Q3 2025 Core & Main Inc Earnings Call

December 9, 2025

Speaker #1: Hello, and welcome to the Core & Main Q3 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 one on your telephone keypad.

Operator: Hello and welcome to the Core & Main Q3 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 one on your telephone keypad. I'll now hand it over to Glenn Floyd, Director of Investor Relations. Please go ahead.

Speaker #1: I'll now hand it over to Glenn Floyd, Director of Investor Relations. Please go ahead.

Speaker #2: 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 Core & Main's fiscal 2025 third quarter earnings call.

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 Core & Main's fiscal 2025 third quarter earnings call. Joining me this morning are Mark Witkowski, our Chief Executive Officer, and Robyn Bradbury, our Chief Financial Officer. Mark will begin today's call by sharing an update on our business and recent performance. Robyn will follow with a review of our third quarter results and our outlook for the year. 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.

Speaker #2: Joining me this morning are Mark Witkowski, our Chief Executive Officer, and Robyn Bradbury, our Chief Financial Officer. Mark will begin today's call by sharing an update on our business and recent performance.

Speaker #2: Robyn will follow with a review of our third-quarter results and our outlook for the year. We'll then open the line for Q&A, and Mark will wrap up with closing remarks.

Speaker #2: 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.

Speaker #2: 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.

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 press release and in 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.

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 press release and in 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.

Speaker #2: 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 press release and in the appendix of today's investor presentation.

Speaker #2: Thank you again for your interest in Core & Main. I'll now turn the call over to our Chief Executive Officer, Mark Witkowski.

Speaker #2: Witkowski. Thanks, Glenn, and good

Mark Witkowski: Thanks, Glenn, and good morning, everyone. Before we dive into our results, I want to start by reminding everyone of Core & Main's value proposition. Core & Main is a leading specialty distributor of water infrastructure products and services in North America, supporting the repair, upgrade, and expansion of our nation's critical water systems. Our competitive advantages, including national scale and resources, local market expertise backed by the best-trained sales force, industry-specific technology, and comprehensive product solutions, position us to lead an attractive secular growth market driven by aging infrastructure, increasing water demand, and ongoing investment needs. Our business model is built for resilience. Today, municipal projects represent over 40% of our sales, providing steady, predictable demand supported by reliable funding sources.

Speaker #3: Good morning, everyone. Before we dive into our results, I want to start by reminding everyone of Core & Main's value proposition. Core & Main is a leading specialty distributor of water infrastructure products and services in North America, supporting the repair, upgrade, and expansion of our nation's critical water systems.

Speaker #3: Our competitive advantages, including national scale and resources, local market expertise backed by the best-trained sales force, industry-specific technology, and comprehensive product solutions, position us to lead an attractive secular growth market driven by aging infrastructure, increasing water demand, and ongoing investment needs.

Speaker #3: Our business model is built for resilience. Today, municipal projects represent over 40% of our sales, providing steady, predictable demand supported by reliable funding sources.

Speaker #3: Our non-residential end market, which represents roughly 40% of sales, benefits from a diverse project mix across commercial, industrial, and infrastructure applications, many of which are poised for growth.

Mark Witkowski: Our non-residential end market, which represents roughly 40% of sales, benefits from a diverse project mix across commercial, industrial, and infrastructure applications, many of which are poised for growth. Residential activity represents less than 20% of our sales. While near-term dynamics in this market remain challenged, we continue to view the long-term outlook as attractive, supported by population growth and a structural undersupply of housing. This diversification, combined with emerging growth drivers like data centers and treatment plant modernization, provides a strong foundation for our business. Core & Main consistently produces strong free cash flow and compelling returns on invested capital, giving us the flexibility to reinvest in the business, pursue strategic growth opportunities, and return capital to shareholders. We continue to control our own destiny through disciplined execution on multiple fronts.

Our non-residential end market, which represents roughly 40% of sales, benefits from a diverse project mix across commercial, industrial, and infrastructure applications, many of which are poised for growth. Residential activity represents less than 20% of our sales. While near-term dynamics in this market remain challenged, we continue to view the long-term outlook as attractive, supported by population growth and a structural undersupply of housing. This diversification, combined with emerging growth drivers like data centers and treatment plant modernization, provides a strong foundation for our business. Core & Main consistently produces strong free cash flow and compelling returns on invested capital, giving us the flexibility to reinvest in the business, pursue strategic growth opportunities, and return capital to shareholders. We continue to control our own destiny through disciplined execution on multiple fronts.

Speaker #3: Residential activity represents less than 20% of our sales. While near-term dynamics in this market remain challenged, we continue to view the long-term outlook as attractive, supported by population growth and a structural undersupply of housing.

Speaker #3: This diversification, combined with emerging growth drivers like data centers and treatment plant modernization, provides a strong foundation for our business. Core & Main consistently produces strong free cash flow and compelling returns on invested capital, giving us the flexibility to reinvest in the business, pursue strategic growth opportunities, and return capital to shareholders.

Speaker #3: We continue to control our own destiny through disciplined execution on multiple fronts. For example, expanding into high-growth geographies, broadening our product offering in areas like treatment plants, smart meters, infusible HDPE, and deploying our strong balance sheet to pursue accretive M&A opportunities.

Mark Witkowski: For example, expanding into high-growth geographies, broadening our product offering in areas like treatment plants, smart meters, and fusible HDPE, and deploying our strong balance sheet to pursue accretive M&A opportunities, including our recent expansion into the $5 billion Canadian market. These strategic investments are expanding our addressable market, strengthening customer relationships, and positioning us to capture above-market growth as near-term headwinds subside. Equally important, our pricing discipline and gross margin expansion in recent quarters demonstrate the strength of our value proposition in addition to our team's ability to execute. We are staying focused on what we can control and building the foundation for sustained growth and profitability. Turning now to the quarter, we delivered positive net sales growth despite soft residential demand and a tough comparison from last year, driven by contribution from acquisitions and strong performance across our sales initiatives.

For example, expanding into high-growth geographies, broadening our product offering in areas like treatment plants, smart meters, and fusible HDPE, and deploying our strong balance sheet to pursue accretive M&A opportunities, including our recent expansion into the $5 billion Canadian market. These strategic investments are expanding our addressable market, strengthening customer relationships, and positioning us to capture above-market growth as near-term headwinds subside. Equally important, our pricing discipline and gross margin expansion in recent quarters demonstrate the strength of our value proposition in addition to our team's ability to execute. We are staying focused on what we can control and building the foundation for sustained growth and profitability. Turning now to the quarter, we delivered positive net sales growth despite soft residential demand and a tough comparison from last year, driven by contribution from acquisitions and strong performance across our sales initiatives.

Speaker #3: Including our recent expansion into the $5 billion Canadian market. These strategic investments are expanding our addressable market, strengthening customer relationships, and positioning us to capture above-market growth as near-term headwinds subside.

Speaker #3: Equally important, our pricing discipline and gross margin expansion in recent quarters demonstrate the strength of our value proposition, in addition to our team's ability to execute.

Speaker #3: We are staying focused on what we can control and building the foundation for sustained growth and profitability. Turning now to the quarter, we delivered positive net sales growth despite soft residential demand and a tough comparison from last year.

Speaker #3: Driven by contributions from acquisitions and strong performance across our sales initiatives, municipal construction remains strong, supported by a highly favorable funding and demand environment.

Mark Witkowski: Municipal construction remains strong, supported by a highly favorable funding and demand environment. The recent federal government shutdown had little to no impact on the municipal projects we support, as roughly 95% of funding for these projects comes from state and local sources. Local utility rate revenues and municipal bonds are dependable sources of funding, and certain states are also advancing new legislation to repair and upgrade aging infrastructure. Recent actions include Texas authorizing up to $20 billion of funding for new water supply projects over the next two decades, New York deploying approximately $3 billion in new water infrastructure investments, and Arkansas committing more than $500 million to water and sewer upgrades, each reinforcing a robust project pipeline. The state revolving funds provide a renewable source of capital to support water and wastewater infrastructure projects, with current balances exceeding $100 billion in total.

Municipal construction remains strong, supported by a highly favorable funding and demand environment. The recent federal government shutdown had little to no impact on the municipal projects we support, as roughly 95% of funding for these projects comes from state and local sources. Local utility rate revenues and municipal bonds are dependable sources of funding, and certain states are also advancing new legislation to repair and upgrade aging infrastructure. Recent actions include Texas authorizing up to $20 billion of funding for new water supply projects over the next two decades, New York deploying approximately $3 billion in new water infrastructure investments, and Arkansas committing more than $500 million to water and sewer upgrades, each reinforcing a robust project pipeline. The state revolving funds provide a renewable source of capital to support water and wastewater infrastructure projects, with current balances exceeding $100 billion in total.

Speaker #3: The recent federal government shutdown had little to no impact on the municipal projects we support, as roughly 95% of funding for these projects comes from state and local sources.

Speaker #3: Local utility rate revenues and municipal bonds are dependable sources of funding, and certain states are also advancing new legislation to repair and upgrade aging infrastructure.

Speaker #3: Recent actions include Texas authorizing up to $20 billion of funding for new water supply projects over the next two decades, New York deploying approximately $3 billion in new water infrastructure investments, and Arkansas committing more than $500 million to water and sewer upgrades, each reinforcing a robust project pipeline.

Speaker #3: The State Revolving Funds provide a renewable source of capital to support water and wastewater infrastructure projects, with current balances exceeding $100 billion in total.

Speaker #3: Supplemental funding from the Infrastructure Investment and Jobs Act remains a multi-year tailwind, with roughly $30 billion allocated to the states and more expected next year.

Mark Witkowski: Supplemental funding from the Infrastructure Investment and Jobs Act remains a multi-year tailwind, with roughly $30 billion allocated to the states and more expected next year, but only a fraction deployed by municipalities so far. Taken together, these dynamics provide long-term funding for critical water infrastructure projects that can no longer be deferred and remain essential to public health and economic development. In non-residential, we continue to see healthy growth in infrastructure projects such as roads and bridges, education and healthcare, and data centers. This growth is helping to offset softness in commercial, retail, and office space projects. Data centers represent a low single-digit portion of our total sales mix today, but they are becoming a more meaningful driver of our growth as AI-driven capacity expands. These projects require more water infrastructure than traditional manufacturing facilities due to cooling needs, as they draw large volumes from local water supplies.

Supplemental funding from the Infrastructure Investment and Jobs Act remains a multi-year tailwind, with roughly $30 billion allocated to the states and more expected next year, but only a fraction deployed by municipalities so far. Taken together, these dynamics provide long-term funding for critical water infrastructure projects that can no longer be deferred and remain essential to public health and economic development. In non-residential, we continue to see healthy growth in infrastructure projects such as roads and bridges, education and healthcare, and data centers. This growth is helping to offset softness in commercial, retail, and office space projects. Data centers represent a low single-digit portion of our total sales mix today, but they are becoming a more meaningful driver of our growth as AI-driven capacity expands. These projects require more water infrastructure than traditional manufacturing facilities due to cooling needs, as they draw large volumes from local water supplies.

Speaker #3: A fraction deployed by municipalities, so, but only a far. Taken together, these dynamics provide long-term funding for critical water infrastructure projects that can no longer be deferred and remain essential to public health and economic development.

Speaker #3: In non-residential, we continue to see healthy growth in infrastructure projects such as roads and bridges, education and healthcare, and data centers. This growth is helping to offset softness in commercial, retail, and office space projects.

Speaker #3: Data centers represent a low single-digit portion of our total sales mix today, but they are becoming a more meaningful driver of our growth as AI-driven capacity expands.

Speaker #3: These projects require more water infrastructure than traditional manufacturing facilities due to cooling needs, as they draw large volumes from local water supplies. This often necessitates upgrades to municipal systems and, in some cases, on-site water treatment facilities to conserve usage.

Mark Witkowski: This often necessitates upgrades to municipal systems and, in some cases, on-site water treatment facilities to conserve usage. We also see private investment flowing into public utilities to build capacity, creating opportunities for Core & Main across the municipal and private end markets. Data center development doesn't happen in isolation. As these campuses come online, they attract workers and ancillary businesses, driving demand for housing, retail, and commercial services, all of which drive the need for new water infrastructure. And this concentrated population growth places strain on local water systems, triggering further investment in water distribution and treatment infrastructure. We're seeing this firsthand at a major hyperscale campus near South Bend, Indiana, where project-related demand has been so substantial that our local branch has nearly tripled in size over the past few years.

This often necessitates upgrades to municipal systems and, in some cases, on-site water treatment facilities to conserve usage. We also see private investment flowing into public utilities to build capacity, creating opportunities for Core & Main across the municipal and private end markets. Data center development doesn't happen in isolation. As these campuses come online, they attract workers and ancillary businesses, driving demand for housing, retail, and commercial services, all of which drive the need for new water infrastructure. And this concentrated population growth places strain on local water systems, triggering further investment in water distribution and treatment infrastructure. We're seeing this firsthand at a major hyperscale campus near South Bend, Indiana, where project-related demand has been so substantial that our local branch has nearly tripled in size over the past few years.

Speaker #3: We also see private investment flowing into public utilities to build capacity, creating opportunities for Core & Main across the municipal and private end markets.

Speaker #3: Data center development doesn't happen in isolation. As these campuses come online, they attract workers and ancillary businesses, driving demand for housing, retail, and commercial services, all of which drive the need for new water infrastructure.

Speaker #3: And this concentrated population growth places strain on local water systems, triggering further investment in water distribution and treatment infrastructure. We're seeing this firsthand at a major hyperscale campus near South Bend, Indiana, where project-related demand has been so substantial that our local branch has nearly tripled in size over the past few years.

Speaker #3: In many cases, the initial investment for data centers unlocks capacity for broader municipal, residential, and non-residential expansion, creating a long-term tailwind across our core markets.

Mark Witkowski: In many cases, the initial investment for data centers unlocks capacity for broader municipal, residential, and non-residential expansion, creating a long-term tailwind across our core markets. As we expected and discussed on last quarter's call, residential lot development softened during the quarter, particularly in the Sunbelt markets. Builders are carefully pacing lot development against housing affordability concerns and consumer uncertainty. But as housing affordability improves in the future, we will be well-positioned to capitalize on the release of pent-up demand. Our growth initiatives continue to lay the foundation for long-term results. Let me highlight a few areas where our execution is creating competitive advantages. First, our product initiatives, including fusible HDPE, treatment plant solutions, and geosynthetics, each achieved double-digit growth in the quarter as we expand our ability to deliver integrated solutions for aging water infrastructure. Meter products returned to high single-digit growth in Q3.

In many cases, the initial investment for data centers unlocks capacity for broader municipal, residential, and non-residential expansion, creating a long-term tailwind across our core markets. As we expected and discussed on last quarter's call, residential lot development softened during the quarter, particularly in the Sunbelt markets. Builders are carefully pacing lot development against housing affordability concerns and consumer uncertainty. But as housing affordability improves in the future, we will be well-positioned to capitalize on the release of pent-up demand. Our growth initiatives continue to lay the foundation for long-term results. Let me highlight a few areas where our execution is creating competitive advantages. First, our product initiatives, including fusible HDPE, treatment plant solutions, and geosynthetics, each achieved double-digit growth in the quarter as we expand our ability to deliver integrated solutions for aging water infrastructure. Meter products returned to high single-digit growth in Q3.

