Hello, and welcome to the Core & Main Q2 2021 Earnings Call. My name is Charlie and I will be coordinating your call today. [Operator Instructions]. I will now hand you over to your host, Robyn Bradbury, from Core & Main to begin. Robyn, please go ahead.

Thank you. Good morning and welcome to the Core & Main fiscal 2021 second-quarter earnings call. This is Robyn Bradbury, Vice President of Investor Relations and FP&A for Core & Main. Thank you for joining us this morning to attend our first earnings call as a public company. We are thrilled to share our results with you. Steve LeClair, our Chief Executive Officer, will lead today's call with a company overview and our second-quarter execution highlights. Mark Witkowski, our Chief Financial Officer, will then discuss our second-quarter financial results and second-half outlook followed by a Q&A. We will conclude the call with Steve's closing remarks. For Q&A please limit to one question and one follow-up. [Operator Instructions] Thank you for your cooperation. Some of the information you will hear today may include forward-looking statements. They may include statements regarding our intentions, beliefs, assumptions or current expectations concerning our financial position, results of operations, cash flows, prospects or growth strategies. 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 guarantees of future performance or outcomes and that they may differ materially from those made in or suggested by the forward-looking statements contained on this call. These forward-looking statements are made only as of the date of this call. We do not undertake any obligation to update or revise any forward-looking or cautionary statements to reflect changes in assumptions, the occurrence of events or changes in future operating results. In addition to providing results that are determined in accordance with U.S. GAAP, we present EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted net income and net debt leverage, all of which are non-GAAP financial measures. These measures are not considered measures of financial performance or liquidity under GAAP, but we use them to assess the operating results of our business. For a reconciliation to the nearest GAAP measure, please refer to the slides in the appendix of the fiscal 2021 second-quarter investor presentation which can be found on our Investor Relations website. Thank you for participating on the call and for your interest in Core & Main. I will now turn the call over to Chief Executive Officer, Steve LeClair.

Thank you, Robyn. Good morning, everyone. Thank you for joining us today and welcome to our fiscal 2021 second-quarter earnings call, our first earnings call as a publicly traded company. This is an exciting milestone for our Company and I'm very pleased to be sharing it with you. I will begin today's call with a brief overview of our business and industry. I will then cover our key growth drivers and acquisition strategy followed by a review of our ESG characteristics. I will end by discussing our second-quarter execution highlights before turning the call over to our Chief Financial Officer, Mark Witkowski, to discuss our fiscal 2021 second-quarter financial results and second-half outlook. I will start on Page 5 of the presentation with a brief overview of Core & Main. Core & Main is a leading specialty distributor of water, wastewater, storm drainage and fire protection products and related services serving municipalities, private water companies and professional contractors across municipal, non-residential and residential end markets nationwide. Our specialty products and services are used in the maintenance, repair, replacement and construction of water and fire protection infrastructure. We are one of only two national distributors operating across large and highly fragmented markets, which we estimate to be approximately $27 billion in size. With more than 285 branches across the U.S., we serve as a critical link between over 4,500 suppliers and a diverse and long-standing base of over 60,000 customers. We have diversified end market exposure with an estimated 45% municipal, 37% non-residential and 18% residential end market mix in fiscal year 2020. Furthermore, we had near equal exposure to construction on new projects and existing repair and replace projects in fiscal year 2020. On Page 6 we provide an overview of our broad product offering and service offering. We offer…

Thank you, Steve. Good morning, everyone. Turning to Page 14, I'll begin by covering our second-quarter operating results. Net sales in the second quarter were nearly $1.3 billion, an increase of approximately 36% over the prior year period. The increase was driven by volume gains and higher average selling prices relative to the prior year period. Our sales benefited from demand across each of our end markets. Residential construction has continued to benefit from strong housing demand and live development. The municipal end markets have started to see an acceleration of growth. Our non-residential end market, which contains a mix of project types ranging from commercial buildings to roads and bridges, saw varying results but overall experienced positive volume growth in the quarter. Our execution of sales initiatives and our leadership position in our industry has allowed us to outperform our end markets and deliver solid core share gains by ensuring our customers have access to the products where and when they needed them. We believe roughly half of our net sales increase for the quarter was due to price inflation, which was much higher than expected and driven by our team's ability to efficiently pass through rising material costs. We experienced rapidly rising material costs on PVC pipe, in addition to many other product lines, but to a lesser extent than PVC. Our teams have done a fantastic job navigating the inflationary environment and working closely with our customers to give them advanced notice of these market price increases. Pipe valves and fitting sales increased nearly 43% compared to the prior year period due to the mix of strong volume gains and price inflation from rising material costs. The same factors drove growth in our storm drainage and fire protection product lines, which were up 21% and 37%, respectively,…

