Core & Main, Inc. (CNM) Earnings Call Transcript & Summary

Good morning, everyone. Welcome to Core & Main's First Investor Day. We're so glad you could join us today whether in person or over the webcast. I'm Robyn Bradbury, Vice President of Finance and Investor Relations for Core & Main. I've been with this business for over a decade as of many of the presenters that you will hear from today. I'll start with the exciting legal disclaimers. I must point out the obligatory safe harbor statement, please make note of it on Page 3 of the presentation. I'm happy to share that we have made a donation in your honor to 2 charities that are important to us. Folds of Honor is a charity that provides scholarships to children and spouses of fallen and disabled service members and first responders. This is a cause we have supported for many years. supporting our military veterans and first responders is important to us. Many of our associates are military veterans themselves. The second cause is the Maui Fire Disaster Relief Fund sponsored by the United Way. The fund has allowed United Way to fast track donations to make a difference for Maui survivors. It's important to us to support our local teams when disasters occur. In addition to our philanthropic efforts, we are committed to bettering our communities in ways that are core to our business. Our products and services help provide clean water to local communities and aid and water conservation efforts. We partner with our customers to provide solutions to the impacts of droughts and flooding and our fire protection products help protect people and property. We have a great lineup of presentations this morning. We have a break in the middle and Q&A session at the end. We will closely adapt with some live product demos and displays followed by lunch. We hope you leave here today with a deeper understanding of the uniqueness of our industry, our competitive advantages within the industry, our organic growth, inorganic growth and margin expansion strategies, our people-first culture of agility, innovation and execution and lastly, our long-term financial outlook. To kick it off, we have a short video to show how we partner with our customers and suppliers to advance reliable infrastructure with local service nationwide. And then our CEO, Steve LeClair, will take the stage. Enjoy. [Presentation]

