Core & Main Announces Fiscal 2023 Fourth Quarter and Full-Year Results
- Strong financial performance in fiscal 2023 with net sales reaching $6.7 billion.
- Net income of $531 million and Adjusted EBITDA of $910 million.
- Invested $780 million in 10 acquisitions to enhance geographic footprint and product offering.
- Deployed $1.3 billion to repurchase and retire 45 million shares.
- Opened 4 new locations and closed 10 acquisitions during the year.
- Net cash provided by operating activities reached a record $1.1 billion.
- Increased gross profit margin to 27.1% and decreased Adjusted EBITDA margin to 13.6%.
- Net debt leverage ended at 2.1x due to investments in growth and acquisitions.
- Expectations for fiscal 2024 include net sales of $7.4 to $7.6 billion and Adjusted EBITDA of $925 to $975 million.
- Decrease in Adjusted EBITDA by 2.7% in fiscal 2023.
- Net income decreased by 8.6% in fiscal 2023.
- Higher SG&A expenses impacting net income and Adjusted EBITDA.
- Increase in net debt leverage to 2.1x due to borrowings for investments.
- Normalized gross profit margin from strategic inventory investments.
Insights
The financial results reported by Core & Main Inc. indicate a mixed performance in the fiscal year 2023. The slight increase in net sales suggests a stable demand for their infrastructure products, but the reduced gross profit margin and net income point to cost pressures, possibly from inflation or increased operating expenses. The share repurchase program reflects a strategic move to enhance shareholder value and could be seen as a signal of the company's confidence in its future prospects.
Investors may view the acquisitions positively as they can lead to expanded market presence and product offerings, which could drive future revenue growth. However, the increased SG&A expenses and interest expenses due to higher interest rates may raise concerns about the company's cost management and debt levels. The net debt leverage ratio, while within reasonable limits, will be an area to monitor closely, especially as interest rates fluctuate.
The reported Adjusted EBITDA decline and the decrease in Adjusted EBITDA margin are noteworthy. These metrics are important for understanding the company's operational efficiency and profitability. The decline suggests that Core & Main may be facing margin compression, potentially from increased competition or higher input costs. The company's liquidity position, highlighted by the increase in operating cash flow, appears strong, which is essential for sustaining operations and funding growth initiatives.
From a valuation perspective, the repurchase and retirement of shares could be accretive to earnings per share over the long term, but this must be balanced against the capital used for this purpose that could have been allocated to other growth initiatives. Investors will likely scrutinize the forecasted net sales and Adjusted EBITDA for fiscal 2024 to assess the company's growth trajectory and operational targets.
Core & Main's financial results must be contextualized within the broader economic environment. The company's performance, particularly the increase in net sales, suggests resilience in the face of a potentially softer market. The strategic inventory investments and optimization efforts are indicative of proactive management in an inflationary period. However, the increased SG&A expenses and interest expenses reflect the broader economic challenges of inflation and rising interest rates.
The company's capital allocation strategy, including the balance between acquisitions, share repurchases and organic growth investments, will be critical in navigating economic uncertainties. The projected improvement in end-market volumes for fiscal 2024 could signal an optimistic outlook for the infrastructure sector, but this hinges on broader economic conditions and fiscal policies that impact infrastructure spending.
Fiscal 2023 Fourth Quarter Results (Compared with Fiscal 2022 Fourth Quarter)
-
Net sales increased
4.8% to$1,440 million
-
Gross profit margin decreased 40 basis points to
26.7%
-
Net income of
$76 million
-
Diluted earnings per share increased
9.7% to$0.34
-
Adjusted EBITDA (Non-GAAP) decreased
2.4% to$160 million
-
Net cash provided by operating activities of
$294 million
Fiscal 2023 Results (Compared with Fiscal 2022)
-
Net sales increased
0.8% to a record of$6,702 million
-
Gross profit margin increased 10 basis points to
27.1%
-
Net income of
$531 million
-
Diluted earnings per share increased
0.9% to$2.15
-
Adjusted EBITDA (Non-GAAP) decreased
2.7% to$910 million
-
Adjusted EBITDA margin (Non-GAAP) decreased 50 basis points to
13.6%
-
Net cash provided by operating activities increased
to a record of$668 million $1,069 million
- Opened 4 new locations in underserved markets
- Closed 10 acquisitions during and after the year
-
Deployed
of capital to repurchase and retire 45 million shares at an average per share price of approximately$1.3 billion $30
- Net Debt Leverage (Non-GAAP) ended the year at 2.1x following significant investments in organic growth, acquisitions and share repurchases
"Fiscal 2023 was an exceptional year for Core & Main given the extraordinary performance we achieved during the preceding two years and considering the softer market conditions that have followed," said Steve LeClair, chairman and chief executive officer of Core & Main.
