. We're well positioned to capitalize on long-term secular drivers of water infrastructure investment, including aging systems, population growth, and increasing regulatory requirements.

Thank you all again for joining us today. I want to close out by recognizing our associates for their dedication and commitment to delivering exceptional service to our customers.

This quarter, we delivered solid sales growth driven by resilient market demand, stable pricing, and continued market share gains.

We're seeing strong results from our growth initiatives, and we believe there's an opportunity to accelerate that momentum with additional investment.

We recently expanded our presence with new locations and priority markets and announced an acquisition that broadens, our footprint in Canada.

These actions reflect our disciplined approach to investing in the business to drive long-term growth.

Mark Witkowski: With the right team in place, a growing platform, and a proven strategy, we are confident in our ability to execute on the opportunities ahead and deliver even greater value to our customers, suppliers, communities, and shareholders. Thank you for your continued interest in Core & Main. Operator, that concludes our call.

Drivers of water infrastructure investment include aging systems, population growth, and increasing regulatory requirements.

With the right team in place a growing platform. And a proven strategy, we are confident in our ability to execute on the opportunities ahead and deliver even greater value to our customers suppliers, communities and shareholders.

Thank you for your continued interest in Core & Main. Operator, that concludes our call.