10-K: Core & Main Reports Fiscal 2024 Results, Announces Leadership Transition

Core & Main reports an 11% increase in net sales for fiscal 2024 and announces a leadership transition with Mark Witkowski succeeding Steve LeClair as CEO.

Summary

• Core & Main, Inc., a leading specialty distributor, reported an 11% increase in net sales for fiscal 2024, reaching $7,441 million compared to $6,702 million in fiscal 2023.
• The increase in net sales was primarily driven by acquisitions, higher volumes, and contributions from the 53rd selling week, partially offset by slightly lower selling prices.
• Gross profit increased by 8.9% to $1,980 million, but gross profit as a percentage of net sales decreased slightly from 27.1% to 26.6%.
• Operating income decreased by 2.8% to $719 million due to higher selling, general, and administrative expenses (SG&A) and depreciation and amortization (D&A) expenses.
• Net income decreased by 18.3% to $434 million, primarily due to increased interest expense and income tax expense.
• Adjusted EBITDA increased by 2.2% to $930 million.
• The company announced a leadership transition, with Steve LeClair transitioning to Executive Chair and Mark Witkowski becoming the new CEO effective March 31, 2025.
• The company employed approximately 5,700 associates as of February 2, 2025.
• The company estimates its addressable market to be approximately $39 billion in sales in fiscal 2024.
• The company estimates that approximately 42% of its net sales for fiscal 2024 were from the municipal construction sector, 38% from the non-residential construction sector, and 20% from the residential construction sector.

Sentiment

Score: 6

Explanation: The document presents mixed results with increased net sales and Adjusted EBITDA but decreased net income and operating income. The leadership transition adds uncertainty, resulting in a neutral sentiment score.

Positives

• Net sales increased by 11% due to acquisitions and higher volumes.
• Adjusted EBITDA increased by 2.2%.
• The company has a strong acquisition platform and a track record of successful integrations.
• The company has a comprehensive cybersecurity program based in-part on the National Institute of Standards and Technologys Cybersecurity Framework.
• The company has a share repurchase program in place.

Negatives

• Gross profit as a percentage of net sales decreased slightly.
• Operating income decreased by 2.8% due to higher SG&A and D&A expenses.
• Net income decreased by 18.3% due to increased interest expense and income tax expense.
• The company is subject to price fluctuations in its product costs.
• The company is subject to inventory management risks.

Risks

• Declines and volatility in the U.S. residential and non-residential construction markets could reduce net sales.
• Slowdowns in municipal infrastructure spending and delays in appropriations of federal funds could reduce net sales.
• The company may lose business to competitors through the competitive bidding process.
• Price fluctuations in product costs could impact financial performance.
• The company is subject to inventory management risks.
• Acquisitions involve inherent risks, and the anticipated benefits may not be realized.
• The company operates in fragmented and highly competitive markets.
• The development of alternatives to distributors of the company's products could decrease net sales.
• The company may be unable to hire, engage, and retain key personnel.
• The company is subject to certain safety and labor risks associated with the distribution and fabrication of its products.
• Interruptions in the proper functioning of the company's IT systems or compromise of confidential data could disrupt operations.
• The company's indebtedness may adversely affect its financial health.
• Increasing scrutiny and changing stakeholder expectations and disclosures in respect of ESG and sustainability practices may adversely impact our business and our stock price and impose additional costs or expose us to new or additional risks.

Future Outlook

The company expects increased federal infrastructure investment to focus on upgrading municipal waterworks systems and addressing demographic shifts, creating a favorable funding environment.

Management Comments

• Steve LeClair, our Chief Executive Officer, will transition to the role of Executive Chair, where he will act as an advisor to the business, while continuing to lead the board of directors as chair.
• Mark Witkowski, our current Chief Financial Officer, will succeed Steve LeClair as our Chief Executive Officer and become a member of the board of directors.
• Robyn Bradbury, our current Senior Vice President of Finance and Investor Relations, will succeed Mark Witkowski as Chief Financial Officer.

Industry Context

The water, wastewater, storm drainage and fire protection products distribution industry is highly fragmented, with Core & Main being one of only two national distributors.

Comparison to Industry Standards

• The document does not provide enough information to make a detailed comparison to industry standards.
• Without specific competitor data or industry benchmarks, a comprehensive assessment is not possible.

Management Changes

Legal Proceedings

• The company is from time to time involved in litigation incidental to the ordinary conduct of its business, including personal injury, workers compensation and business operations.

Related Party Transactions

• The company is party to the Former Limited Partners Tax Receivable Agreement and the Continuing Limited Partners Tax Receivable Agreement.
• The company entered into the Exchange Agreement.

Stakeholder Impact

• Shareholders may experience volatility in the stock price due to market conditions and the leadership transition.
• Employees may be affected by the leadership transition and any resulting changes in strategy or operations.
• Customers may benefit from the company's continued investment in expanding its product and service offerings.
• Suppliers may be impacted by the company's strategic sourcing and acquisition activities.

Next Steps

• The company intends to continue opening new branches in underpenetrated geographies.
• The company intends to continue investing in attracting, retaining, and developing associates.
• The company will continue to evaluate and pursue opportunistic acquisitions.
• The company will continue to execute on margin enhancement initiatives.

Key Dates

Keywords

Core & Main, financial results, net sales, EBITDA, acquisitions, infrastructure, waterworks, construction, leadership transition, share repurchase