"Our teams navigated the dynamic environment to deliver strong financial performance, including net sales of over
"I would like to thank our associates, suppliers and customers for their dedication to serving our communities and building reliable infrastructure for generations to come. I would also like to thank the board of directors for appointing me chairman of the board and trusting me to lead this great organization. We have generated a significant amount of momentum for the business in recent months between the acquisitions we completed, the internal investments we made and the value we returned to shareholders, and we look forward to capitalizing on that momentum in fiscal 2024. We have never been better positioned to compete in this highly fragmented industry and execute our strategy to capture market share while driving long-term profitable growth."
Three Months Ended January 28, 2024
Net sales for the three months ended January 28, 2024 increased
Gross profit for the three months ended January 28, 2024 increased
Selling, general and administrative (“SG&A”) expenses for the three months ended January 28, 2024 increased
Net income for the three months ended January 28, 2024 decreased
The Class A common stock basic earnings per share for the three months ended January 28, 2024 increased
Adjusted EBITDA for the three months ended January 28, 2024 decreased
Fiscal Year Ended January 28, 2024
Net sales for fiscal 2023 increased
Gross profit for fiscal 2023 increased
Selling, general and administrative expenses for fiscal 2023 increased
Net income for fiscal 2023 decreased
The Class A common stock basic earnings per share for fiscal 2023 decreased
Adjusted EBITDA for fiscal 2023 decreased
Liquidity and Capital Resources
Net cash provided by operating activities for fiscal 2023 was
Net debt, calculated as gross consolidated debt net of cash and cash equivalents, as January 28, 2024 was
As of January 28, 2024, we had
On February 9, 2024, we entered into a
On February 12, 2024, we entered into an interest rate swap pursuant to which we will make payments to a third-party based upon a fixed interest rate of
Fiscal 2024 Outlook
-
Net sales of
to$7,400 $7,600 million
-
Adjusted EBITDA (Non-GAAP) of
to$925 $975 million
-
Adjusted EBITDA margin (Non-GAAP) of
12.5% to12.8%
-
Operating Cash Flow Conversion (Non-GAAP) of
60% to70% of Adjusted EBITDA
"We expect end market volumes to improve in fiscal 2024, providing a foundation for us to gain market share through the execution of our product, customer and geographic expansion initiatives," LeClair continued. "We expect the M&A we completed during and after the year to contribute
Conference Call & Webcast Information
Core & Main will host a conference call and webcast on March 19, 2024 at 8:30 a.m. ET to discuss the company's financial results. The live webcast will be accessible via the events calendar at ir.coreandmain.com. The conference call may also be accessed by dialing (833) 470-1428 or +1 (404) 975-4839 (international). The passcode for the live call is 947824. To ensure participants are connected for the full call, please dial in at least 10 minutes prior to the start of the call.
An archived version of the webcast will be available immediately following the call. A slide presentation highlighting Core & Main’s results will also be made available on the Investor Relations section of Core & Main’s website prior to the call.
About Core & Main
Based in
Cautionary Note Regarding Forward-Looking Statements
Certain statements contained in this press release include “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Examples of forward-looking statements include information concerning Core & Main’s financial and operating outlook, as well as any other statement that does not directly relate to any historical or current fact. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “could,” “should,” “forecasts,” “expects,” “intends,” “plans,” “anticipates,” “projects,” “outlook,” “believes,” “estimates,” “predicts,” “potential,” “continue,” “preliminary,” or the negative of these terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we can give you no assurance these expectations will prove to have been correct. These forward-looking statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to differ materially from any future results, levels of activity, performance, or achievements expressed or implied by these forward-looking statements.
