Core & Main, Inc.

hello everyone and welcome to the core and main second quarter 2023 earnings call my name is bruno and i'll be operating your call today during the presentation you can register to ask a question by pressing star 1 on your telephone keypad i will now hand over to your host robin bradbury please go ahead thank you good morning everyone this is robin bradbury vice president of finance and investor relations for core and main we are thrilled to have you join us this morning for our second quarter earnings call

I am joined today by Steve LeClair, our Chief Executive Officer, and Mark Wieckowski, our Chief Financial Officer. Steve will lead today's call with a business update, followed by an overview of our recent acquisitions. Mark will then discuss our second quarter financial results and full year outlook, followed by a Q&A session. We will conclude the call with Steve's closing remarks. We issued our second quarter earnings press release this morning and posted a presentation to the investor relations section of our website. As a reminder, our press release, presentation, and the statements made during this call include forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ from our expectations and projections. Such risks and uncertainties include the factors set forth in our earnings press release and in our filings with the Securities and Exchange Commission. We will also discuss certain non-GAAP financial measures, which we believe are useful in assessing the operating results of our business. A reconciliation of these measures can be found in our earnings press release and in the appendix of our investor presentation. Thank you for your interest in Core and Main. I will now turn the call over to Chief Executive Officer Steve LeClair.

Thanks, Robin. Good morning, everyone. Thank you for joining us today. If you're following along with our second quarter investor presentation, We'll begin on page five with a brief business update. Core and Main delivered another quarter of solid results as we maintain our focus on driving operational excellence across the business. Sales of $1.9 billion were equal to last year's record high and up 43% in the second quarter of fiscal 2021. End market demand has largely performed as expected through the first half of the year. Municipal repair and replacement demand has been resilient supported by healthy municipal budgets and increased water and wastewater utility rates. Residential construction has been soft compared to last year's strong performance. We are optimistic for the second half of the year as there continues to be a limited supply of developed lots and builders look to invest in lot development to support continued demand from homebuyers. The non-residential market was broadly flat through the second quarter. However, we are beginning to see pockets of softness for new project starts in select markets. Despite the potential for near-term softness and non-residential starts, our broad exposure to various project types within this market generally provides stability, as demand for these projects can happen on different cycles. The need for more robust water management solutions remains highly relevant due to the increasing effects of extreme weather events and water scarcity. Core and Main is well positioned to capitalize on these trends over the long term due to our size, scale, and technical expertise across the water sector. We delivered strong adjusted EBITDA margins of 14.5% for the second quarter to our disciplined pricing and gross margin execution. Prices have sustained through the first half of the year, in part due to the non-discretionary nature of demand in our industry. coupled with the fact that most of our products are either highly specified or made specific for our sector, which provides a resilient pricing framework in our industry. Overall, we expect a slightly positive impact on pricing for the full year as we continue to anniversary the prior year price increases. Gross margins exceeded expectations yet again as we execute on our gross margin initiatives and continue to benefit from our prior inventory investments. We expect gross margin to continue normalizing the second half of the year as our inventory costs catch up with market prices. We generated robust cash flow in the second quarter from our inventory optimization efforts, trading balance sheet capacity to reinvest in the business, pursue strategic M&A, and return capital to shareholders. To that end, We executed a $141 million share repurchase from our majority shareholder during the second quarter, reducing diluted share count by 5 million shares. This marks our second share repurchase transaction this year, having deployed over $470 million of capital and retiring 20 million shares. Turning to our recent acquisitions on page six, we added two high-performing businesses to our family during the quarter, generating annual net sales of approximately $100 million on a combined basis. Foster Supply is a leading producer, installer, and distributor of specialty precast concrete products, storm drainage, and other erosion control solutions, operating out of seven locations across Kentucky, Tennessee, and West Virginia. Since 1981, the team at Foster Supply has been the partner of choice for contractors and municipalities seeking innovative solutions for unique work sites and infrastructure challenges. Bringing that team to Corn Main will allow us to combine our collective expertise and differentiated product and service offerings to meet the needs of our shared waterworks and geosynthetics customers. D'Angelo is a leading provider of fire protection and waterworks products with three locations in Southern California. Since 1987, The team at D'Angelo has provided underground and fire protection contractors with an extensive product and service offering, including water, sewer, storm drainage, and other related products. The breadth of knowledge, dedication to outstanding customer service, and complimentary product offering gained through this acquisition will greatly enhance our presence and service capabilities in Southern California. Both of these businesses offer an expansion into new geographies enhance our product lines, and add key talent while aligning with our strategy of advancing reliable infrastructure. We are committed to driving sustainable growth through M&A and we look forward to adding more high quality businesses like these to the core and main family moving forward. Turning to page seven, I'll now discuss how we are well positioned to win in our industry. We play a critical role in the supply chain by connecting a large and diverse set of suppliers with a highly fragmented customer base. Our customers benefit from our technical expertise, customer service, purchasing capabilities, product breadth and availability, and the convenience of our branch locations, which allows us to provide consistent and timely delivery. Combined, these capabilities provide advantages relative to smaller local competitors and allow us to attract business from large multi-regional contractors and municipalities with more complex projects. Our suppliers recognize our value proposition to customers, and we believe they increasingly view us as an integral partner, given our ability to extend their sales and geographic reach with deep technical knowledge of local specifications. This enables us to benefit from favorable supplier agreements and product availability, as well as opportunities for product line exclusivity and restrictive distribution arrangements. These exclusive and restrictive distribution rights limit new entrants into our industry and provide a significant and sustainable competitive advantage. At the local level, our branches carry a range of product lines, brands, and inventory levels tailored to local specifications to effectively respond to our customers' project needs. Our associates are specifically trained in project scoping and planning, often performing digital takeoffs by curating a product list and custom solution, leveraging our regional and national network of product specialists to develop a solution tailored to our customers' needs. We complement this knowledge and sales expertise with our proprietary technology platforms that incorporate decades' worth of experience and insights into customers' planning and sourcing needs. Our proprietary bidding platform and online customer portals build customer loyalty by facilitating a more seamless bidding, planning, materials management, and delivery experience. We also prioritize investments in the development and well-being of our people. Our award-winning training programs enable us to accelerate development of our top talent to drive profitable growth while maintaining a supportive and mission-driven culture. Our dedication to developing industry leaders allows us to attract and retain the most qualified and motivated individuals in our industry. In addition, we provide attractive career growth opportunities to our associates while utilizing their knowledge and local expertise. The role of the specialized distributor within the value chain is becoming increasingly important as our fragmented customer base demands higher levels of availability across a broad set of products. which are procured from a large number of suppliers. As our industry becomes more complex with new regulations and product specifications, our scalable competitive advantages position us to win over our smaller local competitors. Before I turn the call over to Mark, I'd also like to announce that we're hosting our inaugural Investor Day in New York City on October 4th. The event will be hosted both in person and virtually, and we plan to present our business strategy, growth drivers, and financial objectives. If you have any questions about the event, please reach out to us through our investor relations team. With that, I will now turn it over to Mark to discuss our financial results and full year outlook. Go ahead, Mark.