Core & Main, Inc.

Hello and welcome to the Core and Main Q4 and Fall Year 2025 Earnings Call. My name is Alex. I'll be coordinating today's call. If you'd like to ask a question at the end of the presentation, you may press star followed by 1 on your telephone keypad. I'll now hand it over to Glenn Floyd, Director of Investor Relations, to begin. Please go ahead.

Good morning and thank you for joining us. I'm Glenn Floyd, Director of Investor Relations at Core and Main. We appreciate you taking the time to be with us today for our fiscal 2025 fourth quarter and full year earnings call. Joining me this morning are Mark Witkowski, our Chief Executive Officer, Robin Bradbury, our Chief Financial Officer, and Brad Coles, our President. Mark will start with a business update and review of our fiscal 2025 performance. Brad will then discuss the investments we are making to drive market share gains and margin expansion over the long term. Robin will follow with a review of our financial results and outlook for fiscal 2026. We will then open the line for questions and Mark will wrap up with closing remarks. 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. For more information, please refer to the cautionary statements included in our earnings 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 and Main. I will now turn the call over to our Chief Executive Officer, Mark Witkowski.

Thanks, Glenn, and good morning, everyone. I'll begin on page five with a brief overview of Corn, Maine and its market position. Corn, Maine is a leading specialty distributor of water infrastructure products and services in North America, supporting the repair, upgrade, and expansion of critical water systems. Having a portfolio of more than 225,000 products, many of which are exclusive to our industry with limited distribution rights, We combine local expertise with national capabilities to provide water infrastructure solutions to municipalities, private water companies, and professional contractors across municipal, non-residential, and residential end markets. Our footprint consists of more than 370 branches across the US and Canada, which serves as a crucial link between 5,000 suppliers, and a diverse base of more than 60,000 customers. Our end markets are balanced and stable, providing resilience through varying demand environments. Municipal projects represent 44% of our sales, generating steady demand from reliable funding sources. Our non-residential end market, which represents roughly 38% of sales, benefits from a diverse project mix across commercial, industrial, and infrastructure applications. Residential lot development represents approximately 18% of our sales. And while near-term dynamics in this end 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 the emerging growth drivers like AI-related infrastructure needs, and treatment plant modernization provides a strong foundation for our business. Our competitive advantages, including local market expertise backed by our highly trained sales force, national capabilities, and industry-specific technology, position us to lead an attractive $44 billion addressable market across the US and Canada, up roughly $5 billion from last year with the addition of Canada. We estimate our US market share at approximately 20% today with a small but growing share in Canada. This combination gives us significant runway to grow and capture additional share over time. Our ability to win in the market starts with the value we create for both our customers and our suppliers, which we've highlighted on slide six. It begins with our people first culture, which empowers our associates to operate with an entrepreneurial mindset and build strong relationships in their local markets. For our customers, we provide a broad portfolio of highly specified products, deep technical expertise, and a consultative sales approach that helps them navigate complex infrastructure projects. Our local teams understand the specifications, regulations, and project requirements unique to each municipality and job site. allowing us to support customers through early project planning through delivery and installation. At the same time, we differentiate ourselves through our delivery capabilities and proprietary technology tools, which help simplify estimating, procurement, and job site logistics. Combined with our national distribution network, this enables us to deliver materials reliably and efficiently. helping customers keep projects on schedule and within budget. For our suppliers, corn mains serves as a critical channel to reach a highly fragmented customer base. Our expanded sales force and geographic footprint provide access to tens of thousands of contractors, municipalities, and utilities across the country. We also help drive the adoption of new products and technologies by leveraging our local relationships, technical expertise, and market insights. Underlying all this is our operating model, which combines local expertise with national capabilities and resources. Our local teams lead customer relationships and project execution, while our scale provides advantages in sourcing, distribution, technology, and product availability. This combination allows us to deliver a high level of service to customers while also creating meaningful value for our supplier partners. Together, these capabilities form a differentiated value proposition that positions Quorumain to consistently gain market share and deliver strong, reliable execution. Turning to our recent accomplishments on page 7, fiscal 2025 was a year of disciplined execution for Quorumain. We delivered our 16th consecutive year of sales growth. a result that reflects the resilience of our business, the long-term strength of our end markets, and the consistent performance by our teams across the country. We generated net sales of $7.65 billion, adjusted EBITDA of $931 million, adjusted diluted EPS of $2.97, and operating cash flow of $650 million. As we talk through the year, I want to frame our performance against the annual value creation targets we use to measure the business, which include end market growth, organic above market growth, acquisitions, margin expansion, and cash flow. First is our end market growth. Our annual target assumes 2% to 4% market volume growth. And in fiscal 2025, our end markets were roughly flat overall. Municipal volumes were up low to mid-single digits and continued to be a source of strength supported by steady repair and replacement activity and a healthy funding environment. While municipal demand remained resilient, it was not enough to fully offset softness in other areas of our end markets. Non-residential volumes were relatively muted throughout the year. Growth from data centers, street and highway projects, and multifamily developments provided support but that strength was offset by