Good morning, everyone, and welcome to Core & Main's First Investor Day. I'm Steve LeClair, CEO of Core & Main. I'm excited to be here today really for a couple of different reasons. First, since our IPO in 2021, you've mostly heard from Mark Witkowski, Robyn and myself. But today, you're going to hear from the leadership team that made all of these great results happen. I'm so excited to demonstrate their talent, but even more importantly, to demonstrate the depth and breadth of the leadership at Core & Main. So second, for each of these earnings calls that we have done, we spent much of our time talking about past quarter results, whether it's been margins or pricing, acquisitions that we've done and really the near-term outlook. Today, I'm excited to share our vision for the future. The 5-year outlook in our business model, and how our business model and capital allocation strategy comes together to drive growth and value creation for shareholders. So let's dive in. So for some of you that may be newer to the story, we are an industry leader and a specialty distributor in a very fragmented market with long-term secular tailwinds. You've seen how resilient our business has been over the last 2 years through COVID supply chain disruption and our uncanny ability to enhance margins and profitability despite all those hurdles. You're going to experience firsthand from the presentations and displays, our entrepreneurial and people-first culture today. And finally, we'll share more information about our strong cash flow and the flexibility this gives our business to compound value creation and execute on a clear strategy to deliver $10 billion of net sales and 15% adjusted EBITDA margins by 2028. So Core & Main's specialty distributor based in St. Louis, Missouri. In fiscal 2022, we delivered $6.7 billion of revenue and $935 million of adjusted EBITDA. We have very well balanced end market exposure with 39% municipal, 39% nonresidential and 22% residential. And we are evenly split at about 50% new construction and 50% repair and replacement, which provides great stability. And on the right-hand side, you can see that we have 320 branches close to 4,500 employees across this country. But what really stands out to me is the level of fragmentation of our customer base. We have over 60,000 customers and that 1 representing more than 1% of our total net sales. And so for our 4,500 suppliers, many of which are dedicated to the sector, we play a critical role in getting their products to market in this very fragmented customer base. So while we can trace our roots back to 1874, really over the last 2 decades, we've been consolidating in this space. But the story really gets interesting in 2017. In 2017, we were a division of HD Supply until we were carved out as part of an LBO as a stand-alone business. And really, for the first time in this industry, and the first time in our business's history, there was a business with national size and scale that was dedicated to this sector. And why was that so transformational? We were now able to reinvest our free cash flow back into the business. And as such, we were able to execute our strategic plan and unlock explosive growth. So following that success in 2021, we launched our IPO, and it was a very crowded field. We were one of the largest industrial IPOs in the last several years and 2 years later, we stand here as one of the most successful IPOs in that class across all sectors. So while we are incredibly proud of our track record, today we are going to focus on our vision for the future. Across our enterprise, we have launched our objective to become the undisputed leader in each of our end markets and in each of our product categories. And we are the tip of the spear who could drive the adoption of new products and technologies, delivering modernized solutions for critical infrastructure needs and maximizing our growth potential to deliver sector leading shareholder returns. So this is a great chart that highlights how our industry is differentiated and how Core & Main is differentiated within our industry. So I'm going to start here on the left. So our industry is regulated at the federal, state and local level. In addition, our waterworks and fire protection products have rigorous specification requirements once again at the national, state and local levels. And this complexity creates a challenging matrix of highly specialized and localized product requirements. The suppliers of these products, many of them are dedicated to this sector, look for distributors with knowledge at the local levels to reach this very fragmented customer base. And because of that, most of these suppliers have limited distribution access rights. And since most of our customers are looking to fulfill infrastructure projects that require multiple product categories, pipes, valves, fittings and restraints, all of which have limited distribution rights. This becomes a significant competitive advantage for distributors with size and scale. New entrants have to be able to secure multiple lines of products that each have limited access, which spades it very difficult. So on the right-hand side, Core & Main differentiates by having the leading industry expertise with award-winning training programs, developing some of the best sales -- best trained salespeople and operators in the industry. And our size and scale gives us the unique capability of driving the adoption of new products and technologies for both our suppliers and our customers. Driving the growth of smart meters, fusible HDPE pipe and other new and innovative solutions to digitize and provide reliable infrastructure. And you're going to hear from Jessica Killion a little later this morning on our proprietary technology and innovation tools that have been specifically designed for application in this sector, providing robust applications, delivering productivity for both our customers and our associates. And I think this has been one of the least understood aspects of our business between the uniqueness of the industry and our strong competitive position, this creates a very favorable industry structure for long-term sustained growth. So if you look at our industry structure, Core & Main participates in a large and growing $40 billion addressable market. We are 1 of 2 national distributors competing in this space. The remainder of the market is served by hundreds of local, regional and specialty niche distributors and to a much lesser degree, direct sales from suppliers to end users. Aging infrastructure, the nondiscretionary repairs and upgrades create a very stable, but growing base. And as I mentioned earlier, we play a critical role in driving the adoption of new products to water municipalities across the country. The demographic trends and population growth fuels new residential construction and commercial construction projects to support the expansion of suburban communities. Now on the right-hand side of this page, we have a great track record of increasing market share. You will hear firsthand from our leadership team about our strategy for driving above-market growth with local share gains, geographic expansion, expansion of new product offerings and strategic M&A. And we benefit from secular growth trends that underpin each of our end markets. Municipal demand has shown steady growth over the long term due to the critical need to replace aged water infrastructure. And with better access to capital and increased water utility rates, we expect these trends to continue for the foreseeable future. We also believe we can capitalize on the anticipated long-term growth in residential and nonresidential development, both of which remain below long-term historical averages and are expected to benefit from both population growth, the historical underbuild of housing, the population shifts and the need for nonresidential development to follow. So most of you know the sorry state of our water infrastructure in the United States, and these stats give a pretty good flavor of the extent of repair and replacement opportunity. The average age of pipe in service today has risen to 45 years. And the cycle of repairing and patching pipe, it only leads to failure in the next weakest link of that pipe and that system. And these extreme cycles of weather also perpetuate what is an already strained system in so many communities today. Water main breaks happen at a rate of about 800 per day. And you're going to be hearing from our CHRO, Laura Schneider, later today. She's had first-hand experience with this. 4 years ago, she built a new home in St. Louis. And while the home was new, the water main was not, and she's experienced 3 water main breaks in front of her home, ultimately, wiping out her landscape 3 times that have all been replaced until that water main was ultimately replaced. It's kind of funny. She would actually call Jack Schaller, our President, about trying to get it fixed, but anyways -- but that's really indicative of the change that is now happening in this industry. Municipalities are no longer just patching up the problem. They are now utilizing rate increases and additional sources of funding to finally replace this failing infrastructure. And that is why sustainability is at our core. Helping our municipal customers solve these problems and providing reliable solutions for their infrastructure needs is the core of what we do. In addition to that inherent role that we play at local, regional and national levels for advancing reliable infrastructure, we have also used our size and scale to drive awareness of underrepresented groups in our industry. Nearly a decade ago, we founded a women's network with the goal of driving better visibility and representation in the construction industry. And I'm proud to share with you that this organization has reached well beyond the walls of Core & Main and into our suppliers and into our customers, increasing our industry's collective approach to diversifying our leadership in our workforce, and you're going to see that firsthand today. Finally, I'd encourage all of you to look at our previous released ESG reports and the progress we are making across the entire ESG spectrum. So to meet some of the demands of the crumbling infrastructure, we are seeing critical investments in the past an infrastructure bill that we believe will provide incremental funding and tailwinds into the future. We are just now starting to see those funds sprinkle into our state revolving funds. Particularly, there's over $55 billion allocated to the clean drinking water and over $50 billion to protect against droughts and floods. And those who are here in New York understand what floods are all about. Last week as you saw an inundation of flooding that happened that really brought the city to its knees. So in addition to the magnitude of these investments, there's additional tailwinds that come from the disbursement of these funds to the states. Municipalities will now have access to low-interest loans to fund these projects and they will pay back these loans back into the state revolving funds, creating a regenerative source of funding that will extend beyond the initial disbursement, creating a great flywheel effect for many, many years to come. So let's take a look at our product portfolio. As mentioned earlier, whether it's pipe, valves, fittings or our storm drainage and retention systems, these products are unique to our sector. You won't find them at Home Depot or Lowe's, and nearly all of them have limited distribution rights. In addition, these products are rarely ordered on a stand-alone basis, but as part of a larger project, meaning that you need to bundle a broad assortment of these highly specified items from multiple suppliers to meet your customers' project needs. You're going to have the opportunity and I encourage you to take this opportunity to see some of the products that are on display out here. So here's an example of how these products come together and the communities we live, work and play in. From the pipes and lift stations below ground, the smart meters and sprinkler systems, we play an integral role in the communities that we serve. The other thing I'd share is that this is a very generic representation of a city. In reality, each municipality each water system is unique. They are unique due to a number of factors: factors, including population density, topography of the land, the water source, pressures, frost line depths, water tables and soil acidity and even the age of the existing infrastructure. As we flip to the next page, here's a real-world example of how these situations emanate. So as Laura can tell you, water main breaks are bad, but sewer main breaks are even worse. So not far from here in the community in New Jersey, they experienced a break that released more than 5 million gallons of untreated sewage into the streets inundating a local neighborhood. The pipe that failed was installed nearly 75 years ago, manufacturers no longer in business, and it was an odd diameter. Our specialists were immediately on site and designed, engineered and constructed a customized fitting from other materials. They even provided the equipment and training for their personnel to complete this connection. So this was far more than just supplying a product in emergency. It was utilizing local knowledge and national scale to deploy resources and expertise in a true emergency situation, so I know of no other company that could bring together those resources, that knowledge base in this time frame to address a situation like this. And this is the type of work that Core & Main does every day across this great nation. So that was a great review of our history and an overview of our industry and our end markets. So over the past several years, we have benchmarked our performance against the best-in-class specialty distributors. And operationally, I can boldly say we have outperformed all of them for our key metrics of sales growth, adjusted EBITDA growth and adjusted EBITDA margin expansion. Our track record is undisputed. And now I'm excited to introduce for the first time our long-term financial targets. We expect to deliver 9% net sales CAGR over the next 5 years, a 12% adjusted EBITDA CAGR, and more importantly, a 210 basis point improvement in adjusted EBITDA margins. Given our efficient and resilient business model, we expect to generate $3.5 billion to $4.5 billion of operating cash flow, which provides excellent flexibility for strategic investment. You will hear about our immense growth opportunities from the rest of the presentations today and what we plan to do to meet these targets. We'll focus now on our growth engine we've unlocked, how we capture organic growth, scale and expand our operating margins and compound value creation with M&A. So as we rolled out our vision of being undisputed leaders in every market we serve, our field teams look to drive share locally. We do this by developing and attracting the best sales talent and strengthening our position in underpenetrated geographies through greenfields. We look market by market at our product penetration, identifying opportunities in products like storm drainage geosynthetics, fusible HDPE solutions. And we ask ourselves, do we have dots on the map in all the right places? And are we pulling through all of our product lines in those dots? And in this very fragmented customer base that we have, our local relationships have also become instrumental in driving the adoption of new products and technologies. Take advanced metering systems, for example. Not only do we have the reach to introduce these systems to rural and suburban municipalities, we also have the resources to tackle the large metropolitan areas like Miami and Chicago, where we simplify the installation for them where we integrate to software, and we even manage the network over the life of that product. And because we are local in those markets, that creates a level of trust and accountability unmatched by OEM -- by any OEM trying to sell directly. Now let's talk about how we utilize size and scale to expand our margins. Because our pricing is local in nature and complex, we have utilized advanced analytics provide real-time insights to our local branches on product costs and market pricing. As you've seen, over the last several years, this has allowed us to take price increases into the market quickly while making sure our customers are well aware as they plan their projects. And because many of our customers' projects can have longer-term durations, 6 months or longer, we can often provide insight and lock-in prices for those specific projects, working directly with our suppliers and to ensure that there's both price and availability to keep these projects on time and on budget. And this is a tremendous value to our customers. As it eliminate so much of the risk in something that only size and scale can provide. Secondly, you're going to hear from Brad later today, we are in the early innings of our private label initiative. Currently, a little over 2% of our products are sold via private label. In other industries, as much as 10% of COGS goes private label or is direct sourced. Our gross margin on these products is generally 1.5 to 2x our standard rate, and we see a long runway ahead to drive sustainable margin enhancement through private label as we expand both our product portfolio and the distribution and logistics capabilities. Since 2017, we have deployed over $1 billion of capital for M&A, closing 28 acquisitions and generating over $225 million in incremental adjusted EBITDA. Nearly every deal we did was proprietarily sourced based on our relationships and reputation in the industry. We consistently have been able to add 100 to 300 basis points of gross margin improvement and 100-plus basis points of cost synergies with each deal. But more importantly, than driving some of these operational synergies has been the ability to attract great talent and new platforms for compounded growth. So you will hear from 3 of our leaders that have joined the Core & Main family through M&A, Ken, Michael and Wade and the positive impact this has had both for the growth of their business and the development of their own associates. So we are truly the acquirer of choice in our industry. And later in the day, Jeff will be covering more detail about our unmatched M&A process, the pipeline and the long runway ahead for us. So one of the great elements as I shared earlier of the Investor Day is the opportunity to showcase the depth and breadth of our executive team. This team has accomplished so much from standing the business up on its own in 2017 to unlocking unprecedented growth and profitability to driving one of the most successful IPOs in 2021, and most importantly, charting our path and our vision for the future. Each plays a vital role in our operating model. And you're going to get a chance to hear firsthand the passion and excitement they bring to the table, making Core & Main a differentiated business and investment. So let me now introduce you to the framework for our operating model. It starts with people first. Either from the formation of our name, Core & Main, which was established from a submission by one of our own associates in South Carolina branch to our values and family-driven culture. From there, we have drived by keeping this entrepreneurial mindset, being action-oriented and driving operational execution and strategy execution. As I shared earlier, our history is unique given its large size, it's fragmented customer base and it's complex structure. One event that I've always felt has been underappreciated in our operating model is the strong linkage between local expertise and national capabilities. That has underpinned our ability to create value in this space and has truly differentiated us. And you will see numerous examples of that throughout the day. So to summarize, Core & Main has a clear, sustainable competitive advantage in a large industry with high barriers to entry. Significant organic and inorganic growth opportunities in a highly fragmented market, sustainable margin enhancement initiatives and strong cash flow generation, fueling ongoing value creation for shareholders. So before I hand it over to Jack and Robyn to talk about why we win. Let me first play a quick video to show you how we deliver superior value to our customers. [Presentation]

That video provided an example of how we partner with our customers on their complex infrastructure projects. Jack and I are here to talk to you about why we win through some of his past experiences in the industry. I'd like to introduce Jack Schaller, President of Core & Main. Jack has been with this business for over 40 years, starting in the warehouse in 1979. Jack is an industry icon and is well respected by our customers and suppliers. Jack tells us a little bit about your career.

