Core & Main, Inc. Class A

Q2 2021 Earnings Conference Call


spk_0: welcome to the core nine the qq twenty twenty one earnings call my name is charlie and i will be coordinating your cool today if you wish to ask the question during the presentation you may register to be played like a starfleet by one on the telephone key part i will now have you a you have not been drug free from core main again robin please go ahead
spk_1: thank you
spk_2: good morning and welcome to the corn main to two thousand twenty one second quarter earnings call with robin bradbury vice president of investor relations and have been a before i mean thank you for joining up with morning to attend our first earnings call as a public company were threatened be sure we got with you people claire our chief executive officer will lead to do call with the company overview and our second quarter execution highlight margaret county our chief financial officer will the end of cutler second quarter financial results and second half outlook followed by a q and a we will conclude the call would be closing remarks are you in a equivalent to one question and one power of you're out additional questions you may return to the queue thank you for your cooperation some of the information you will hear today may include forward looking statements they may include statement regarding our intention believe assumptions are current expectation comparing our financial diversion result of operations cash flow profit both are growth strategy forward looking statements are subject to known and unknown risks and uncertainties many of which may be outside of our control we caution you that forward looking statements are not guarantee the teacher performance or outcome and that they may differ materially from the bill both made an ortho just by the forward looking statements intent on the car before looking statements are made only out of the date with call we do not undertake any obligation to update or revise any forward looking or cautionary statement to read what changes an assumption be current the event or changer than future operating reebok in addition to pre be providing result further determined in accordance with us can we prevent ybarra adjusted ebitda adjusted even a margin adjusted net income and that that leverage all awards or non gaap financial measures leave measures are not comfort measure the financial performance or liquidity under god but we you've been through a fast the operating results of our business for reconciliation to the nearest got measure please refer to the flies on your conduct of the forty thousand and twenty one second quarter and buster presentation which can be found on on investor relations website thank you for of the painting on the called and for your interest for me i will now time to call over to chief executive officer evil claire
spk_3: thank you out and the morning everyone thank you for joining us today welcome to our scope it out and forty one second quarter earnings call or early on in call of a publicly traded company that is an exciting miles over a company and i'm very pleased to share that with you oh begins they'd call that we've all view of our business and industry i would uncover key drunk drivers and acquisition strategy ball by regular gst characteristics i went by discussing our second quarter execution i like the or call over to our chief financial officer michael cascade that of got are difficult to god and twenty one second quarter financial results and second half outlook or thought on page five the presentation with a brief overview of corn may corn main of the leading specialty distributor water wastewater storm drainage and fire protection products and related services sorry municipalities by that water companies a professional contractors across the net supple nonresidential and residential and markets nationwide or be bought i could serve as are using the maintenance repair or replacement and construction of water and buyer protection infrastructure we are one of only two national distributors operating across large and highly fragmented market which we estimated to be approximately twenty seven billion dollars in size but more two hundred eighty five branch of the car to you as we serve as a critical link between over forty five hundred suppliers and a diverse and longstanding base of over sixty thousand customers we have diversified and market exposure with an estimated forty five percent municipal thirty seven percent non residential an eighteen percent residential and market legs and fiscal year two thousand twenty furthermore we are near equal exposure to construction on new projects and existing repair and replace projects in fiscal year two thousand and twenty a paid expansion provide an overview of our broad product offering and service offering we offer a comprehensive portfolio over two hundred thousand skills covering a whole spectrum of specialized products that the core of our business i'll apply to bow the bearings it or the fundamental building blocks for underground water infrastructure in water treatment plants above ground and in many cases structures you will feel fire protection wine buyer protection infrastructure required not only to specialized that a products including sprinklers and dao but also the ability to fabricate assemble sprinkler systems in their components we are natural distributors swag smartwater meters it's very significant environmental and economic benefits municipality in also provide a variety of value added services including natalie project management installation hardware and software but also life long leaders leadership the management we are also a national provider spawn drainage and jails and better than erosion control solutions which are growing and important to to the recent impact of climate change and increase natural lighting disasters on page that and we show a strong value proposition we offered a boulder customers and our suppliers we are trusted source to our customers because of operational excellence across a broad offering a products and services we take a consultative failed approach leveraging our deep understanding a lot of better cases the design the kirill project plans and other key value added services draw the line for the project our role the national distributors more than just supplying products we have access to a broad product offering you have the ability to secure products for any job and in any environment for our customers paired with a national branch network we also offer complimentary value added services that are key to our value proposition that we believe differentiate us that our competitors we a longstanding relationship with our suppliers and in many cases we benefit from favorable purchasing arraignment emperor schools about for access the products especially during periods of material shortages are geographic footprint than reached the local community the that central to our suppliers but we have a highly developed understand the market the customer base and the growth opportunities we believe we have the ability and expertise the guy the adoption of new products and technologies that author the logistics of last mile delivery customer support we have a large and highly trained fails wars with the ability to reach are highly fragmented customer base on page eight we outline the levers and enable us to drive sustainable girl over the past few years get into that and people and capability to strengthen our ability to drive growth as we look ahead with the multiple avenues to continue pursuing first wifi beneficial industry trends supported by secular girl drivers the traditionally stable municipal and market poised to accelerate additional spending was necessary to address historical under desmond it's a boar population growth residential construction is currently serving the population growth demographic population chefs low housing inventory and record low interest rates with the surgeon residential construction comes along long rejuvenated nonresidential investment but community the expanded demand increases were waterworks storm drainage and buyer protection products we believe we're at the beginning of a new non residential construction cycle and feet favorable tail in the head particularly in vertical such as commercial and institutional building data centers and where housing