Core & Main Announces Record Fiscal 2022 First Quarter Results
Core & Main (NYSE: CNM) reported robust financial results for Q1 fiscal 2022, with net sales surging 52% to $1,598 million. Gross profit grew 64% to $421 million, enhancing the gross margin to 26.3%. Net income skyrocketed to $137 million, up from $27 million. Adjusted EBITDA doubled to $219 million, with a margin increase to 13.7%. The company successfully improved its net debt leverage to 2.2x and remains active in M&A, having completed two acquisitions and planning another. Adjusted EBITDA guidance for fiscal 2022 is raised to $710-$750 million, indicating strong growth potential.
- Net sales increased 52% to $1,598 million.
- Gross profit margin improved by 200 basis points to 26.3%.
- Net income rose to $137 million from $27 million.
- Adjusted EBITDA increased 101% to $219 million.
- Adjusted EBITDA margin improved by 340 basis points to 13.7%.
- Net Debt Leverage decreased to 2.2x from 2.5x.
- Adjusted EBITDA guidance raised to $710-$750 million for fiscal 2022.
- Selling, general and administrative expenses rose by 34% to $206 million, impacting net income.
- Shortages of semiconductor chips affected growth in meter products.
Fiscal 2022 First Quarter Highlights (Compared with Fiscal 2021 First Quarter)
-
Net sales increased
52% to$1,598 million
-
Gross profit margin increased 200 basis points to
26.3%
-
Net income increased to
from$137 million $27 million
-
Adjusted EBITDA (Non-GAAP) increased
101% to$219 million
-
Adjusted EBITDA margin (Non-GAAP) increased 340 basis points to
13.7%
-
Net Debt Leverage (Non-GAAP) decreased to 2.2x as of
May 1, 2022 compared with 2.5x as ofJanuary 30, 2022
-
Active in M&A during and subsequent to the quarter, closing on the
Dodson Engineered Products, Inc. andLock City Supply, Inc. acquisitions and signing a definitive agreement to acquireEarthsavers Erosion Control, LLC
-
Raising expectation for fiscal 2022 Adjusted EBITDA to be in the range of
to$710 , representing year-over-year growth of$750 million 18% to24%
“We delivered an extraordinary start to fiscal 2022, as we achieved strong growth in both net sales and Adjusted EBITDA,” said
LeClair concluded, "We remained active in M&A during and subsequent to the quarter, highlighting our commitment to drive sustainable growth through acquisitions. We closed on the
Three Months Ended
Net sales for the three months ended
Gross profit for the three months ended
Selling, general and administrative (“SG&A”) expenses for the three months ended
Net income for the three months ended
Adjusted EBITDA for the three months ended
Capital Structure and Liquidity
Net Debt, calculated as gross consolidated debt net of cash and cash equivalents, as of
As of
Fiscal 2022 Outlook
"We are raising our expectation for fiscal 2022 Adjusted EBITDA to be in the range of
Conference Call & Webcast Information
An archived version of the webcast will be available immediately following the call. A slide presentation highlighting Core & Main’s results and key performance indicators will also be made available on the Investor Relations section of Core & Main’s website prior to the call.
About
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
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Amounts in millions (except share and per share data), unaudited |
|||||
|
Three Months Ended |
||||
|
|
|
|
||
|
|
|
|
||
Net sales |
$ |
1,598 |
|
$ |
1,055 |
Cost of sales |
|
1,177 |
|
|
798 |
Gross profit |
|
421 |
|
|
257 |
Operating expenses: |
|
|
|
||
Selling, general and administrative |
|
206 |
|
|
154 |
Depreciation and amortization |
|
35 |
|
|
34 |
Total operating expenses |
|
241 |
|
|
188 |
Operating income |
|
180 |
|
|
69 |
Interest expense |
|
13 |
|
|
36 |
Income before provision for income taxes |
|
167 |
|
|
33 |
Provision for income taxes |
|
30 |
|
|
6 |
Net income |
|
137 |
|
$ |
27 |
Less: net income attributable to non-controlling interests |
|
51 |
|
|
|