Factors that could cause actual results and outcomes to differ from those reflected in forward-looking statements include, without limitation, declines, volatility and cyclicality in the
Additional information concerning these and other factors can be found in our filings with the Securities and Exchange Commission. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing cautionary statements. All such statements speak only as of the date made and, except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.
CORE & MAIN, INC. |
|||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS |
|||||||||||
Amounts in millions (except share and per share data) |
|||||||||||
|
|
|
|
||||||||
|
Three Months Ended |
|
Fiscal Years Ended |
||||||||
|
January 28, 2024 |
|
January 29, 2023 |
|
January 28, 2024 |
|
January 29, 2023 |
||||
|
|
|
|
|
|
|
|
||||
Net sales |
$ |
1,440 |
|
$ |
1,374 |
|
$ |
6,702 |
|
$ |
6,651 |
Cost of sales |
|
1,056 |
|
|
1,001 |
|
|
4,884 |
|
|
4,856 |
Gross profit |
|
384 |
|
|
373 |
|
|
1,818 |
|
|
1,795 |
Operating expenses: |
|
|
|
|
|
|
|
||||
Selling, general and administrative |
|
230 |
|
|
213 |
|
|
931 |
|
|
880 |
Depreciation and amortization |
|
38 |
|
|
36 |
|
|
147 |
|
|
140 |
Total operating expenses |
|
268 |
|
|
249 |
|
|
1,078 |
|
|
1,020 |
Operating income |
|
116 |
|
|
124 |
|
|
740 |
|
|
775 |
Interest expense |
|
22 |
|
|
20 |
|
|
81 |
|
|
66 |
Income before provision for income taxes |
|
94 |
|
|
104 |
|
|
659 |
|
|
709 |
Provision for income taxes |
|
18 |
|
|
20 |
|
|
128 |
|
|
128 |
Net income |
|
76 |
|
|
84 |
|
|
531 |
|
|
581 |
Less: net income attributable to non-controlling interests |
|
13 |
|
|
30 |
|
|
160 |
|
|
215 |
Net income attributable to Core & Main, Inc. |
$ |
63 |
|
$ |
54 |
|
$ |
371 |
|
$ |
366 |
|
|
|
|
|
|
|
|
||||
Earnings per share |
|
|
|
|
|
|
|
||||
Basic |
$ |
0.35 |
|
$ |
0.31 |
|
$ |
2.15 |
|
$ |
2.16 |
Diluted |
$ |
0.34 |
|
$ |
0.31 |
|
$ |
2.15 |
|
$ |
2.13 |
Number of shares used in computing EPS |
|
|
|
|
|
|
|
||||
Basic |
|
181,333,247 |
|
|
172,483,768 |
|
|
172,839,836 |
|
|
169,482,199 |
Diluted |
|
213,854,692 |
|
|
246,275,118 |
|
|
227,818,077 |
|
|
246,217,004 |
CORE & MAIN, INC. |
|||||
CONSOLIDATED BALANCE SHEETS |
|||||
Amounts in millions (except share and per share data) |
|||||
|
|
|
|
||
|
January 28, 2024 |
|
January 29, 2023 |
||
ASSETS |
|
|
|
||
Current assets: |
|
|
|
||
Cash and cash equivalents |
$ |
1 |
|
$ |
177 |
Receivables, net of allowance for credit losses of |
|
973 |
|
|
955 |
Inventories |
|
766 |
|
|
1,047 |
Prepaid expenses and other current assets |
|
33 |
|
|
32 |
Total current assets |
|
1,773 |
|
|
2,211 |
Property, plant and equipment, net |
|
151 |
|
|
105 |
Operating lease right-of-use assets |
|
192 |
|
|
175 |
Intangible assets, net |
|
784 |
|
|
795 |
Goodwill |
|
1,561 |
|
|
1,535 |
Deferred income taxes |
|
542 |
|
|
— |
Other assets |
|
66 |
|
|
88 |
Total assets |
$ |
5,069 |
|
$ |
4,909 |
|
|
|
|
||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
||
Current liabilities: |
|
|
|
||
Current maturities of long-term debt |
$ |
15 |
|
$ |
15 |
Accounts payable |
|
504 |
|
|
479 |
Accrued compensation and benefits |
|
106 |
|
|
123 |
Current operating lease liabilities |
|
55 |
|
|
54 |
Other current liabilities |
|
94 |
|
|
55 |
Total current liabilities |
|
774 |
|
|
726 |
Long-term debt |
|
1,863 |
|
|
1,444 |
Non-current operating lease liabilities |
|
138 |
|
|
121 |
Deferred income taxes |
|
48 |
|
|
9 |
Tax receivable agreement liabilities |
|
706 |
|
|
180 |
Other liabilities |
|