development projects we have several organic growth lovers be demonstrated that we can grow faster than our underlying a dreadful market we believe our competitive advantages allowed to continue to gain share a local level with only forty percent share cost an estimated twenty seven billion dollar decimal market we saw significant opportunity grow we can pay any to drive organic expansion the under penetrated geography who new greenville locations we are meaningful runway way to increase penetration with your key to accounts you have a specialized key focus on serving for recount which include large private or company a national contractors we believe me or better position than ever to serve the national customers are larger projects requiring dedicated failed personnel greater kind of glass for teeth and more complex a specialized procurement need our side and scale physician got to continue accelerate the adoption of products and our industries such a smart meters divisible a technology shields and batiks and erosion control solutions that number of other developing a categories acquisitions or another key component of our growth strategy we a long long way to consolidate our fragmented industry or rockets includes consolidation existing thing market positions new geography is an expansion into prada categories where we are clearly under penetrated eldest gutter apple back to edition strategy more detail mechanics like right finally we have identified a long list of opportunity to enhance gross margins including private label to global sourcing and pricing in procurement initiatives the illegal year two thousand and twenty private label made up roughly one percent of our total product expenditures we believe that we have an opportunity to transition several hundred million dollars or an ancillary span to be internally source that we have no intention of transitioning highly specified product in the private label are disrupting any product from our top peer supplier partners we have recently built a team of pricing analysts who have been able to enhance product margins using data to drive pricing decisions and by pro actively updating price increases to increase pricing their ability to our branch network additionally a category the entertainment opportunities continue shit they expanded suppliers the best pricing and payment programs in order to optimize gross margins we're in the early any good executing and many and even are scare them feel long run way of opportunity ahead on page nine the provided timeline of our recent acquisitions we have a strong track record of acquiring and integrating benefit the we continue to cultivate a real pipeline of targets for the short and long term we have atrophied an integrated fourteen acquisition since becoming an independent company two thousand and seventeen adding one six hundred thirty million dollars and aggregate historical annual net sales including to nathan deal that clothes subsequent to the second quarter which eldest got some more detail shortly we had a refined products it's like gonna find the crack the both on target for we are well positioned to source acquire in any great new businesses we believe me are widely viewed as enquirer of choice due to our longstanding relationship and entrepreneurial culture and our investment in the development of our people when she could generate margin a permanent synergy value for my acquisitions to purchasing capability fixed cost reduction the needs of our scaled the likely platforms with stripe operational efficiency that are branches our industry at large and highly fragmented and we will go ahead with the a runway for growth to emanate we maintain a very robust pipeline of peter acquisitions with we pursue for disciplined approach we prioritize complimentary been little bit helpless consolidating the the market position expanded the new geographic areas i are keep our and offer new products on page and we show our newest acquisitions allen and bag and supplied pipe the pacific bike acquisition highlights are focused on expanding into underserved geography pacific finally the significant player modernizing an expanding water infrastructure into why as game yet no presents and previously but the bikers than an operation can pick out and eleven southern municipality then contractors in the water wastewater storm drainage in your nation in the street with a broad waterworks prada goff right a five operate for location spanning the island of hawaii malley in a lot of the allen and bag and supply acquisitions highlight our focus on expanding our president and under penetrated product categories it provides a sizable girl opportunity in a large and pregnant in jail synthetics and erosion control market which we estimate we rally by billion dollars in side over the past three decades allen and the building fell into one of the nation's leading supplier good deals and panics and erosion control products by joining our team together we'll expand our expertise to better serve our customers nationwide and a larger reach for our products and services with a dedicated team special serving the rapidly growing and highly specialized deals and panics and regime control market annual net sales pathetic pain and allen and bag and supply for the fiscal year ended december thirty first two thousand twenty or roughly seventy in take the million dollars respectively and bold accusations of the incremental to our sale in earnings girl with the majority the second half of fiscal two thousand and twenty one trying to pay the lab and we she or he has key characteristics eg as corner or business model our company and are people are committed to the provision of faith and refundable lyrica structured throughout the united states preserving the harassment most valuable resource and providing clean and safe water to our community or the core what we do our products and services are integral them building preparing the men painting essential waterways wire storm drainage buyer protection systems water lottery a finite resource and community water supply challenges including natural flooding contamination and drought continue to increase in severity be partner with our customers calvin sure water resources and activities are available to meet each local communities short and long term need we believe our investment in our people for award winning training and career development in the true differentiator for us we are proud yes even experts were preparing the industry leaders for tomorrow to continue our tradition of local experts nationwide we're deeply committed to our community and are so she of or inaugural yes the report that was published last fall's become a critical pizza communication with all our stakeholders the blade dark call get on e s t matters and sustainability will benefit our business been haunting our relationships with are so she it's our customers are suppliers and the community even which we operate we will continue to thug gets on this area and enhance our communication reporting around the sg overtime with that al now cover our second quarter execution i like on page twelve of the presentation during and subsequent to the second quarter because that's actually completed our initial public offering approximately forty million shares of class a common thought generating gross proceeds of approximately eight hundred million dollars including the ball exercise and the underwriters over a lot in an option we use the proceeds from the offering to deal ever to balance sheet for listening that and greater financial flexibility to pursue our growth strategies while he i feel as a gray miles down for ask remain focus on driving solid business result in a very dynamic environment the second quarter we delivered record next album nearly one point three billion dollars growing nearly thirty six percent over the prior year period and record adjusted even other one hundred thirty five million which was nearly fifty seven percent over the prior year period we continue to expand our market share and improve our profitability to the execution of our failed and margin initiative while you're using our leadership position in the industry to gain access the hard to find products for our customers and purchase opportunistically ahead of announced product called increase is that spanned are gross margins earlier this