[Operator Instructions] Our first question is from David Manthey of Baird. Your line is open. Please go ahead.

Thank you. Good morning, everyone. Of the 43% growth that you saw in PVC, can you approximately quantify the impact of inflation versus volume growth? And I think you had previously been assuming that PVC would start to decline in the second half. Are you now assuming that it will be sustained in 2022 at current price levels?

Dave, I'll answer on the pricing for the quarter on PVC. I'd tell you certainly over half of PVC was going to be pricing obviously had a bigger impact on PVC than some of the other product categories. It's kind of the best target I can give you on PVC in terms of the impact there. In terms of the go forward, Steve, do you want to talk about that?

Dave, I'd share with you that certainly PVC has been disrupted significantly over the last year from Hurricane Laurel last fall, to the deep-freeze that happened in Texas in the beginning of this year to now Hurricane Ida. So we are seeing demand at all-time highs and product availability and supply at all-time lows. So given those dynamics we feel like we're going to see that pricing hold in there through the duration here, at least for the next several months. And so, along those lines that was -- we obviously didn't expect to see pricing carry through as strong as we had this year. We expect it to taper down to more stabilized levels. But given some of these external factors, we think it will probably hold in there for a bit.

Okay, thanks. And as it relates to the $55 billion in the current infrastructure bill, if that goes through and if those dollars start to filter down to the municipalities, might there be some crowding out relative to already stretched municipal budgets or do you think that's all incremental? And then second, if you can just comment on just the debate around infrastructure? Do you view that as a positive long-term? That maybe there's changing attitudes, changing priorities in the U.S. as it relates to infrastructure spending today at any level?

Dave, I would say that even if you go back to the back half of 2019, we started seeing municipal and infrastructure spend starting to really grow and accelerate. Obviously, it took a pause in the second and third quarter of 2020 due to COVID. But it's continued to remain very strong, demand has remained strong. I think the municipalities are certainly better positioned now, they have been able to get rate unlike they've been able to do a decade ago. So, along those lines we feel those budgets are really strong and secure. Now obviously, if you throw in an infrastructure bill and $55 billion dedicated to modernizing clean drinking water systems across America, we do think that is all incremental based on what we are seeing. Now if and when that bill gets passed and how those funds get down there, we'll see how that plays out. I do think the industry is much better positioned than what we were a decade ago with infrastructure spending in that sector.

Sounds great. Thanks very much, guys.

Thanks, Dave.

Our next question comes from Jamie Cook from Credit Suisse. Your line is open. Please go ahead.

Hi, good morning. Nice quarter. I guess just 2 questions, sorry to harp on PVC pipe again. But your margins in this quarter were really impressive. Your gross margins I think might be a record for you guys. I'm just wondering was a lot of that PVC pipe and can margins sustain in that level in the back half. I'm just trying to think about how we get to your increased EBITDA guidance. And then can you help us understand what the EBITDA contribution is from the two acquisitions in the back half? Thanks.

Yeah. Thanks, Jamie; thanks for the question. In terms of PVC and the gross margin impacts, we really saw nice margin improvement across really all of our product lines. As I mentioned, we did see some material cost increases across the board, certainly larger on PVC, but we were able to manage those pretty well across the board. And in the case of PVC that was no different. So, we were able to realize some margin improvement there. As those prices started to increase we were able to buy PVC pretty well during the environment and get those passed along at the appropriate time frame, which is certainly much better than we've been able to do in the past when we've seen rapidly rising material increases. So, I'd say it's really across the board where we were able to pick up some margin enhancement across various product lines.