Speaker #3: As we expected and discussed on last quarter's call, residential lot development softened during the quarter, particularly in the Sunbelt markets. Builders are carefully pacing lot development against housing affordability concerns and consumer uncertainty.

Speaker #3: But as housing affordability improves in the future, we will be well-positioned to capitalize on the release of pent-up demand. Our growth initiatives continue to lay the foundation for long-term results.

Speaker #3: Let me highlight a few areas where our execution has created competitive advantages. First, our product initiatives, including fusible HDPE, treatment plant solutions, and geosynthetics, each achieved double-digit growth in the quarter.

Speaker #3: As we expand our ability to deliver integrated solutions for aging water infrastructure, meter products returned to high single-digit growth in the third quarter. Recent contract awards, including our largest metering contract award to date, give us confidence in both near- and long-term demand for our advanced metering products.

Mark Witkowski: Recent contract awards, including our largest metering contract award to date, give us confidence in both near- and long-term demand for our advanced metering products. Driving growth through geographic expansion also remains a key priority. We recently opened new branches near Houston and Denver, bringing our year-to-date total to five new locations. We expect to open more branches before fiscal year end, and we are evaluating over a dozen additional high-growth markets for future expansion. These new branches enhance our proximity to high-growth markets and increase our service levels, supporting continued market share gains. In September, we completed the acquisition of Canada Waterworks, further expanding our growth platform in a fragmented $5 billion Canadian addressable market. This acquisition aligns with our core strengths and increases exposure to growing end markets. Canada is a natural adjacency to our US.

Recent contract awards, including our largest metering contract award to date, give us confidence in both near- and long-term demand for our advanced metering products. Driving growth through geographic expansion also remains a key priority. We recently opened new branches near Houston and Denver, bringing our year-to-date total to five new locations. We expect to open more branches before fiscal year end, and we are evaluating over a dozen additional high-growth markets for future expansion. These new branches enhance our proximity to high-growth markets and increase our service levels, supporting continued market share gains. In September, we completed the acquisition of Canada Waterworks, further expanding our growth platform in a fragmented $5 billion Canadian addressable market. This acquisition aligns with our core strengths and increases exposure to growing end markets. Canada is a natural adjacency to our US.

Speaker #3: Driving growth through geographic expansion also remains a key priority. We recently opened new branches near Houston and Denver, bringing our year-to-date total to five new locations.

Speaker #3: We expect to open more branches before fiscal year-end, and we are evaluating over a dozen additional high-growth markets for future expansion. These new branches enhance our proximity to high-growth markets and increase our service levels, supporting continued market share gains.

Speaker #3: In September, we completed the acquisition of Canada Waterworks, further expanding our growth platform in a fragmented $5 billion Canadian addressable market. This acquisition aligns with our core strengths and increases exposure to growing end markets.

Speaker #3: Canada is a natural adjacency to our U.S. markets, and we're excited to welcome the Canada Waterworks team to Core & Main. Integration activities are underway with a solid plan to realize synergies.

Mark Witkowski: markets, and we're excited to welcome the Canada Waterworks team to Core & Main. Integration activities are underway with a solid plan to realize synergies. While we continue to invest in growth, we remain equally focused on improving profitability. Gross margins improved by 60 basis points year over year to 27.2%, reflecting the success of our private label initiative and disciplined sourcing and pricing execution. Our private label strategy continues to produce strong results, and we are on track for private label products to represent approximately 5% of our total sales this year. On SG&A, we've implemented roughly $30 million of annualized cost savings in an effort to improve operating leverage and maximize the efficiency of our business. We expect to realize these savings over the next 12 months.

markets, and we're excited to welcome the Canada Waterworks team to Core & Main. Integration activities are underway with a solid plan to realize synergies. While we continue to invest in growth, we remain equally focused on improving profitability. Gross margins improved by 60 basis points year over year to 27.2%, reflecting the success of our private label initiative and disciplined sourcing and pricing execution. Our private label strategy continues to produce strong results, and we are on track for private label products to represent approximately 5% of our total sales this year. On SG&A, we've implemented roughly $30 million of annualized cost savings in an effort to improve operating leverage and maximize the efficiency of our business. We expect to realize these savings over the next 12 months.

Speaker #3: While we continue to invest in growth, we remain equally focused on improving profitability. Gross margins improved by 60 basis points year over year, to 27.2%, reflecting the success of our privately labeled initiative and disciplined sourcing and pricing execution.

Speaker #3: Our private label strategy continues to produce strong results, and we are on track for private label products to represent approximately 5% of our total sales this year.

Speaker #3: On SG&A, we've implemented roughly $30 million of annualized cost savings in an effort to improve operating leverage and maximize the efficiency of our business.

Speaker #3: We expect to realize these savings over the next 12 months. We remain disciplined in our headcount decisions by selectively filling critical sales roles while reallocating resources to areas of the business with the greatest growth potential.

Mark Witkowski: We remain disciplined in our headcount decisions by selectively filling critical sales roles while reallocating resources to areas of the business with the greatest growth potential. At the same time, we continue to invest in modern technologies to help us drive future SG&A leverage. These tools strengthen customer service, uncover more selling opportunities, and expand our ability to take advantage of emerging AI capabilities. We expect these investments to enhance productivity and support margin expansion. Our strong free cash flow provides flexibility to pursue strategic M&A, invest in organic growth, and return capital to shareholders. Profitable growth remains our top capital allocation priority, supported by a robust pipeline of acquisition and greenfield opportunities. We will remain disciplined on valuation and returns while maintaining balance sheet flexibility to drive shareholder value.

We remain disciplined in our headcount decisions by selectively filling critical sales roles while reallocating resources to areas of the business with the greatest growth potential. At the same time, we continue to invest in modern technologies to help us drive future SG&A leverage. These tools strengthen customer service, uncover more selling opportunities, and expand our ability to take advantage of emerging AI capabilities. We expect these investments to enhance productivity and support margin expansion. Our strong free cash flow provides flexibility to pursue strategic M&A, invest in organic growth, and return capital to shareholders. Profitable growth remains our top capital allocation priority, supported by a robust pipeline of acquisition and greenfield opportunities. We will remain disciplined on valuation and returns while maintaining balance sheet flexibility to drive shareholder value.

Speaker #3: At the same time, we continue to invest in modern technologies to help us drive future SG&A leverage. These tools strengthen customer service, uncover more selling opportunities, and expand our ability to take advantage of emerging AI capabilities.

Speaker #3: We expect these investments to enhance productivity and support margin expansion. Our strong free cash flow provides flexibility to pursue strategic M&A, invest in organic growth, and return capital to shareholders.

Speaker #3: Profitable growth remains our top capital allocation priority, supported by a robust pipeline of acquisition and greenfield opportunities. We will remain disciplined on valuation and returns, while maintaining balance sheet flexibility to drive shareholder value.

Speaker #3: As part of our disciplined capital allocation strategy, earlier this morning, we announced a $500 million increase to our share repurchase authorization. This action reflects our conviction in our growth outlook and free cash flow generation, as well as the board's shared confidence in our ability to continue creating long-term shareholder value.

Mark Witkowski: As part of our disciplined capital allocation strategy, earlier this morning, we announced a $500 million increase to our share repurchase authorization. This action reflects our conviction in our growth outlook and free cash flow generation, and the board's shared confidence in our ability to continue creating long-term shareholder value. With this expanded capacity, we can act opportunistically as market conditions present attractive opportunities. We are gaining momentum across our sales, gross margin, and operational initiatives, strengthening our ability to drive organic growth, expand margins, and achieve operating leverage. We remain confident in the attractiveness of our end markets over the medium and long term, and we continue to invest in our associates and value-added capabilities to capture growth and market share. In closing, I want to express my sincere appreciation for our teams across the country.

As part of our disciplined capital allocation strategy, earlier this morning, we announced a $500 million increase to our share repurchase authorization. This action reflects our conviction in our growth outlook and free cash flow generation, and the board's shared confidence in our ability to continue creating long-term shareholder value. With this expanded capacity, we can act opportunistically as market conditions present attractive opportunities. We are gaining momentum across our sales, gross margin, and operational initiatives, strengthening our ability to drive organic growth, expand margins, and achieve operating leverage. We remain confident in the attractiveness of our end markets over the medium and long term, and we continue to invest in our associates and value-added capabilities to capture growth and market share. In closing, I want to express my sincere appreciation for our teams across the country.

Speaker #3: With this expanded capacity, we can act opportunistically as market conditions present attractive opportunities. We are gaining momentum across our sales, growth margin, and operational initiatives.

Speaker #3: Strengthening our ability to drive organic growth, expand margins, and achieve operating leverage. We remain confident in the attractiveness of our end markets over the medium and long term, and we continue to invest in our associates and value-added capabilities to capture growth and market share.

Speaker #3: In closing, I want to express my sincere appreciation for our teams across the country. Their dedication and focus on execution have been instrumental in advancing our strategic priorities, and I couldn't be more proud of what we've accomplished together this year.

Mark Witkowski: Their dedication and focus on execution have been instrumental in advancing our strategic priorities, and I couldn't be more proud of what we've accomplished together this year. Thank you for your continued support and confidence in our vision. With that, I'll turn the call over to Robyn to review our third quarter financial results and outlook for the year. Go ahead, Robyn. Thanks, Mark. Good morning, everyone. I'll start on page seven of the presentation with some highlights from our third quarter results. Net sales increased 1% to $2.1 billion. Organic volumes and prices were roughly flat versus prior year, while acquisitions contributed about one point of growth. We delivered positive pricing across nearly all product categories in the third quarter. The one exception was municipal PVC pipe, where prices are down roughly 15% year over year and nearly 40% from the 2022 peak.

Their dedication and focus on execution have been instrumental in advancing our strategic priorities, and I couldn't be more proud of what we've accomplished together this year. Thank you for your continued support and confidence in our vision. With that, I'll turn the call over to Robyn to review our third quarter financial results and outlook for the year. Go ahead, Robyn.

Speaker #3: Thank you for your continued support and confidence in our vision. With that, I'll turn the call over to Robyn to review our third-quarter financial results and outlook for the year.

Speaker #3: Go ahead, Robyn.

Robyn Bradbury: Thanks, Mark. Good morning, everyone. I'll start on page seven of the presentation with some highlights from our third quarter results. Net sales increased 1% to $2.1 billion. Organic volumes and prices were roughly flat versus prior year, while acquisitions contributed about one point of growth. We delivered positive pricing across nearly all product categories in the third quarter. The one exception was municipal PVC pipe, where prices are down roughly 15% year over year and nearly 40% from the 2022 peak.

Speaker #2: Thanks, Mark. Good morning, everyone. I'll start on page seven of the presentation with some highlights from our third quarter results. Net sales increased 1% to $2.1 billion.

Speaker #2: Organic volumes and prices were roughly flat versus the prior year, while acquisitions contributed about one point of growth. We delivered positive pricing across nearly all product categories in the third quarter.

Speaker #2: The one exception was municipal PVC pipe, where prices are down roughly 15% year over year and nearly 40% from the 2022 peak. As we've noted in prior quarters, even with the continued moderation in PVC pipe pricing, our discipline has enabled us to sustain a stable price environment overall.

Mark Witkowski: As we've noted in prior quarters, even with the continued moderation in PVC pipe pricing, our discipline has enabled us to sustain a stable price environment overall. We estimate our end markets were down low single digits in the quarter, driven by declines in residential lot development and a tough comparison from last year. The residential decline was concentrated in Sunbelt markets like Florida, Texas, Arizona, and Georgia, where developers have slowed the pace of new development. Activity appears to have stabilized as we move through the quarter, and we remain confident in the attractive long-term fundamentals of these high-growth markets. Our overall portfolio is resilient. Municipal demand continues to be a source of strength, and we're seeing solid activity in large, complex non-residential projects where our scale, product breadth, and technical expertise give us a strong competitive position.

As we've noted in prior quarters, even with the continued moderation in PVC pipe pricing, our discipline has enabled us to sustain a stable price environment overall. We estimate our end markets were down low single digits in the quarter, driven by declines in residential lot development and a tough comparison from last year. The residential decline was concentrated in Sunbelt markets like Florida, Texas, Arizona, and Georgia, where developers have slowed the pace of new development. Activity appears to have stabilized as we move through the quarter, and we remain confident in the attractive long-term fundamentals of these high-growth markets. Our overall portfolio is resilient. Municipal demand continues to be a source of strength, and we're seeing solid activity in large, complex non-residential projects where our scale, product breadth, and technical expertise give us a strong competitive position.

Speaker #2: We estimate our end markets were down low single digits in the quarter, driven by declines in residential lot development and a tough comparison from last year.

Speaker #2: The residential decline was concentrated in Sunbelt markets like Florida, Texas, Arizona, and Georgia, where developers have slowed the pace of new development. Activity appears to have stabilized as we move through the quarter, and we remain confident in the attractive long-term fundamentals of these high-growth markets.

Speaker #2: Our overall portfolio is resilient. Municipal demand continues to be a source of strength, and we're seeing solid activity in large, complex non-residential projects, where our scale, product breadth, and technical expertise give us a strong competitive position.

Speaker #2: This balanced mix across end markets provides stability through varying demand environments. Gross margin in the third quarter was 27.2%, up 60 basis points year-over-year.

Mark Witkowski: This balanced mix across end markets provides stability through varying demand environments. Gross margin in Q3 was 27.2%, up 60 basis points year over year. This improvement was driven by benefits from our private label initiative and disciplined purchasing and pricing execution. Total SG&A expenses increased 8% to $295 million. SG&A growth in the quarter was driven by acquisitions, elevated inflation in areas like facilities and fleet, higher employee benefits costs, and strategic investments to support future growth. SG&A in Q3 was $7 million lower than Q2, reflecting a reduction in one-time items and disciplined cost management. Cost inflation in our industry typically runs in the low single-digit range annually, but it's trending closer to mid-single digits this year.

This balanced mix across end markets provides stability through varying demand environments. Gross margin in Q3 was 27.2%, up 60 basis points year over year. This improvement was driven by benefits from our private label initiative and disciplined purchasing and pricing execution. Total SG&A expenses increased 8% to $295 million. SG&A growth in the quarter was driven by acquisitions, elevated inflation in areas like facilities and fleet, higher employee benefits costs, and strategic investments to support future growth. SG&A in Q3 was $7 million lower than Q2, reflecting a reduction in one-time items and disciplined cost management. Cost inflation in our industry typically runs in the low single-digit range annually, but it's trending closer to mid-single digits this year.

Speaker #2: Driven by benefits from our private label, this improvement was initiated through disciplined purchasing and pricing execution. Total SG&A expenses increased 8% to $295 million.

Speaker #2: SG&A growth in the quarter was driven by acquisitions, elevated inflation in areas like facilities and fleet, higher employee benefits costs, and strategic investments to support future growth.

Speaker #2: SG&A in the third quarter was $7 million lower than in the second quarter, reflecting a reduction in one-time items and disciplined cost management. Cost inflation in our industry typically runs in the low single-digit range annually, but it's trending closer to mid-single digits this year.

Speaker #2: Against a softer end-market backdrop and no incremental pricing, the productivity gains we're delivering aren't enough to fully absorb these pressures, especially given how efficiently we already operate from an SG&A as a percentage of sales standpoint.