year ppp read and manufacturers declared force majeure to the raw material shortages stemming from plant closures as a result of unprecedented winter weather in texas and louisiana it was the second force majeure and pdt rather than less than six months and the ripple effects were felt across the entire supply chain industrywide pvc manufacturing capacity inventory declined while demand strengthen which both feet which push pvc pipe prices to an all time high in recent months pp by manufacture return to full capacity and are tdp suppliers have been working to rebuild inventory and the and has continued to be strong and prices rose to the second quarter been pack and hurricane i'd i'd still not fully known that we expect that it will likely further impact availability of pvc products and keep prices at or above those we had experience so far this year on a mall and a smaller scale the growing forget against we're all experiencing supply chain impact than other chronic category you'd unprecedented demand constrained manufacturing capacity container shortages party issues and semiconductor church shortages a portion of our smart meter products and chip and and short supply net impacted our ability to satisfy all the customer demand some of our suppliers import raw materials are finished products and were beginning to see an impact in a car and supply of those products you did a declining availability and rising costs the divorce for shipping containers we're also seeing some deferral or shipment as a result of constrain labour capacity across the industry from our suppliers to our customers despite the notable challenges are team for navigate the environment well given our long term relationships with our suppliers in our leadership in the industry they are often able to gain prefer to accept the products torn period the material shortages and provide reliable service their customers nationwide two coordinated efforts with their branches and leadership team we believe we can gain market share like excessively mitigating the impact of the supply chain of and by ensuring accept the products in providing advance notice of coffee increases and reliable information and product availability to our customers i'm incredibly proud of the dedication of our customers and suppliers on is challenging environment more than ever we have served as with jessica experts for our customers have been undermined and source products during a period of unprecedented price increases and product shortages are providing credible market information to our suppliers regarding the me on to assist them in production planning as previously mentioned would continue to execute on our growth strategy by announcing to new acquisitions done the corner allen and bag and supply and pacific by company baltimore close subsequent to the quarter we continue to cause we monitor the impact the calvin nineteen and of variance and have surfaced across country throughout the pandemic we continue to operate and an essential business or buying our customers with the products and services necessary to maintain and improve our nation's water infrastructure at the beginning of the pandemic we put policy and business continuity plans and play protect ourselves she she's customers and suppliers are keen to remain agile and then quickly adapted a new total calls while increasing efficiency throughout the process that been rolled out and laugh at phillies began loosening restrictions we also began eating certain covered nineteen protocols while still keeping faith be or number one priority we are committed to keeping ourselves your customers and suppliers they are competing to keep all their branches open subsequent to the end of a quarter the senate passed the bipartisan one trillion dollar and back in america at the largest long term federal investment our nation's infrastructure nearly a century among other things the plan makes transformational and historic investment in clean water infrastructure and infrastructure that provides resilience be changing climate while still uncertain if or when the bill will be signed into law and when the bundle start making their way into our and market a direct infusion of federal funds for water wastewater and storm drainage infrastructure and amended location to accelerate we can be placed an activity we believe we are well positioned to capitalize on any favorable pale ones created by the additional investment however we are well positioned continue to grow even without this potential infusion of bones i will now turn the call over to our chief financial officer market cathy discuss our fiscal two thousand and twenty one second quarter financial results and second half outlook thank you the good morning everyone turn the page fourteen i began by covering or second quarter operating results not sales in the fucking corner were nearly one point three million an increase of approximately thirty six percent over the prior year period increases driven by buying games and higher average selling price is relative to the prior year period or sales benefited from the me and across each of her and markets residential construction has continued to benefit from strong housing demand and lot of development and you know someone market has started seeing acceleration of roof or nonresidential and market which contained a mix of project types ranging from commercial buildings to roads and bridges some varying results but overall experience positive mine up than a quarter or execution of failed initiatives and our leaders shoot ship position and or industry a lot of the a performer and markets and deliver solid core share gains by ensure your customers have access to the products where and when they needed them we believe roughly half of our net sales increase for the quarter when did a price inflation which was much higher than expected and driven by or team's ability to efficiently pass through writing material costs we experience to rapidly rising material costs on pvc pipe in addition the many other product lines but to a lesser extent and pbc i couldn't have done a fantastic job navigating the inflationary environment and working closely with our customers to give them advance notice of these market price increases pike about and fitting sales increased nearly forty three percent compared to the prior year period knicks of strong buying games and price inflation from rising material costs the same factors for a group and or storm drainage and fire protection product lines which were up twenty one and thirty seven percent respectively compared with the prior year period our metering product line grew by nine percent compared with the prayer period lingering growth was tempered by the global semiconductor chip shortage which is a necessary component in certain smart metering devices gross profit in the second quarter increased forty one percent at three hundred and twenty five million first profit of the percentage of sales was twenty five point one percent compared with twenty four point one percent in the prayer period and improvement of approximately one hundred basis points the increase in gross profit person was primarily improvements and products or saying and pricing even or scale we've been able to meet opportunistic inventory purchases ahead of announced price increases which is how slow the growth of the net cost of our products during an inflationary period we believe our initiative to get better visibility than these cost increases from our vendors to our field james has resulted in gross margin enhancement we also continue to make progress and our private label initiative and double the amount of internally source products relative to the same quarter last year selling general and administrative expenses for the second quarter increase forty percent or one hundred ninety two million the increase primarily attributable to an increase in personal expenses driven by higher variable incentive compensation resulting from higher sales volume and stronger profitability in addition we experienced higher headcount and discretionary expenses you to furloughs and spending reductions in the response to coburn nineteen and the prior year period as seen a expenses also increased by seventy million related the higher equity based compensation expanse to do accounting for equity words and one point three million related costs associated with the initial public offering as a result of i doubt refinancing we recognize the net loss and that modification and extinguishment during the quarter of fifty point four million this amount consisted of early redemption premiums for financing for you might have settlement of our cash for ensure three slap instrument yeah man capitalized third party fees annual interest expense savings as a result of that refinancing have expected to be rough the eighty five million adjusted even daggers fifty seven percent or one hundred and fifty five million improving adjusted ebitda margin by approximately one hundred and sixty basis points the increase in the just that he did that march and was due to strong say at net sales growth gross margin or eight expansion in leveraging are fixed costs structure on the sales growth adjusted net income increased two hundred fifteen percent to sixty one million increases due to strong sales growth in gross margin rate expansion partially offset by hire a student a expenses primarily attributable to hire variable compensation passed during the period