I'm sorry, can gross margins sustain at the 25% range in the back half? And then just the EBITDA contribution from the two acquisitions in the back half, what's implied?

I think, Jamie the way that we are looking at the back half in terms of margins is still being able to sustain those. But I would say as these prices stabilize we would expect the cost side of the equation to catch up and see a little bit of margin compression there. Typically, we are a little stronger in the back half anyway, but that's kind of how to think about the back half. In terms of the EBITDA increment for the acquisitions, I would tell you that post-synergy we expect both of those to be accretive to the business.

Okay, thank you.

Yeah, thanks.

Our next question comes from Keith Hughes of Truist. Your line is open. Please go ahead.

Thank you. A question on the effects of Ida. I know you said it was still to be figured out. But do you now have a timeframe of what your suppliers are telling you in terms of when they will know what the situation looks like? Is this within a week or is this going to drag on for months?

Tough question, Keith as we look at it. So, certainly when you look at the impact that it has had, the biggest impact we've seen, obviously is PVC. So, during that time period when Ida came through it shuttered about 40% of the of the PVC capacity in Louisiana and Texas. So, that's one challenge is getting those plants back up and running, power being restored. And then the second challenge, which is a little bit more unpredictable is going to be the transportation situation, particularly rail and truck in and out of there. So, we anticipated somewhere in the neighborhood of 4 to 6 weeks somewhere in that ballpark, where we're going to be seeing the after effects of that. It could be longer, it could be shorter, but we do expect somewhere in that ballpark. And it's day by day right now as we go through it. Secondary impact of Ida has really been -- to a much lesser degree has been the weather impact that it's had across the country. When we get into areas that have been inundated with wet weather, oftentimes our contractors are unable to dig into saturated soil, so that can push things out a week. But that's to a much lesser extent and certainly something that we are used to do when we get into weather events like that. But the PVC piece is going to be one we are going to have to be sorting out over the next several weeks.

Okay. And just along the same lines, are you able to do any substitution with the customers with ductile iron or HDPE or anything to kind of bridge the gap or is that just too much?

We've certainly seen situations where either due to price or availability, there have been material substitutes at levels we haven't quite frankly seen before in the past. I would share with you also that even with ductile iron pipe availability is at a premium as well too as manufacturers are really at capacity at this point. The inventory in the network is at all-time lows as well, too. So, it's going to be a challenge working through all of those product categories to find viable substitutes.

Okay, thank you.

So, I would say the good news is -- and this really does play to our strengths on this, Keith, in that one of the things we really prided ourselves and one of our differentiators is access to product and being able to support customers through this. And then secondarily is, where appropriate, finding substitutes for those products and pulling that through. So, more so than ever our customers are leaning on us pretty heavily for that.

Okay, thank you.

Our next question is from Pat Bowman of JPMorgan. Your line is open. Please go ahead.

I was on mute. Sorry about that. Good morning, everyone. Can you frame for us in the quarter relative to that 18% volume growth, how each of the end markets trended relative to that? I had assumed resi was above that maybe. I don't know, I'll let you answer that. And then as a follow-up to that, can you give a sense on expectations for second-half volume growth across those end markets, like which ones are being most impacted by supply constraints? Just curious if you could flesh it out a little bit more. Thanks.

Pat, thanks for the question. Good morning. For the quarter I would tell you right, resi is certainly the strongest of the end markets. I'd say well into double-digit category there. And then non-resi and muni, certainly nice growth in the quarter. I'd say muni has typically been stronger than our typical low single-digit. We did see some nice strength in muni and then non-resi in that same range. So, really good performance across those. I'd say going into the back half, everything we see right now is fairly consistent across this end markets with continued demand and tailwinds. No real impact due to product availability that would impact any end market more than the other.

Okay. And relative to volume versus price growth in the second half. How would you frame -- it sounds like you'll get more price growth than volume growth. So I just wondered if you could flesh that out a little bit as well -- on the revenue side.

Yeah, Pat. I think it will look a lot like the first half of the year, with the exception being the fourth quarter where we started to see pricing pick up last year due to the effects of the hurricanes last fall. That's when we really started to see some of the initial price increases come through on PVC. So, you will seem price be a little less of a story most likely in the fourth quarter relative to at least the second and third quarters.