16 |
|
|
19 |
Total liabilities |
|
3,545 |
|
|
2,499 |
Commitments and contingencies |
|
|
|
||
Class A common stock, par value |
|
2 |
|
|
2 |
Class B common stock, par value 9,630,186 and 73,229,675 shares issued and outstanding as of January 28, 2024 and January 29, 2023, respectively |
|
— |
|
|
1 |
Additional paid-in capital |
|
1,214 |
|
|
1,241 |
Retained earnings |
|
189 |
|
|
458 |
Accumulated other comprehensive income |
|
46 |
|
|
45 |
Total stockholders’ equity attributable to Core & Main, Inc. |
|
1,451 |
|
|
1,747 |
Non-controlling interests |
|
73 |
|
|
663 |
Total stockholders’ equity |
|
1,524 |
|
|
2,410 |
Total liabilities and stockholders’ equity |
$ |
5,069 |
|
$ |
4,909 |
CORE & MAIN, INC. |
|||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS |
|||||||
Amounts in millions |
|||||||
|
|
||||||
|
Fiscal Years Ended |
||||||
|
January 28, 2024 |
|
January 29, 2023 |
||||
Cash Flows From Operating Activities: |
|
|
|
||||
Net income |
$ |
531 |
|
|
$ |
581 |
|
Adjustments to reconcile net cash from operating activities: |
|
|
|
||||
Depreciation and amortization |
|
154 |
|
|
|
148 |
|
Equity-based compensation expense |
|
10 |
|
|
|
11 |
|
Other |
|
7 |
|
|
|
— |
|
Changes in assets and liabilities: |
|
|
|
||||
(Increase) decrease in receivables |
|
21 |
|
|
|
(51 |
) |
(Increase) decrease in inventories |
|
328 |
|
|
|
(149 |
) |
(Increase) decrease in other assets |
|
2 |
|
|
|
(4 |
) |
Increase (decrease) in accounts payable |
|
11 |
|
|
|
(140 |
) |
Increase (decrease) in accrued liabilities |
|
4 |
|
|
|
5 |
|
Increase (decrease) in other liabilities |
|
1 |
|
|
|
— |
|
Net cash provided by operating activities |
|
1,069 |
|
|
|
401 |
|
Cash Flows From Investing Activities: |
|
|
|
||||
Capital expenditures |
|
(39 |
) |
|
|
(25 |
) |
Acquisitions of businesses, net of cash acquired |
|
(231 |
) |
|
|
(128 |
) |
Other |
|
— |
|
|
|
1 |
|
Net cash used in investing activities |
|
(270 |
) |
|
|
(152 |
) |
Cash Flows From Financing Activities: |
|
|
|
||||
Repurchase and retirement of partnership interests |
|
(1,344 |
) |
|
|
— |
|
Distributions to non-controlling interest holders |
|
(41 |
) |
|
|
(57 |
) |
Payments pursuant to Tax Receivable Agreements |
|
(5 |
) |
|
|
— |
|
Borrowings on asset-based revolving credit facility |
|
665 |
|
|
|
244 |
|
Repayments on asset-based revolving credit facility |
|
(235 |
) |
|
|
(244 |
) |
Repayments of long-term debt |
|
(15 |
) |
|
|
(15 |
) |
Debt issuance costs |
|
— |
|
|
|
(2 |
) |
Other |
|
— |
|
|
|
1 |
|
Net cash used in financing activities |
|
(975 |
) |
|
|
(73 |
) |
(Decrease) increase in cash and cash equivalents |
|
(176 |
) |
|
|
176 |
|
Cash and cash equivalents at the beginning of the period |
|
177 |
|
|
|
1 |
|
Cash and cash equivalents at the end of the period |
$ |
1 |
|
|
$ |
177 |
|
|
|
|
|
||||
Cash paid for interest (excluding effects of interest rate swap) |
$ |
105 |
|
|
$ |
74 |
|
Cash paid for income taxes |
|
116 |
|
|
|
147 |
|
Non-GAAP Financial Measures
In addition to providing results that are determined in accordance with