spk_4: and preparing adjusted net income we exclude the effect of non controlling interest as we evaluate and means the business as a whole
spk_3: for reconciliation of net income to adjusted net and can refer to the fly them the appendix or the presentation on page fifteen on not covered dad and liquidity position at the end of the quarter our that at the end of the quarter was one billion four hundred and thirty three million a year know that leverage down to three point three times which is one point nine turns favorable to the prior quarter the reduction in that the library just primarily result of not proceed to generated from initial public offering the refinancing transactions taken any connection with the a piano and an increase in adjusted either that we expect to continue the leveraging the balance sheet similar what we have accomplished in the path despite making strategic investments to grow the business much me create acquisitions we closed and the refinancing over a new one point five billion dollar term loan in conjunction with the closing of or a piano which carries interested library class margin of two hundred and fifty basis points maturing in july twenty twenty eight we correspondingly entered into a five year fixed interest rate hedge with an initial notional value of one billion dollars to lock in live where me that seventy four basis points the notional value will reduce by one hundred million per year begin the in july twenty twenty three to the end of the hutch term as per the not refinancing we also expanded and extended are asset based revolving credit facility from seven hundred million eight hundred and fifty million to july twenty twenty six at the end of the second quarter we had over nine hundred million and liquidity including approximately sixty seven million cash and cash equivalents
spk_4: we believe that our cash on hand together with the availability of borrowing center asset based revolving credit facility and cash generated from operations will be sufficient in the near term to meet are working capital need anticipated capital expenditures schedule principal and interest payments and or term loan and to continue pursuing arthur
spk_3: strategies operating cash flow on a second quarter was left in the prior year period due to the acceleration of interest payments associated with that refinancing along with investments and working capital support our group we have continued and vast an inventory to ensure availability and access to products for our customers need investments along with the growth in the business compared to last year resulted in a larger working capital build and the current quarter
spk_5: historically we have generated in most of our operating cash
spk_3: and happening here two week and wine working capital that be inventory spending and lower customer receivables which i could see a similar seasonal generation of operating cash flow in the second half of this year subsequent to the end of the corner the underwriters of an initial public offering exercise their overlap an option which resulted in the issuance of an additional five point two million class a shares generating net proceeds of ninety nine point five million dollars we intend to use the net proceeds for general corporate purposes turn page fifteen another scouts or outlet for the remainder of of clear
spk_4: we expect that to me and improving trans we experience in the first half a year to continue into the second half
spk_3: though tempered against tapper prayer camps in anticipated supply chain constraints last year we experienced a softer first al qaeda covert nineteen related restrictions and a snap back into me and and a second half the city's loosen restrictions and markets began to recover as well as favorable weather environment than the fourth quarter each of our and markets appears poised for continued growth based on bidding activity in order flow and the execution of are defined where initiatives as expected to continue driving core marketshare games what we are pleased with that results so far this year we believe our supply chain is experiencing capacity constraints across many product lines which we anticipate will be further impacted by hurricane either really little temper buying growth in the second half of the year while keeping prices that historically high levels to the end of the year we typically of scary the feet and of slowdown throughout the second half of the year and the fourth quarter a particular susceptible than variability did a cold winter weather in northern geography the pacific pipe and alan i'm begging for plaque with that him to contribute nearly half a year of operating result each with pacific paid closing at the beginning of august and how i'm supply closing at the end of august when i combine betas these acquisitions generated roughly one hundred thirty nine of net sales for the fiscal year ended december thirty one twenty twenty we maintain a very strong pipeline of high quality acquisition targets and with for daddy more than to the car me family or acquisitions are performing well and we continue to improve our ability to integrate them into our company and create synergies together expect the continued delivering i gross margin initiatives generating year by year margin expansion in the second half but moderated compared to the first out of their product costs catch up with market prices if product costs stabilize we also expect to continue leveraging or costs structure delivering year a year as to in a rate improvement in the second half however the us to any rate improvement will be scaled compared to what we delivered in the first app as a result of approximately ten million of ongoing annual cost needed to support our company following the initial public offering
spk_4: taken all together we expect four year twenty twenty one a job that he did that to be in the range of four hundred and seventy five hundred and ten million representing a year over year increase of thirty seven to forty nine percent
spk_3: there are several uncertainty that exists for the balance of the year that could significantly impact or estimates and a position as towards the lower or higher end of the range the ongoing probe in nineteen pandemic product availability constraints labor shortages declining commodity prices and unfavorable weather can position as towards the lower end of the range sustain pricing levels and gross margins continued to man across each of our and markets along with our suppliers ability to need to me and can result in performance near the top and of the range given the unprecedented pricing the me and and product availability challenges were experiencing right now we feel at this range represents or best view of where we believe or finish the year on our cover of the topic of interest unrelated there are second quarter performance regarding our organizational structure and tax receivable agreement in terms of our share structure we currently have roughly two hundred and forty six million shares a class a common stock in class be a common stock issued an outstanding
spk_4: cheers of class a common stock in class be common stock have the same one for one voting rights class be shareholders do not hold economic interests and car me however they have the ability to exchange one share of class be common stock in one partnership interesting core mean holdings l p from