Thanks, Robyn, and good morning, everyone. I started in this industry, August 27, 1979, with a local company in St. Louis called Sidener Supply, privately held. The very first day on the job, I took it as a job. I didn't look at it as a career, but I quickly saw that this could become a career. My first day on the job was a rather memorable one. It was a typical sweltering day in St. Louis in high heat, high humidity, a tractor trailer full of -- a closed 40-foot tractor trailer, a van pulled into the yard and the warehouse manager looked at me and said, that's your job. So I had to unload the entire truck by myself that day. So kind of a tough first day. At the end of that day, I remember overhearing my manager at that time, say, if this kid comes back tomorrow, he's a keeper.

Were you a keeper?

I think so. I think I was a keeper because I cared. They hired me to do a job, and it never even crossed my mind not to come back the second day. So I did come back that second day, and I did a lot of different things through the years. After about 30 days in the warehouse, I moved inside the counter to wait on customers as they came in at the city counter, did inside sales. I did purchasing. I did outside sales. I became a branch manager. I actually opened up -- I moved around a couple of times, opened up a couple of branches in Chicago and in Colombia, Missouri, actually then implemented a new computer program -- computer system for our company and taught that to our 18 locations throughout Missouri, Illinois and Indiana. I, eventually, became President of that company. And I had some grand ideas about M&A and growing and with greenfields, but the owner of the company, Mr. Larry Sidener, was in his 80s at that time, did not really have a good succession plan, and I told him if we stood still, we're going to go backwards. So I convinced him to sell the company, which we did, but in 1997. But that -- my career progression is not really unique to me. A lot of our key folks have gone through that same progression, done the inside sales, outside sales and managers. It's really pretty remarkable about how many people have come through that same pipeline. And really, for some reason, when you get in this industry, it's kind of a sticky industry. We -- once we get in, we don't seem to get out. Obviously, I'm working example of that 44 years later. And I think it's really part of why we win is the depth of knowledge that we have in our team.

When did you start to see this job as a career?

I quickly saw the value of the industry by working with the customers as they came into the yard. I visited job sites. I'll be quite honest with you, I was pretty naive back then. I used to think when I first started in the industry, there's only so many hydrants that you can sell. There's only so much pipe you can sell. If there was a finite amount, boy, was I wrong. This industry will never die. And once I realized that, I saw that a career was possible, and it was not just a pipe dream, no pun intended.

Let's talk about the value we asked in this industry, specifically to our customers. As Jack said, customer relationships are critical. There are many ways that we add value to our customers. So let's walk through a couple of those. We have a broad product offering and access to product with limited distribution rights.

Yes. A great example of that is the supply chain issues in the last couple of years that we had because of our size and scale that Steve had mentioned, we were able to get product quicker in better deliveries than most of our competitors.

We partner with our customers from pre-project planning all the way through delivery. How does that work?

And when a set of blueprints come out, we utilize a digital software called PlanSwift. That is integrated with our packaging system, our bid packaging system called PowerScope, gives you a complete takeoff of all of the pipe, valves, fittings and the proper specifications and the proper number of feet and [indiscernible] that you need.

What about job site logistics?

Very, very important. We have over 1,400 delivery vehicles delivering to the job site. And a lot of times, our job sites do not really have an address. It's a field somewhere. So when a customer calls and need some material, we can put them on one of our trucks and get it there when they need it.

And we have local expertise and knowledge in each market that we operate?

Yes, that is really, really critical to local knowledge and expertise with our -- we have over 1,700 sales reps in 320 branches in 48 states. We're the local experts there. When they -- when a customer comes in and ask about the specification of a particular municipality, we have that knowledge.

As Steve mentioned, we also introduced new products to our customers. We'll hit on that in a minute. But what about around-the-clock availability, why is that important?

Well, it's important because water mains don't break between 8 to 5 p.m. They've always seem to make or break in the middle of the night for some reason. And as Steve mentioned, did you know that there's over 800 water main breaks a day? And just since Robyn opened up this conference this morning, there's probably been about 35 water main breaks just since we've been sitting here, pretty [ inspiring ], isn't it?

They never happen between 8 and 5. How do we support the customer after hours?

Yes. We -- hundreds of times a year we were opened up after hours. Our Westport in St. Louis branch near our corporate headquarters opened up over 200 times last year, twice on Christmas Day. We know what products in the ground, and we know what they can help. And -- but the key here is we just don't open in emergencies. We're open every day, Monday through Friday, helping the customers with their supplier who -- there's material needs. So not only do they come to us in emergency situation, but also in nonemergency situations.

When water main breaks, it's not only that people are without water, which was a big deal, but there's other downstream impacts. Can you give us an example?

Yes. I'll refer back to a time when I was the branch manager in the Columbia, Missouri branch, it was about a week before Christmas, and I got a call in the middle of the night, while there was a blizzard going on outside, from a customer in Machens, Missouri, which is about 30 miles north of Colombia. So they had a water main break that was supplying water to a factory that employed over 200 people. They said that we had to get the water main back in service, and if we didn't get that, they were going to have to call the 200 employees there and tell them they were either going to have to take a day -- PTO or a day without pay. Nobody wanted to deliver that message a week before Christmas. Well, he came down through -- he started on his journey down to meet me at the branch. The good news is I got to the branch on time, the bad news the snow was so thicken that I couldn't get to the pipe. So I became snowplow boy that day. And I hooked up the snowplow to our 1-ton truck. I cleared the path to the 10-inch PVC that he knew, that he needed. By the time I had done that, he got there, I put the 10-inch pipe on his -- 40 feet of 10-inch pipe on his truck. I asked him a few questions about what do -- how he was hooking that up. He said, "I think it's duct-to-line pipe." And I asked him what the OD was, and he gave me OD, and I confirmed it was duct-to-line pipe. So I make sure that he had the right material to cut duct-to-line to PVC pipe. I put him on his way. In about 5:30 that morning, he gave me a call back and said, "Thank you for coming out in the middle of the night, in this snowstorm, in this blizzard. We got the water main fixed and all the employees coming in to work that day."

Let's talk about these customer testimonials on the right-hand side of this slide. When we were preparing for Investor Day, I asked Jack to send me a couple of these, and I think he sent me about 100, and I had to ask them to stop.

Yes. When I reached out to -- my regional Vice President asked me to send some of those, I had the time to turn the faucet off. We literally get hundreds of e-mails and text and letters and phone calls thanking us for what we do. We take pride in our -- in what we do for our customers, and they see the value.

Just like our customer relationships, our supplier relationships are critical. We have 4,500 suppliers. How do we support our suppliers and why are we important to them?

Well, first of all, we're just about every supplier's biggest customer. And as Steve mentioned, size and scale certainly do matter. Our geographic footprint and our local relationships are critical to getting their products into the market. With 320 branches, 1,700 sales associates in 48 states, and we're an extension of their supplier sales force. We have knowledge of the local markets. We have our delivery logistics of over 1,400 delivery vehicles. These are things that the other suppliers cannot do without us.