softness and more traditional commercial lot development activity. Residential lot development declined low double digits as housing affordability and higher mortgage rates continue to weigh on demand. We expect residential will eventually return to growth to satisfy the significant undersupply of housing in the U.S. While end market trends are outside of our control, we have been proactive in repositioning the business to perform in this environment by strengthening our municipal business while remaining fully committed to the private construction markets. We've had a couple years of softer-than-normal end markets, and despite near-term softness, we expect growth to resume in the medium term. Second is our organic above-market growth. Our annual target calls for 2 to 4 percent, and in fiscal 2025, we delivered squarely within that range. A big driver of that performance was our sales initiatives. which delivered robust results as we broaden our portfolio of solutions to address aging water infrastructure. Collectively, average daily net sales grew double digits in fusible HDPE, treatment plant solutions, and geosynthetics. Average daily net sales for meter products grew 12% in the quarter and grew mid-single digits for the year, on top of a strong prior year growth comparison of 32%. We also expanded our footprint during and subsequent to the year to make our products more accessible nationwide, opening 10 new branches and attractive markets. We have a pipeline of additional greenfield locations and expect to open additional locations as we progress throughout the year. Collectively, these sales and geographic expansion initiatives drove three points of organic above-market growth in fiscal 2025, reflecting continued share gains across our markets. We are confident in our ability to continue driving above-market growth through these sales, geographic, and key talent initiatives in fiscal 2026 and beyond. Third is our growth from acquisitions. Our annual target is 2 to 4 percent growth from acquisitions, and in fiscal 2025, we delivered 2 percent. That includes contributions from acquisitions completed in fiscal 2024, along with two complimentary acquisitions we completed in fiscal 2025, Canada Water Works and Pioneer Supply. Together, these acquisitions added five branches to our footprint during the year. Canada Water Works builds on the platform we established in Canada last year with the HM pipe acquisition. With these additions, we now operate seven branches in Ontario, including two green fields opened earlier this year, as we continue expanding our presence. Pioneer Supply expands our presence in Texas and Oklahoma, further extending our reach in attractive growth markets. Both businesses bring a strong reputation for quality and service that align with Coramain's mission. Together, we're extending our reach and creating even greater opportunities for growth and value creation. More broadly, acquisitions and greenfields are complementary tools we use to expand our footprint and unlock new growth opportunities. In some markets, we establish a presence through greenfields, while in others, like Canada, acquisitions provide an initial platform that we can then expand through additional investments over time. We are well positioned to continue driving growth through M&A. Fourth is margin expansion. In fiscal 2025, we delivered strong gross margin performance, expanding 30 basis points year-over-year, driven by higher private label penetration and disciplined purchasing and pricing execution. Our gross margin performance for the year reflects great execution by our local teams and challenging market conditions, coupled with the benefits of our national scale and initiatives. Flat end market volumes and flat pricing coupled with higher than normal inflation on our operating costs, limited our ability to achieve SG&A leverage this year. Historically, we've offset these impacts with productivity and price increases and expect we will do that going forward. Our last value creation lever is cash generation. Every year, we target converting 60% to 70% of adjusted EBITDA into operating cash flow. We delivered $650 million of operating cash flow in fiscal 2025, which represents conversion at the high end of the range. Strong cash generation continues to be a differentiator for Core and Main, and it gives us flexibility to invest in the business, pursue strategic M&A, and return capital to shareholders. As we look ahead, our focus is straightforward. Extend the advantages we've built, compound market share gains, and continue expanding the structural earnings power of the business. Beginning on page eight, we'll cover the fundamentals of our end markets and why they remain attractive over the long term. Brad will then walk through why we have confidence in our ability to grow and improve profitability. We benefit from a large base of aging municipal water infrastructure that drives consistent repair and replacement activity. And that backdrop is complemented by strong local funding and incremental federal and state funding that expands the addressable opportunity. We also continue to see an increasing need for modernization projects, including treatment plant upgrades and metering conversions, which reinforce the multi-year nature of municipal demand. Our non-residential end market is supported by a balanced mix between new development and repair and replacement activity, ranging from commercial and industrial construction to less cyclical infrastructure projects like road and bridge rehabilitation activity. As I mentioned earlier, we're seeing mixed demand across project types in the near term, but the long-term themes like onshoring and broader infrastructure investment are expected to support a steady pipeline of work as large projects move from planning to execution. Lastly is residential. While near-term housing activity can move with interest rates and affordability, The long-term demand drivers are structural. The U.S. has built fewer homes than household formations over the past two decades, which has created an undersupply and a long runway for future lot development. Importantly, residential growth can also provide incremental support to our other two end markets. As communities expand into suburban and rural areas, commercial development follows. And all of that residential and non-residential growth places a greater strain on local water systems, which drives municipal expansion, upgrades, and repairs. We believe a release of pent-up residential activity supports residential, non-residential, and municipal growth. Next, I would like to welcome Brad Kohls, our president, who will walk through the investments we are making in our products, capabilities, footprint, and people, and how those initiatives are driving market share gains, and supporting margin expansion. Go ahead, Brad.