spk_3: one share a class a comments back
spk_4: the class be shareholders ownership of partnership interesting or mean holding cell lp is reflected in our consolidated financial statements of nine controlling interest
spk_3: over time as he had change take place and nonconforming interest over decent size and evaluating and managing a business of the whole wastefully the effects of nine controlling interest as part of our ip out when we organize the company of and a t structure which enables us to retain certain favorable tax attributes and potentially generate sizable new favorable tax attributes and and up see organization it is typical to enter into tax or siebel agreements with the pre i feel honors to establish the terms of have a favorable tax attributes will be shared
spk_4: a summary the details of each tier is located in the appendix or the presentation assuming the full exchange or class be shareholders of their shares of class be comments back and partnership interest to shares of classic comments back that the closing fact price per share of class a common stock as of july thirty thirty at twenty twenty one and current tax rates we anticipate a
spk_3: substantial reduction in our cash tax rate net of the payment obligations under the or a we expect the net cash savings to be in the low to mid single digits of pretax buggy and income further cheery payments are not made and much tax benefits are actually realized i hope you find that additional detail helpful as we introduce our business inner structure
spk_4: in closing we're very pleased with our second quarter performance and for staffers else we continue to focus our efforts on increasing marketshare improving profitability and generating consistent operating cash flow
spk_0: pack includes are prepared remarks at that time i like to turn the car over to the operator for questions if you're at right at your accent
spk_6: i like i bought a telephone now have you change your mind it's gonna follow michael
spk_0: our fast
spk_3: anti of badge or like open please go ahead thank you good morning everyone martin ever yeah forty three percent growth yeah a of the forty three percent growth that new you sign p to approximately quantify the impact of inflation vs volume growth and i think you had previously been assuming that bbc would start to decline in the second half a year now assuming that a be and sustained into twenty twenty two at current price levels yeah dave i'll i'll answer on that on the pricing for the quarter and priest on pvc i pad thai alone he certainly over over half of pvc was gonna be pricing wish had a bigger impact on pvc them some of the other product categories and that that down the best targeting to be on on p b c terms of the the impact their terms of the go former damn he got talk about that yeah yeah a charity or that sit out certain like a be here and and gets rapid significantly over the last year by hurricane laura last fall to the date three that out and in texas you know in the beginning in the here canal hurricane i'd actually get we are seeing demand at all time high end product availability and supply all time lows can given that dynamics we all on it would be like we're going to feed that pricing hold and there the duration hear it will at least for the next that next several months and sell he along those lines on yeah that was wow because they didn't expect to see pricing territorial as strong as we had this year we expect a tapered and more stable like levels by getting somebody the external factors are we think probably older never bet okay thanks and and as relate to the fifty five billion in nam in the current infrastructure bell if that goes through and it's those dollar start to to filter down and municipalities might there be some crowding out relative to already stretched municipal by jets or the that's all incremental and an executive he just comment on and i'm just the the at the debate around infrastructure of you need as a positive long term the navy there's changing attitudes changing priority these in the us is relates to infrastructure spending add today at at any level yeah day i would say that even go back to back at two thousand and nineteen sort of thing as fallen infrastructure span starting to really drawn accelerate he articulated a pod and second third quarter lot two thousand and twenty two to call that but it yeah it's continue to be remain very strong demand it remains strong i think the municipalities are certainly better position now the been able to get rate or like they've been able to deal you a decade ago long will blindly guild budgets are really strong and secure article a bitter oleanna and infrastructure dale and fifty five billion dollars dedicated to modernizing know clean drinking water systems that america we do think that's all incremental based on on what we're seeing now get and when that delegate path and alice bond get down there will we'll see how that plays out i do think the industry is much better position and i were a decade ago with infrastructure spending and in that sector
spk_7: it's as great apes very much guys
spk_8: like that
spk_0: our that question
spk_9: your like i said
spk_3: hi good morning and night porter am against it to question in florida are abandonment pvc pipe began by your mark in in this quarter were really impressive your gross margins likely and which might be a record for you guys and i'm just wondering with a lot of that the tv the pipe in and can we can marching sort of disdain and i love on the back and trying think that how we get year increase either guy guided on and then can you help us understand what the biggest contribution edge bomb that you applications in the back half thanks yeah i think shooting things for the the question in terms of you know pv fee and in the gross margin and panics you know we really sad nice merging improvement because really over or product lines and mentioned we don't feed you know some material cost increases across the board as certainly larger on tv see but we have a manage those pretty malik across the board
spk_4: and in the case of of pvc that that was no difference where blood knight the i realize some
spk_2: marginal improvement their his those prices third increase increased level to buy pt she'd pretty well during the environment and and get those passed along and at the appropriate time for him which is certainly much better than we've been able to do in the past lucy rapidly rising and material increases so i gave you to across the border we are they will
spk_3: the pick up to march in the ants minute across various product products and sorry and again garth marking sustain and that rate at an at the twenty five percent the back happening to predict or contribution from the to applications and a catholic comply
spk_4: yeah okay jamie that the way that we're looking at the back half in terms of margins you still being able to stay knows that i knew i would say you know as as these prices stabilize we would accept we would expect the class size of the equation that the to catch up in and she a little bit of margin now russian they're typically were a little stronger and that in the back half anyway
spk_9: that time that that can have to think about the back half that in terms of the event that income and for the acquisitions in i would tell you that posts energy and we expect both of those to be creative
spk_0: the to the business