I want to talk about this opportunity in Texas, where we're partnering with our supplier to drive product into the customer projects, helping transition future projects from reinforced concrete pipe into corrugated HDPE. Tell us a little bit about this one.

Yes. Typically, in most states, including Texas, the specification for a storm drain is reinforced concrete pipe. We partnered with one of our key suppliers that manufactures corrugated HDPE. They were calling on the Texas DOT and engineers for many years. Finally got the approval to allow corrugated HDPE as an alternative to concrete, which was very welcome to us because concrete typically is not sold through distribution. Now we have an alternative where corrugated HDPE was a want to be sold. It's something we have to keep in stock. It's easier to install. It's lighter in a way can we have it in stock. So right after that, we have now a dedicated team calling on engineers, calling on customers, calling them municipalities, letting them know that HDPE -- corrugated HDPE is an alternative to reinforce concrete pipe.

And that's an example of how all of us can win together. Core & Main, our suppliers...

Exactly. Our customers, our suppliers and our customers all win in that situation.

It's a big opportunity that we're really excited about.

Absolutely.

Speaking of specifications, One thing that's unique about our industry is how many of our products are highly specified. Specifications are mandated locally by 50,000 municipalities across the U.S. Why do municipalities need these specifications?

Well, I think it's pretty important for the municipal to have consistency in what they have in there -- the consistency of quality and the preference of the products that they have. They need to know what's in the ground. When something breaks or they need repair, and they need to know what's in the ground. And imagine, I'll use hydrants up there, if you look at the screen up here as an example. Imagine if the hydrant tights were not tight, the specs were not tight. These different specs for the different cities around and municipalities around can vary from municipality to municipality and vary by depth of bury. It can vary by the threads and the pumper nozzle, by the threads and the hose nozzle, the operating nut whether opens left or open right, and even the color of the hydrant. So can you imagine if the specs were wide open, and they didn't have tight specs. Anybody could put any hydrant they wanted to. There's a fire, that building on fire, that the fire department comes to put the fire out. They try and hook up, and it's not the right connection in these, so what a strategy that would be if the specs were not tight.

And we have local specifications across many of our product categories, not just hydrants, pipes, valves, fittings.

Absolutely.

Our local knowledge and expertise are so valuable given the diverse specifications across the markets. To close it out, we are well positioned to continue to win in this industry where relationships matter. We have significant size and scale, and we have deep knowledge and understanding of products. Jack, anything you want to leave the group with?

Yes. I guess I would just say that I really love this industry. I've grown to love the industry. Obviously, I wouldn't be here 44 years later, If I didn't love the industry. And our well-trained associates are passionate about what they do. I've always had the personal philosophy no matter what job or a position I had within the company, I wanted to do it better than anyone else had ever done it before. And I think that translates into our associates that they want to be the best. This is still a relationship business. We celebrate our wins with our suppliers and our customers. Winning is still exciting and winning never gets old. We have a significant opportunity for growth and the future is bright. So thank you for allowing me to talk a little bit about why we win and the importance of relationships. To talk a little bit more about our growth opportunities, let me introduce Mr. Brad Cowles.

Thanks, Jack, and thanks, Robyn. Great setup. So my name is Brad Cowles. I'm the other half of the presidential team here at Core & Main. A little bit about me. I started my career as a mechanical engineer. I worked for the Michelin Tire company for about a decade in the U.S. and France, and I got to design and manufacture some of the world's greatest tires. But 18 years ago, I started on this Core & Main journey when I joined the Home Depot, and I had the opportunity to lead the information technology integration of about 30 acquisitions and a handful of divestitures during our formation of HD Supply. I learned a lot of our businesses through the lens of IT leadership, and I eventually became the company's Chief Information Officer in 2015. And during that time, our technology teams, many of whom have joined me in this Core & Main journey, built tremendous digital solutions to boost our productivity, we built mobile apps for our field associates, and we improved customer stickiness with web and customer self-service applications before those things were even cool. We even broached the $1 billion mark in e-commerce during that time. But I had an opportunity to return to my product routes in 2017 when I joined Steve, Jack and Mark Witkowski, as we began in the process of carving out what would become Core & Main from HD Supply. Believe me, it's been an exciting ride. What excites me most, and it's what I get to talk to you about today is our growth. I'm lucky to be part of a company that is built for growth from the ground up, really what we'd say the branch up. Every one of our branches every day is trying to sell more product to more customers and to do so more profitably. We arm the branches with data about their financial performance about their growth opportunities, about their share of wallet, and they give us back a wealth of knowledge and ideas about organic growth opportunities, sales talent to pursue and they even give us a long list of complementary acquisitions that we can pursue to complement our company. With 320 branches and over 4,500 well-trained associates, we generate a lot of ideas. And that could be overwhelming, but we have a continuous process to collect and evaluate and vet those ideas and sort them into the best of the best, and that culminates each year in our strategic plan. That strat plan crystallizes those few opportunities that we're really going to pursue and invest in, whether they be organic or inorganic or better yet, a combination of both. Sometimes, it's as simple as pulling a product through and branches that may not be selling a lot of it. Other times, we have to learn something new. And when we do, we're very careful to make sure we're still leveraging our core competencies our branches, our customers, suppliers, things we know. In other words, we like our adjacencies to really be adjacent. Those few ideas that make the cut, we bring them to life as initiatives. We resource them for scale, and we measure them with a focus on profitability. What you see on this page is a set of initiatives that we have in place currently, some focused on product, others focused on strategic partnerships others yet focused on penetration into underpenetrated geographies. I'm going to show you this morning how all of this comes together to drive growth in excess of the market. But first, I want to show you a short video about our metering initiative, and how a decade of innovation can help Core & Main and the communities we serve. [Presentation]