Mark Witkowski: Against a softer end market backdrop and no incremental pricing, the productivity gains we're delivering aren't enough to fully absorb these pressures, especially given how efficient we already operate from an SG&A as a percentage of sales standpoint. This level of inflation is not typical, and while we expect it to moderate over time, we have moved quickly to address it. Since the last quarter, we've implemented $30 million of annualized cost savings, with roughly $1 million of savings recognized in Q3. These savings primarily reflect reductions in personnel-related costs as we've eliminated approximately 4% of non-sales-focused roles since last quarter. We expect Q4 SG&A to be roughly $25 million lower than Q3 due to a seasonal reduction in sales and the results of our cost actions. Our approach is measured and focused on shifting resources without compromising customer service or long-term growth.

Against a softer end market backdrop and no incremental pricing, the productivity gains we're delivering aren't enough to fully absorb these pressures, especially given how efficient we already operate from an SG&A as a percentage of sales standpoint. This level of inflation is not typical, and while we expect it to moderate over time, we have moved quickly to address it. Since the last quarter, we've implemented $30 million of annualized cost savings, with roughly $1 million of savings recognized in Q3. These savings primarily reflect reductions in personnel-related costs as we've eliminated approximately 4% of non-sales-focused roles since last quarter. We expect Q4 SG&A to be roughly $25 million lower than Q3 due to a seasonal reduction in sales and the results of our cost actions. Our approach is measured and focused on shifting resources without compromising customer service or long-term growth.

Speaker #2: This level of inflation is not typical. While we expect it to moderate over time, we have moved quickly to address it. Since the last quarter, we've implemented $30 million of annualized cost savings, with roughly $1 million of savings recognized in the third quarter.

Speaker #2: These savings primarily reflect reductions in personnel-related costs, as we've eliminated approximately 4% of non-sales-focused roles since last quarter. We expect fourth quarter SG&A to be roughly $25 million lower than the third quarter due to a seasonal reduction in sales and the results of our cost actions.

Speaker #2: Our approach is measured and focused on shifting resources without compromising customer service or long-term growth. While we take targeted actions to improve efficiency, we continue to invest in growth-focused roles to support product line and geographic expansion, including greenfields.

Mark Witkowski: While we take targeted actions to improve efficiency, we continue to invest in growth-focused roles to support product line and geographic expansion, including greenfields. We have an experienced management team that understands what it takes to drive operational excellence through cycles, balancing near-term efficiency with the investments required to continue positioning Core & Main for long-term growth and success. We are committed to driving annual SG&A rate improvement going forward. Adjusted diluted EPS increased approximately 3% to $0.89 compared to $0.86 last year. Growth was driven by higher adjusted net income and the benefit of a lower share count from share repurchases. As a reminder, we exclude intangible amortization from adjusted EPS because a significant portion relates to the formation of Core & Main following our 2017 leveraged buyout.

While we take targeted actions to improve efficiency, we continue to invest in growth-focused roles to support product line and geographic expansion, including greenfields. We have an experienced management team that understands what it takes to drive operational excellence through cycles, balancing near-term efficiency with the investments required to continue positioning Core & Main for long-term growth and success. We are committed to driving annual SG&A rate improvement going forward. Adjusted diluted EPS increased approximately 3% to $0.89 compared to $0.86 last year. Growth was driven by higher adjusted net income and the benefit of a lower share count from share repurchases. As a reminder, we exclude intangible amortization from adjusted EPS because a significant portion relates to the formation of Core & Main following our 2017 leveraged buyout.

Speaker #2: We have an experienced management team that understands what it takes to drive operational excellence through cycles, balancing near-term efficiency with the investments required to continue positioning Core & Main for long-term growth and success.

Speaker #2: We are committed to driving annual SG&A rate improvement going forward. Adjusted diluted EPS increased approximately 3% to $0.89 compared to $0.86 last year. Growth was driven by higher adjusted net income and the benefit of a lower share count from share repurchases.

Speaker #2: As a reminder, we exclude intangible amortization from adjusted EPS because a significant portion relates to the formation of Core & Main following our 2017 leveraged buyout.

Speaker #2: This adjusted metric better reflects the underlying earnings power and free cash flow generation of our business, which is why we view it as an important indicator of our performance.

Mark Witkowski: This adjusted metric better reflects the underlying earnings power and free cash flow generation of our business, which is why we view it as an important indicator of our performance. Adjusted EBITDA of $274 million was 1% below the prior year, while adjusted EBITDA margin declined 30 basis points to 13.3%, driven by a higher SG&A as a percentage of net sales. This was partially offset by 60 basis points of gross margin expansion. Turning to the balance sheet, cash flow, and capital allocation, we ended the quarter with net debt at nearly $2.1 billion and net debt leverage of 2.2x, well within our target range. Liquidity was $1.3 billion, including $89 million of cash and the remainder under our ABL facility. Operating cash flow was $271 million, reflecting nearly 100% conversion from adjusted EBITDA and highlighting the strength of our cash generation ability.

This adjusted metric better reflects the underlying earnings power and free cash flow generation of our business, which is why we view it as an important indicator of our performance. Adjusted EBITDA of $274 million was 1% below the prior year, while adjusted EBITDA margin declined 30 basis points to 13.3%, driven by a higher SG&A as a percentage of net sales. This was partially offset by 60 basis points of gross margin expansion. Turning to the balance sheet, cash flow, and capital allocation, we ended the quarter with net debt at nearly $2.1 billion and net debt leverage of 2.2x, well within our target range. Liquidity was $1.3 billion, including $89 million of cash and the remainder under our ABL facility. Operating cash flow was $271 million, reflecting nearly 100% conversion from adjusted EBITDA and highlighting the strength of our cash generation ability.

Speaker #2: Adjusted EBITDA of $274 million was 1% below the prior year, while adjusted EBITDA margin declined 30 basis points to 13.3%, driven by a higher SG&A as a percentage of net sales.

Speaker #2: This was partially offset by 60 basis points of gross margin expansion. Starting with the balance sheet, cash flow, and capital allocation, we ended the quarter with net debt at nearly $2.1 billion and net debt leverage of 2.2 times, well within our target range.

Speaker #2: Liquidity was $1.3 billion, including $89 million in cash, with the remainder under our ABL facility. Operating cash flow was $271 million, reflecting nearly 100% conversion from adjusted EBITDA and highlighting the strength of our cash generation ability.

Speaker #2: Over the last 12 months, we have generated free cash flow equal to 5.6% of our market capitalization, a level that is more than double the average free cash flow yield of S&P 500 companies and meaningfully above specialty distribution tiers.

Mark Witkowski: Over the last 12 months, we have generated free cash flow equal to 5.6% of our market capitalization, a level that is more than double the average free cash flow yield of S&P 500 companies and meaningfully above specialty distribution peers. We returned $50 million to shareholders through share repurchases during Q3, reducing our share count by roughly 1 million. Year to date, we've repurchased approximately 2.9 million shares for $140 million, including an additional $43 million deployed so far through Q4. We announced a $500 million increase to our share repurchase authorization this morning, bringing our total capacity to approximately $684 million. Since our 2021 IPO, we have repurchased over 50 million shares, roughly 20% of our original shares outstanding, reflecting our commitment to returning capital to shareholders.

Over the last 12 months, we have generated free cash flow equal to 5.6% of our market capitalization, a level that is more than double the average free cash flow yield of S&P 500 companies and meaningfully above specialty distribution peers. We returned $50 million to shareholders through share repurchases during Q3, reducing our share count by roughly 1 million. Year to date, we've repurchased approximately 2.9 million shares for $140 million, including an additional $43 million deployed so far through Q4. We announced a $500 million increase to our share repurchase authorization this morning, bringing our total capacity to approximately $684 million. Since our 2021 IPO, we have repurchased over 50 million shares, roughly 20% of our original shares outstanding, reflecting our commitment to returning capital to shareholders.

Speaker #2: We returned $50 million to shareholders through share repurchases during the third quarter, reducing our share count by roughly 1 million. Year to date, we've repurchased approximately 2.9 million shares for $140 million, including an additional $43 million deployed so far through the fourth quarter.

Speaker #2: We announced a $500 million increase to our share repurchase authorization this morning, bringing our total capacity to approximately $684 million. Since our 2021 IPO, we have repurchased over 50.

Speaker #1: Shareholders, we remain opportunistic with share repurchases, and our strong cash-generating ability provides ample capacity to continue evaluating organic and inorganic investments to maximize long-term value.

Mark Witkowski: We remain opportunistic with share repurchases, and our strong cash-generating ability provides ample capacity to continue evaluating organic and inorganic investments to maximize long-term value. Turning to our outlook on page nine, we are reaffirming the full-year guidance we issued in September, including 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. Full-year net sales growth is projected at 4 to 5%, excluding the impact of one fewer selling week compared to last year, which represents a roughly 2% headwind for FY25. End market volumes are anticipated to be flat to slightly down for the year, reflecting a low double-digit decline in residential lot development, partially offset by low to mid-single digit growth in municipal volumes and a roughly flat non-residential market.

We remain opportunistic with share repurchases, and our strong cash-generating ability provides ample capacity to continue evaluating organic and inorganic investments to maximize long-term value. Turning to our outlook on page nine, we are reaffirming the full-year guidance we issued in September, including 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. Full-year net sales growth is projected at 4 to 5%, excluding the impact of one fewer selling week compared to last year, which represents a roughly 2% headwind for FY25. End market volumes are anticipated to be flat to slightly down for the year, reflecting a low double-digit decline in residential lot development, partially offset by low to mid-single digit growth in municipal volumes and a roughly flat non-residential market.

Speaker #1: Turning to our outlook on page nine, we are reaffirming the full-year guidance we issued in September, including net sales of $7.6 to $7.7 billion.

Speaker #1: Adjusted EBITDA is expected to be between $920 million and $940 million, with operating cash flow projected at $550 million to $610 million. Full-year net sales growth is anticipated to be 4% to 5%, excluding the impact of one fewer selling week compared to last year, which represents a roughly 2% headwind for FY 2025.

Speaker #1: End volumes are anticipated to be flat to slightly down for the year, reflecting a low double-digit decline in residential lots, partially offset by development.

Speaker #1: low to mid single digit growth in volumes municipal and a roughly flat non-residential market . Pricing is expected to have a neutral impact on sales growth , and we remain on track to deliver 2 to 4 percentage points of above market growth .

Mark Witkowski: Pricing is expected to have a neutral impact on sales growth, and we remain on track to deliver 2 to 4 percentage points of above-market growth. Gross margin is expected to improve year over year, supported by continued private label growth and disciplined purchasing and pricing execution. We have successfully navigated a dynamic environment over the last few years, and I'm extremely proud of how consistently our teams have executed. We've meaningfully expanded our market share while broadening our addressable market through product and service adjacencies. We've demonstrated disciplined pricing, delivered sustainable gross margin expansion, and generated strong free cash flow to reinvest in the business and return capital to shareholders. Our next objective is to convert that momentum into stronger growth and improved SG&A leverage.

Pricing is expected to have a neutral impact on sales growth, and we remain on track to deliver 2 to 4 percentage points of above-market growth. Gross margin is expected to improve year over year, supported by continued private label growth and disciplined purchasing and pricing execution. We have successfully navigated a dynamic environment over the last few years, and I'm extremely proud of how consistently our teams have executed. We've meaningfully expanded our market share while broadening our addressable market through product and service adjacencies. We've demonstrated disciplined pricing, delivered sustainable gross margin expansion, and generated strong free cash flow to reinvest in the business and return capital to shareholders. Our next objective is to convert that momentum into stronger growth and improved SG&A leverage.

Speaker #1: Margin is gross expected to improve year over year, supported by continued private label growth and disciplined purchasing and pricing execution. We have successfully navigated a dynamic environment over the last few years, and I'm extremely proud of how consistently our teams have executed.

Speaker #1: We've meaningfully expanded our market share while broadening our addressable market through product and service adjacencies. We've demonstrated disciplined pricing, delivered sustainable gross margin expansion, and generated strong free cash flow to reinvest in the business and return capital to shareholders.

Speaker #1: Our next objective is to convert that momentum into stronger growth and improved SG&A leverage. We have the management team in place to execute on that plan, supported by a long track record of operational excellence and disciplined cost management.

Mark Witkowski: We have the management team in place to execute on that plan, supported by a long track record of operational excellence and disciplined cost management. We remain confident in the long-term fundamentals of our end markets, and with the strategic investments we've made, combined with our balance sheet flexibility and proven execution, we are well positioned to continue growing above the market through disciplined execution, value-accretive M&A, and the exceptional service that enables us to support our customers and capture new opportunities. With that, we'll open the call for questions. Thank you. As a reminder, if you'd like to ask a question, please press * by 1 on your telephone keypad. If you'd like to remove your question, please press * by 2. Our first question for today comes from Brian Biros of Thompson Research Group. Brian, your line is now open. Please go ahead. Hey, good morning.

We have the management team in place to execute on that plan, supported by a long track record of operational excellence and disciplined cost management. We remain confident in the long-term fundamentals of our end markets, and with the strategic investments we've made, combined with our balance sheet flexibility and proven execution, we are well positioned to continue growing above the market through disciplined execution, value-accretive M&A, and the exceptional service that enables us to support our customers and capture new opportunities. With that, we'll open the call for questions.

Speaker #1: We remain confident in the long-term fundamentals of our end markets. With the strategic investments we've made, combined with our balance sheet and proven execution, we are well positioned with the flexibility to continue growing above the market through disciplined execution, the value of M&A, and the exceptional service that enables us to support our customers and capture new opportunities.

Speaker #1: That, with that, we'll open the call for questions.

Speaker #2: Thank you. As a reminder, if you would like to ask a question, please press star followed by one on your telephone keypad.

Operator: Thank you. As a reminder, if you'd like to ask a question, please press * by 1 on your telephone keypad. If you'd like to remove your question, please press * by 2. Our first question for today comes from Brian Biros of Thompson Research Group. Brian, your line is now open. Please go ahead.

Speaker #2: If you'd like to remove your question, please press star followed by two. Our first question for today comes from Brian Burrows of Thomson Research Group.

Speaker #2: Brian, your line is now open. Please go ahead.

Speaker #3: Hey , good morning . Thank you for taking my questions today . Can you talk about the the large , complex projects that you talked about ?

Brian Biros: Hey good morning. Thank you for taking my questions today. Can you talk about the large, complex projects that you talked about? Do you have any updated market share numbers, growth rates, or kind of revenue exposure numbers? Our understanding from a variety of contacts is that these projects, depending on how you classify them, are seeing growth rates well above other end markets and that distributors still play a critical role in these projects, maybe even more so, as many products are still going through distribution as opposed to OEM direct and helping control the flow of products to the site. So just curious to what you're seeing given the value you provide there to these large, complex projects.

Speaker #3: If you have any updated market share numbers , growth rates or kind of revenue exposure numbers , understanding from a our variety of contexts that these projects , depending on how you classify them , are seeing growth rates .

Mark Witkowski: Thank you for taking my questions today. Can you talk about the large, complex projects that you talked about? Do you have any updated market share numbers, growth rates, or kind of revenue exposure numbers? Our understanding from a variety of contacts is that these projects, depending on how you classify them, are seeing growth rates well above other end markets and that distributors still play a critical role in these projects, maybe even more so, as many products are still going through distribution as opposed to OEM direct and helping control the flow of products to the site. So just curious to what you're seeing given the value you provide there to these large, complex projects. Yeah, Brian, good morning. It's Mark.