spk_3: okay thank you yeah and our next question comes from keep use of jury ah thank you a question on the actual i that i said it still to to be figured out that you have that you know how the time for and what your suppliers challenge in terms of but it was mehldau what the situation looks like exists for the lakers have a drag on for months yeah yeah i tell a question again as we look at it as or lane you'll look at the impact it had that big impact weeks been obviously pvc to learn that time period when i took a through it it's kind of shattered about forty percent of the tpp capacity and or louisiana and texas gel yeah yeah that's one challenge get in that no plans back up and running on our being restored and second challenge which is a little bit more unpredictable is gonna be the transportation situation a particularly rail and trapped in an out of their so we anticipated sundar the neighborhood of forty six weeks and learn that ballpark or we're gonna be seeing the after effects of that it can be longer and could be shorter ah but we do it they do expect somewhere in that ballpark and it kind of day by day right now they got through it secondary impact i'd i'd really bad yet a much lesser degree is than the the weather impact that it had a craft the contrary you don't we get and into areas that have been inundated with wet weather often times and get our contractors are unable to dig into you know saturated soil to that can push like that way that and so much lesser extent and and certainly something that were used to when we get into our weather event like that but then the pdp pieces is gonna be one going to be sorted out over the next several weeks that that and just as long as i launched are you able to do a substitution with the customers a library cheaper or if i had a bridge the gap or that that is too much yeah we've we've certainly seen situations where either loot price or availability there have been material substitutes at at levels we haven't quite frankly have seen before in the past on the i would share with the also that even double iron bioavailability that are premium as well with manufacturers are really at capacity at this
spk_10: point the inventory in a network is that all time lows as well to sell lot and it's gonna be a challenge working through all those probably categories are viable substitute
spk_3: okay thank you i would pay that you know that the good a good news is and if that really does apply to our strength on the gate and that one of the things that we really pride in our ourselves the wonder differentiator that access the product and i will support customers through this and then secondarily as is where appropriate finding substitute for those products and poll adding that roussel more so than our customers are leaning on up for a pretty heavily for that okay like you our next question has some eighteen them i had i'm it becomes a year and they had a had i think i would think i was on you know i'm sorry about that and one million one i'm kicking you frame for us for in a in the am quarter routed that teaching present buying girls how each of the i'm marking stranded routed to never had a shame reggie was about that needy and argentina and then and now and fall into that can give a and expectations for second have anger you know questions and markets like which ones are being most impact like spiking finish curious confession annulled my next yeah pat thanks for that question the morning yeah for like for the quarter i would tell you right well he certainly the strongest the and merkel said say well in the to double digit category there and then he non non non the in uni and certainly a nice group and a quarter it's a unique typically dinner know stronger than are typical can a low single digits
spk_11: and we did see some nice strengthen and the man
spk_3: in in a non resident kind of that theme to marines so
spk_11: really good know performance across those i say in a going into the back now at everything we see right now is is fairly consistent across as and market to have continued the me and and tail lands no real impact you deprived availability and i'm you know that would impact any and market more than the other
spk_3: okay and while kids to kind of the volume vs price growth more second half like how would you are and how did you train canada and like you'll get more price growth on combine that i just wanted wanted to trust now but as well i'm rob pelinka yeah i think it'll like a lot like that the first half of the year with the exception being the fourth quarter where we started to see know pricing picked up last year the to the a faction that you know the hurricanes last fall when we really sir to see somebody initial price increases i can am pt feature and your feet price below laughs at the story most likely an unmanned the fourth quarter relative to the police the second and third quarters
spk_12: okay in my power by a than one a pipeline yeah just updated on the side of the pipeline
spk_3: and then tell you how to take act on that given more the compounds thousand luggage postwar the recent girl that you tell me that tina
spk_13: yeah thanks yeah we got a really strong pipeline continue that bad
spk_14: dino really find opportunities out there jockey look at the deal that we just glad celtic when they're really good indicators of what we've been able to deal with both on acquisitions a new geography them and to crack and and smith jr pipeline continues to be robot by taken it short medium term your you'll see proud that you'll see probably deal
spk_3: in of smaller range of the five to thirty million dollar read the new ah in the over the next the next few quarters on back die yet we continue to see a lot of opportunity up there certainly the tax situation and the potential legislation that being contemplated has really start a lot of interest in a lot about potential salary as well too shall we continue to be encouraged by what we're saying that pipeline from a capital structure really no impact whatsoever going public sale we continue to have ample liquidity to pursue all of our i'm in a target in addition to just great cashflow characteristics or the business l on yeah really well positioned to continue the i'm in a pipeline great thanks for the our best luck i kept my step on t of god i think my everybody a my job so so my and night my first question is really just are employed think the twenty point you for clearly wanna fight and going through that here and his chariot how does how does that our what then potentially the coin my g e give back a little bit i q your customers on price if we checked he he got commodity the kind of stabilize and an authentic curious on how to think about the gross margin implications as well the i don't really difficult to access what's gonna happen in twenty twenty two you know certainly what we've seen as pricing has remained from we we inedible better than expected certainly amazon factory quarter and then we anticipate that had to carry through and in a in the short term but as for twenty twenty two will that have to wait and see how that play now there's so many different dynamic can play right now in terms of the may and and and capacity constraints and everything outfits are it's really hard to get color on out at this point
spk_15: okay ah know that that's that's fair i guess i guess maybe just dumb newman fall on that they'll meet at guess he would back here to be and fifteen as the price
spk_3: yeah depending on what happened with my that money burn let's say flattened from here or a they're typically some type of you know he has you're getting double they get breaking the here are now you've gotta get back i kept that next year and a trying to figure out of there that you go on that
spk_0: yeah typically we do feet and sticking it to that that the pricing will be while cause may have play a little the pricing in the market does kind of the a little bit more sticky older i get over several months and so that that's pretty traditional what we've seen so their definitely would be a lag on their in terms of while when the deflation starts hitting
spk_12: got it that makes sense in either one by one paul on a free cash flow
spk_3: if only i'd give building one of been working capital that here and if given the environment of iran again i know probably really difficult thing and catholic any twenty two by can he had some point it if we if if they supply and chain environment again kenneth able i guess you could we get some type of working capital really the from your business yeah journal from will have a favorite be watching really cool for years soon as we get through to the be under the year he'll certainly senior release just did or to can feed on wind down on to some expand in the in the northern geography so you typically relief a little working capital my it look for bird and and and beyond in a we would just bring up the watch the supply constraints very closely and they can decisions about know when when and where we make those investments gotta make sense think i'm betting can get and thank you thank you
spk_4: our next question is how he bali of bought things your line item please go ahead morning and want ah thanks for taking the questions