I love that and as you see in the video, our own associates are literally out there in the community, bringing the value of CORE+ directly to their doors. In this case, we helped implement an advanced metering system that brings not only better economic, but also better environmental performance to the utility. And our thanks to Brandon, Mississippi for sharing that great story. So what is this meter initiative all about? Well, if you think not too long ago, what used to be a mechanical meter that was buried in the mud was read by someone who walked by on foot, kind of rubbed it off. That's now a digital device that's relaying data to a series of network collectors, and that data is aggregated and processed, not only for water flow, which is the main point, but also information about potential failures in the metering system, potential leaks in the piping system. That data has pumped over into customer billing systems. And often these days, self-service customer portals on the web and in the palm of your hand. And that complexity can be difficult for the 50,000 water departments across this country to implement. So we bring it to them the easy way with CORE+. And as they talked about in the video, that's just an ever-expanding basket of services and software that complement the meter, and it helps us not only provide a better solution and win projects. It helps those communities adopt these advanced technologies more quickly and better yet helps them realize the benefits. In the center of this page is fire protection, another initiative that started with an idea from our field when some of our contractors used to cross over from waterworks into fire protection. So we started selling them sprinkler pipe and valves and fittings. We grew this initiative tremendously with 3 key acquisitions in California, in the Carolinas and most recently in New York. Along the way, we've invested tremendously in organic growth, and we now have a world-class network of 55 supply locations in 22 fabrication facilities where we make bundle and assemble custom kits of pipe, sprinklers and valves. And those kits help our customer the fire sprinkler contractor efficiently install these life-saving systems that are over your head right now. Finally, to the right, if you're looking at a set of plans and you're selling pipes and valves and fittings into a waterworks project, it's inevitable that those plans are also calling for drainage. We learned from our own field a decade ago that some branches were really good at selling drainage in other branches, we're not. So we turned it into an initiative, and we educated the company. We taught our estimators how to spot and quote these opportunities. We developed national supplier relationships that gave everybody the product and the pricing that they need. And then we sat back and we measured the results, 16% CAGR over a 10-year history kind of speaks for itself. All 3 of these initiatives have an impressive 10-year track record and each of these 3 has accelerated since we became an independent company in 2017. Collectively, today, these 3 initiatives alone are driving $2 billion of annual revenue. So how do we top that? Well, as I said in the opening comments, the ideas just keep coming. And fortunately, we've got a deck of ideas about this tall. I want to talk to you about 3 that are getting some great traction, although I would say they're still in early innings, starting on the left with fusible high-density polyethylene or HDPE for short. This is a solution that's born in the oil fields. But with the help of Core & Main, we're bringing it into the waterworks industry because it provides a better, more economical solution in certain circumstances. Directional drilling techniques and the unique tensile strength of this product and the way that it's fused together at the joints allows us to put new or replacement water infrastructure under existing roads, bridges and highways. The product might cost a little more, but the avoidance of disruption and cost to replace that above ground infrastructure more than offsets it. We're becoming a leading player in HDPE in the water industry, and it's bringing us not only product revenue, but also services revenue for technicians, rentals, we're getting equipment sales, and we're also getting into a whole new area of fabrication. Think of HDPE as another product that we can bring our existing customers, and it also opens the door to adjacent markets where HDPE is more common, like agriculture and mining and landfills. Now in the middle, the treatment plant, the unspoken hero of the water system and every water system starts and ends with one. You got to get clean water at the front end, and you've got to treat the sewer at the back end. And traditionally, Core & Main has focused on selling the products that connect these treatment plants to the customers. But with our treatment plant initiative, we're getting up inside the fence, and we're getting access to a huge new basket of valves and equipment. But in order to do this, we've had to hire some really specialized talent that understands the unique specifications of treatment plants and more particularly, understands the complex project and funding processes that these treatment plants follow. Our partnerships with national contractors has given us great access to these opportunities as is our advocacy of the design build process, which is a newer, lower risk way to design and fund and execute these projects. Our treatment plant team now has an industry-leading 20 professionals certified by the, Design Build Institute of America. And finally, to the right, very similar to me to the storm drain story I showed you a moment ago. If you're looking at plans for any construction site that moves dirt in the United States, there's an extensive call for erosion control products. You would see that most visibly as silt fence. But there's a lot more to it than that. There's also a call for more permanent products like geo textiles, geo grids, retaining wall structures they're going to hold that earth in place for the life of the project. Really excited about this. We're in very early innings. We've completed 4 acquisitions to begin the life of this initiative, and we've got a long way to go. So collectively, these 3, just 3 of the ideas in the stack give us an incremental $10 billion of addressable market opportunity. And as you can see from the numbers, we're in very early innings with a lot of runway. These things, and what I showed you on the prior page is how we're going to continue to drive growth in excess of market of 2% to 4% each year. Now it's not always about the products that you carry. Sometimes you got to be conveniently located next to the work that's being done. And nobody knows better how to identify gaps on the map than our local field teams. With their insights and our market data, we have significantly expanded the geographic footprint of Core & Main since we became an independent company. It's hard for me to believe now, but we had right around 200 branches when we separated. And as you've heard today, we have 320. And how did we do that in just 6 years? Well, we start with greenfields. And greenfields are a great way to get into new geography, and we can do that really well because we have deep talent pools. We can attract and train people right away. We have supplier relationships that led us stock up on the right product instantaneously even if it's new geography. These branches don't cost a lot in terms of CapEx to open and operate. And our track record is excellent. The 20 greenfields we've started since 2017 have generated positive operating income within the first 2 years. And together, those 20 branches, even though some of them are quite new are delivering right now $200 million in annual revenue. But since local relationships are often key to getting into these markets, sometimes bolt-on mergers and acquisitions are the right way to go. And you can see that in the numbers. Fortunately, M&A is something that we're very, very good at. 28 acquisitions have added another 95 branches to our footprint over that same period of time. And you'll get to hear a lot more about that from our business development leader, Jeff Giles in a bit. But what I like about this is we take all the benefits of those product initiatives, and we compound it by continuing to enter underpenetrated geographies through a balance of greenfields and M&A. I want to transition a bit. I've talked a lot about how hard we work to grow the businesses, but to expand the margins, I say you've got to work smart. Now gross margin in its essence is the spread between what you pay for the products that you sell and the price that you sell them at. Some people think, "Oh, you've got to be the low-price provider to get the job." And that is definitely not true. Most of the time, we can command our value with the price. And for that reason, we leave pricing decisions to the local field, but they're not alone. Behind them is a team of pricing analysts that run analytics across our extensive transaction set. And right in our systems, they get not only a recommended starting price, they get an indication of the margin sensitivity if they have to change the price. We even give them our best guess as to what the competitor down the street who lacks our scale is paying for the same product. That way, they can make fully informed pricing decisions whether they're prioritizing market share gains or their own margin expansion. Now on the buy side, when you're sourcing product, our teams come in and leverage our national buying power to get us the best back-end programs and the best pricing right out of the gate. But as Jack mentioned, those deep supplier partnerships can also not only help us weather but capitalize on unique situations that occur in the supply chain, like the disruptions that we experienced coming out of COVID or more recently, all of the activity on price and price changes. Moving to the right, private label. Just to say for now that you put yourself in the very best cost position if you become your own supplier. This is a subject that I'm really passionate about, and I'm going to talk about that a little bit more in just a moment. But finally, dropping all of that gross margin through to the bottom line, it's all about operational excellence. We're lucky to have a very efficient cost structure already, and we make that cost structure even more efficient as we grow. And it's not for lack of effort. I teased in the intro that we have a legacy of digitization and innovation, and our field operators are not only seasoned and well trained, but they're incentivized by their compensation plan to grow sales, to grow margin and to grow EBITDA and improve cash flow. And for those reasons, they generate a ton of ideas. And Jessica Killion is going to talk to you how we take that immense set of inputs from our field and turn it into continuous innovation. So all of this is what I'm talking about when I say work smart to expand margins, and it's why we're positioned to deliver continuous operating leverage for the years to come. Now private label, as I said, an area that is very special to me. Whether you are directly sourcing commodity products like gaskets or nuts and bolts or you're developing great brands of your own, like Trumbull municipal accessories or GemLock grooved fittings and couplings or more recently for us, Earthsavers erosion control products. Private label is a powerful lever to expand margins. We have already developed a substantial private label capability, and we deliver it to our branches through an internal master distribution network of 5 DCs and counting. Our brands are well respected in the industry because we develop premium, not low-cost products, and we give them enhanced features wherever possible. We constantly solicit feedback on the quality, the pricing and the packaging of these products, and we aim to be the #1 service provider to our branches every day. And best of all, we capture all of that incremental margin at the master distributor level. Now as an engineer, I'm pretty passionate about this area because it not only involves product design, but I've personally gotten to travel to countless countries and factories and boundaries as we've established manufacturing partners with those that we trust to make our products. Now I say that because private label is not easy. Anyone that tells you otherwise, I think, is overstating it. But it is a powerful lever. And these products deliver 1.5 to 2x the margin profile of the products that they replace. And as Steve mentioned in his opening remarks, as good as we are, we're in very early innings, maybe 2% of what we're selling today is private label. We see the opportunity in excess of 10%. And every percentage point along that journey expands Core & Main EBITDA margins by 15 to 20 basis points. So I hope you can see and feel why I'm so excited about this business. We're built for growth. We are a perpetual motion machine of idea generation, and we've proven we can take the best of the best of those ideas, turn them into initiatives and execute them at scale to drive growth in excess of market. Then we add sustainable margin enhancement to that mix with our capabilities to price, to source, to digitize and to private label. And then we compound it all with our geographic expansion through greenfields and M&A. And to me, that is an exciting formula for growth. So with that said, I'd like to introduce our Vice President of Corporate Development, Mr. Jeff Giles. Thank you.