Speaker #3: Well above other end markets. And that distributors still play a critical role in these projects, maybe even more so as many products are still going through distribution as opposed to OEM direct, helping control the flow of products to the site.

Speaker #3: So just curious to what you're seeing , the value given you provide there to these large , complex projects .

Speaker #4: Yeah . Brian good morning . It's Mark . You know , we're excited about you know , these complex projects and particular the data center activity that we've seen out And for a number of there .

Mark Witkowski: Yeah Brian good morning. It's Mark we're excited about these complex projects, in particular the data center activity that we've seen out there for a number of reasons, and some of which you mentioned there. I mean, these fit really right into our value proposition where these local relationships with the underground contractors really matter. They really rely on that local distribution to get them all the products that they need. And that's when scale really comes into play as well and having access to all the material that they need to really be that one-stop shop for our customers. So it really becomes critical, the ability to be able to timely supply all the products that they need. The pace of these projects is quick, as you can imagine. And we're in a really good position just given our geographic diversity to capture a lot of that business.

Mark Witkowski: We're excited about these complex projects, in particular the data center activity that we've seen out there for a number of reasons, and some of which you mentioned there. I mean, these fit really right into our value proposition where these local relationships with the underground contractors really matter. They really rely on that local distribution to get them all the products that they need. And that's when scale really comes into play as well and having access to all the material that they need to really be that one-stop shop for our customers. So it really becomes critical, the ability to be able to timely supply all the products that they need. The pace of these projects is quick, as you can imagine. And we're in a really good position just given our geographic diversity to capture a lot of that business.

Speaker #4: reasons . And some of which you mentioned there , I mean , these fit really right into our value proposition , where these local relationships with the underground contractors really matter .

Speaker #4: They really rely on that local distribution to get the products that they need. And that's when scale really comes into play as well.

Speaker #4: And having access to all the material that they need to really be that one stop shop for , for our customers . So it really becomes critical .

Speaker #4: The ability to timely supply all the products that need to be supplied. The pace of these projects is as quick as you can imagine.

Speaker #4: And you know , we're in a really good position just given our geographic diversity to capture a lot of that business . And , you know , I gave that example on the call about a market that , you know , Robin and I recently visited about a year ago to really see this in action .

Mark Witkowski: And I gave that example on the call about a market that Robyn and I recently visited about a year ago to really see this in action and on-site. And talking to the customers there about really the value proposition and how they rely on our consistent and quality service that we provide really puts us in a great position then as these projects pop up in other markets. And in many cases, those customers travel to the next project, and we're really in a great position to capture that. So yeah, we've seen really good growth in the communities where these pop up. I'd say, as I mentioned, this is still kind of a low single-digit overall exposure for us, but we've seen it grow rapidly. And like I said, really excited about really the growth that that's driving in that space.

And I gave that example on the call about a market that Robyn and I recently visited about a year ago to really see this in action and on-site. And talking to the customers there about really the value proposition and how they rely on our consistent and quality service that we provide really puts us in a great position then as these projects pop up in other markets. And in many cases, those customers travel to the next project, and we're really in a great position to capture that. So yeah, we've seen really good growth in the communities where these pop up. I'd say, as I mentioned, this is still kind of a low single-digit overall exposure for us, but we've seen it grow rapidly. And like I said, really excited about really the growth that that's driving in that space.

Speaker #4: And talking to the customers there about really the value proposition and how they rely on our consistent and quality service that we provide.

Speaker #4: Really puts us in a great as these position . Then , projects pop up in other markets and in many cases , those customers travel to the next project .

Speaker #4: We're really in a great position to capture that. So, yeah, we've seen really good growth in the communities where these pop up.

Speaker #4: I'd say, you know, as I mentioned, this is still a low kind of a single-digit overall exposure for what we've seen it grow us.

Speaker #4: rapidly and But like I said , really excited about , you know , really the growth that that's driving in that space . I'd say in addition , what we see is these projects typically put a lot of demands on the water systems .

Speaker #4: That does a couple of things. One, it increases the value of water. And a lot of these communities, which puts money back into the system for further investment.

Mark Witkowski: I'd say in addition, what we see is these projects typically put a lot of demands on the water systems. That does a couple of things. One, it increases the value of water in a lot of these communities, which puts money back into the communities for further investment, and then obviously puts a strain on the systems as well, which requires additional investment, typically some of which is done by the companies that are building these projects and then turned over to the municipalities. So we've just really seen a lot of characteristics there that drive some long-term demand for us, and I'm excited about that. It'll be interesting to see where that goes over the next few years. Like I said, on the guidance, it looks like it's largely maintained.

I'd say in addition, what we see is these projects typically put a lot of demands on the water systems. That does a couple of things. One, it increases the value of water in a lot of these communities, which puts money back into the communities for further investment, and then obviously puts a strain on the systems as well, which requires additional investment, typically some of which is done by the companies that are building these projects and then turned over to the municipalities. So we've just really seen a lot of characteristics there that drive some long-term demand for us, and I'm excited about that.

Speaker #4: communities And then obviously puts a strain on systems the as well , which requires additional investment . Typically , some of which is done by the by the companies that are building these projects .

Speaker #4: And then turned over to the municipality. So we've just really seen a lot of characteristics there that drive some long-term demand for us.

Speaker #4: And I'm excited about.

Speaker #3: be And interesting to see where that that next goes over the few years , I guess . Then on on the looks guidance like it's maintained , largely but I think the municipal raised outlook was slightly now expected to be low up single digits to mid-single digits or last quarter looked like it was just low single digits it's just what's maybe causing that slight raise .

Brian Biros: It'll be interesting to see where that goes over the next few years. Like I said, on the guidance, it looks like it's largely maintained. I think the municipal outlook was raised slightly, now expected to be up low single digits to mid-single digits, where last quarter looked like it was just low single digits. To me, it was just what's causing that slight raise. Is that just a short-term timing kind of for Q4, or is that maybe signaling we could see an improved municipal market into the mid-single digits going forward for you guys? Thank you.

Mark Witkowski: I think the municipal outlook was raised slightly, now expected to be up low single digits to mid-single digits, where last quarter looked like it was just low single digits. To me, it was just what's causing that slight raise. Is that just a short-term timing kind of for Q4, or is that maybe signaling we could see an improved municipal market into the mid-single digits going forward for you guys? Thank you. Yeah, thanks, Brian. We have a lot of confidence in our municipal end market. There's significant funding going in there at all levels. So on the federal side, there's still ample funding coming in at those levels. Very little of the IIJA spending has been spent really at all. The municipalities are using a lot of local water funds to support their projects, and we're seeing them increase rates to customers there.

Speaker #3: Is that and just so short-term timing kind of for Q4, or is it maybe signaling that we could see an improved municipal market into the mid-single digits going forward for you guys?

Speaker #3: Thank you .

Speaker #1: We have a Yeah . Thanks , Brian . lot of confidence in our municipal end market . There's significant funding going in there all at all levels .

Robyn Bradbury: Yeah, thanks, Brian. We have a lot of confidence in our municipal end market. There's significant funding going in there at all levels. So on the federal side, there's still ample funding coming in at those levels. Very little of the IIJA spending has been spent really at all. The municipalities are using a lot of local water funds to support their projects, and we're seeing them increase rates to customers there.

Speaker #1: So on the federal side, there's still ample funding coming in at those levels. Very little of the IIJA spending has been spent really at all.

Speaker #1: We've seen municipalities using a lot of local water funds to support their projects, and we're seeing them increase rates to customers there.

Speaker #1: So there's good tailwinds there. And then, as Marc mentioned in the prepared remarks, there's a lot of state-level funding going out to support municipalities as well.

Mark Witkowski: So there's good tailwinds there. And then, like Mark mentioned in the prepared remarks, there's a lot of state-level funding going out to support municipalities as well. So did lift it a little bit, but just feel really good about the municipal end market over the short-term, medium-term, long-term. Got it. Pass it along. Thank you. Thank you. Our next question comes from Matthew Bouley of Barclays. Your line is now open. Please go ahead. Good morning, everyone. Thank you for taking the questions. I wanted to follow up on the end market side. Obviously, you just touched on Muni. What I'm getting at is if you have any kind of early thoughts on 2026. So given where municipal is, I think I heard you say residential might have been some signs of stabilization in Q3.

So there's good tailwinds there. And then, like Mark mentioned in the prepared remarks, there's a lot of state-level funding going out to support municipalities as well. So did lift it a little bit, but just feel really good about the municipal end market over the short-term, medium-term, long-term.

Speaker #1: So you know, it did lift it a little bit. But I just feel really good about the municipal end market over the short term, medium term, and long term.

Speaker #3: Pass along . Thank you .

Speaker #2: Thank you. Our call will be led by Mark Witkowski of Barclays. Your line is now open. Please go ahead.

Brian Biros: Got it. Pass it along. Thank you.

Operator: Thank you. Our next question comes from Matthew Bouley of Barclays. Your line is now open. Please go ahead.

Speaker #5: Good morning, everyone. Thank you for taking the time. I wanted to follow up on the end market questions side. Obviously, you just touched on Muni.

Matthew Bouley: Good morning, everyone. Thank you for taking the questions. I wanted to follow up on the end market side. Obviously, you just touched on Muni. What I'm getting at is if you have any kind of early thoughts on 2026. So given where municipal is, I think I heard you say residential might have been some signs of stabilization in Q3. Then obviously, you got non-rez where it sounds like the data center piece is driving things. So just, I don't know, any help on kind of early thoughts and directional trends into 2026 there? Thank you.

Speaker #5: What I'm getting if you have any kind of early thoughts on 2026 . So , you know , given where municipal is , I think I heard you say residential might , might have been some signs of stabilization in Q3 .

Speaker #5: Then you non-res obviously got it where it sounds like the centerpiece is driving things. The data, so just I don’t know, any help on kind of early thoughts and directional trends into 2026 there.

Mark Witkowski: Then obviously, you got non-rez where it sounds like the data center piece is driving things. So just, I don't know, any help on kind of early thoughts and directional trends into 2026 there? Thank you. Yeah, thanks, Matt. Good morning. It's Mark. Yeah, as Robyn touched on, in terms of the municipal end market, we continue to see that as really strong, steady growth for us as we wrap up 2025 and into 2026 and beyond. Non-residential for us, like we've talked about on previous calls, it's a mixed bag there. We've seen some really good strength in areas like these more complex projects that we see. And then there's been pockets of softness with lighter commercial business that tends to follow some of the residential activity. So as we think about the resi side, obviously, we're watching rates closely.

Speaker #5: Thank you

Speaker #5: .

Speaker #4: morning . It's Yeah . Good Mark . Yeah . As touched on Robin terms of the in municipal end market . We continue to see that really as strong steady growth for us as we wrap up 2025 and into into 2026 .

Mark Witkowski: Yeah, thanks, Matt. Good morning. It's Mark. Yeah, as Robyn touched on, in terms of the municipal end market, we continue to see that as really strong, steady growth for us as we wrap up 2025 and into 2026 and beyond. Non-residential for us, like we've talked about on previous calls, it's a mixed bag there. We've seen some really good strength in areas like these more complex projects that we see. And then there's been pockets of softness with lighter commercial business that tends to follow some of the residential activity. So as we think about the resi side, obviously, we're watching rates closely.

Speaker #4: And beyond know . You know , , nonresidential , you for us is , you know , like we've talked about on previous calls , it's a mixed bag there .

Speaker #4: seen We've some some really good strength in areas like these more complex projects that we we see . that And then there's been , pockets of softness with the , you know , lighter commercial business that tends to follow some of the residential activity , you know , so as we think about , you know , the resi side , obviously we're watching rates closely .

Speaker #4: There's more decisions here coming up from the fed in December . And we'll see what you know what they touch on in terms of the outlook .

Speaker #4: So we want to see a little more on that front before we, you know, call residential as we go forward.

Mark Witkowski: There's more decisions here coming up from the Fed in December, and we'll see what they touch on in terms of the outlook. So we want to see a little bit more on that front before we call residential as we go forward. It clearly softened into the second half of the year, which we warned people about earlier this year. So we're likely to see maybe a bit of a headwind as we start off 2026. But just given the overall levels of residential, I think we've covered most of that risk for any further softening of that. I would expect that at some point here, that pent-up demand is going to release, and we'll be back into really good residential growth that could then spur some of that additional commercial development.

There's more decisions here coming up from the Fed in December, and we'll see what they touch on in terms of the outlook. So we want to see a little bit more on that front before we call residential as we go forward. It clearly softened into the second half of the year, which we warned people about earlier this year. So we're likely to see maybe a bit of a headwind as we start off 2026. But just given the overall levels of residential, I think we've covered most of that risk for any further softening of that. I would expect that at some point here, that pent-up demand is going to release, and we'll be back into really good residential growth that could then spur some of that additional commercial development.

Speaker #4: It clearly , you know , softened into the second half of the year , which you know , we warn people at we earlier this year .

Speaker #4: So you know , we're likely see maybe a bit of to a headwind as we start off 2026 . But just given the overall levels of residential , I think I think we've covered most of that risk for , you know , any further softening of that would expect that , you know , at some point here that pent up demand is going to release .

Speaker #4: And , you know , back we'll be really good into residential growth that could then spur some of that additional commercial development . And I think on top of kind of continued investment of these data centers , I don't see that slowing down here anytime soon .

Speaker #4: That , you know , really good provides a backdrop here at at some point when we see that market resi release .

Mark Witkowski: And I think on top of kind of continued investment of these data centers, I don't see that slowing down here anytime soon. That provides a really good backdrop here at some point when we see that resi market release. Okay. Got it. No, thanks for that, Mark. Second one, kind of jumping into the margins, obviously a solid gross margin result there, above 27%. So if I heard you correctly, I think you said SG&A would be down $25 million sequentially in Q4. And correct me if I'm wrong, but that seems to imply the gross margin probably ends up fairly similar sequentially. So I'm just curious if this kind of 27% level is sort of a new normal here and any sort of additional color there on what's driving the strength there. Thank you. Yeah, sure, Matt. I'll take that one. So you're right.

And I think on top of kind of continued investment of these data centers, I don't see that slowing down here anytime soon. That provides a really good backdrop here at some point when we see that resi market release.

Speaker #5: it . No thanks for that . Okay . Mark Got . Second one kind of jumping into the margins . Obviously a solid gross margin there result above 27% .

Matthew Bouley: Okay. Got it. No, thanks for that, Mark. Second one, kind of jumping into the margins, obviously a solid gross margin result there, above 27%. So if I heard you correctly, I think you said SG&A would be down $25 million sequentially in Q4. And correct me if I'm wrong, but that seems to imply the gross margin probably ends up fairly similar sequentially. So I'm just curious if this kind of 27% level is sort of a new normal here and any sort of additional color there on what's driving the strength there. Thank you.

Speaker #5: So, if I heard you correctly, I think you said SG&A would be down sequentially by $25 million in Q4. And correct me if I'm wrong, but that seems to imply that the margin gross, you know, ends up probably fairly similar sequentially.

Speaker #5: So I'm just curious if this 27% level kind is normal, and sort of a year in any additional color there. What's driving the there?

Speaker #5: strength Thank .

Speaker #5: you Yeah , sure .