spk_3: first one on the under gross margin side he talked about some of that opportunistic yeah pre buying i guess i had a bad price increases for and damn thing at the same time i heard you say that in the second half you expect costs more so catch up so my question is is there any reason why we wouldn't see it kind of similar pre by benefit and in the second pass a given some of these the you know that more near term inflationary trends i'm kind of her had a balances two together again hey man thanks thanks to the question yeah i think it is really looked into the second half of it's really about a product availability and and what happens to those pricing level on a sustained pricing surprising genocides a stabilizers in flattens we would expect that cost try to catch up a little and movie in a little pressure there in the second half they continue to rise like that man and i will continue to you know take advantage of those those buying opportunities and i think we we get a little benefit out of that the back half for that but some of those challenges or what he does drive and that the other range of the day for the second half is you know just really thing i told my happens on availability and and price and then fact now
spk_0: understood or get that very helpful there and and second one under under non residential and market they can add a comment at the top
spk_16: you know you sounded relatively confident the in a kind of being a think he said the beginning of a non read cycle i'm just curious and eight what you've seen in your own beds with some terms of you know whether it's backlog are quoting it in certain verticals you know actually seeing a tangible uptick yeah to are you making sort of a longer term call
spk_2: i'm in a based on some the longer term indicators you're saying like it
spk_3: yeah you know we look at nonresidential really into way so they're certainly on roads and bridges which has been storm drain which continue to be very strong and then for commercial construction oh or which really a young or fire protection products are in obviously are instrumental in a lot of commercial can shrug yeah that was an area that would hit pretty hard earned coded and what we're starting to things in anticipate on a big resurgence this year but where you start to see a lot according activity where he served to see that area for a mock we can do a lot of warehousing and that data center work for a buyer protection systems and that continue to carry through her actually else or see a lot more current commercial construction and somebody market that where you're really challenge darn cold and so that's encouraging the as we can get had some really good tail in the head of us and and start of the news cycle right well thanks the the back in march like that
spk_9: oh and that our next crop and as on toppling content of resets great your line is open please go ahead
spk_2: i think you can take him a question today and as been some tokens on the headlines from lighter than like ida ah hurricane i have the for the opportunities and hadn't weather than like bees highlight corning solutions
spk_3: cheekily around climate change in other two chapters letting it that and you update catherine yeah you know one of the things that were saying is the climate change situations i really emanated it's some bigger large scale projects that are out there that may not be as their the mold everybody the we will get water source projects where has been drought areas you know you look at at projects like and lake mead for example on the week been very active in a number of these big treatment plant water source projects same thing in in the was confident some of these areas are really struggling and a lot of ways to be able to find new water source the strategic account he that we had that was a the waterloo large national contractors in engineering firms have really am and hands durbin for the ability to pull through those products and yeah with they like about also the ability to work at a national level and then and the local expertise and film capabilities let's given israel of and it will continue to see that he with a lot of the flooding situations you know more infrastructure that's goes into storm drain age in water retention systems and think along those lines you know we're right at the forefront of that we work with a lighter vendor partners and helping to establish specs for new detention retention systems for and more more efficient commercial construction to prevent water one off into streams and you know the waterways said
spk_2: things are all really playing into you know somebody they the strength that we built as a business and particularly with a strategic account and then a couple that with our local presence given us have a big advantage continue to be able to add support those need of climate change as the more impact
spk_16: you can thank you and on the out my follow question and he provide a lot he tell today on supply chain you managing it ill everything from meters test tv see have been impacted
spk_3: that against this backdrop you're not alone from the distribution standpoint and managing supply chain and what if any weights at have you been able to determine if you're gaining market share giving your size your specialty nature international footprint yeah katherine there's no doubt that down and eat have given our side with gallery able to get preferred access to a lot of products that are really in short supply right now on it and i just shared are aligned are smaller competitors unfortunately don't have that ability to be able to do that and we've been able to pick up quite a bit of their the associated with that and you know secondarily is when there are big material for a bit like this in a working on the consulting way in which we do with our sales process yeah we were diligently to try and find that we can get the product that you know what are the alternative type to material that can be used to live the complete these projects in that direction they are the value that we provide their and understanding lol a local specifications and and being able to you know provide them solutions that a complaint these projects if you look our yeah we we talk logan and that labour shortages are contractors right now as are pretty significant labour challenges as well to so they had a crew they do not want that crew sitting idle waiting and material to tell you not an opportunity where were we can really help them and it's are many different way than being able to either get access to that
spk_4: product or final term it the material choices are and pick up like those projects we keep their they were forced active
spk_3: okay and and find final follow up to plan your guidance between on better than expectation
spk_2: what what what is
spk_17: what hundred can melt we'd better
spk_0: i'm oil and bulls been notably worse she's your expectations as you are planning to this school year
spk_3: yeah katherine thanks for the question yeah i retire as we were planning for the year initially certainly that them rapid increase in the continue to increase in a product pricing that we shouldn't from our suppliers the certainly at that level says that we have never seen and that we certainly don't anticipate am no one thing we were able to do and i again and i think was sam more unique here for this year than what we do on and and the past with the ability to get that pricing and the the hands of our feel teams that faster and we're all that see a nice guy gross margin improvement after this would rather rapidly inflationary environment so i dated both of those items while we were preparing for this environment and ready for it not has certainly we executed i think better than we be than anticipated through their set by those are canada the big areas and obviously yeah you know the strength and to me and coming out a cold and as wow wow we fascination increases and and gentleman's coming and i'm certainly is this that has been nice to see for or this theresa those are all areas or like i'm buying the and you know all to me were at here with the full your guidance actually think he then again it our next question is come out for me personally and your line of open take got up agger morning i'm more than that you feel ability as shit hague morning at you know what with the availability issues that we've seen in pvc and other materials and labor challenges just mentioned are you seeing any outright a man destruction or hers is the matter projects and getting pushed out a few months or quarters and just one eighty talk a little bit about how your customers responded to show shortages you talked about substitution earlier
