Hello, and welcome to the Core & Main Q4 and Full Year 2025 Earnings Call. My name is Alex, and I'll be coordinating today's call. [Operator Instructions] 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 & 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; Robyn Bradbury, our Chief Financial Officer; and Brad Cowles, 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. Robyn 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 & 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 5 with a brief overview of Core & Main and its market position. Core & Main 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, nonresidential and residential end markets. Our footprint consists of more than 370 branches across the U.S. 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 nonresidential 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 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 U.S. and Canada, up roughly $5 billion from last year with the addition of Canada. We estimate our U.S. market share at approximately 20% today with a small but growing share in…

Thanks, Mark, and good morning, everyone. It's great to be here with you today. Turning to Page 9. I want to share some insights on the sales initiatives and capabilities that are driving consistent above-market growth and market share gains. Building on the foundation of our core business and extensive branch presence, we're bringing additional value to our customers in 2 primary ways with a broader product offering to cover all of their project needs and by bringing complete solutions to their more complex challenges. Our key initiatives, meters, treatment plant, fusible HDPE and geosynthetics have combined to grow at an average annual rate of approximately 14% over the past 5 years, significantly outpacing underlying market demand. Two of these initiatives are focused on expanding our product offering, fusible HDPE and geosynthetics. These product initiatives require new supplier partnerships, specialized equipment and technicians as well as unique storage and logistics solutions. As we expand these capabilities across our branch network, we can bring these products to our current customers and also pursue new customers who specialize in the installation of these unique products. Fusible HDPE, for example, is used in water and sewer systems by our current municipal and contractor customers, but the same products, fusion equipment and technicians are also used in agriculture, energy, mining, landfill and other applications, often in the very same geography. Smart meters and treatment plant are sales initiatives focused on solving more complex problems and offering more comprehensive solutions to our customers. We do this by investing in national teams with very specific expertise who complement the efforts of our local branches. We help our customers understand the possible solutions. And in doing so, we often create additional demand. Smart metering is a great example of how our turnkey solutions are winning with the…

Thanks, Brad. Good morning, everyone. I'll start on Page 13 with some highlights from our fourth quarter results. Net sales in the fourth quarter decreased 7% to $1.58 billion. As a reminder, we had 1 fewer selling week in the fourth quarter of this year compared to last year. On an average daily net sales basis, sales increased about 1%, driven by roughly 1 point of organic volumes. Pricing remained positive across nearly every product category with the exception of PVC pipe, resulting in roughly flat pricing overall. Sales in the final week of the quarter were also affected by severe winter weather that temporarily limited construction activity in several regions. Gross margin in the fourth quarter was 27.1%, an increase of 50 basis points year-over-year. The improvement reflects higher private label penetration and disciplined purchasing and pricing execution. Total SG&A for the quarter decreased 5% to $264 million. The year-over-year decline was driven primarily by lower variable costs from 1 less selling week, along with benefits from our previously announced cost actions. Sequentially, SG&A was $31 million lower than the third quarter, reflecting approximately $5 million of realized savings with the remainder due to reductions in variable costs. Over the course of fiscal 2025, we implemented approximately $30 million of annualized cost actions with roughly $6 million recognized this year and the remainder expected to flow through our results during fiscal 2026. Our approach continues to be measured. We are improving our cost structure without compromising customer service or long-term growth. At the same time, we continue to invest in targeted roles to support product line and geographic expansion. We are highly focused on regaining operating leverage by offsetting SG&A investments with productivity gains while maintaining the service levels and capabilities that support our growth strategy. Adjusted EBITDA in…

[Operator Instructions] Our first question for today comes from David Manthey of Baird.

My first question is the one that I get from investors most frequently, which is the growth disconnect of Core & Main versus the corresponding segment at your largest competitors. And I know we've talked about this offline. I just was hoping you could maybe just address some of the differences in vertical end market influence and geographic and product mix and why you think there's a slight disconnect between your growth and your biggest competitor?