Speaker #1: one . Matt I'll take that So you're really right , we had strong gross performance in the driven quarter by in our growth margin private label initiative .

Robyn Bradbury: Yeah, sure, Matt. I'll take that one. So you're right. We had really strong gross margin performance in Q3 driven by growth in our private label initiative. We did a really good job with some purchasing and pricing execution in Q3. And we do expect to be able to continue to enhance gross margins from here, leveraging some of those margin initiatives that we've talked about. Gross margin in Q4 should be. It's probably going to be more in the range between Q2 and Q3. Q3 will probably be a little bit higher, maybe the peak level for the year, as it can move around a little bit. But expecting a good result in Q4 for gross margins, expecting you're right, expecting to bring SG&A down by about $25 million as we start to recognize some of the cost actions that we've done already.

Speaker #1: a really good job We did with some purchasing and execution in pricing the quarter . And we do expect to be able to continue to enhance gross from here , leveraging some of those margin initiatives that that we've talked about , margin in the gross fourth quarter should know , it's be , you going to be more in probably the range between the second and third quarter .

Mark Witkowski: We had really strong gross margin performance in Q3 driven by growth in our private label initiative. We did a really good job with some purchasing and pricing execution in Q3. And we do expect to be able to continue to enhance gross margins from here, leveraging some of those margin initiatives that we've talked about. Gross margin in Q4 should be. It's probably going to be more in the range between Q2 and Q3. Q3 will probably be a little bit higher, maybe the peak level for the year, as it can move around a little bit. But expecting a good result in Q4 for gross margins, expecting you're right, expecting to bring SG&A down by about $25 million as we start to recognize some of the cost actions that we've done already.

Speaker #1: Third quarter will be a little bit probably higher . peak Maybe the the year , as it can around a move little bit , but expecting a good result in fourth quarter for gross margins , expecting , you're right , the to down SG&A by about start to 25 million as we recognize some of the cost actions that we've done already .

Speaker #1: So it should a good be result there . And then we expect to , like I said , continue to expand . margins annually from Gross there .

Speaker #1: It might not be exactly perfect on an annual basis, but we expect that expansion to get sequentially better every quarter.

Mark Witkowski: So it should be a good result there. Then we expect to, like I said, continue to expand gross margins annually from there. It might not be exactly perfect sequentially every quarter, but on an annual basis, we expect to get that expansion. Great. Thanks, Robyn. Good luck, guys. Thank you. Our next question comes from David Manthey of Baird. Your line is now open. Please go ahead. Thank you. Good morning, everyone. First question on the top line. Last quarter, you had said you expected residential to continue to soften through H2. And Robyn, if I heard you right, you said you're seeing stabilization at the end of Q3. I don't want to read too much into that. And I know it's not getting stronger, but is that a slightly more optimistic residential view than you were expecting 90 days ago? Yeah. Thanks, Dave.

So it should be a good result there. Then we expect to, like I said, continue to expand gross margins annually from there. It might not be exactly perfect sequentially every quarter, but on an annual basis, we expect to get that expansion.

Speaker #5: Great. Robin, good luck, guys.

Speaker #6: .

Matthew Bouley: Great. Thanks, Robyn. Good luck, guys.

Speaker #2: you . Yeah Our next Thank comes from Manthey of David question Baird . now Your line is open . Please go ahead .

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

Speaker #7: Good Thank you . morning everyone . First question the line . Last quarter you had top said you residential to expected to soften the second half .

David Manthey: Thank you. Good morning, everyone. First question on the top line. Last quarter, you had said you expected residential to continue to soften through H2. And Robyn, if I heard you right, you said you're seeing stabilization at the end of Q3. I don't want to read too much into that. And I know it's not getting stronger, but is that a slightly more optimistic residential view than you were expecting 90 days ago?

Speaker #7: And through right, heard you, Robyn. If I’m hearing you right, you said you see the end of stabilization at the end of the third quarter. I don’t want to read too much into that.

Speaker #7: I know it's not, and I am stronger; it's that but slightly optimistic, more residential view than you were expecting 90 days ago?

Speaker #1: Yeah . Thanks , Dave . You know , for resi , we started to see like we talked about last quarter call . We really that to see started soften at the end of July .

Robyn Bradbury: Yeah, thanks Dave. For resi, we started to see, like we talked about on the last quarter call, we really started to see that soften at the end of July, and it really continued into August, September, and October. So for the full quarter, it was soft, and it was down in that kind of low double digits to mid-teens range for the quarter. I wouldn't say we've seen good movement there. We've just seen it kind of soften as homebuilders were developing less lots, awaiting some better affordability and some better demand there. So not a lot of movement during the quarter, but it did really perform in line with what we expected. We started to see some of that soften late last quarter and saw that continue throughout the quarter.

Mark Witkowski: For resi, we started to see, like we talked about on the last quarter call, we really started to see that soften at the end of July, and it really continued into August, September, and October. So for the full quarter, it was soft, and it was down in that kind of low double digits to mid-teens range for the quarter. I wouldn't say we've seen good movement there. We've just seen it kind of soften as homebuilders were developing less lots, awaiting some better affordability and some better demand there. So not a lot of movement during the quarter, but it did really perform in line with what we expected. We started to see some of that soften late last quarter and saw that continue throughout the quarter. Okay. Thank you.

Speaker #1: And at really continued August , into September and October . So for the full quarter was , it it was soft and it was down in that kind of low double digits to mid-teens range the for quarter .

Speaker #1: I wouldn't say we've seen good there. We've just seen movement; it kind of softened as homebuilders were developing less, lots of awaiting some better affordability demand there.

Speaker #1: Some better and a lot of not so movement during the quarter, but it did really perform in line with what we expected.

Speaker #1: We started to see some of that soften late in the quarter and throughout the continuing quarter last.

Speaker #1: We saw some of that soften late in the quarter throughout the continuing quarter last that.

Speaker #7: Thank you, Gross. Regarding second quarter margins with private label at mix, it doesn't seem like a large move, enough to move the needle.

Speaker #7: And you .

David Manthey: Okay, thank you. And second on gross margin, with private label at 5% of the mix, it doesn't seem large enough to move the needle. I know you talk about it a lot, and I'm sure there's a wide disparity between all other products and private label. But could you maybe talk about the magnitude of that in terms of stack ranking relative to gross margin benefit? And then you mentioned some of the other sourcing and pricing initiatives. Could you really lean into those a little bit and give us an idea of maybe some of those other buckets that are lifting gross margin and how much opportunity remains in the coming, say, one to three years?

Mark Witkowski: And second on gross margin, with private label at 5% of the mix, it doesn't seem large enough to move the needle. I know you talk about it a lot, and I'm sure there's a wide disparity between all other products and private label. But could you maybe talk about the magnitude of that in terms of stack ranking relative to gross margin benefit? And then you mentioned some of the other sourcing and pricing initiatives. Could you really lean into those a little bit and give us an idea of maybe some of those other buckets that are lifting gross margin and how much opportunity remains in the coming, say, one to three years? Yeah, sure. So private label is a big driver for us. And I would say in the quarter, a good portion of that was driven by private label growth.

Speaker #7: I know you talk about it a lot, and I'm sure there's a wide disparity between all other products and label, but could you talk about the magnitude of that in terms of stack ranking relative to gross margin and then benefit?

Speaker #7: you mentioned And some of the other the sourcing pricing and initiatives . Could really into those a little lean bit and give us an idea of maybe some of those other buckets that are lifting gross you and how much margin , remains in opportunity coming , say , 1 to 3 years ?

Speaker #1: Yeah , sure . So is label private a driver for us . And I would say the in quarter , big you know , a good portion of that was private label And growth .

Robyn Bradbury: Yeah, sure. So private label is a big driver for us. And I would say in the quarter, a good portion of that was driven by private label growth.

Speaker #1: driven by then , you other less than half was half or driven by our , you know , really strong execution on purchasing and pricing private label has and expanded our margins .

Mark Witkowski: And then the other half or less than half was driven by our really strong execution on purchasing and pricing. And private label has expanded our margins, I would say, pretty significantly over the last several years since we started getting into this and driving the growth there. So we're really happy with the 5% of sales that we will have at the end of this year. Our long-term target there is in that 10% to 15% range. So lots of opportunity to continue to expand there. As we move forward into the upcoming years, I would say private label is going to still be a pretty big driver there. We think that can drive something like 10 to 20 basis points a year. Some of our sourcing initiatives can drive additional margin enhancement on top of that.

And then the other half or less than half was driven by our really strong execution on purchasing and pricing. And private label has expanded our margins, I would say, pretty significantly over the last several years since we started getting into this and driving the growth there. So we're really happy with the 5% of sales that we will have at the end of this year. Our long-term target there is in that 10% to 15% range. So lots of opportunity to continue to expand there. As we move forward into the upcoming years, I would say private label is going to still be a pretty big driver there. We think that can drive something like 10 to 20 basis points a year. Some of our sourcing initiatives can drive additional margin enhancement on top of that.

Speaker #1: I would say pretty significantly over the last several years since, you know, started into getting this and driving the growth there.

Speaker #1: So we were really happy with the 5% of sales that we will have at the end of the term year. Long is in the 10% to 15% range.

Speaker #1: So lots of opportunity to continue to expand . There as we move forward know , into , you upcoming years . I would say private going to still be pretty big driver label is there .

Speaker #1: I think that I can drive, you know, something like 10 to 20 basis points a year. Our some of initiatives sourcing can drive additional enhancement on top of margin that.

Speaker #1: those are we have a lot of areas that confidence and So ability to continue to the margin improvement drive . Sourcing is a lot of , you know , managing the relationships our suppliers and with you know , our spend , shifting as spend us in the positioning marketplace .

Mark Witkowski: So those are areas that we have a lot of confidence and ability to continue to drive the gross margin improvement. Sourcing is a lot of managing the relationships with our suppliers and shifting our spend, whereas best positioning us in the marketplace. And then on the purchasing side, we did a really nice job this year of buying ahead of price increases, similar to how we always do. We see price increases come into the market kind of in the early spring timeframe. And we're always constantly managing our inventory to make sure we're optimizing margin as much as possible. Terrific. Thank you. Thanks, Dave. Thank you. Our next question comes from Nigel Coe of Wolfe Research. The line is now open. Please go ahead. Thanks. Good morning, guys. Just want to go back to SG&A.

So those are areas that we have a lot of confidence and ability to continue to drive the gross margin improvement. Sourcing is a lot of managing the relationships with our suppliers and shifting our spend, whereas best positioning us in the marketplace. And then on the purchasing side, we did a really nice job this year of buying ahead of price increases, similar to how we always do. We see price increases come into the market kind of in the early spring timeframe. And we're always constantly managing our inventory to make sure we're optimizing margin as much as possible.

Speaker #1: And then on the we did purchasing side , a really this job year of buying ahead of price increases , similar to how we always see price do .

Speaker #1: into the market kind of in the in the early timeframe . And we're spring managing our constantly inventory to make sure we're always margin as We possible optimizing .

Speaker #7: Terrific . you Thank .

Speaker #1: Thanks , Dave .

David Manthey: Terrific. Thank you. Thanks, Dave.

Speaker #2: Thank you . question Our next from Nigel of Wolfe comes Research . Coe The line is now Please ahead go

Operator: Thank you. Our next question comes from Nigel Coe of Wolfe Research. The line is now open. Please go ahead.

Speaker #2: .

Speaker #8: . Just want to go back to SG&A Thanks . Good guys guide for for the So does Q that fully the run embed rate of SG&A savings that , $30 million analyzes , baked into that fully for Q and then , you know , on the one hand , you're talking about , you know , very you're running lean , now right .

Nigel Coe: Thanks. Good morning, guys. Just want to go back to SG&A. So the guide for Q4, does that fully embed the run rate of SG&A savings, that $30 million annualized, is that fully baked into Q4? And then on the one hand, you're talking about you're running very lean right now. But then I think the slide, and you referenced this, you're exploring further opportunities. I'm just actually wondering what kind of direction you're moving in terms of looking at further productivity.

Mark Witkowski: So the guide for Q4, does that fully embed the run rate of SG&A savings, that $30 million annualized, is that fully baked into Q4? And then on the one hand, you're talking about you're running very lean right now. But then I think the slide, and you referenced this, you're exploring further opportunities. I'm just actually wondering what kind of direction you're moving in terms of looking at further productivity. Yep. Yeah, sure. Nigel, thanks for the question. So the $30 million, a lot of that will hit in Q4 from a run rate perspective, not all of it. I would say it's probably going to be more in the kind of $5 million range of SG&A savings impact in the fourth quarter from some of the actions that we've taken. Some of them will go into effect.

Speaker #8: and you But referenced slides think the exploring further just wondering what direction kind of moving in in terms at you're further of looking productivity .

Speaker #6: Yeah .

Speaker #1: sure . the Nigel , thanks for question . Yeah , So the $30 million , a that will hit in a run rate perspective , lot of Q4 from not all of it .

Robyn Bradbury: Yep. Yeah, sure. Nigel, thanks for the question. So the $30 million, a lot of that will hit in Q4 from a run rate perspective, not all of it. I would say it's probably going to be more in the kind of $5 million range of SG&A savings impact in the fourth quarter from some of the actions that we've taken. Some of them will go into effect.

Speaker #1: I would say it's probably going to kind of $5 million more in savings impact in the fourth quarter from some of the actions that we've taken.

Speaker #1: of them Some will go into We've effect . changes , executed realize but we'll more of the savings FY in 26 . we won't get the full run rate on the in in So But we'll Q4 .

Mark Witkowski: We've executed on the changes, but we'll realize more of the savings in FY26. So we won't get the full run rate in Q4, but we'll get the full run rate into FY26. And then remind me of your second question, Nigel. Yeah. The second part of the question was really around, on the one hand, you're talking about you're running very lean. You're not going to sacrifice growth initiatives, etc. But then you also then talk about other productivity actions that you're exploring. So I'm just wondering what direction you see above and beyond that $30 million. Yeah, sure. Yeah. And we do. If you compare us to others, we do have a very efficient SG&A rate already. We haven't gotten the operating leverage that we expected lately. And so that's where the cost-out actions came from.

We've executed on the changes, but we'll realize more of the savings in FY26. So we won't get the full run rate in Q4, but we'll get the full run rate into FY26. And then remind me of your second question, Nigel.

Speaker #1: Run full, get the rate into 26. And then remind me of your second question, FY Nigel.

Speaker #8: Yeah , the second part of the question really was , was around , know , on one hand , you're you talking about you're running very lean , you know , you're not going to sacrifice growth initiatives , then you etc.

Nigel Coe: Yeah. The second part of the question was really around, on the one hand, you're talking about you're running very lean. You're not going to sacrifice growth initiatives, etc. But then you also then talk about other productivity actions that you're exploring. So I'm just wondering what direction you see above and beyond that $30 million.

Speaker #8: also then about other , you know , but , productivity , you know , actions that exploring . So I'm just you're wondering what you you know , above and beyond see , that direction $30 million .

Speaker #9: Yeah ,

Speaker #1: do . And we

Speaker #1: we , you know , if We , you compare us to do have others , we a sure . efficient Yeah . very G&A already .

Speaker #1: we , you know , if We , you compare us to do have others , we a sure . efficient Yeah . very G&A rate We haven't gotten the operating that we expected leverage lately .