Good morning, everyone. I'm Jeff Giles, Vice President of Corporate Development for Core & Main. I appreciate you spending some time with us today. to hear our unique and compelling story. And I'm excited to share why I believe we are incredibly well positioned to continue driving value creation through M&A. I joined Core & Main almost 6 years ago to build out and lead our corporate development team with responsibility for M&A and strategic planning. I have almost 2 decades of M&A, business development and strategic planning experience in both private equity and corporate environments. I began my post-MBA career at Emerson Electric in business development and strategic planning before transitioning into a series of private equity and corporate development roles. Most recently, I led corporate development for Barry-Wehmiller, a St. Louis-based privately held $3 billion global business, primarily focused on capital equipment manufacturing that is known for its people-centric culture. In the 5 years I was there, we nearly doubled the size of the company primarily through acquisitions. Now when I joined Core & Main, I was tasked with building out a world-class M&A organization and firmly establishing Core & Main as the acquirer of choice in our industry. And we spent the last 5-plus years striving to do just that, but we aren't planning to stand still as we have tremendous opportunity ahead to drive profitable growth through M&A. I'm thrilled to be here and share with you what we've accomplished so far, along with a few key messages that highlight while we are so well positioned for continued success in our M&A journey. We built an experienced motivated team driving an M&A platform built around people and process that is highly refined and repeatable. In aggregate, my team is combined to complete over $2.5 billion in M&A throughout our careers. We have a robust pipeline of actionable opportunities cultivated through years of research and analysis and relationship development, all in partnership with dozens of our field team leaders. Our approach is highly disciplined in terms of how we value businesses and select the right partners as well as our approach to synergy identification and realization. And not only have we been the most active acquirer in our core markets, we have proven our ability to expand into complementary markets to increase our TAM and drive profitable growth. I'm incredibly proud of our strong track record of M&A. As you've heard, we've completed 28 acquisitions since becoming an independent company in August of 2017, adding nearly 100 branches, more than $1 billion in revenue and generating over $225 million in incremental adjusted EBITDA. We completed our first acquisition as a stand-alone company just 2 months after our carve-out from HD Supply when we acquired Minnesota Pipe, adding 3 branches to our footprint in Minnesota. You'll hear from one of the former owners and now a key leader in the region, Wade Baumberger, in our upcoming panel discussion. As we move into 2018, we continue to build out the team, refine our process and started building momentum, completing 4 acquisitions, adding 4 branches. In 2019, we added 27 branches through 4 acquisitions including one of our largest in Long Island pipe supply, which transformed our fire protection business and brought us great talent and capabilities that launched our private label business, as Brad mentioned. Michael Moss, one of the former owners who now leads our private label business is also with us today, and you'll hear from him in our upcoming panel discussion as well. Despite a short pause due to the uncertainty around COVID in 2020, we remained active, adding 15 branches to 2 acquisitions, including R&D company, which is one of our largest and most strategic waterworks acquisitions, filling in key white space in Northern California. After our brief COVID slowdown, we ramped up our volume again in 2021, completing 5 acquisitions that added 18 branches, including L&M bag and supply, our first major acquisition in the geosynthetics industry. We also acquired Pacific Pipe in 2021 based in Maui. We're fortunate to have the former owner, Ken Ota, here with us today, all the way from Maui, so he can share his personal story about bringing his people into the Core & Main family. Fortunately, Ken and the rest of our team members in Maui were not harmed in the tragic fires that impacted Lahaina, but we know many of the families weren't so lucky. Our thoughts and prayers remain with all those impacted, and we'll continue to do what we can to help them with their recovery and rebuilding. We're grateful to have Ken here today in his capacity as an Area Director for Core & Main. 2022 was a record year from a volume standpoint as we acquired 7 companies, adding 14 branches across the country, across waterworks, geosynthetics and private label, including Trumbull Manufacturing, an iconic waterworks brand and now a key component of our private label business. So far, this year has been another productive one on the M&A front as we've already completed 5 acquisitions, adding 14 branches over $200 million of revenue. Most recently welcomed the J.W. D’Angelo company team into the Core & Main family, which brought us even further great talent in California and great capabilities in both our core waterworks and fire protection businesses. Clearly, we've accomplished a lot since 2017. And along the way, we have strengthened our M&A capabilities and created a highly refined and repeatable process, enabling us to deploy $1 billion on M&A in that time frame. At the outset, I mentioned our commitment to establishing Core & Main as the acquirer of choice in the industry, and I firmly believe our pace volume and the quality of the companies we've acquired [indiscernible], but we certainly didn't get here by accident. This has been a purposeful approach driven by a number of key factors. We leverage our strong reputation as a tough but fair competitor with the most knowledgeable and experienced associates in the industry. We've established an entrepreneurial pay-for-performance culture supported by world-class training that differentiates us from our competitors and helps us attract and develop industry leaders. You'll hear more on this from Laura when she dives into our people-first culture and our commitment to being the employer of choice in the industry. Our intense focus on people throughout the acquisition process enables us to ensure cultural alignment, which is one of our most critical filters. Our people are the most important part of our business. We have built a process that provides a high-touch, empathy-driven approach to understanding the perspectives, feelings and motivations of all associates who've all come into Core & Main family. We are acutely aware of how our soon-to-be new team members feel when they first hear the company is being acquired, and we're right there on day 1 to ensure we can deliver the appropriate messaging, answer their questions, directly address their concerns and begin to share all the positives that go along with joining the Core & Main family, including the tremendous training and career advancement opportunities that generally didn't exist for them previously. Our large national footprint and capabilities are second to none, but [Audio Gap] apart. One of my first days on the job almost 6 years ago, I was speaking with one of our long tenured sales reps, who shared a story that really resonated with me and exemplifies our dedication to local service nationwide. He was speaking with a long-time customer who just read an article about Core & Main that referenced the 240-plus branches we had at the time. Well, apparently, this came as a surprise as the customer shared we had no idea Core & Main was such a large national business saying, "I've always thought, it was my local Core & Main branch down the street." That really resonated with me because in a way, that's who we are. Our integration process and playbook are well-defined, scalable and highly flexible based on the needs of each company that we welcome into the Core & Main family. While our preference is generally to partner with management teams and owners who want to continue working for Core & Main post close, and you'll meet a few great ones here shortly. But we can also accommodate scenarios where owners are only interested in the short transition period for writing off in the sunset. Because of our deep bench of experienced leaders, we are uniquely well positioned to provide a solution like this. We're also happy to continue in the brands of companies we acquire, if there's value in the market or if it's important to recognize the legacy of the company that we're acquiring. I've spoken a lot about process. Now it's incredibly important to what we do, and one of my primary goals from day 1 was to establish a formal, disciplined process that is both repeatable and scalable with a clear focus on a well-defined set of strategic and financial filters. We are highly focused on acquisitions that will increase our geographic footprint, augment our product portfolio, have strong cultural alignment and, of course, enhance our talent and capabilities through the addition of great people. We're focused on select critical infrastructure industries in fragmented markets requiring a high degree of expertise and highly specified products. Our financial filters are straightforward and guide us to pursue the most attractive opportunities that exceed our return hurdles, are margin accretive through synergy realization and have low CapEx requirements, allowing us to generate a high degree of free cash flow. Our focused approach positions us incredibly well to continue our core market consolidation and expansion into complementary markets to provide profitable growth and margin enhancement opportunities. As I've shared, we have a process-driven approach to help us develop and capture a significant M&A pipeline opportunity. As Brad mentioned, our strategic planning process guides our action and sets our direction on which opportunities to pursue. But to do this successfully, we need good data. So one my first priorities when structuring our strategic planning process was to build out a comprehensive market map, so we have a clear picture of the competitive landscape in our core markets with granular data down to the district level. Because of this, I believe we have the most detailed and accurate market level data, thanks to the close collaboration with over 100 field team members, we are continuously involved in our target identification and market mapping exercises, which ensures we maintain a clear view of the opportunity in front of us. Our deal sourcing methodology leverages data and analytics as well as the close collaboration I mentioned with our incredibly knowledgeable and experienced field team leadership. Through this work, we've developed a comprehensive proprietary database of acquisition targets, and we're building relationships with owners and management teams on a daily basis. While the majority of our deals have been and will continue to be proprietary, those that were in a formal auction were generally limited and we came in as the preferred buyer. I take great pride in the teams we've built we have accelerated our efforts, cementing M&A as an integral part of our growth story. We have dedicated M&A and integration teams in place, the strong track record of execution, working in close partnership with field leadership and functional teams. As we continue to identify opportunities to grow our TAM, we've rolled out our market mapping exercises across several complementary markets, leveraging our proven core market M&A playbook alongside highly customized third-party research needed to give us the detail we need to execute on our inorganic growth strategy. We've already made great progress with our expansion in geosynthetics, natural gas and concrete structures, and we're continuously evaluating additional markets that align with our growth strategy. Through all of this work, we've identified, contacted and begun planting the seeds with hundreds of acquisition targets, which enables our relentless pursuit of a vast acquisition target universe. Our active deal pipeline generally consists around 15 active opportunities at any given time, but not every opportunity is right, or at least not right now. On average, we review 50-or-so opportunities annually, only pursuing those that align with our focus and pass our strategic financial filters. Given our track record and all the work we put into the relation -- developing relationships with the owners of the hundreds of companies in our proprietary target database, we see a clear path to $1 billion of incremental revenue through M&A over the next 5 years and significant runway to continue acquiring right companies that comprise our $40 billion fragmented industry. Now I share with you how we achieved our position as the acquirer of choice in the industry with our intense focus on people and process. What I'm sure you really want to hear is how our M&A strategy commits value for our shareholders. Given our size and scale, we are optimally positioned to realize synergies through M&A, driving significant value creation. We primarily think about synergies in 2 ways: revenue and margin. On the revenue side, we have consistently proven our ability to drive above-market growth in companies we acquire through access to our functional support capabilities and our focus on operational excellence. And companies we acquire gain access to our broad array of products virtually overnight, given Core & Main's nationwide one-stop shop offering. On the margin side, we're able to migrate acquired companies to our preferred supplier programs, which can immediately add 100 to 300 basis points to the bottom line. And we've proven our ability to achieve scalable growth on our existing cost base. Given our nationwide footprint, in some cases, we're able to optimize our branch footprint to consolidation and our private label products provide opportunity for immediate pull-through. But what I really love about our model is our ability to implement cost-saving initiatives to drive meaningful margin improvement without a focus on stripping out people or cutting costs to may put revenue at risk. We've proven our ability to create a real win-win scenario for 1 plus 1 equals 3 or more. As you've heard, we've acquired 28 companies generating over $225 million in incremental adjusted EBITDA. And I feel pretty good about that. But what is even more compelling, as I just alluded to, is our ability to create value through synergies and operational excellence, which has allowed us to achieve an implied multiple of approximately 4 to 6x on a post-synergy basis. I'm incredibly proud of what we've built over the last 6-plus years with the right people and process in place and a sincere commitment to further our reputation as the acquirer of choice in the industry. And while we have accomplished a lot in a relatively short period of time, what is most exciting to me is the immense opportunity in front of us and the long runway for future acquisition growth combined with our unique ability to drive immediate value creation through M&A. Thank you all for allowing me to share what I think is a pretty cool story. And now I'm thrilled to welcome our 3 special guests to the stage, Wade Baumberger, District Manager, Minnesota and North Dakota and a former owner of Minnesota Pipe; Michael Moss, Senior Director of Supply Chain, the man driving our private label initiative and a former owner of Long Island Pipe Supply. And of course, Ken Ota, Area Director of Hawaii, and the former owner of Pacific Pipe Company. Welcome, gentlemen. Thanks for making the trip. Appreciate having you here. So we're going to start with a brief introduction from each of you, and then would love to hear a little bit about your interaction with Core & Main prior to the acquisition and just a little bit about your legacy company. So let's start with Wade.