We define EBITDA as net income or net income attributable to Core & Main, Inc., as applicable, adjusted for non-controlling interests, depreciation and amortization, provision for income taxes and interest expense. We define Adjusted EBITDA as EBITDA as further adjusted for certain items management believes are not reflective of the underlying operations of our business, including but not limited to (a) loss on debt modification and extinguishment, (b) equity-based compensation, (c) expenses associated with the public offerings and (d) expenses associated with acquisition activities. Net income attributable to Core & Main, Inc. is the most directly comparable GAAP measure to EBITDA and Adjusted EBITDA. We define Adjusted EBITDA margin as Adjusted EBITDA divided by net sales. We define Operating Cash Flow Conversion as net cash provided by (used in) operating activities divided by Adjusted EBITDA for the period presented. We define Net Debt Leverage as total consolidated debt (gross of unamortized discounts and debt issuance costs), net of cash and cash equivalents, divided by Adjusted EBITDA for the last twelve months.
We use EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Operating Cash Flow Conversion and Net Debt Leverage to assess the operating results and effectiveness and efficiency of our business. Adjusted EBITDA includes amounts otherwise attributable to non-controlling interests as we manage the consolidated company and evaluate operating performance in a similar manner. We present these non-GAAP financial measures because we believe that investors consider them to be important supplemental measures of performance, and we believe that these measures are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. Non-GAAP financial measures as reported by us may not be comparable to similarly titled metrics reported by other companies and may not be calculated in the same manner. These measures have limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP. For example, EBITDA and Adjusted EBITDA:
- do not reflect the significant interest expense or the cash requirements necessary to service interest or principal payments on debt;
- do not reflect income tax expenses, the cash requirements to pay taxes or related distributions;
- do not reflect cash requirements to replace in the future any assets being depreciated and amortized; and
- exclude certain transactions or expenses as allowed by the various agreements governing our indebtedness.
EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Operating Cash Flow Conversion and Net Debt Leverage are not alternative measures of financial performance or liquidity under GAAP and therefore should be considered in conjunction with net income, net income attributable to Core & Main, Inc. and other performance measures such as gross profit or net cash provided by or used in operating, investing or financing activities and not as alternatives to such GAAP measures. In evaluating Adjusted EBITDA, you should be aware that, in the future, we may incur expenses similar to those eliminated in this presentation.
No reconciliation of the estimated range for Adjusted EBITDA, Adjusted EBITDA margin or Operating Cash Flow Conversion for fiscal 2024 is included herein because we are unable to quantify certain amounts that would be required to be included in net income attributable to Core & Main, Inc. or cash provided by or used in operating activities, the most directly comparable GAAP measures, without unreasonable efforts due to the high variability and difficulty to predict certain items excluded from Adjusted EBITDA. Consequently, we believe such reconciliation would imply a degree of precision that would be misleading to investors. In particular, the effects of acquisition expenses cannot be reasonably predicted in light of the inherent difficulty in quantifying such items on a forward-looking basis. We expect the variability of these excluded items may have an unpredictable, and potentially significant, impact on our future GAAP financial results.
