Core & Main (CNM) Q1 2025 earnings summary

Executive summary

• Net sales for Q1 2024 increased 11% year-over-year to $1.74 billion, driven by acquisitions, organic growth, and earlier seasonal activity in northern geographies.

• Organic sales grew 3%, with acquisitions contributing 8% to growth; residential volumes improved year-over-year for the first time in over a year.

• Five acquisitions closed year-to-date, including Dana Kepner, the largest to date, expanding geographic reach and product offerings.

• Adjusted EBITDA declined 1% to $217 million, with margin compressing 150 basis points to 12.5% due to gross margin normalization and higher inventory costs.

• Diluted EPS was $0.49, down 2% compared to Q1 2023.

Financial highlights

• Gross profit rose 7% year-over-year to $468 million, with gross margin down to 26.9% from 27.9% due to higher inventory costs and competitive pressures.

• Net income was $101 million, down from $133 million year-over-year, primarily due to lower operating income and higher interest expense.

• Operating income declined to $168 million from $181 million year-over-year.

• Operating cash flow was $78 million, reflecting lower-than-normal seasonal inventory build and higher tax and interest payments.

• SG&A expenses rose 15% to $257 million, with two-thirds of the increase from acquisitions.

Outlook and guidance

• Raised and narrowed FY2024 net sales guidance to $7.5–$7.6 billion (12–13% growth) and adjusted EBITDA to $935–$975 million (3–7% growth).

• Expects low single-digit end market volume growth, with residential in the low-to-mid single digits, non-residential flat to slightly up, and municipal steady at low single digits.

• M&A expected to contribute 7–8% of total sales growth (~$450 million revenue), with EBITDA contribution at company average.

• Gross margin expected to face 30–50 basis points of sequential pressure in Q2 and Q3 due to competitive pricing, but initiatives in private label and sourcing to offset.

• Operating cash flow conversion targeted at 60–70% of Adjusted EBITDA.