Net income attributable to |
$ |
86 |
|
|
|
|
|
|
|
||
Earnings per share (1) |
|
|
|
||
Basic |
$ |
0.51 |
|
|
|
Diluted |
$ |
0.50 |
|
|
|
Number of shares used in computing EPS (1) |
|
|
|
||
Basic |
|
167,536,662 |
|
|
|
Diluted |
|
246,145,536 |
|
|
(1) |
The Company analyzed the calculation of earnings per share for the periods prior to the Reorganization Transactions (as described in Note 1 to the condensed consolidated financial statements included in our Quarterly Report on Form 10-Q for the three months ended |
CONDENSED CONSOLIDATED BALANCE SHEETS Amounts in millions (except share and per share data), unaudited |
|||||
|
|
|
|
||
ASSETS |
|
|
|
||
Current assets: |
|
|
|
||
Cash and cash equivalents |
$ |
1 |
|
$ |
1 |
Receivables, net of allowance for credit losses of |
|
1,113 |
|
|
884 |
Inventories |
|
1,063 |
|
|
856 |
Prepaid expenses and other current assets |
|
25 |
|
|
26 |
Total current assets |
|
2,202 |
|
|
1,767 |
Property, plant and equipment, net |
|
95 |
|
|
94 |
Operating lease right-of-use assets |
|
157 |
|
|
152 |
Intangible assets, net |
|
844 |
|
|
871 |
|
|
1,517 |
|
|
1,515 |
Other assets |
|
79 |
|
|
35 |
Total assets |
$ |
4,894 |
|
$ |
4,434 |
|
|
|
|
||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
||
Current liabilities: |
|
|
|
||
Current maturities of long-term debt |
$ |
15 |
|
$ |
15 |
Accounts payable |
|
859 |
|
|
608 |
Accrued compensation and benefits |
|
65 |
|
|
109 |
Current operating lease liabilities |
|
50 |
|
|
49 |
Other current liabilities |
|
77 |
|
|
58 |
Total current liabilities |
|
1,066 |
|
|
839 |
Long-term debt |
|
1,510 |
|
|
1,456 |
Non-current operating lease liabilities |
|
107 |
|
|
103 |
Deferred income taxes |
|
41 |
|
|
35 |
Payable to related parties pursuant to Tax Receivable Agreements |
|
147 |
|
|
153 |
Other liabilities |
|
17 |
|
|
17 |
Total liabilities |
|
2,888 |
|
|
2,603 |
Commitments and contingencies |
|
|
|
||
Class A common stock, par value |
|
2 |
|
|
2 |
Class B common stock, par value |
|
1 |
|
|
1 |
Additional paid-in capital |
|
1,214 |
|
|
1,214 |
Retained earnings |
|
180 |
|
|
92 |
Accumulated other comprehensive income |
|
39 |
|
|
16 |
Total stockholders’ equity attributable to |
|
1,436 |
|
|
1,325 |
Non-controlling interests |
|
570 |
|
|
506 |
Total stockholders’ equity |
|
2,006 |
|
|
1,831 |
Total liabilities and stockholders’ equity |
$ |
4,894 |
|
$ |
4,434 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Amounts in millions, unaudited |
|||||||
|
Three Months Ended |
||||||
|
|
|
|
||||
Cash Flows From Operating Activities: |
|
|
|
||||
Net income |
$ |
137 |
|
|
$ |
27 |
|
Adjustments to reconcile net cash from operating activities: |
|
|
|
||||
Depreciation and amortization |
|
36 |
|
|
|
38 |
|
Provision for bad debt |
|
1 |
|
|
|
— |
|
Equity-based compensation expense |
|
3 |
|
|
|
1 |
|
Other |
|
(3 |
) |
|
|
— |
|
Changes in assets and liabilities: |
|
|
|
||||
(Increase) decrease in receivables |
|
(227 |
) |
|
|
(159 |
) |
(Increase) decrease in inventories |
|
(207 |
) |
|
|
(125 |
) |
(Increase) decrease in other assets |
|
(1 |
) |
|
|
(2 |
) |
Increase (decrease) in accounts payable |
|
251 |
|
|
|
206 |
|
Increase (decrease) in accrued liabilities |
|
(28 |
) |
|
|
(34 |
) |
Increase (decrease) in other liabilities |
|
1 |
|
|
|
4 |
|
Net cash used in operating activities |
|
(37 |
) |
|
|
(44 |
) |
Cash Flows From Investing Activities: |
|
|
|
||||
Capital expenditures |
|
(6 |
) |
|
|
(4 |
) |
Acquisitions of businesses, net of cash acquired |
|
(6 |
) |
|
|
— |
|
Proceeds from the sale of property and equipment |
|
1 |
|
|
|
— |
|
Net cash used in investing activities |
|
(11 |
) |
|
|
(4 |
) |
Cash Flows From Financing Activities: |
|
|
|
||||
Distributions to non-controlling interest holders |
|
(5 |
) |
|
|
(10 |
) |
Borrowings on asset-based revolving credit facility |
|
57 |
|
|
|
— |
|
Repayments of long-term debt |
|
(4 |
) |
|
|
(3 |
) |
Net cash provided by (used in) financing activities |