Yes. Thanks, Dave. Appreciate the question. Dave, I would tell you from an end market perspective, we feel really good about our presence and reach certainly across the municipal end market, nonresidential and the residential end markets. We clearly are, I would say, in every market that our other national competitor is in. We've got -- obviously, we both compete against a large volume of local distributors and regional competitors. So I think both us and our other national distributors are doing a really good job of taking share across the industry with certainly us driving a lot of good share growth with our smart meter business. Treatment plant is an area, I would say, that we've grown pretty significantly. I would say that's an area that they've been, I would say, a little ahead of us over the years, but we're rapidly, I would say, gaining ground in that area. And then I think certainly, as part of the data center construction that we've seen pop up, I would say they've been in a little better position in some of those markets, particularly the ones that are kind of in their backyard in kind of Northern Virginia area and Texas, in particular, are areas that we're investing in, I'd say, rapidly to kind of catch that. But what I would tell you is that what I like in terms of our position there is we're seeing more and more of these data centers pop up across the U.S. And given our geographic reach and our strong relationships we have in these local markets, we've seen a lot of good gains here over the last couple of years on those data centers as we've seen those expand much more broadly across the U.S. And I think our exposure there is going to continue to be helpful as we pick up that business. So we view it as a positive. I think our large national competitors having good results. We're seeing good share gains and good results on our side and feel that that's a good thing overall for the industry.

I appreciate that color. The second question is on costs. So as we think about the cost-out program and the $30 million run rate, I think you said $5 million of the benefit hit in the fourth quarter that would imply that, I guess, we don't lap that fully until we get to the first half of 2027. Can you just correct me on that if I'm wrong, that you'll continue to see year-on-year benefits from that cost-out program diminishing through the year, but still positive through 2026. Is that correct?

Yes. Thanks, Dave. That's what we're expecting. We saw -- we completed all of the $30 million of cost out during FY '25. We got about $1 million of that benefit in the third quarter. We got $5 million of that benefit in the fourth quarter. So that remainder of that $30 million, we'll see all of that really hit in the first, second and third quarter of next year before we annualize those cost-out efforts.

Got it. So if you're at $5 million in the fourth quarter, that implies a $20 million run rate. So there should still be positive, I should say, lower costs in the beginning of '27 as well.

Perfect. Yes.

Our next question comes from Matthew Bouley of Barclays.

So maybe just to address kind of the current market conditions around energy and commodity inflation following the Middle East conflict here. So maybe just kind of near-term diesel surcharges, et cetera, how are you expecting to deal with that? How should we think about modeling all that? And then over these past few weeks, kind of what are you hearing from suppliers around price increases? And how does that play into your guide for flat pricing for the year?

Yes. Thanks, Matt. I'll go ahead and take that one. I would tell you, we're obviously watching things very closely as they develop in the Middle East. We definitely have a direct impact as we see some of the increases in fuel with our delivery operating expenses and that sort of thing, but it's still relatively small, and we've got a lot of that embedded in the guide that we laid out. I would say more indirectly, we're watching closely the effects on the oil and gas market. We have seen that start to, I would say, impact the global resin prices that are out there. So there is some indications that we're going to start seeing some increases coming through on certain product categories related to that. And frankly, just all the -- if fuel and those prices continue to increase, I think we'll see some of that increase flow through some other product categories more broadly. But specifically, as those resin prices increase globally, we're starting to hear signs that we'll start seeing some increases related to products like PVC, HDPE pipe could definitely be impacted by that and definitely things that we're starting to hear about right now. So those are things that we'll watch closely as this continues to develop, but I view those as kind of positive signs for us as we look to see some stability with pricing in some of those product lines. So overall, I'd say we kind of view it as neutral to positive if this kind of disruption continues in the market from that standpoint. But obviously, any kind of uncertainty, the rising fuel prices within the global economy, we're definitely concerned that, that could create a little bit of uncertainty in the macro, just demand environment, which is part of why I think you saw the nature of the guidance that we put out there was just given a lot of that overall uncertainty that we could experience.

Got it. Okay. No, that's great color. And then secondly, kind of stepping back around some of the growth investments. I heard you saying you're focusing investments in areas like data center, maybe treatment plants as well, if I heard you correctly, sort of looking to close that gap versus your competition. I guess, number one, just any way to kind of quantify the investments you're putting in there? Just obviously, we're trying to dial in the SG&A outlook. But again, kind of stepping back, what are some of the specifics you're looking to do here, whether it's from -- in terms of your sales force, et cetera? What kind of needs to be done? And what would the kind of resulting impact be on, again, these large projects out there?