Okay, and then my follow-up is on the M&A pipeline. Can you guys just update us on the size of the pipeline? And then your opportunity execute on that given the current balance sheet leverage post these recent deals that you've executed on?

Yeah. We've got a really strong pipeline, continue to really find opportunities out there. So, if you look at the deal that we just close subsequent, they're really good indicators of what we've been able to do with bolt-on acquisitions and new geographies and then new product enhancement. So, our pipeline continues to be robust. I think in the short- and medium-term you'll see probably deals in a smaller range of the $5 million to $30 million revenue over the next few quarters, but we continue to see a lot of opportunity out there. Certainly the tax situation and the potential legislation that's being contemplated has really stirred a lot of interest and a lot of potential sellers as well, too. So, we continue to be encouraged by what we are seeing in the pipeline. From a capital structure, really no impact whatsoever with going public. So, we continue to have ample liquidity to pursue all of our M&A targets in addition to just great cash flow characteristics for the business. So, really well positioned to continue the M&A pipeline.

Great. Thanks for the color. Best of luck.

Thank you.

Our next question is from Joe Ritchie of Goldman Sachs. Your line is open. Please go ahead.

Thanks. Good morning, everybody.

Hey, good morning, Joe.

So, my first question is really just around pricing for 2022. So, clearly a lot of pricing going through this year. I'm just curious, how does that look then potentially four 2022? You give back a little bit to your customers on price if we start to commodity prices kind of stabilize? And then also I'm just curious on how to think about the gross margin implications as well.

Yeah. Joe, really difficult to assess what's going to happen in 2022. Certainly what we've seen is pricing has remained firm. A little better-than-expected, certainly we saw in second quarter. And then we anticipate that to carry through in the short-term. But as for 2022, we'll just have to wait and see how this plays out. There are so many different dynamics in play right now in terms of demand and capacity constraints and everything else. It's really hard to give color on that at this point.

Okay, that's fair. I guess maybe one follow on to that though. I guess, Steve, would you expect there to be some stickiness to price depending on what happens with commodities, if commodities were, let's say, flattened from here? Or is there typically some type of -- if you're getting double-digit pricing this year, you've got to give back like half of that next year? I'm just trying to figure out if there is a heuristic around it.

Yeah. Typically we do see some stickiness to that, so the pricing will -- while costs may deflate a little the pricing in the market does tend to be a little bit more sticky over several months. And so, that's pretty traditional of what we've seen. So, there definitely would be a lag on there in terms of when the deflation starts hitting.

Got it, that makes sense. And maybe my one follow on is free cash flow. Clearly you're building a little bit of working capital this year just given the environment that we are in. Again, I know it's probably really difficult to answer for 2022. But at some point if the supply chain environment, again kind of stabilizes should we get some type of working capital relief from your business?

Yeah. Joe, that's something we'll obviously be watching really closely here especially as we get through to the end of the year. You'll certainly see a release just due to our typical seasonal line down to some extent in the northern geographies. So, we typically release a little working capital. But if you look forward and beyond, we're going to have to watch the supply constraints very closely and make some decisions about when and where we make those investments.

Got it. That makes sense. Thanks, everybody, and congrats.

Thanks, Joe.

Thanks, Joe.

Our next question is from Matthew Bouley of Barclays. Your line is open. Please go ahead.

Good morning, everyone. Thanks for taking the questions. The first one on the gross margin side. You talked about some of that opportunistic pre-buying I guess ahead of price increases. And I think at the same time I heard you say that in the second half you expect costs to more so catch up. So, my question is -- is there any reason why we wouldn't see a similar prebuy benefit in the second half given some of these more near-term inflationary trends? How do you balance those two together? Thank you.

Hey, Matt. Thanks for the question. I think as we looked into the second half, it's really about product availability and what happens to those pricing levels. So, sustained pricing, so pricing kind of I'd say stabilizes and flattens we would expect that cost side to catch up a little and see probably a little pressure there in the second half. If they continue to rise like they've been we'll continue to take advantage of those buying opportunities. And I think we get a little benefit out of that in the back half. So, some of those challenges are what's driving the range that we gave for the second half as just really saying what ultimately happens on availability and price in the second half.

