Core & Main, Inc. (NYSE: CNM) Q1 2025 Earnings Call | 06/10/2025

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Core & Main Fiscal Q1 2025 Earnings Call Summary

Core & Main reported a strong first quarter for fiscal year 2025, achieving record net sales and adjusted EBITDA, driven by resilient end markets, strategic growth initiatives, and strong execution by their associates.

Key Financial Highlights (Q1 FY25):

Net Sales: $1.9 billion (record for Q1), up 10% year-over-year. Mid-single-digit organic sales growth.
Adjusted EBITDA: $224 million (record for Q1), up 3% year-over-year.
Adjusted EBITDA Margin: 11.7%, an 80 basis point decline, which was in line with expectations.
Gross Margins: 26.7%, a sequential improvement from Q4 FY24 (26.6%) due to pricing discipline, private label success, and sourcing efforts. Down slightly year-over-year (26.9%) due to higher average inventory costs.
Selling, General & Administrative (SG&A) Expenses: Increased 14% to $293 million, primarily due to acquisitions and inflation. Organic SG&A was up approximately 4%, reflecting productivity gains.
Diluted Earnings Per Share (EPS): $0.52, up approximately 6%.
Net Debt: Approximately $2.3 billion.
Net Leverage: 2.4 times.
Total Liquidity: $1.1 billion.
Operating Cash Flow: $77 million (a historically lower cash generation quarter).
Share Repurchases: Deployed $39 million to repurchase 837,000 shares.

Business and Market Dynamics:

Municipal Construction: Seeing steady growth, with increasing opportunities from the Infrastructure Investment and Jobs Act (IIJA) funding for water and wastewater treatment plants, transmission line replacements, and stormwater management. This provides confidence in the near and long-term outlook.
Residential Development: Resilient in Q1 but showing signs of softening due to economic conditions and affordability pressures, with developers reducing footprints. Despite short-term uncertainty, secular fundamentals remain strong, anticipating pent-up demand release as interest rates moderate.
Non-Residential End Market: Diversified mix provides stability. Strong sales in data center construction, institutional buildings, multifamily housing, and road/bridge projects. Softer activity in commercial buildings, manufacturing, and warehousing.
Market Share Gains: Achieved robust share gains through product, customer, and geographic expansion initiatives. Meters grew 10%, and treatment plant/fusible high-density polyethylene (HDPE) offerings grew double digits.
Tariff Impact: Direct impact on Core & Main's supply chain has been minimal as the majority of products are domestically made. They are working with suppliers to mitigate disruptions and are taking pricing actions where necessary. The broader economic impact of tariffs remains uncertain.

Strategic Initiatives and Capital Allocation:

Growth Levers: Focus on selling more products to more customers, share gains through local service, product initiatives (meters, fusible HDPE, treatment plant, storm drainage, geosynthetics), and geographic expansion (Greenfields and bolt-on acquisitions).
Greenfields: 20 new Greenfields since 2017 are now delivering nearly $300 million in annual net sales. Expecting 5-10 new Greenfields in 2025.
Acquisitions: Completed over 40 acquisitions since 2017, adding approximately 140 branches and $1.8 billion in annual net sales. Acquisition pipeline remains healthy.
Talent Development: Continued heavy investment in employee growth and development through training programs and academies.
Margin Expansion: Sustainable margin expansion expected through private label, sourcing optimization, pricing analytics, and digitization.

Fiscal Year 2025 Outlook (Reaffirmed):

Net Sales: $7.6 billion to $7.8 billion.
Adjusted EBITDA: $950 million to $1 billion.
Adjusted EBITDA Margins: 12.5% to 12.8%.
End Markets: Expected to be roughly flat for the full year, with stability in the first half but less clarity in the second half due to uncertainties (tariffs, inflation, interest rates).
Volume Growth: Expecting 2-4 points of above-market volume growth.
Pricing: Expected to be neutral or better for the full year.

The company remains confident in its strategy and leadership position, emphasizing strong fundamentals and outperforming the market.

About this video

Core & Main, Inc. (NYSE: CNM) reported Q1 2025 results on June 10, 2025, delivering record net sales of $1.91 billion—up 10% year-over-year and surpassing Wall Street’s revenue expectations. The company’s strong performance was driven by resilient demand in the municipal water infrastructure segment, which continues to benefit from the need to upgrade aging systems, while residential and non-residential markets remained flat. Gross profit rose 9% to $510 million, and net income increased 4% to $105 million. Diluted earnings per share climbed 6% to $0.52, matching analyst forecasts. Adjusted EBITDA grew 3% to $224 million, with an adjusted EBITDA margin of 11.7%. Gross margin improved sequentially to 26.7%, supported by disciplined pricing, private label growth, and successful M&A integration. The company generated $77 million in operating cash flow during what is typically a seasonally low quarter and deployed $39 million to repurchase 837,000 shares at an average price of $46.64. Net debt stood at $2.3 billion, with total liquidity of $1.1 billion. Core & Main reaffirmed its full-year fiscal 2025 guidance, projecting net sales between $7.6 billion and $7.8 billion and adjusted EBITDA of $950 million to $1 billion. The company expects continued low-single-digit growth in the municipal segment, with flat performance in residential and non-residential markets. Management emphasized minimal tariff exposure and ongoing focus on margin enhancement, organic growth, and strategic acquisitions. Outlook: FY2025: Net sales guidance of $7.6–$7.8 billion; adjusted EBITDA guidance of $950 million–$1 billion Continued market share gains in municipal water infrastructure Focus on capital allocation, margin expansion, and M&A pipeline About Inside Ticker: For more expert analysis and real-time updates on Core & Main, Inc. (NYSE: CNM) and other market movers, follow Inside Ticker and visit InsideTicker.com for in-depth reports, financial insights, and the latest news on leading companies. #CoreAndMain #CNM #EarningsCall #Q12025 #RecordRevenue #WaterInfrastructure #Guidance #MarketShare #Investing #InsideTicker

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