Yes, Matt, this is Brad Cowles. I'll take that. The initiatives that I highlighted kind of the biggest movers for us with the most attractive kind of growth dynamics, I'd put smart utility in there, but also the treatment plant. And the resources that we invest in to do treatment plant work adapt very well to all of the -- what I would just generally call higher capacity, more complex water delivery projects, which are on data centers or large plants, water transmission lines and actual water treatment plants themselves. And that structure that we put in place, one of those national complementary team structures that we use to kind of enhance the capabilities of the local branch, we're going to be investing upwards of another 30 people in that initiative this year, just to give you a sense of the scale. And those are resources that are kind of positioned both regionally and nationally to -- they're a little bit more mobile and cover a little bit more geography than a branch, which is serving generally kind of a fairly tight radius. And so they go where the work is. They follow these strategic national accounts, and they bring that level of expertise that really builds confidence and trust in us and accelerates the ability to win on those bigger projects.

Our next question comes from Joe Ritchie of Goldman Sachs.

So first question maybe for Mark. So you take a look at the guidance of kind of $950 million to $980 million EBITDA guidance for the year implies 2% to 5% EBITDA growth. I guess, how are you thinking about the kind of range of options here between the low end and the high end? And if we can maybe dig in a little bit on some of the main components, whether it's SG&A, gross margins, the investments that you're making, that would be helpful.

Joe, it's Robyn. I'll take that one. Thinking about the guide and what we laid out here, obviously, it's an unusual time with a lot of uncertainty with what's going on in the macro environment. So we felt like we needed to be prudent with what's going on externally. So with the guide, we've got the market kind of flattish. We'll always deliver on that above-market growth. And we do have a little bit of M&A in there that we completed last year. Our -- what we've got embedded in the guide is expecting pricing to be about flattish for the year might look similar to what we saw in FY '25. Now obviously, with what Mark just mentioned on the price of resin increasing, we could see a little bit of lift there, and that's an opportunity for us. So if you think about the guide and what we've laid out and the opportunities that we have to perform on the high end of that or even outside of that, it's things like if we get a little bit of price that's going to be incredibly helpful for us on the top line, that will help us get more SG&A leverage. We're expecting the residential market to continue to be at the levels that it's been performing lately. So that will be a headwind in the first half of the year for us given where that activity is sitting today. But if some of the uncertainty settles out and we do see a little bit improvement in the markets, then that could obviously help us as well. Any extra lift we get on the sales side will help us hit those SG&A targets and help us get better leverage there. We have a lot of confidence in gross margin. Our private label initiative has been performing really well. We expect that to continue and expect to continue to deliver on gross margin initiatives. And then I think you asked also on the low end of the guide. Obviously, if there's higher inflation than what we're expecting, we did see a lot of inflation in FY '25. That was in the mid-single digits range. We typically expect to see that in the low single digit range, which is what we're expecting. But if any of that inflation comes in higher or if any of the markets are a little bit weaker, that would bring us in at the lower end of that guide.

Super helpful, Robyn. And then maybe my follow-on question either for Brad or for Mark. Just on the M&A discussion. So you guys have had just an incredible track record of compounding the M&A over the last several years, you can go back to the HD Supply days. But like the -- when I look at this year, this year was a little bit lighter or the most completed year was a little bit lighter. How are you guys thinking about getting back to maybe that cadence of maybe 2 to 4 points a year? And then also, is that opportunity likely to occur this year? Like just help us walk us through kind of the 2027 expectations for M&A and your ability to maybe kind of get back to what the more normalized cadence was for the company?

Yes. Thanks, Joe. I'll take that. In terms of the M&A, I would tell you, I'm extremely confident in our capabilities there and the pipeline that we have. Even though 2025 for us was a lighter year, we still delivered on the low end of the M&A growth target that we put out from 2% to 4%. And there just has not been a lot trading in our industry, and we are incredibly well positioned with the relationships that we have with the opportunities that are out there. It tends to be choppy. We've had some lighter years in our recent history as well. So -- and we've had some years where it's come well beyond that range. So I do expect that it will be choppier. I do think we've got a really good pipeline of opportunities right now that we're looking at. So expect 2026 will be a year for us where we're kind of right in that range with plenty of opportunities that we're keeping a close eye on that could extend us beyond that. So I feel really good about the M&A that we've got. And then as you've seen in a lighter year, we're also opening up a record number of greenfields as well. So we've got both levers. We're well positioned to capture that share one way or the other and feel confident in our team's ability to go do that.

Our next question comes from Matt Johnson of UBS.

I guess, first off, if we could just talk about the meters business a little bit. I think you guys have sounded pretty excited about this business for some time now. So I guess, can you guys just give a little more detail on what level of growth you're expecting for this segment in 2026? And also how much of a contribution you guys are expecting from the contracts that you guys talked about this past quarter? And just any kind of more color you could give on the magnitude and the timing of that contract would be great.