|
48 |
|
|
|
(13 |
) |
Increase (decrease) in cash and cash equivalents |
|
— |
|
|
|
(61 |
) |
Cash and cash equivalents at the beginning of the period |
|
1 |
|
|
|
381 |
|
Cash and cash equivalents at the end of the period |
$ |
1 |
|
|
$ |
320 |
|
|
|
|
|
||||
Cash paid for interest |
$ |
12 |
|
|
$ |
50 |
|
Cash paid for taxes |
$ |
28 |
|
|
$ |
7 |
|
Non-GAAP Financial Measures
In addition to providing results that are determined in accordance with GAAP, we present EBITDA, Adjusted EBITDA, Adjusted EBITDA margin and Net Debt Leverage, which are non-GAAP financial measures. These measures are not considered measures of financial performance or liquidity under GAAP and the items excluded therefrom are significant components in understanding and assessing our financial performance or liquidity. These measures should not be considered in isolation or as alternatives to GAAP measures such as net income or net income attributable to
We define EBITDA as net income or net income attributable to
We use EBITDA, Adjusted EBITDA, Adjusted EBITDA margin 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 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
No reconciliation of the estimated range for Adjusted EBITDA for fiscal 2022 is included herein because we are unable to quantify certain amounts that would be required to be included in net income attributable to
The following tables set forth a reconciliation of net income or net income attributable to
(Amounts in millions, unaudited) |
|
Three Months Ended |
||||||
|
|
|
|
|||||
Net income attributable to |
|
$ |
86 |
|
|
|
||
Plus: net income attributable to non-controlling interests |
|
|
51 |
|
|
|
||
Net income |
|
|
137 |
|
|
$ |
27 |
|
Depreciation and amortization (1) |
|
|
36 |
|
|
|
35 |
|
Provision for income taxes |
|
|
30 |
|
|
|
6 |
|
Interest expense |
|
|
13 |
|
|
|
36 |
|
EBITDA |
|
$ |
216 |
|
|
$ |
104 |
|
Equity-based compensation |
|
|
3 |
|
|
|
1 |
|
Acquisition expenses (2) |
|
|
— |
|
|
|
2 |
|
Offering expenses (3) |
|
|
— |
|
|
|
2 |
|
Adjusted EBITDA |
|
$ |
219 |
|
|
$ |
109 |
|
|
|
|
|
|
||||
Adjusted EBITDA Margin: |
|
|
|
|
||||
|
|
$ |
1,598 |
|
|
$ |
1,055 |
|
Adjusted EBITDA / |
|
|
13.7 |
% |
|
|
10.3 |
% |
(Amounts in millions, unaudited) |
|
Twelve Months Ended |
||||||
|
|
|
|
|
||||
Net income attributable to |
|
$ |
225 |
|
$ |
166 |
||
Plus: net income attributable to non-controlling interests |
|
|
110 |
|
|
|
59 |
|
Net income |
|
|
335 |
|
|
|
225 |
|
Depreciation and amortization (1) |
|
|
143 |
|
|
|
142 |
|
Provision for income taxes |
|
|
75 |
|
|
|
51 |
|
Interest expense |
|
|
75 |
|
|
|
98 |
|
EBITDA |
|
$ |
628 |
|
|
$ |
516 |
|
Loss on debt modification and extinguishment |
|
|
51 |
|
|
|
51 |
|
Equity-based compensation |
|
|
27 |
|
|
|
25 |
|
Acquisition expenses (2) |
|
|
5 |
|
|
|
7 |
|
Offering expenses (3) |
|
|
3 |
|
|
|
5 |
|
Adjusted EBITDA |
|
$ |
714 |
|
|
$ |
604 |
|
(1) |
Includes depreciation of certain assets which are 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 the IPO and Secondary Offering 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: |
||||||||
(Amounts in millions, unaudited) |
|
As Of |
||||||
|
|
|
|
|
||||
Senior ABL Credit Facility due |
|
$ |
57 |
|
|
$ |
— |
|
Senior Term Loan due |
|
|
1,489 |
|
|
|
1,493 |
|
Total Debt |
|
|
1,546 |
|
|
|
1,493 |
|
Less: Cash & Cash Equivalents |
|
|
(1 |
) |
|
|
(1 |
) |
Net Debt |
|
$ |
1,545 |
|
|
$ |
1,492 |
|
Twelve Months Ended Adjusted EBITDA |
|
|
714 |
|
|
|
604 |
|
Net Debt Leverage |
|
|
2.2x |
|
|
|
2.5x |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20220613005807/en/
VP, Investor Relations and FP&A
(314) 995-9116
InvestorRelations@CoreandMain.com
Source:
FAQ
What were Core & Main's Q1 2022 financial results?
How did Core & Main's gross profit margin change in Q1 2022?
What is the Adjusted EBITDA guidance for Core & Main in 2022?
What challenges did Core & Main face in Q1 2022?