Understood. Okay, very helpful there. And then the second one on the non-residential end market. I think you made a comment at the top, you sounded relatively confident kind of being I think you said at the beginning of a non-res cycle. I'm just curious what you've seen in your own business in terms of whether it is backlog or quoting in certain verticals. Actually seeing a tangible uptick yet or are you making a longer term call based on some of the longer-term indicators you're seeing. Thank you.

Yeah. We look at non-residential really in two ways. So, there's certainly roads and bridges which has been storm drainage which has continued to be very strong. And then for commercial construction, which really our fire protection products are obviously instrumental in a lot of commercial construction. That was an area that was hit pretty hard during COVID. And what we are starting to see, and we didn't anticipate a big resurgence this year, but we're already starting to see a lot of quoting activity, we're already starting to see that area firm up. We've been doing a lot of warehousing and data center work for fire protection systems. And that's continued to carry through and we are we are actually now starting to see a lot more commercial construction in some of these markets that were really challenged during COVID. So, that is an encouraging to us. We think that has some really good tailwinds ahead of us ahead of us and the start of a new cycle.

All right. Well, thanks, Steve, and thank you, Mark.

Thanks, Matt.

Our next question is from Kathryn Thompson with Thompson Research Group. Your line is open. Please go ahead.

Hi. Thank you for taking my questions today. There has been some focus on the headwinds from weather events like Hurricane Ida. But what are the opportunities and how do weather events like these highlight Core & Main solutions, particularly around climate change and other disruptive weather events? Thank you.

Thanks, Kathryn. One of the things that we're seeing is the climate change situations have really emanated in some bigger large-scale projects that are out there that may not be as visible to everybody. But we look at water source projects where there's been drought areas. You look at projects like in Lake Mead for example. We've been very active in a number of these big treatment plant and water source projects, same thing in Wisconsin and some of these areas that are really struggling in a lot of ways to be able to find new water source. The strategic account teams that we have that work with a lot of the large national contractors and engineering firms have really enhanced our business and the ability to pull through those products. And what they like about us is the ability to work at a national level and then have local expertise and fulfillment capability. So, that's given us a real advantage. We'll continue to see that too with a lot of the flooding situations as more infrastructure investment goes into storm drainage and water retention systems and things along those lines, we're right at the forefront of that. We work with a lot of our vendor partners in helping to establish specs for new detention and retention systems for more efficient commercial construction to prevent water runoff into streams and other waterways. So, those things are all really playing into some of the strengths that we've built as a business and particularly with these strategic accounts. And then couple that with our local presence, it's given us a big advantage to continue to be able to support those needs as climate change has more impact.

Okay, thank you. And then my follow-on question -- you provided a lot of detail today on supply chain. How you're managing it, everything from meters to PVC have been impacted. But against this backdrop, you are not alone from a distribution standpoint in managing supply chain. What if any ways have you been able to determine if you're gaining market share given your size, your specialty nature and your national footprint?

Yeah. Kathryn, there's no doubt that given our size and scale we're able to get preferred access to a lot of products that are really in short supply right now. And I did share that a lot of our 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 business associated with that. Secondarily is when there are big material shortages like this working on the consulting way in which we do with our sales process. We work diligently to try and find if we can't get the product, what are the alternative types of materials that can be used to complete these projects. And that's a big part of the value that we provide there and understanding a lot of the local specifications and being able to provide them solutions to how to complete these projects. If you look at our -- we've talked a little bit about labor shortages. Our contractors right now have pretty significant labor challenges as well, too. So, when they have a crew, they do not want that crew sitting idle waiting on materials. And so, that's an opportunity where we can really help them in so many different ways in being able to either get access to that product or find alternative material choices for them to complete those projects and keep their workforce active.

Okay. And then just a final follow-up just on your guidance, which was better than expectations. What has been relatively better and what has been relatively worse versus your expectations as you were planning for this fiscal year.