Robyn Bradbury: Yeah, sure. Yeah. And we do. If you compare us to others, we do have a very efficient SG&A rate already. We haven't gotten the operating leverage that we expected lately. And so that's where the cost-out actions came from.

Speaker #1: And so that's where the cost-out actions came from. We do have a number of things that we're working on to gain additional productivity.

Speaker #1: And in to addition the actions that cost we've already taken , and a lot of that stems around technology to make us more efficient , service our to customers , to better , automate more in the back office .

Mark Witkowski: We do have a lot of things that we're working on to gain additional productivity in addition to the cost-out actions that we've already taken. And a lot of that stems around technology to make us more efficient, to service our customers better, to automate more in the back office. And so we have made some investments in technology that we believe will result in further productivity and help us get that SG&A leverage starting into next year. Okay. I'll leave it there. Thanks. Thank you. Our next question comes from Joe Ritchie of Goldman Sachs. Your line is now open. Please go ahead. Hi. Good morning, guys. Good morning, Jeff. So I wanted to touch on the private label discussion again.

We do have a lot of things that we're working on to gain additional productivity in addition to the cost-out actions that we've already taken. And a lot of that stems around technology to make us more efficient, to service our customers better, to automate more in the back office. And so we have made some investments in technology that we believe will result in further productivity and help us get that SG&A leverage starting into next year.

Speaker #1: And we have made some investments in technology that we believe will further productivity and help us achieve that SG&A leverage starting in next year.

Speaker #1: .

Speaker #8: Okay . I'll Thanks . leave it there .

Speaker #2: you . Our next question comes from Joe Ritchie of Sachs . Your line is now Goldman open . Thank Please .

Nigel Coe: Okay. I'll leave it there. Thanks.

Operator: Thank you. Our next question comes from Joe Ritchie of Goldman Sachs. Your line is now open. Please go ahead.

Speaker #10: Good morning guys Hi .

Speaker #10: . So I ahead to touch on the private label discussion again the . Can you maybe just elaborate on what is on the constraint moving private potentially label in that initiative faster ?

Joe Ritchie: Hi. Good morning, guys.

Robyn Bradbury: Good morning, Jeff.

Joe Ritchie: So I wanted to touch on the private label discussion again. Can you just maybe just elaborate on what the constraint is on potentially moving private label in that initiative faster since you are seeing some good gains from that? And then where are you seeing the biggest penetration across your product lines or systems?

Mark Witkowski: Can you just maybe just elaborate on what the constraint is on potentially moving private label in that initiative faster since you are seeing some good gains from that? And then where are you seeing the biggest penetration across your product lines or systems? Yeah, Joe. Hey, it's Mark. Thanks for the question. Yeah. And I would tell you on private label, we've been really pleased with the progress that we've made there. We've expanded our capabilities there pretty significantly. Things that you need to continue to grow it at that pace obviously include a lot of the product work that's done. We've got great engineers and researchers that help us on that product development that has to be sourced and vetted to continue to advance that through the system.

Speaker #10: Since you are seeing some good some gains from that . And then where are good you seeing the biggest penetration product lines or systems ?

Speaker #4: Yeah , Hey , Joe . it's Mark . Thanks for the question . You I would tell you on know , we've been pleased with the progress that really we've made there .

Mark Witkowski: Yeah, Joe. Hey, it's Mark. Thanks for the question. Yeah. And I would tell you on private label, we've been really pleased with the progress that we've made there. We've expanded our capabilities there pretty significantly. Things that you need to continue to grow it at that pace obviously include a lot of the product work that's done. We've got great engineers and researchers that help us on that product development that has to be sourced and vetted to continue to advance that through the system.

Speaker #4: We've expanded , our capabilities you know , there pretty significantly . You know , things that you need , you know , to continue you know , grow it at that to , pace .

Speaker #4: include a lot of the product work that's We've got great . You know , engineers and researchers that help help that us on product development .

Speaker #4: to be That has sourced and vetted , you know , to continue to advance that through the system . You know , you need the logistics capabilities .

Speaker #4: So we continue to invest in distribution space and facilities and equipment to, you know, work all that product through the system. Obviously, customer acceptance on that side.

Mark Witkowski: You need the logistics capabilities so we continue to invest in distribution space, facilities, and equipment to work all that product through the system. Obviously, you need some customer acceptance on that side. So these are all kind of well-ingrained processes that we have to continue to expand that and has really been the key piece to, as Robyn mentioned, to allow us to expand gross margins here over the past few years. So we've got continued opportunities there. That's a big part of what we continue to look at. I'd say we've got a really solid plan over the next two to three years to expand that. I think a pace of a point or so a year is something that we felt is achievable and something that we've been able to deliver historically.

You need the logistics capabilities so we continue to invest in distribution space, facilities, and equipment to work all that product through the system. Obviously, you need some customer acceptance on that side. So these are all kind of well-ingrained processes that we have to continue to expand that and has really been the key piece to, as Robyn mentioned, to allow us to expand gross margins here over the past few years.

Speaker #4: So needs these are kind of all ingrained well we processes that have to continue to expand that . And has really been the key piece to , you know , as Robin allow us mentioned , to to expand gross margins here over the few years .

Speaker #4: So we've got continued opportunities That's a there . big part of , you know , we continue to what look at . we've got a really I'd say solid plan over the next to 2 to 3 years I expand that .

So we've got continued opportunities there. That's a big part of what we continue to look at. I'd say we've got a really solid plan over the next two to three years to expand that. I think a pace of a point or so a year is something that we felt is achievable and something that we've been able to deliver historically.So we'll continue to work down those paths, and I think you should expect to see that growth as we move forward.

Speaker #4: The pace of a point or so is something that we felt is a year, and it's achievable—something that we have been able to deliver historically.

Speaker #4: So we'll we'll continue to work down know , those paths . think you'll And I should expect to that see growth as we move as we forward .

Mark Witkowski: So we'll continue to work down those paths, and I think you should expect to see that growth as we move forward. Got it. That's helpful, Mark. And then I guess my following question, look, it's interesting to hear you talking about the data center opportunity. Clearly, that is going to continue to accelerate, and there's a lot of momentum in the market. I guess as you think about your positioning, your capabilities, whether you need to make investments in certain regions in order to participate in a more meaningful way going forward, maybe just kind of talk a little bit through whether there is additional investment that's necessary. And then also to some degree, why it's such a small portion of your business today, given that there has been development over the last few years. Yeah. Thanks, Joe.

Speaker #10: Got That's it . helpful then I Mark . guess And my follow on it's question . interesting Look , to you hear talking data about the .

Speaker #10: Got That's it . helpful then I Mark . guess And my follow on it's question . interesting Look , to you hear talking data about the center opportunity that that you know , accelerate .

Joe Ritchie: Got it. That's helpful, Mark. And then I guess my following question, look, it's interesting to hear you talking about the data center opportunity. Clearly, that is going to continue to accelerate, and there's a lot of momentum in the market. I guess as you think about your positioning, your capabilities, whether you need to make investments in certain regions in order to participate in a more meaningful way going forward, maybe just kind of talk a little bit through whether there is additional investment that's necessary. And then also to some degree, why it's such a small portion of your business today, given that there has been development over the last few years.

Speaker #10: continue to lot of momentum And there's a in the market , I guess , as think about your you your positioning , capabilities , you know , whether make investments in certain you need to order to regions in participate in more meaningful way .

Speaker #10: a Going forward , maybe just kind of bit talk a little through whether additional there is investment that's necessary . also , you know , And , and then degree , to some why it's such a small portion of your business today , been over the there has years development .

Speaker #10: last few

Speaker #4: Joe . Thanks , Yeah . I you know , You know , relates to the as it think , you know , we've in a lot obviously projects of throughout the know , country .

Mark Witkowski: Yeah. Thanks, Joe. As it relates to the scale, I think we obviously participate on a lot of projects all throughout the country, large-scale water replacement projects, other types of commercial and residential development. So this is still a good and important part of our business that's growing rapidly. I would tell you we're always looking to make additional investments and improve our market position across the country, but we've got a great foundation. We have a broad geographic reach. So wherever these hyperscalers go to make these investments, we're always in a good kind of foundational position based on the local relationships that we have. It's still very much a local business. It's typically some of our best customers that are working on these types of projects because they're so critical to those developers to be successful.

Speaker #4: large participated all You scale replacement water projects , other types of and residential commercial development . So is , you this still a good and important part of our business that's growing rapidly .

Mark Witkowski: As it relates to the scale, I think we obviously participate on a lot of projects all throughout the country, large-scale water replacement projects, other types of commercial and residential development. So this is still a good and important part of our business that's growing rapidly. I would tell you we're always looking to make additional investments and improve our market position across the country, but we've got a great foundation. We have a broad geographic reach. So wherever these hyperscalers go to make these investments, we're always in a good kind of foundational position based on the local relationships that we have. It's still very much a local business. It's typically some of our best customers that are working on these types of projects because they're so critical to those developers to be successful.

Speaker #4: I would tell you , you always to make looking know , we're and investments improve market position across our the country . But we're we've got a great a We have foundation .

Speaker #4: broad geographic reach . So wherever these go to hyperscalers these investments , you know , we're make always in a good foundational kind of position .

Speaker #4: You know , based on the local relationships that we have . It's still a very much business . It's typically local some are types of working on projects because these they're so to critical developers to be successful .

Speaker #4: Where got the we've relationships best locally , we lot of work in in this areas tend to where we earn , you know , need to relationships the with the customers that doing are that work , those are investments make similar to how we that we would operate other markets where we're in trying to improve our market So position .

Mark Witkowski: Where we've got the best relationships locally, we tend to get a lot of this work in areas where we need to earn those relationships with the customers that are doing that work. Those are investments that we make similar to how we would operate in other markets where we're trying to improve our market position. So you should expect, as there's growth in data centers in certain markets, that we're looking to enhance our capabilities, build out our capacity, and make sure that we can service that to the best of the customer's needs. I think it looks very similar in terms of the investments. We've also got national relationships with some of the large contractors to get involved in these. So we attack it from various aspects, and we'll continue to invest to make sure that we get more than our fair share of that business. Great.

Where we've got the best relationships locally, we tend to get a lot of this work in areas where we need to earn those relationships with the customers that are doing that work. Those are investments that we make similar to how we would operate in other markets where we're trying to improve our market position. So you should expect, as there's growth in data centers in certain markets, that we're looking to enhance our capabilities, build out our capacity, and make sure that we can service that to the best of the customer's needs. I think it looks very similar in terms of the investments. We've also got national relationships with some of the large contractors to get involved in these. So we attack it from various aspects, and we'll continue to invest to make sure that we get more than our fair share of that business.

Speaker #4: you should there's growth expect , in markets , certain we're centers in looking data to enhance our build out our capabilities , capacity , and make sure can service that that we to the best of the customer's needs .

Speaker #4: I think it looks very promising in terms of the similar investments. You know, we've also got national relationships with some of the contractors that are largely involved in getting these.

Speaker #4: So we attack it from from aspects , and we'll continue various to sure that get we more than our that of that , business fair share .

Speaker #10: Thank you Great . .

Speaker #6: Yeah .

Joe Ritchie: Great. Thank you.

Speaker #2: Thank you. Our next question comes from Anthony Pettinari of Citi. Your line is now open. Please go ahead.

Mark Witkowski: Thank you. Thank you. Our next question comes from Anthony Pettinari of Citi. Your line is now open. Please go ahead. Good morning. Robyn, you had talked about cost inflation running kind of mid-single digit versus maybe more typical low single digit rate. And I'm wondering if you could give any more context in terms of the drivers there, and then just maybe in terms of cadence, like when those comps get easier, when you might expect that rate to normalize, or any other color there. Sure. Yeah. I would say the areas that we've seen driving the majority of the inflation this year have been on our facilities, on our fleet, and on medical costs. So those are the main drivers. Obviously, those are some big buckets of cost for us. Our largest bucket of cost is personnel-related expense, and then it's our facilities after that.

Operator: Thank you. Our next question comes from Anthony Pettinari of Citi. Your line is now open. Please go ahead.

Speaker #11: Good morning. I had a talk with Robin about the cost of digit inflation running versus mid-single digits, maybe more typical low single-digit rates. And I'm wondering if you could give any terms of the drivers there.

Anthony Pettinari: Good morning. Robyn, you had talked about cost inflation running kind of mid-single digit versus maybe more typical low single digit rate. And I'm wondering if you could give any more context in terms of the drivers there, and then just maybe in terms of cadence, like when those comps get easier, when you might expect that rate to normalize, or any other color there.

Speaker #11: And then maybe in terms of just cadence, like those comps get easier. When you might expect that rate to normalize to, or any other color there.

Speaker #6: Sure

Speaker #1: areas the that we've seen would say driving the of majority the inflation have on our been facilities , on this year fleet , and on our medical costs .

Robyn Bradbury: Sure. Yeah. I would say the areas that we've seen driving the majority of the inflation this year have been on our facilities, on our fleet, and on medical costs. So those are the main drivers. Obviously, those are some big buckets of cost for us. Our largest bucket of cost is personnel-related expense, and then it's our facilities after that.

Speaker #1: So the main drivers . Obviously , those those are buckets of are some cost for us . Our bucket of largest cost is personnel related expense .

Speaker #1: And then it's our facilities after So we that . through as renew some that we've had in the that leases past really pricing good those fair market values are up and causing on some of some then there .

Mark Witkowski: So as we go through and renew some leases that we've had in the past that we've gotten really good pricing on, some of those fair market values are up and causing some inflation there. And then similarly on the fleet, we've just seen inflation there over time. And then medical is an area that we've had. We had a big impact last quarter. We had a lot of high-cost claims, but there's also a lot of inflation hitting that area. So expect that to continue into the fourth quarter. Don't have a lot of that remediating in the fourth quarter yet, but I would say we started, well, probably anniversary around that, around the second quarter of next year. That's when we started to see the larger impacts of that inflation.

So as we go through and renew some leases that we've had in the past that we've gotten really good pricing on, some of those fair market values are up and causing some inflation there. And then similarly on the fleet, we've just seen inflation there over time. And then medical is an area that we've had. We had a big impact last quarter. We had a lot of high-cost claims, but there's also a lot of inflation hitting that area. So expect that to continue into the fourth quarter. Don't have a lot of that remediating in the fourth quarter yet, but I would say we started, well, probably anniversary around that, around the second quarter of next year. That's when we started to see the larger impacts of that inflation.

Speaker #1: , you know , on the inflation fleet similarly , we've just there seen then medical is an area that we've had . You know , we had a And impact quarter .

Speaker #1: , you know , on the inflation fleet similarly , we've just there seen then medical is an area that we've had . You know , we had a And impact inflation a lot of big high claims .

Speaker #1: But there's also a lot of inflation that is hitting. So expect that to continue into the fourth quarter. Don't have a lot of that remediating in the fourth yet.

Speaker #1: But I would say we started we'll quarter probably anniversary around that around the second quarter of next year . That's when we started to see the the larger impacts of that inflation .

Speaker #1: So , you expect know , do it to at some point in the quarters and get back to something that's a little bit more coming normalized for for our industry .