Thank you. Wade Baumberger, I'm currently a District Manager for Core & Main, and my responsibility is Minnesota and North Dakota. So prior to that, I was the -- a partner and a president of a company called Minnesota Pipe and Equipment, that was founded in 1989 and had grown to 3 branches in the Minnesota market. And I was competitor of Core & Main's, and I knew Core & Main very well. I knew that a lot of their people, met them at trade shows, had a respect for each other, and they were a great competitor. I mean, as far as the competitor goes anyway. So in the spring of 2017, my partner, he had been retired for a couple of years, and he came back from Florida after the winter and we sat down, and he was finally deciding, he wanted to figure out an exit strategy. And we had a few discussions, and it was a lot from my wife and my wife is also involved in this business and has been for her whole career also and for us to take that on and buy him out and plus try to continue to grow our business was felt like a lot. So we made the decision that it was time for us to look at selling the business. So we put the business up for sale and had a lot of interest and I presented to private equity. I presented to national companies, independent companies. But Core & Main was -- I knew who they were, they were the clear choice. I wanted -- it was a very important decision for me. I mean I had a small company with 25 employees, and this decision was very important that -- your employees are your family, they're under your friends or who you spend your weekends, what that's what this business does to you that they're your family. So it's really important for me to find the right partner. And I knew Core & Main was the leader of waterworks, and I wanted to go with a company that I felt the most comfortable with for my people and myself, I wanted to continue on, and I wanted to work with the best. So that's where we ended up.

Thank you for that Wade. We're thrilled that you and [ Bonnie ] chose Core & Main and trusted us to bring your family into our family. Happy to have you here. Michael, let's move on to you.

Good morning, everybody. Michael Moss. I am the Senior Director of Supply Chain. Some people at this company can say they've been here for 50 years, and I can probably say I've been here for 50 months. Previously, I was with my family business, which was founded by my father, Robert Moss, in 1975, which was Long Island Pipe Supply. We were a fire protection fabricator and distributor. And we led in our markets with service, and what we had felt was industry-leading expertise up and down the roster of 350 or so employees, which ultimately led to remarkable growth. At the time we sold the business to Core & Main in July of 2019, we had 22 locations spanning across 11 states. What made Long Island Pipe unique were 2 different business units, the first focus in domestic manufacturing, which is Albany Pipe & Nipple and of course, our private label division with the global supply chain capabilities. Now in regards to our relationship with Core & Main prior, we were competitors. But I would say, I would categorize it as a healthy competition. Core & Main definitely pushed us as a regional business to continue to enhance our product offering, our service level and, of course, our strategy.

Thank you for that, Michael. As we talked about, the Long Island Pipe acquisition was transformational for our fire protection business and brought us incredible capabilities in private label, which you're helping drive today, and we've got plenty of opportunity ahead there. Ken how about you?

Well, good morning, everyone, and aloha from Hawaii. I probably traveled the farthest, 5,000 miles and 11 hours away. And this guy traveled about 5 miles.

It still took 2.5 hours.

That's right. I've been in the business in this industry for the last 31 years. It's an incredible journey for me and it's an opportunity that I just enjoy being in this industry for -- I have 4 locations in Hawaii, on island of Hawaii, on Maui and also on the Big Island and [indiscernible] Oahu. It's been a wonderful journey just going through all the life cycles of opportunity for growth in Hawaii, and it's been a journey that I want to continue on.

Thank you for that Ken. We certainly want you to continue on as well. From the first day we met Ken and the team in Hawaii, it was immediately clear that the cultural and strategic fit was just incredibly strong and it's really improved that so far, and we're just getting started. So next question I'd like to ask, why did you choose to partner with Core & Main? And in your opinion, what do you think makes Core & Main, the acquirer of choice? Ken, we'll start with you on that.