Yes. Thanks, Matt. This is Brad. I'll take that. This initiative is -- it's been an exciting area for us. We've just consistently delivered at least low double-digit growth year after year. We continue to invest, and I think we keep getting better. Those large projects that we win can represent in a given year between maybe 1/3 or a little more than 1/3 of kind of our volume. Keep in mind, we have a massive underlying base of municipal sales that drive kind of your more everyday repair and replace and upgrade meter projects. But those large ones have been quite interesting and more substantial as we've become kind of the preferred prime contractor, if you will, for that scale and complexity of project. In 2025, we had another incredible year. We were comping, I think, 32% growth from the prior year. So it was a bit of a stretch. But I think we're back on our stride. You heard Mark say we pushed a 12% growth in the quarter on the meter initiative. And I'd say early innings in 2026, we feel like we're back on stride even having swallowed that pretty large step change in '24 to 2025. So I'm pretty excited about it. We're investing additional resources there, much like we are in treatment plan to keep our coverage strong. We've got a good pipeline of additional large projects and expect to have that same kind of balance going forward in '26, where we still have a massive base of underlying municipal meter sales and then a nice third to slightly higher coming from those big projects.

That's great. Appreciate that. And then also if we could just ask to get a little more detail on what you guys are expecting for the resi end market this year. I think Robyn said expecting down in the first half before leveling off in the second half. So I guess any kind of color you can give on what level of declines you guys exited the year at? And then how you're kind of expecting that to shape up through the year would be great.

Yes. I would tell you, as we exited 2025, we felt that it was sequentially pretty stable but at low levels. And so we kind of work our way here into early 2026, we're definitely in a different position than we were last year at this time. You go back to the early part of 2025, and there was some optimism out there in the builder and development world. There were projects that were -- that we saw a lot of good bidding activity on, and we saw some good volume in the early part of 2025, which then definitely tapered off as we got into the second quarter and then into the back half. So I'd say sequentially, it's been stable, but we're definitely in a different position than we were last year at this time, which is kind of what's leading us to believe resi will be relatively soft year-over-year to start the year and should ease in terms of the comparisons as we get into the second half of 2026.

Our next question comes from Mike Dahl of RBC.

Can we just stick with the end market conversation? And Mark, let's just put a finer point on things. So resi was down low double digits for the year in '25 and clearly worse in the second half. Are we -- is this commentary to suggest that given the tough comps, resi is likely down something like mid-teens or worse in the first half of the year and still winds up down high single digits, 10%? I think people are just trying to bridge to the -- like more specifically, yes, the resi, but then also if we step back within the flat blended end markets, the quantitative build of what is resi, what is non-resi, what is muni. So if you could help dial that in. And maybe also just as part of that, quarter-to-date trends, if you could enlighten us a little on how that's shaped up, obviously, a lot of weather dynamics, et cetera.

Yes. Mike, I'll take that. So starting with resi, the way that we're thinking about that is that we had a decent residential end market in the first quarter of last year. As -- like Mark mentioned, there was some optimism for the second half of the year and the homebuilders are still developing some lots during that time. So we saw some good activity in the first quarter. So we're going to be anniversarying that tougher comp in the first quarter. So expecting the first part of the year to be down in the low double digits to mid-teens range for residential and then sequentially improving throughout the year. So the second quarter could look something like down high single digits and then maybe it's flattish in the back half of the year. Really not expecting at this point that residential gets much better. There's nothing pointing to that yet. Obviously, there's some optimism there and there's some pent-up demand at some point, but the timing of that is uncertain. So a tougher comp in the first half of the year for resi and then that starts to improve and maybe we get to about flattish by the end of the year because those comps get easier. On the nonresidential side -- sorry, on residential, so we're expecting that all works out to be about -- down about mid-single digits for resi for FY '26. And then on the nonresidential side, we're expecting it to perform somewhat similar to FY '25, which is in the flattish range. There's a lot of project types within our nonresidential and there's some of those project types that are performing well, some of the data centers, some of the street and highway projects, multifamily and then there's a lot of that lighter commercial type of work that's been softer this year, retail, office space, some of those areas -- and we're not expecting a lot of change in what we've seen there. So expecting the nonresidential market to be flattish. And then on the municipal side, this is an area that's very steady, stable, strong for us, had a really good year in FY '25, expecting that to continue to perform well. In the guide, we've got embedded low single-digits growth there on the municipal side. But this is an area that's got ample funding at the state level, the federal level, at the local level. We feel like this is a really key and important market for us that we think is going to be strong and stable over the short, medium and long term.