Mark Witkowski: So do expect it to moderate at some point in the coming quarters and get back to something that's a little bit more normalized for our industry. Okay. That's very helpful. And then just following up on data centers, Mark, I think that you made a reference to these being quick projects. I'm not sure if I heard that right, but in terms of kind of visibility into these projects, maybe timeline, I'm sure it's hard to generalize, but is it possible to talk about sort of maybe what a typical project looks like in terms of your visibility into the demand, the timeline, and completing that? Yeah. Thanks, Anthony. Yeah. I'm happy to clarify that. These projects, they're not completed quickly. I'd say the pace of construction of these is at a pace that requires that operational excellence that we provide our customers.

So do expect it to moderate at some point in the coming quarters and get back to something that's a little bit more normalized for our industry.

Speaker #11: . That's very helpful . And then just following up on data centers , Mark , I think that you made a reference these being to quick projects .

Anthony Pettinari: Okay. That's very helpful. And then just following up on data centers, Mark, I think that you made a reference to these being quick projects. I'm not sure if I heard that right, but in terms of kind of visibility into these projects, maybe timeline, I'm sure it's hard to generalize, but is it possible to talk about sort of maybe what a typical project looks like in terms of your visibility into the demand, the timeline, and completing that?

Speaker #11: I'm not sure if I right , heard that in but terms of kind of visibility into these projects , maybe line time , I'm sure you know , it's hard to generalize , but is it to talk possible sort of about maybe what a typical project looks like in terms of , you know , your visibility into the demand and the timeline and completing that ?

Speaker #4: Yeah . Thanks , Yeah , happy to clarify that these are projects they're not completed quickly . They're I'd they're the pace say of of these .

Mark Witkowski: Yeah. Thanks, Anthony. Yeah. I'm happy to clarify that. These projects, they're not completed quickly. I'd say the pace of construction of these is at a pace that requires that operational excellence that we provide our customers.

Speaker #4: Is at a pace that that operational excellence that we provide our requires customers . fast paced So but they they're last can several the buildout .

Mark Witkowski: So they're fast-paced projects, but they can last several years based on the nature of the build-out. We've seen some of the projects that we've worked on just continue to add phases to these projects. So we'll get pretty good visibility out as we get involved in these, at least kind of a year out of work that's being done. And then those projects can then expand beyond there based on what we've seen. So they can last quite a while, but the pace that you have to execute at is very quick. And that's where the trust that our customers place in us really comes in hand in our ability to execute these projects so that they can be successful and they can be a preferred contractor on these projects going forward.

So they're fast-paced projects, but they can last several years based on the nature of the build-out. We've seen some of the projects that we've worked on just continue to add phases to these projects. So we'll get pretty good visibility out as we get involved in these, at least kind of a year out of work that's being done. And then those projects can then expand beyond there based on what we've seen. So they can last quite a while, but the pace that you have to execute at is very quick. And that's where the trust that our customers place in us really comes in hand in our ability to execute these projects so that they can be successful and they can be a preferred contractor on these projects going forward.

Speaker #4: We've years seen based on construction projects that we've worked on . You know , nature of just they continue to add phases these to projects .

Speaker #4: So , you know , we'll get pretty visibility good as we out , you know , get involved these , least kind of you know , at a of , in year out work of of that's being done .

Speaker #4: And then those projects can expand beyond their base, based on what we've seen. So they can last quite a while.

Speaker #4: But the you know , have to pace that you execute at is very quick . is , And that's where the trust that our customers place in us really comes in hand in our ability to execute these so that they can be successful and they can be a projects preferred contractor on these projects going forward .

Speaker #4: That's when it really becomes a win win for us and our customers . When we're both working to complete those projects as as possible .

Speaker #4: efficiently

Mark Witkowski: That's when it really becomes a win-win for us and our customers when we're both working to complete those projects as efficiently as possible. Okay. That's very helpful. I'll turn it over. Thank you. Our next question comes from Patrick Baumann of J.P. Morgan. Your line's now open. Please go ahead. Good morning. I had a couple of cleanups here. Just on pricing, I think you said muni PVC pipe down about 15% in the quarter year over year. Kind of implies everything else was up like low single digits. Is that right? And then is that kind of that algo? Do you expect that to continue into 2026 such that prices on net will remain stable? Yeah. Thanks, Pat. That's right. PVC pricing has kind of come down off its peak levels over time, and that's the right range of what we're seeing.

That's when it really becomes a win-win for us and our customers when we're both working to complete those projects as efficiently as possible.

Speaker #11: Okay, that's very helpful. Turn it over, I'll.

Anthony Pettinari: Okay. That's very helpful. I'll turn it over.

Speaker #2: Thank you. Our next question comes from Patrick Bowman of J.P. Morgan. Your line is now open. Please go ahead.

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

Speaker #7: Good morning

Speaker #12: a couple cleanups here just on

Speaker #12: pricing you said Muni PVC . pipe down . I think Had 15% in the quarter year over year . Kind of implies everything about else was up like single digits .

Patrick Baumann: Good morning. I had a couple of cleanups here. Just on pricing, I think you said muni PVC pipe down about 15% in the quarter year over year. Kind of implies everything else was up like low single digits. Is that right? And then is that kind of that algo? Do you expect that to continue into 2026 such that prices on net will remain stable?

Speaker #12: low Is that is that right ? And then is that kind of that that algo , do you expect that to continue into 26 such price that , you know , net will remain stable .

Speaker #1: Yeah . Thanks , Pat . That's right . You know PVC kind of come pricing has down peak off its over levels that's time .

Robyn Bradbury: Yeah. Thanks, Pat. That's right. PVC pricing has kind of come down off its peak levels over time, and that's the right range of what we're seeing.

Speaker #1: The right range of what we're seeing... don't expect a lot of changes; expect a point in from year. So pricing is flat for the year.

Speaker #1: And as we you know get into FY more details on 26 we'll provide the call . But next expecting pricing to be , you know , at least flattish for FY 26 .

Mark Witkowski: Well, don't expect a lot of changes from this point in the year. So pricing flat for the year. And as we get into FY26, we'll provide more details on the next call, but expecting pricing to be at least flattish for FY26. We could have some product categories that are down, but expect the majority of them to be up overall. So feel like that's going to be stable at minimum. What are you seeing in other commodity products outside of the PVC stuff? Yeah. Well, yeah. If you think about steel and copper are really the only true commodities that we have that move with the underlying markets, and those both have price favorability for the year. They've been price favorable for a while, and I would expect that to continue. So those are small areas of our overall products and sales, but those are up.

Well, don't expect a lot of changes from this point in the year. So pricing flat for the year. And as we get into FY26, we'll provide more details on the next call, but expecting pricing to be at least flattish for FY26. We could have some product categories that are down, but expect the majority of them to be up overall. So feel like that's going to be stable at minimum.

Speaker #1: We could have some product categories that are down , but expect the majority of them to be up So feel like that's going to overall .

Speaker #12: What are we seeing in other products outside of commodity, the PVC stuff? Yeah, well.

Patrick Baumann: What are you seeing in other commodity products outside of the PVC stuff?

Speaker #6: .

Speaker #1: Yeah . If you think about ,

Speaker #1: steel and really copper the only true you know commodities have that we that move underlying markets are . both have with the And those price year favourability .

Robyn Bradbury: Yeah. Well, yeah. If you think about steel and copper are really the only true commodities that we have that move with the underlying markets, and those both have price favorability for the year. They've been price favorable for a while, and I would expect that to continue. So those are small areas of our overall products and sales, but those are up. I would say virtually every product except for the municipal PVC is up year over year.

Speaker #1: been priced favorable for a while . for the continue . to those are small our areas of products . You know overall But They've sales .

Speaker #1: up . And those say are virtually every , you know , product except municipal for the PVC is up year over year .

Mark Witkowski: I would say virtually every product except for the municipal PVC is up year over year. And ductile iron is also up? Yep. That's right. Okay. And then on the M&A pipeline, can you just talk about what you're seeing there? There's been a little bit of a lull here in terms of activity. What's causing that? And how should we think about you guys deploying capital to M&A over the next six to 12 months? Yeah, Pat, that's Mark. We're still very excited about the M&A pipeline that we've got. We've got some very active deals that we're working right now. We've got many opportunities that we continue to see out on the horizon. There has been, I'd say, a lull in the deals that are out in the market. We haven't, I'd say, missed out on anything in the market.

Speaker #12: And ductile iron is also up.

Speaker #6: Yeah . That's right

Patrick Baumann: And ductile iron is also up?

Speaker #6: .

Speaker #12: Okay . And then pipeline , can you just talk M&A about like what you're seeing there . We've been bit of a lull a little here in terms of activity .

Robyn Bradbury: Yep. That's right.

Patrick Baumann: Okay. And then on the M&A pipeline, can you just talk about what you're seeing there? There's been a little bit of a lull here in terms of activity. What's causing that? And how should we think about you guys deploying capital to M&A over the next six to 12 months?

Speaker #12: What's causing what's that . And what you know what how should we think about you guys deploying capital to M&A over the next 6 to 12 months .

Speaker #4: Yeah Pat . That's You know we're still Mark . about excited the very M&A pipeline that we've got . We've got very active some deals that we're working right now .

Mark Witkowski: Yeah, Pat, that's Mark. We're still very excited about the M&A pipeline that we've got. We've got some very active deals that we're working right now. We've got many opportunities that we continue to see out on the horizon. There has been, I'd say, a lull in the deals that are out in the market. We haven't, I'd say, missed out on anything in the market.

Speaker #4: Got many opportunities that we continue to see out the out on . there horizon say a lull the and the , you know , the deals that are the out in the market .

Speaker #4: You know , we haven't I'd say missed out on market . I just want to anything in the assure you of that it has been a , I'd say a lull in activity , but we are some working in real time that , you know , we're about .

Mark Witkowski: I just want to assure you of that. It has been, I'd say, a lull in activity, but we are working some in real time that we're excited about and expect you'll hear some announcements from us soon. And we continue to be very active on that front. So I'd expect from a capital deployment perspective, our priorities haven't changed. We'll continue to invest organically. We'll deploy capital for M&A, and we'll continue to look at share repurchases, as you saw our additional authorization that we announced this morning. So continue right along with our strategy and the priorities that we've laid out. Great. Thanks for the time. Thank you. Thank you. Our next question comes from Sam Reid of Wells Fargo. Your line's now open. Please go ahead. Thanks for taking my question. Just looking for a little bit more detail on the SG&A cuts.

I just want to assure you of that. It has been, I'd say, a lull in activity, but we are working some in real time that we're excited about and expect you'll hear some announcements from us soon. And we continue to be very active on that front. So I'd expect from a capital deployment perspective, our priorities haven't changed. We'll continue to invest organically. We'll deploy capital for M&A, and we'll continue to look at share repurchases, as you saw our additional authorization that we announced this morning. So continue right along with our strategy and the priorities that we've laid out.

Speaker #4: And excited expect , you know , you'll hear some from us announcements And , soon . you know , we continue to be very active on on that So I'd front .

Speaker #4: expect , you know , from a capital deployment perspective , you know , our priorities haven't You know , we'll changed . continue to invest , you know , organically .

Speaker #4: We will we'll deploy capital for M&A and we'll continue to at look share repurchases . As you saw , additional authorization that we this announced morning .

Speaker #4: So, we continued right along with the priorities that we've laid out.

Speaker #6: Great .

Speaker #12: time Thanks for the .

Speaker #4: Thank you .

Patrick Baumann: Great. Thanks for the time. Thank you.

Speaker #2: Thank you. Our next question comes from Reid Wells with Sam Your, Fargo. The line is now open. Please go ahead.

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

Speaker #13: Thanks for taking my Just looking for a question . little bit more detail on SG&A the cuts could you just give us . sampling a And perhaps of some of the call it maybe more back office type jobs that you're eliminating as this part of You know , are process ?

Sam Reid: Thanks for taking my question. Just looking for a little bit more detail on the SG&A cuts. Perhaps, could you just give us a sampling of some of the, call it maybe more back-office type jobs that you're eliminating as part of this process? Are they concentrated at the branch level, more skewed towards corporate? Just love some additional perspective there.

Mark Witkowski: Perhaps, could you just give us a sampling of some of the, call it maybe more back-office type jobs that you're eliminating as part of this process? Are they concentrated at the branch level, more skewed towards corporate? Just love some additional perspective there. Yeah. Thanks for the question, Sam. We did, like I said on the call, $30 million of cost out. The majority of that is personnel-related cost. We were able to make reductions in about 4% of our roles overall. We were not focused on anything that was driving sales. I mean, we talked about on the last quarter that these were going to be very targeted actions, and we weren't going to do anything to compromise any customer service or long-term growth. And I think we've done a really good job of making sure those were targeted.

Speaker #13: they branch concentrated at the more level , skewed towards corporate ? Just love some additional perspective . There .

Speaker #1: Yeah . Thanks for the question , Sam . You know , we did like I on call . You know , the said $30 million of cost out the majority of is that personnel related costs .

Robyn Bradbury: Yeah. Thanks for the question, Sam. We did, like I said on the call, $30 million of cost out. The majority of that is personnel-related cost. We were able to make reductions in about 4% of our roles overall. We were not focused on anything that was driving sales. I mean, we talked about on the last quarter that these were going to be very targeted actions, and we weren't going to do anything to compromise any customer service or long-term growth. And I think we've done a really good job of making sure those were targeted.

Speaker #1: We were able to make reductions in about 4% of our roles. Overall, we were not focused on anything that was driving sales.

Speaker #1: I mean , about on we talked the last quarter that these were going to be very targeted actions , and going to do we weren't anything to compromise any customer service or long growth .

Speaker #1: And we've done a really good job of making sure those targeted were on the back office side. I would say over time, we've been able to leverage technology and become more efficient.

Mark Witkowski: On the back-office side, I would say over time, we've been able to leverage technology and become more efficient. So I wouldn't point to any particular role, but I would say we were able to make some changes generally across the board to take cost out overall, and then some additional kind of supporting functions. So it was a mix of headcount, which is why we didn't talk about it in a detailed way on the last call because we knew it was going to be a little bit broad and across the board, but also kind of very targeted to specific areas that maybe we've had some overlap from M&A, or maybe we've converted systems and we're able to become more efficient in that way. That helps, Robyn.

On the back-office side, I would say over time, we've been able to leverage technology and become more efficient. So I wouldn't point to any particular role, but I would say we were able to make some changes generally across the board to take cost out overall, and then some additional kind of supporting functions. So it was a mix of headcount, which is why we didn't talk about it in a detailed way on the last call because we knew it was going to be a little bit broad and across the board, but also kind of very targeted to specific areas that maybe we've had some overlap from M&A, or maybe we've converted systems and we're able to become more efficient in that way.

Speaker #1: So I wouldn't point to any particular role , but I would say , you know , we were make some changes generally across the able to board to to cost out overall and then some additional kind of functions .

Speaker #1: it was a supporting mix headcount , of which is why we , you know , we didn't talk about detailed way it in a last call because it was going we knew be little a bit broad in across the to board .

Speaker #1: But also kind of very targeted to specific areas. We've had some overlap, maybe from M&A, or maybe we've converted systems, and we're able to become more efficient in that way.

Speaker #13: That helps, Robin. And then to switch gears here, I just want to drill down a little bit on the muni or the business.

Speaker #13: I should say meter . Sounds like you were meter contract this quarter . not If I'm mistaken . Just maybe a little additional awarded a context on And then talk that .