The following table sets forth a reconciliation of net income or net income attributable to Core & Main, Inc. to EBITDA and Adjusted EBITDA for the periods presented, as well as a calculation of Adjusted EBITDA margin for the periods presented:
(Dollar amounts in millions) |
Three Months Ended |
|
Fiscal Years Ended |
||||||||||||
|
January 28, 2024 |
|
January 29, 2023 |
|
January 28, 2024 |
|
January 29, 2023 |
||||||||
Net income attributable to Core & Main, Inc. |
$ |
63 |
|
|
$ |
54 |
|
|
$ |
371 |
|
|
$ |
366 |
|
Plus: net income attributable to non-controlling interests |
|
13 |
|
|
|
30 |
|
|
|
160 |
|
|
|
215 |
|
Net income |
|
76 |
|
|
|
84 |
|
|
|
531 |
|
|
|
581 |
|
Depreciation and amortization (1) |
|
38 |
|
|
|
36 |
|
|
|
149 |
|
|
|
143 |
|
Provision for income taxes |
|
18 |
|
|
|
20 |
|
|
|
128 |
|
|
|
128 |
|
Interest expense |
|
22 |
|
|
|
20 |
|
|
|
81 |
|
|
|
66 |
|
EBITDA |
$ |
154 |
|
|
$ |
160 |
|
|
$ |
889 |
|
|
$ |
918 |
|
Equity-based compensation |
|
2 |
|
|
|
2 |
|
|
|
10 |
|
|
|
11 |
|
Acquisition expenses (2) |
|
2 |
|
|
|
2 |
|
|
|
6 |
|
|
|
5 |
|
Offering expenses (3) |
|
2 |
|
|
|
— |
|
|
|
5 |
|
|
|
1 |
|
Adjusted EBITDA |
$ |
160 |
|
|
$ |
164 |
|
|
$ |
910 |
|
|
$ |
935 |
|
|
|
|
|
|
|
|
|
||||||||
Adjusted EBITDA Margin: |
|
|
|
|
|
|
|
||||||||
Net Sales |
$ |
1,440 |
|
|
$ |
1,374 |
|
|
$ |
6,702 |
|
|
$ |
6,651 |
|
Adjusted EBITDA / Net Sales |
|
11.1 |
% |
|
|
11.9 |
% |
|
|
13.6 |
% |
|
|
14.1 |
% |
(1) |
|
Includes depreciation of certain assets which is reflected in “cost of sales” in our Statement of Operations. |
(2) |
|
Represents expenses associated with acquisition activities, including transaction costs, post-acquisition employee retention bonuses, severance payments, expense recognition of purchase accounting fair value adjustments (excluding amortization) and contingent consideration adjustments. |
(3) |
|
Represents costs related to secondary offerings reflected in SG&A expenses in our Statement of Operations. |
The following table sets forth a calculation of Net Debt Leverage for the periods presented:
(Dollar amounts in millions) |
|
Fiscal Years Ended |
||||||
|
|
January 28, 2024 |
|
January 29, 2023 |
||||
Senior ABL Credit Facility due July 2026 |
|
$ |
430 |
|
|
$ |
— |
|
Senior Term Loan due July 2028 |
|
|
1,463 |
|
|
|
1,478 |
|
Total Debt |
|
$ |
1,893 |
|
|
$ |
1,478 |
|
Less: Cash & Cash Equivalents |
|
|
(1 |
) |
|
|
(177 |
) |
Net Debt |
|
$ |
1,892 |
|
|
$ |
1,301 |
|
Twelve Months Ended Adjusted EBITDA |
|
|
910 |
|
|
|
935 |
|
Net Debt Leverage |
2.1x |
1.4x |
View source version on businesswire.com: https://www.businesswire.com/news/home/20240318671737/en/
Investor Relations:
Robyn Bradbury, 314-995-9116
InvestorRelations@CoreandMain.com
Source: Core & Main, Inc.
FAQ
What were Core & Main's (CNM) net sales for fiscal 2023?
How much did Core & Main invest in acquisitions during and after the year?
What was Core & Main's net income for fiscal 2023?
What is the Adjusted EBITDA margin for fiscal 2023?