Yeah, Kathryn. Thanks for the question. I would tell you as we were planning for the year initially, certainly the rapid increase and the continued increase in product pricing that we've seen from our suppliers is certainly at levels that we have never seen and that we certainly didn't anticipate. One thing we were able to do, again, that I think was more unique to this year than what we've done in the past was the ability to get that pricing into the hands of our field teams faster. And we were able to see a nice gross margin improvement through this rapidly inflationary environment. So, I'd say both of those items, while we were preparing for this environment and ready for it. Certainly we executed I think better than we could have even anticipated through this. So, those are two of the big areas. And then obviously the strength and demand coming out of COVID as well. While we saw some nice increases and tailwinds coming, certainly it's been nice to see if our industry. So, those are all areas really combine to ultimately where we're at here with the full-year guidance.

Perfect, thank you.

Thank you, Kathryn.

Our next question is from Anthony Pettinari of Citi. Your line is open. Please go ahead.

Hi. Good morning. With the availability issues -- hey, good morning. With the availability issues that we've seen in PVC and other materials and the labor challenges you just mentioned. Are you seeing any outright demand destruction or is this a matter of projects may be getting pushed out a few months or a few quarters? I'm just wondering if you could talk a little bit about how your customers have responded to shortages. You talked about substitution earlier. Is there a big difference between new construction versus repair and replace or different customer types or regions? Just wondering if you can give any more color there.

Anthony, up to this point we really have seen no cancellations of projects due to material shortages at this point or even price increases at this point. So, the demand has continued to remain very robust as we've gone through this period. And we've been able to fulfill, albeit with a lot of work over the last quarter. So, I think we have certainly some caution out there about where some of these shortages may have a more significant impact in coming quarters. But so far demand has remained incredibly strong and we've been able to work through these supply constraints.

Okay, that's very helpful. And then apologies if I missed this, but what was your organic volume growth ex-M&A in 2Q? And is there way to think about what level of organic volume growth is embedded for the guidance for 2021? And then understanding you're not giving guidance for ‘22, but is that kind of ‘21 organic growth rate -- is there any reason to think it's not directionally sustainable for ‘22?

Yeah, Anthony, thanks. For the quarter I would tell you it was mostly organic growth. We had our R&B Company, which was our larger acquisition in 2020, anniversary in the first quarter, and then L&M Supply and Pacific Pipe closed after the second quarter. So, those you should expect to obviously see come through in the back half of the year. Combined they were about $130 million historical annual sales. So, you should see I'd say roughly a little less than half or about half of that come through in the back half of ‘21. And we won't necessarily forecast M&A out into 2022 that we haven't completed yet, but obviously you can expect another half year of those coming through in the first half of ‘22.

Okay, that's helpful. I'll turn it over.

Thank you.

The next question is from Nigel Coe of Wolfe Research. Your line is open. Please go ahead.

Thanks. Good morning, everyone. And thanks for the question. We have covered a lot of ground so there's not a whole lot to go here. But the internal margins were clearly very good, especially given the commodity inflation and the price pass through. It seems like you get a margin on that commodity push and that's very unusual. So, is that normal when you see these swings on commodities? So, was it a function of you prebuying some of the inventory? And I am curious on the back end of that how you think incremental margins might look in the back half of the year relative to Q2.

Nigel, I'd say a couple things. Number one, certainly prebuying has helped us with margins. But probably more importantly than that is our ability to get a lot of these price increases through. We put in a dedicated team in pricing and category management last year to help drive a lot of that. We felt like in many cases we may be lagging the market in terms of the cost increases that we are hitting and getting that translated to price. It just so happened that we started seeing a lot of this inflation hit across all these product categories, our ability to translate that faster really had a substantial impact as we got into the first half of this year. And it was absolutely critical, the same performance that you've seen. We think a lot of that will carry through certainly. It is a little difficult to tell how as we start depleting some of the inventory to fulfill current demand and buying at more elevated costs as we would expect to see some type of compression associated with that. But we do see a lot of opportunity continuing forward with margin enhancement both organically with some of the challenges and the processes we've improved, and certainly looking at some of our private label activity, which is a relatively small part of what we are doing, but we will be rapidly expanding that as well too.