That's helpful and makes a lot of sense. On the -- just as a follow-up, -- just in light of the recent uncertainty and some of the early signals that you're seeing where certain categories could have to potentially take price. How are you thinking about inventory management? Because a lot of these categories probably have some slack where if you wanted to lean in, maybe you could buy ahead of some of this. But just curious to get your thoughts on how you're thinking about that.

Yes. I would tell you, that's something that we do really well here at Core & Main is managing kind of the ins and outs of those inventory investments, especially when there's some indications of price volatility. That's always been, I'd say, a really good driver of gross margin expansion for us and that ability to identify where and when we see those price increases and where and when to make those investments from an inventory standpoint. I think our teams do an extraordinary job of getting a lot of that product ahead of those increases and then working to get that into the market at the appropriate time. So I'd say that's been a standard part of our execution playbook and something that we generally do pretty well.

Our next question comes from Nigel Coe with Wolfe Research.

But just wondering if maybe you could comment on what you're seeing through the first quarter. Just given the comments from Robyn on the residential market, it looks like we might be below that 2% to 3% in the first quarter. Just want to make sure that's the case. And then when it comes to the end market outlook, I think it's obviously keeping a conservative stance here makes a lot of sense given the backdrop. I think a lot of investors are surprised that pricing is flat given the acceleration we've seen in inflation before this Iran shock. So just wondering, is it simply the PVC headwinds here? Or are there any other competitive kind of impediments to getting price here?

Yes, Nigel, I'll touch on what we're seeing so far in the first quarter and then hit on the pricing part. In the first quarter, we've got a January 31 year-end. So we've been through February and not quite all the way through March yet. But I would say what we're seeing is pretty well in line with our guide. We are expecting the first quarter to be our toughest comp quarter. So we are expecting sales and EBITDA might be down a little bit slightly year-over-year and then improving as we go each quarter. And that's in line with what we were expecting. We did see about a $15 million to $20 million weather impact the last week of our fiscal year when there was a deep freeze and a lot of winter severe weather. We're getting a lot of that back in the first quarter. So we think all of that will just come back in the first quarter. Gross margins are performing strong. SG&A, we're seeing some of the cost-out impact favorability there. So feeling good about the first quarter, obviously, on soft markets and probably be down slightly year-over-year on the quarter, but it's coming in really in line with guide and expect it to improve as we get throughout the year. And then on the pricing side, all of our product categories were basically up in FY '25, except for PVC. PVC was down about 15% in the year. So there's a variety of different outcomes that we could see in FY '26, but we're not counting on a full recovery of PVC. Some of the oil increased prices could help either stabilize that or increase it. But what we're seeing today is PVC will have a -- as it's gone down all throughout the year, we're going to have a headwind at least in the first half to 3 quarters of the year on PVC, even if it stabilizes where it's at today. So that would be the puts and takes. We would expect price increases in all of our other product categories.

That's really helpful. And then just a quick one on buybacks. I think from the K, it looks like you bought back about [ 7,000 ] shares in February, March. That's a decent chunk of shares compared to what you did in 2025. Just wondering if there's any intention to keep stepping on buybacks at these current share prices.

Yes. Yes. Nigel, we did about $155 million last year, almost $40 million in the first quarter. Given where the stock price is at, we've got ample cash flow. We've got tons of cash to be able to reinvest in the business, M&A and do buybacks. So you can expect us to see continued buybacks. We've got about over $600 million still remaining on our authorization. So that will be a big part of our capital allocation going forward.

I'll now hand it back to Mark Witkowski for any further remarks.

All right. Thanks for joining us today. As we wrap up, I want to leave you with a few key points. Fiscal 2025 was another year of disciplined execution. We delivered our 16th consecutive year of sales growth, drove 3 points of above-market growth through share gains and structurally expanded gross margins, all while generating strong cash flow. At the same time, we continue to invest in the product categories, footprint and capabilities that position us to compound these gains over time. Looking ahead, we see a clear path to growth and improved operating leverage. Our initiatives are working, our actions to address cost pressures are in place, and our end markets remain attractive over the long term. Over the last 12 months, I've spent meaningful time with customers, suppliers and associates across the country. Those conversations reinforce what differentiates this company, our people, our culture and our consistent focus on execution. I'm grateful for our teams and confident in the opportunity in front of us. Thank you for your continued interest in Core & Main. Operator, that concludes our call.

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