Core & Main Inc. has reported its fiscal 2024 second-quarter results, highlighting both positive and negative changes in key financial metrics compared to the same period in the previous fiscal year.
In the second quarter ended July 28, 2024, the company's net sales increased by 5.5% to reach $1,964 million. However, the gross profit margin decreased by 50 basis points to 26.4%. Notably, net income saw a significant decline of 23.2%, amounting to $126 million. Diluted earnings per share also decreased by 7.6% to $0.61.
Adjusted EBITDA, a non-GAAP metric, decreased by 4.8% to $257 million, with the adjusted EBITDA margin also declining by 140 basis points to 13.1%. The company attributed the growth in net sales to strong acquisitions, particularly in the meter initiative which achieved a remarkable 48% growth during the quarter. However, this growth was partially offset by project delays due to adverse weather conditions.
The press release also emphasized the acquisition of five new businesses during and after the quarter, namely EGW Utilities, Geothermal Supply Company, HM Pipe Products, GroGreen Solutions, and Green Equipment Company. The acquisition of HM Pipe Products is particularly highlighted as it opens up a new multi-billion-dollar addressable market opportunity in Canada for Core & Main Inc.
Looking at the six-month period ended July 28, 2024, net sales increased by 7.9% to $3,705 million. However, gross profit margin decreased to 26.6% from 27.4% in the same period the previous year. The company's net income for this period decreased by 23.6% to $227 million, while adjusted EBITDA decreased by 3.3% to $474 million.
Notably, the company revised its outlook for fiscal 2024, citing significant weather disruptions in the second quarter and an expectation that some anticipated growth in the second half of the year might be pushed into 2025. Core & Main Inc. lowered its full-year net sales range to $7.3 to $7.4 billion and adjusted EBITDA range to $900 to $930 million. However, the company raised its operating cash flow conversion range to 65% to 75% of adjusted EBITDA due to disciplined working capital management.
The company's liquidity and capital resources were also discussed in the release, with net debt reaching $2,439 million as of July 28, 2024, and net debt leverage increasing to 2.7x from 1.7x on July 30, 2023. The increase in net debt leverage was primarily attributed to higher borrowings to fund investments in organic growth, acquisitions, and share repurchases.
Following these announcements, the company's shares moved -2.6%, and are now trading at a price of $46.8. For the full picture, make sure to review Core & Main's 8-K report.