spk_0: and and is there a big difference between in new construction versus repairing or place or a customer types or or regions just one a corridor
spk_18: yeah buddy up to this boy we really have seen no cancellation the projects to the material shortages of this all area or even price increases at this point so that the land as continue to remain very robust as we've gone through this period and in we've been able to fail on the with a lot of work could triple as last call
spk_3: order sell it out a i think we are certainly concoction out there about where some of these shortages may have a more significant impact and you coming quarters but so far the man has remained incredibly strong and we've been able to work through the supply constraints okay that that's very helpful and then apologies if i missed this but what would your organic volume growth and into queue and is their way to think about what level of organic volume growth is embedded for the guidance for twenty twenty one and and then i understand you're not getting enough guidance for twenty two oh but it is that and twenty one organic growth rate three reason to think it's not directional a sustainable for twenty two yeah i'm for me and i think enough for the for the quarter i would say it was mostly organic growth we had now or in be company which was or merger acquisition and twenty twenty anniversary in the first quarter and then that ellen beat the allen and supply pacific pay close die after the sec and quarter said nose and should expect to obviously see can cure in the back half of the year and combine the or about a hundred and thirty million the spark all annual sales i should see i'd say roughly a little less than half for about half of that come through and that in the back out of twenty twenty one and i get up at we won't necessarily forecast that emanate out into twenty twenty two that we haven't completed yet but i'm wish he'd like another half year those can turn the first half it's going to hurt you
spk_18: okay and help of of her over i do
spk_3: the next question of some nigel kind of or from such your line is open think our house thanks good morning everyone under thanks for the question we color grounds whole nother not hello to go given the margins where the clearly that we get is that she given the money inflation and the price potter it seem pretty again a margin on that said cody push and that that's very unusual for a is that normal when you see things and money fill it in a functional you provided them with the imagery and them and keep it in the back end of that you know how how you thinking of a margins might look in the back half a year belted take ticket
spk_19: yeah nigel i'd say called a number one certainly pre buying of helped us with margins but you know probably more importantly the manners our ability to get a lot of these price increases grow he put in a dedicated team and pricing category management the last year to help drive a lot of that we felt like
spk_0: many cases we may be lagging the market in terms of ah the that cost increases at we're heading you get net translated a price yeah it it just so happened that can we started seeing a lot of inflation had across all these products category our ability to train like that faster really had a substantial impact as we got into their the for
spk_3: south of the shared to the that absolutely critical the thing the performance that it's a weeping a lot of apple character oh certainly on it is a little difficult to tell how it out we start completing somebody inventory to fulfill current demand and buying it you know help more elevated cough as we would expect to see some type i can crash and associated with that are we gets a lot of opportunity continuing for that margin enhancement both that organically with some of that the challenges and the on their the property that we've improved and and certainly looking at some of our primal it by that label activity which is a relatively small part of what we're doing but that movie the rapidly expanding that as welcome great thank you my phone wanted for the supply chain later than the you alluded to the senior commentary on meters and that we anything publicly acute care challenges and yet to a second smart meters i'm came and you know a thing for the stable supply in in and need of he'll if they get a below the deterioration second half the improvement hear any any kind that be helpful yeah know that the that supply for a certain types of meters right now is really at a premium that we live prioritizing the available inventory that really serve a good portion of on in our a higher most most critical projects out there that the demand that type of but that guy a meter sell i will receive a little bit about pushing some of the meteor projects that will be in a dependent upon a bit now in a broader availability of those products are we will see and that from factor that we got a meters particularly for am i particularly for a few types of those meters were that supply is gonna be constrained and that will push some of these projects you know into our in the next year great ip i get i that question is from like while of army to market your line is a cow morning quarterbacking and with wanna start out as the follow up to the supply chain question and things like by margie doesn't in on it is there a customer and serve the product the the much some the challenges but wondering if you could put a fire a con yemeni quantifying what some of these constraints have men from nearby and standpoint a you know how i just negative really impacted your expectations for this year and and maybe as a a part two of the question beat the other thing we'd heard recently as some renewed issues under labour side and an uptick in absenteeism i'm can you comment on what you're seeing on he puts some or and labor right now he died share with the at a certain certainly through that first half of this year while loud of supply has been tight and we've not run into real situations here where we've been unable to meet man other than a handful of a projects that were you know in bali smart meters so the and at the relatively a material sell it out
spk_20: we anticipate supply will continue to be kind to the second half ali bobby flay are provided some guidance hear that will continue to defeat the man strong a role strong and that will walk through some of that on seven that yet been determined you know certainly out and cautionary as with each day and it's address i'll let it out with
spk_0: most part we've been able to work for a lot of that and we anticipate will continue to do that now you know you had a second question i'm sorry my could you repeat second question
spk_3: labour okay marian okay yeah yeah you don't like a book labor's been a real challenge though get tight labor market for as you know we operate in know personally as part of your name that the situation we outline very lean branches are that's been challenging to be able to step up and every possible area across the country i'll continue to provide a lot of incentive to attract talent inherently been pretty successful the able to do that when we look at labor for our contractors and our suppliers you know they're all in all have in the same challenges right now and did i did qatar to speculate whether he added going to be any changes associated with that labor pool and being able to get more people back to work we're back down now word will continue to work through that i think it'll be on a bit of a challenge to be get through the back after here no doubt that will continue work through it that i got a okay and then my are question it's still kind of a related track but you i understand planet levi's is currently small but when you think about your growth plans and and but then balance by some supply constraints that you're seeing in sunday's car
spk_0: availability constraints are global supply constraints

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