So the biggest important part of making those big decisions on our side was really just the culture and opportunities for growth, specifically for Hawaii's growth and our people. So the culture side of it was really important [indiscernible] statute of how do we have that balance of values that are correlated with Core & Main that is collaborative teamwork that they checked off the box for Core & Main is mutual respect, checked off the box. There's abundant generosity that I've seen of what Core & Main is all about, just helping the coworkers, helping the community and helping our customers. It's all of those things that the value was so important for our family at Core & Main, which we call ohana. It was a mutual respect of understanding and getting a point across of having ideas and having opportunities for growth. When we looked at growth for our side, we generated -- so it's my anniversary, it's been about 2 years since I'm in Core & Main, and we increased our EBITDA by 65%. And a credit for Core & Main's opportunity for growth because of the new revenue stream we had from erosion control, wastewater treatment plants. We've never had the opportunity for that growth of different sectors in our industry itself. So it just gave us the opportunity. But also it gave us a lot of referrals also coming to Hawaii of the national contractors. So you have that opportunity for growth and expand the better.

Yes. Thank you for that, Ken. Certainly, a great story. We talked about the broad array of product offerings that we enable our acquired companies to take on, and it's a perfect example there. And Obviously, the success speaks for itself. But more importantly, the cultural fit has just been incredibly strong, and we're thrilled to have your team as part of the Core & Main family. Michael, let's move on to you.

Yes, of course. As Ken mentioned, anniversary, selling your business is sort of very -- not sort of -- it is a very big decision. It's sort of like getting married. So Jeff, you've been married, how many times?

28, I guess.

From a geographical perspective, Long Island Pipe was very complementary to Core & Main fire protection. Our business was concentrated in the upper Northeast, really in the New York metro area, where we filled a lot of the white space, which excited us that we were able to bring value back to Core & Main as a family, with our private label division, we always had this dream of having nationwide distribution. We're joining forces with Core & Main. That gave us access overnight to -- at that time, over 250 local branches. Partnering with Core & Main also gave us access to new product lines to better service our customers, for example, fire points to name one. But just partnering with Core & Main, not only was a great decision, understanding the culture and joining forces. But it just further entrenched our relationships with our customers with that new added expanded product offering.

Yes. Certainly. And as I mentioned, the acquisition has been transformational. You, your brother, your father were running remarkable family-owned business and certainly could have kept doing that. But I think when we got together during what was a relatively long courtship process. We all saw what the combination of the 2 companies could really build another one of those examples of 1 plus 1 is certainly more than 3. So thank you again for selecting us. We're going to move over to talk a little bit about the integration process and your experience with that and whether or not it aligned with our expectations coming in. Wade, will start with you on that.

Well, the integration process is -- that's the big challenge, right? And we hear this 1 plus 1 equals 3, and I was -- Steve told me that very early on, "Wade, well, we bought your company now, now I need you to go turn this 1 plus 1 into 3." So I was like, what's this all about? But I quickly understood what he was -- what he wanted to happen here. So the first step was getting the 2 sales teams together, I felt that was the big challenge. You have -- they acquired our company, and we had 2 sales teams that were competitors. So they then -- as you understand, they are competitive people, salespeople are very competitive, but we brought those 2 sales teams together. There's give and take. The new team had to understand that I was a new leader. They had to learn about me, and I think what they figured out they got to see the passion that I had, and they knew that I was there to fight with them. I love the battle, and I love to win. So those integrating that was the big key for us, I think. And then after that, we could find the synergies and start growing, figuring out where the synergies were and how we're going to make 1 plus 1 equal 3. And we did that with -- they had St. Michael, Minnesota branch at Core & Main has a fusion initiative, a big fusion tech team there, and they're amazing. We didn't have that at Minnesota Pipe. They had a census water meter line. You heard about the water meters and what goes on with that. That was not part of what Minnesota Pipe adds. So that was a big add, another synergy. And tell you a little story about within a couple of months after we were acquired. I was at a trade show when I ran into another independent a guy that was running another independent waterworks company that had known over the years, just like I knew a lot of the Core & Main people. And you exchanged pleasantries, but he was kind of more Core & Main ask me about what was going on, and how did this go with Minnesota Pipe? And pretty soon, I could tell he was -- he wanted a little more than that. So we have more discussions and pretty soon within 6 months, I had acquired -- I had brought him on board with Core & Main and 6 of his employees, and we started a brand-new branch in Fargo, North Dakota. So it was -- it's kind of crazy how even have relationships with some competitors and being cordial to each other and being able to have a beer at a trade show can turn into something like that. So it was pretty amazing we were able to open up a new branch, and that's why I tell Steve 1 plus 1 really equal to 4 and approaching 5.

Love that. That's one of our favorite acquisitions that really wasn't an acquisition. We got a whole branch and a team through Wade's relationships. And it's just a great example of relationship development, again, success breeding success. So an excellent story there, Wade. Ken, if you could share a little bit about the integration process? And if that align with your expectations coming in?

Sure. So it's all about, for us, this is about to be [indiscernible], trying to acquire or at least get the understanding of these -- the integration of staff of helping, caring very authentic on Core & Main style. Their integration department, their team is this first class. It was welcoming. It was amazing. They did one-on-one interviews of just having to make sure all of are understanding or from the medical to all of our HR here was incredible of what they've done. And I think it was such a important because that's right out of the gates, we had to move for, and they just did a wonderful job.

Thank you. It's good to hear. We talked a lot about the importance of people and process. And certainly, the people aspect of an acquisition is the most important. If you don't get that right, nothing is going to go well. And I can share that we had no shortage of people that wanted to sign up to help with the integration process in Hawaii there.

Yes. I'd like to add on to that. I mean we were the first acquisition and this had to be new for the Core & Main team and the integration people and the fact that they were there, a lot of anxiety with my employees and I'm telling them I'm standing here with you, but just having the Core & Main team there at our branches bringing that data across. And it was amazing that we could write orders and purchase orders and sales orders and take care of all of our legacy customers immediately from day 1. And so I just -- that was really a great integration process.

Yes. Well, thank you for that, Wade. And again, very purposeful. So love to hear that it's working out. So obviously, with acquisitions, there's a lot of change, right? So I want to chat through some of the differences in your businesses following the acquisition. And then like really operating under Core & Main with our [Audio Gap]. Wade, let's start with you on that.

Well, so I'm coming up on my sixth year, but a lot of the differences were some of the estimating the synergies that the innovations team brought were more efficient. We were able to combine the 2 estimating teams into 1 instead of -- so that was a synergy. We combined our treatment plants. We both had a treatment plant into 1, and now we are the undisputed leader in treatment plant business. We went from 3 stores to 6 stores in my Minnesota market, and now grew North Dakota to 2 stores. But having 6 stores, why is that? What is so great about that? Well, what's great about that is your ability to service our customers and the locations of these strategically placed branches. I tried to strategically place my branches where I had an advantage or where I could service in growing communities and maybe Core & Main or HD Supply didn't have a branch. But now we had 6 branches across the whole market. And when a contractor wins a bid and you have a store that can service a project within miles of the project, it's a big deal. So that was one of the differences. And just the fact that we didn't have to -- my wife and I didn't have to worry about AP and AR and all the training. I mean, that's a lot when you're trying to run your own independent business and now you have all that support behind you, so we could focus on the operations and how to make our business grow and be more profitable. And I could help more time for me to work with the sales team, and that's what I love, selling and women.

Yes. Thanks for that Wade. Some great examples of we're not just buying companies for growth's sake, right, but we're buying the right companies in the right geographic locations, bringing in the right people, the right teams and equipping with capabilities to improve their operations with the ultimate goal of serving our customers in those local markets. Michael, let's hear from you.

Yes. So I would say one of the benefits has been the training and learning programs, gives our employees the opportunity to grow within the organization as well as better service to our customers. As Wade mentioned, the support of the functional units. We don't have to worry about fleet or real estate. That's handled by all the corporate functional units and allows us to run our business more efficiently as well as scale up. The continued investment in technology and innovation has been life-changing for our business. And most importantly, the unwavering commitment into the private label product offering. At the time we sold the business, we had roughly 2,500 SKUs, and we were really focused in fire protection at that point. And as we stand here today, we have with our -- now with our diversification into waterworks, we have nearly 8,000 SKUs, give you a little bit of understanding of our growth.

[indiscernible] extra margin we're making on those valves.