Great, thank you. And my follow on is supply chain related. And you alluded to this in your commentary around meters. And we've certainly seen particularly acute challenges, especially in smart meters. So, I'm just curious, are you seeing stable supply in meters here or do you expect there to be a little bit of deterioration in the second half of the year, improvement? Any color there would be helpful.

Yeah. The supply for certain types of meters right now is really at a premium and we've been prioritizing the available inventory to really serve a good portion of our higher most critical projects out there that would demand that type of meter. So, I think what we're seeing is a little bit of a push in some of the meter projects that will be dependent upon broader availability of those products. So, we will see in that subsector that we've got of meters particularly for AMI, particularly for a few types of those meters where that supply is going to be constrained. And that will push some of these projects into next year.

Great. Thanks, Steve.

Thank you.

Our next question is from Mike Dahl of RBC Capital Markets. Your line is open. Please go ahead.

Good morning, thanks for fitting me in. Just wanted to start out as a follow-up to the supply chain question. It seems like by and large you've still been able to serve the customer and serve the products even with some of the challenges. But wondering if you could put a finer point on and maybe quantifying what some of these constraints have meant from a volume standpoint; i.e., how much it's negatively impacted your expectations for this year. And maybe as a part two of the question, the other thing we've heard recently is some renewed issues on the labor side and an uptick in absenteeism. Can you comment on what you are seeing on puts and takes around labor right now?

I would share with you that certainly through the first half of this year, while the supply has been tight. We've not run into real situations here where we've been unable to meet demand, other than a handful of projects that were involving smart meters, and that's been relatively immaterial. So, we anticipate supply will continue to be tight through the second half. We've obviously provided some guidance here that we'll continue to see demand strong and grow strong and that we'll work through some of that. So, that's yet to be determined. We certainly have some caution areas with PVC, et cetera. But for the most part, we've been able to work through a lot of that and we anticipate we'll continue to do that. Now you had a second question, I'm sorry. Could you repeat the second question? Labor --

It was really around labor, yeah.

Labor has been a real challenge. A tight labor market for us, we operate -- personally as part of Core & Main the situation we operate very lean branches. That's been challenging to be able to staff up in every possible area across the country. We'll continue to provide a lot of incentives to attract talent in here. We've been pretty successful at being able to do that. When we look at labor for our contractors and our suppliers, they're all having the same challenges right now. It's hard to speculate whether there's going to be any changes associated with that labor pool and being able to get more people back to work. But we'll continue to work through that and I think it will be a bit of a challenge as we get through the back half of this year, no doubt, but we'll continue to work through it.

Got it, got it, okay. And then my follow-up question is still kind of a related track. But I understand private label is currently small, but when you think about your growth plans and but then balanced by some of the supply constraints that you're seeing, do some of these product availability constraints or global supply constraints push out the rollout or expansion of your private label efforts?

It hasn't been material at this point. So, we continue to build -- we've built some supply in here to be able to internally serve a lot of our branches, particularly fire protection products. So, we've had a comfortable inventory level to carry through on that so far. We're continuing to work through sourcing as well too to expand the product offerings that we have in there. So, so far we've been able to do a lot of that virtually and it hasn't impeded our progress up to this point. We hope to continue that certainly over the next several quarters.

Okay. Great, thank you.

Thank you.

There are no further questions on the line, so I will hand the call back over to Steve.

Well, thank you all again for joining us today for our first earnings call as a publicly traded company. To close it out I would like to share a few of the key items that make Core & Main a leading specialized distributor. We are a market leader with size and scale in an attractive and fragmented market. We have a strong value proposition playing a pivotal role in shaping our industry. We have multiple levers for organic growth, continually cultivating ways to grow faster than the market and gain share. We have a proven ability to execute and integrate acquisitions with a large pipeline and additional runway. We are poised to benefit from favorable industry trends in each of our end markets. We have an attractive and resilient financial profile with strong return characteristics. And to close it out, I'm incredibly proud and want to thank all of our associates for their continued commitment to our customers and our communities, especially given the disruption related to COVID-19, product availability challenges and labor shortages. We are committed to providing our customers with local knowledge, local experience and local service nationwide. Thank you for your interest in Core & Main. Operator that concludes our call.

Thank you for joining today's call. You may now disconnect your lines.