Sam Reid: That helps Robyn. And then to switch gears here, just want to drill down a little bit on the MUNI or the meter business, I should say. It sounds like you were awarded a meter contract this quarter, if I'm not mistaken. Just maybe a little additional context on that. And then talk through the high single-digit growth. Just maybe give me some context on whether that's coming from newer projects or whether that's more kind of just recurring from kind of some of your longer-term meter contracts. Thanks.

Mark Witkowski: Yeah. Thanks, Sam. It's Mark. We continue to be really successful on the smart meter front. We've been, I would say, pivotal in advancing the digitization of the municipalities.

Mark Witkowski: And then to switch gears here, just want to drill down a little bit on the MUNI or the meter business, I should say. It sounds like you were awarded a meter contract this quarter, if I'm not mistaken. Just maybe a little additional context on that. And then talk through the high single-digit growth. Just maybe give me some context on whether that's coming from newer projects or whether that's more kind of just recurring from kind of some of your longer-term meter contracts. Thanks. Yeah. Thanks, Sam. It's Mark. We continue to be really successful on the smart meter front. We've been, I would say, pivotal in advancing the digitization of the municipalities.

Speaker #13: through the high single digit growth , just maybe give me some context on whether that's coming from newer projects or whether that's more kind of just recurring from kind your of some of contracts .

Speaker #13: longer term Thanks meter .

Speaker #4: Yeah . Thanks , Sam . It's Mark . You know , we continue to be really successful on the smart meter front . We've been , I say , pivotal would in advancing the the municipalities .

Speaker #4: And this is an digitization of where we can really drive demand . You know , by going in and selling the value that we can by , you know , bring really them converting from a or manual , you know , a kind of a legacy , maybe first generation system that they in put really to provide them , you know , the advantages of a system .

Mark Witkowski: And this is an area where we can really drive demand by going in and selling the value that we can bring by really converting them from a manual or kind of a legacy, maybe first-generation system that they put in to really provide them the advantages of a modern system. So we've been, I'd say, very successful in many parts of the country selling some of the largest municipalities now, which have been, I'd say, some of the slower adopters of the technology. So we're really starting to see some movement there and really gain the confidence of our manufacturer partners that we help sell their products for to really be the lead and drive the demand of these system enhancements for the municipalities. So real pleased with the progress there.

And this is an area where we can really drive demand by going in and selling the value that we can bring by really converting them from a manual or kind of a legacy, maybe first-generation system that they put in to really provide them the advantages of a modern system. So we've been, I'd say, very successful in many parts of the country selling some of the largest municipalities now, which have been, I'd say, some of the slower adopters of the technology. So we're really starting to see some movement there and really gain the confidence of our manufacturer partners that we help sell their products for to really be the lead and drive the demand of these system enhancements for the municipalities. So real pleased with the progress there.

Speaker #4: modern So we've I'd say , very been , successful a many of the and parts country selling some of the largest municipalities now , which have been , I'd say , some of slower the adopters of the technology .

Speaker #4: really starting to see some So we're movement there . And really gained the confidence of our manufacturer partners that we help sell their products for , to really lead and be the drive the demand you know , these of , system enhancements for the municipality .

Speaker #4: So pleased real with the progress there . have We achieved , I'd say last couple of years , some of the largest over the in projects only our our not company's history , but in the history in country's terms of the size and scale of these .

Mark Witkowski: We have achieved, I'd say, over the last couple of years, some of the largest projects in not only our company's history, but in the country's history in terms of the size and scale of these. So that's going to be a continued driver of growth for us. And just really excited about the performance of our team there and continue to expect good growth ahead of us. All really helpful. Thanks so much. Thank you. Our next question comes from Matt Johnson of UBS. Matt, your line's now open. Please go ahead. Hey. Good morning, guys. Appreciate the time. I guess, first off, if we could just talk a little bit about greenfields. I think you guys have opened five years to date, is what you said. I guess, could you guys provide a little more color on, I guess, your ambitions for the rest of the year?

We have achieved, I'd say, over the last couple of years, some of the largest projects in not only our company's history, but in the country's history in terms of the size and scale of these. So that's going to be a continued driver of growth for us. And just really excited about the performance of our team there and continue to expect good growth ahead of us.

Speaker #4: So that's going to be a continued driver of growth for us. I'm just really excited about the performance of our team.

Speaker #4: And, you know, we continue to expect good growth ahead of us.

Speaker #13: All helpful . Thanks so much really .

Sam Reid: All really helpful. Thanks so much.

Speaker #2: Thank you. Our next question comes from Matt Johnson of UBS. Matt, your line is now open. Please go ahead. Hey, good morning, guys.

Operator: Thank you. Our next question comes from Matt Johnson of UBS. Matt, your line's now open. Please go ahead.

Speaker #14: I appreciate the time. I guess, first off, if we could just talk a little bit about, I think you guys have opened five year to date, is what you guess.

Matthew Johnson: Hey. Good morning, guys. Appreciate the time. I guess, first off, if we could just talk a little bit about greenfields. I think you guys have opened five years to date, is what you said. I guess, could you guys provide a little more color on, I guess, your ambitions for the rest of the year? Are there any specific markets that you're targeting, whether it be in the US or Canada? And then its target for FY26 also to open 5 to 10 new greenfields.

Speaker #14: Could you just little more color on , I provide a guess your ambitions for the rest of the year ? Are there any specific markets that you're targeting , whether the US it be in Canada ?

Speaker #14: And target then for FY26, also to open 5 to 10 new Greenfields.

Mark Witkowski: Are there any specific markets that you're targeting, whether it be in the US or Canada? And then its target for FY26 also to open 5 to 10 new greenfields. Yeah. Good morning. Thanks for the question. Yeah. We're really excited about some of the greenfields that we've got open this year, as we've mentioned on the call. A couple of really good markets where we've got coverage today, but really looking to continue to expand in both Denver and Houston as really priority markets for us. We've got, I'd say, several more identified, a few of which I expect will get opened between now and the end of the year still, and a really good pipeline ahead of us that we're evaluating. We've got over a dozen markets right now that we're assessing for continued expansion and growth, and expect that you'll see continued growth from a greenfield perspective.

Speaker #14: ?

Speaker #4: Thanks for the question. You know, yeah, we were really excited about some of the greenfields that we've got open this year.

Mark Witkowski: Yeah. Good morning. Thanks for the question. Yeah. We're really excited about some of the greenfields that we've got open this year, as we've mentioned on the call. A couple of really good markets where we've got coverage today, but really looking to continue to expand in both Denver and Houston as really priority markets for us. We've got, I'd say, several more identified, a few of which I expect will get opened between now and the end of the year still, and a really good pipeline ahead of us that we're evaluating. We've got over a dozen markets right now that we're assessing for continued expansion and growth, and expect that you'll see continued growth from a greenfield perspective.

Speaker #4: We've mentioned, as on the call, a couple of good markets where we've got coverage really today. But we're really continuing to look to expand in both Denver and Houston, which are priority markets for us.

Speaker #4: We've identified several more opportunities, a few of which I expect will get opened between now and the end of the year.

Speaker #4: Still . And a really good pipeline ahead of us that we're evaluating . We've got over dozen markets right now that we're assessing for continued expansion and growth , and , you know , expect that you'll see , continued growth from a greenfield .

Speaker #4: As perspective we've talked about on previous calls . typically We are able to get those , you know , profitable you know , at least break within the , first year .

Mark Witkowski: As we've talked about on previous calls, we typically are able to get those profitable within the at least break even within the first year and profitable in years two and three. We've had really good success there as we've opened more this year. The ones we've opened in prior years are continuing to perform as well. So that'll be a continued strategy that you see as we look to continue to expand our geographic presence. That would be both in the US and in Canada. That's great. Thanks, Mark. Then I guess just one more for me. You guys talked a little bit about some of the different state funding that's gone, I think, across Texas, New York, and Arkansas. I think the number in Texas is far larger, at around $20 billion.

As we've talked about on previous calls, we typically are able to get those profitable within the at least break even within the first year and profitable in years two and three. We've had really good success there as we've opened more this year. The ones we've opened in prior years are continuing to perform as well. So that'll be a continued strategy that you see as we look to continue to expand our geographic presence. That would be both in the US and in Canada.

Speaker #4: even within the And profitable in three . And years two and we've had really good success there as we've opened more this And , you know , the year .

Speaker #4: Ones in we've opened prior years continuing to perform well. So that'll be a strategy that you see as we look to continue to expand our geographic presence.

Speaker #4: And that both in the U.S. and Canada.

Speaker #14: That's great . Thanks , Mark . And then I guess just one more for me . You guys talked a little bit about some of the different state funding that's gone , I think , across Texas , New York and Arkansas .

Matthew Johnson: That's great. Thanks, Mark. Then I guess just one more for me. You guys talked a little bit about some of the different state funding that's gone, I think, across Texas, New York, and Arkansas. I think the number in Texas is far larger, at around $20 billion. So I guess, could you guys talk a little bit about how large the Texas market is for you guys and kind of what your participation rate looks like in that state and kind of how impactful you think this new bill could be for you guys moving forward?

Speaker #14: think the number And I Texas is far in larger 20 billion . at around So I guess could you guys talk a little bit how the large Texas market is about kind of guys and what you're participation rate looks that kind of like in state , and impactful you think this new bill could be for you guys .

Mark Witkowski: So I guess, could you guys talk a little bit about how large the Texas market is for you guys and kind of what your participation rate looks like in that state and kind of how impactful you think this new bill could be for you guys moving forward? Yeah. Texas is a very important market for us, as you can imagine. As you think about construction spend across the US, for us, Florida, Texas, and California, those are really important markets. And they tend to drive just in those three states alone can really drive our business. So this additional investment into Texas, I think, will be really important to us. We've got a good, strong position in Texas and expect us to be able to capitalize on that. In addition, Texas has had other advancements.

Speaker #14: Moving forward .

Speaker #4: Texas is a very market for can us as you important imagine . As you Yeah , construction across the US , you know , for us , think about Florida , Texas , California , those are important markets .

Mark Witkowski: Yeah. Texas is a very important market for us, as you can imagine. As you think about construction spend across the US, for us, Florida, Texas, and California, those are really important markets. And they tend to drive just in those three states alone can really drive our business. So this additional investment into Texas, I think, will be really important to us. We've got a good, strong position in Texas and expect us to be able to capitalize on that. In addition, Texas has had other advancements.

Speaker #4: really they tend to drive , you know , just in those three states alone can really drive our business . So this additional investment into Texas , I think will be really important to us .

Speaker #4: We've got good strong position in Texas and expect us to be able to capitalize on that . You know , in addition , Texas has had other advancements .

Speaker #4: You know , one of the elements that we're excited about , which is very long term oriented , but now they you know provide for , , corrugated HDPE as a solution of the drainage storm work .

Mark Witkowski: One of the elements that we're excited about, which is very long-term oriented, but they now provide for corrugated HDPE as a solution for a lot of the storm drainage work in Texas, which has been a heavy concrete market as well. So as we work to advance a lot of those products into the products that we distribute, that can be another good long-term growth driver. Those investments aren't things that happen overnight, but really set up a good foundation. You'll continue to see us invest in Texas, just like we announced the greenfield in Houston. I'd expect that you'll continue to see us make more investments in that state. Thanks. Thank you. At this time, I'll now pass it back to Mark Witkowski for any further remarks. Thank you all again for joining us today.

One of the elements that we're excited about, which is very long-term oriented, but they now provide for corrugated HDPE as a solution for a lot of the storm drainage work in Texas, which has been a heavy concrete market as well. So as we work to advance a lot of those products into the products that we distribute, that can be another good long-term growth driver. Those investments aren't things that happen overnight, but really set up a good foundation. You'll continue to see us invest in Texas, just like we announced the greenfield in Houston. I'd expect that you'll continue to see us make more investments in that state.

Speaker #4: for a lot In Texas , which has been a heavy concrete as well . market we work you So as work to know , to , advance a lot of those products into the products that we distribute , that another can be good long term growth driver .

Speaker #4: That's not to say these investments aren't things that happen overnight. Really, setting up a good foundation will lead to seeing us invest in Texas, just like we announced.

Speaker #4: You know, we at Houston and Greenfield continue to expect that we will make more investments in that state.

Speaker #14: Thanks .

Matthew Johnson: Thanks.

Speaker #2: you . Thank At this time , I'll now pass to Mark Mark Witkowski for any it back remarks further .

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

Speaker #4: Thank you all again for joining us today. Before we close, I want to leave you with a few key points from the last several years.

Mark Witkowski: Thank you all again for joining us today. Before we close, I want to leave you with a few key points. Over the last several years, Core & Main has executed exceptionally well through an unprecedented environment. We captured the benefits from large price increases in 2021 and 2022, committed to holding it, and that is exactly what we've delivered. During that period, we also said we were over-earning gross margin by roughly 100 to 150 basis points. We moved through that normalization exactly as we expected, and we're now back to delivering steady structural gross margin expansion.

Speaker #4: Core & Main has executed well through an exceptionally challenging environment. We captured the benefits from large price increases in 2021 and committed to holding them into 2022, and that is exactly what we've delivered during that period.

Mark Witkowski: Before we close, I want to leave you with a few key points. Over the last several years, Core & Main has executed exceptionally well through an unprecedented environment. We captured the benefits from large price increases in 2021 and 2022, committed to holding it, and that is exactly what we've delivered. During that period, we also said we were over-earning gross margin by roughly 100 to 150 basis points. We moved through that normalization exactly as we expected, and we're now back to delivering steady structural gross margin expansion. Today, we're managing through stubborn inflation, higher costs, and softer end markets. But we're not standing still. We've executed cost actions, and we see a clear path to generate future growth and operating leverage. Our strategic investments and sales initiatives are creating real share gains. And our diversified model positions us to generate resilient, profitable growth.

Speaker #4: We also said we were over earning gross margin by roughly 100 to 150 basis points . We moved through that normalization exactly as we expected , and we're now back to steady delivering structural gross expansion margin .

Today, we're managing through stubborn inflation, higher costs, and softer end markets. But we're not standing still. We've executed cost actions, and we see a clear path to generate future growth and operating leverage. Our strategic investments and sales initiatives are creating real share gains. And our diversified model positions us to generate resilient, profitable growth.

Speaker #4: But we're end standing still . We've executed cost we see a clear actions and generate future growth . And operating leverage . Our strategic investments in initiatives are creating real share gains , and our diversified model positions us to generate profitable growth resilient , .

Speaker #4: We've several navigated unusual disciplined consistency and transparency we're confident in our , and to deliver long term ability to market returns to as the a more supportive backdrop .

Mark Witkowski: We've navigated several unusual years with discipline, consistency, and transparency, and we're confident in our ability to deliver long-term value as the market returns to a more supportive backdrop. Thank you for your continued interest in Core & Main. Operator, that concludes our call. Thank you all for joining us today, Scott. You may now disconnect your lines.

We've navigated several unusual years with discipline, consistency, and transparency, and we're confident in our ability to deliver long-term value as the market returns to a more supportive backdrop. Thank you for your continued interest in Core & Main. Operator, that concludes our call.

Speaker #4: Thank you for your continued interest in corn . Main operator . That concludes our .

Operator: Thank you all for joining us today, Scott. You may now disconnect your lines.

Q3 2025 Core & Main Inc Earnings Call

Request a DemoDemo

CNM

Core & Main

Earnings