Hello, and welcome to the Core & Main Q4 2021 Earnings Call. My name is Alex, and I will be coordinating the call today. I'll now hand over to your host, Robyn Bradbury with Core & Main to begin. Over to you, Robyn.

Thank you. Good morning, and welcome to the Core & Main fiscal 2021 fourth quarter and full-year earnings call. This is Robyn Bradbury, Vice President of Investor Relations and FP&A for Core & Main. Thank you for joining us this morning. We are excited to share our results with you. Steve LeClair, our Chief Executive Officer, will lead today's call with our fourth quarter and full-year execution highlights followed by a discussion on recent topics of interest. Mark Witkowski, our Chief Financial Officer, will then discuss our financial results and fiscal 2022 outlook followed by a Q&A session. We will conclude the call with Steve's closing remarks. For Q&A, please limit to one question and one follow-up. If you have additional questions, you may return to the queue. Thank you for your cooperation. Some of the information you will hear today may include forward-looking statements. Forward-looking statements include all matters that are not historical facts. We may include statements regarding our intentions, beliefs, assumptions or current expectations concerning our financial position, results of operations, cash flows or growth strategies. Forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be outside of our control. We caution you that forward-looking statements are not guarantees of future performance or outcomes and that they may differ materially from those made in or suggested by the forward-looking statements contained on this call. These forward-looking statements are made only as of the date of this call. We do not undertake any obligation to update or revise any forward-looking or cautionary statements to reflect changes in assumptions, the occurrence of events or changes in future operating results. In addition to providing results that are determined in accordance with U.S. GAAP, we represent certain non-GAAP financial measures to assess the operating results and effectiveness and efficiency of our business. We present these measures because we believe investors consider them to be important supplemental measures of performance. For a reconciliation of the non-GAAP measures to the nearest GAAP measure, please refer to the slides in the appendix of the fiscal 2021 fourth quarter investor presentation, which can be found on the Investor Relations section of our website. Thank you for joining us this morning and for your interest in Core & Main. I will now turn the call over to Chief Executive Officer, Steve LeClair.

Thanks, Robyn. Good morning, everyone. Thank you for joining us today, and welcome to our fiscal 2021 fourth quarter and full-year earnings call. Fiscal 2021 was a remarkable year for Core & Main. We delivered record financial performance while delivering on our pledge of dependable service to our customers and suppliers in challenging market conditions. The strength, flexibility and resilience of our business model was exemplified as we fulfilled unprecedented levels of demand. We continue to execute on our strategies to grow the business and strengthen our operational capabilities, while delivering value to our customers, supporting our associates and achieving strong financial performance. We navigated through supply chain challenges, while continuing to deliver extraordinary service to our customers. Infrastructure solutions are localized and must meet product specifications and engineering standards that vary from one municipality to another. Our customers count on us to provide the right solutions to meet these local requirements. Equally important, access to specialty products is critical to our customers' success in completing a project on time and on budget. We have maintained industry-leading product availability during a period of unsurpassed scarcity, a testament to our value proposition. Our customers choose us for the breadth of our products, extensive industry knowledge, familiarity with local specifications, convenient branch locations and reliable delivery capabilities. Throughout the year, we strengthened our connections with existing customers and developed relationships with many new customers across the country. Our success is linked to the quality of our team, the depth of their expertise, and their commitment to overcome any obstacle to achieve our goals. When confronted with a difficult operating environment, our associates adapted and continued delivering on our promise of providing local knowledge, local experience and local service nationwide. I would like to express my sincerest gratitude to all of Core & Main's 4,100 associates for their unwavering dedication, determination and resilience. Our associates are the best in the industry, and I am inspired by their exceptional service to our customers, suppliers, communities and to each other. In fiscal 2021, we delivered just over $5 billion of net sales, up 37% over fiscal 2020, and $604 million of adjusted EBITDA, up 77% over prior year. Our sales growth was driven by strong demand across each of our end markets, higher average selling prices as we passed along rising material costs, solid performance across our sales initiatives to deliver market share gains and acquisitions. We also achieved share gains from having preferred access to products during a period of material shortages. Our teams leveraged a strong sales growth through the expansion of our margin enhancement initiatives and disciplined cost management to achieve record profitability in fiscal 2021. Our focus on pricing analytics and operational execution at both the corporate and local levels produced solid margin results despite the intensifying inflationary pressures we faced. We finished the year strong from an M&A standpoint, adding five extraordinary businesses to our team in fiscal 2021 and acquiring Dodson Engineered Products subsequent to year-end. Each of the acquisitions fits well within our M&A strategy, offering expansion in new geographies, access to new product lines, consolidation of existing market positions and the addition of key talent. Dodson Engineered Products is a single branch, full-service distributor of water, wastewater, storm drainage, agricultural and irrigation products based in Western Colorado. Founded in 1970, Dodson has a long history as a trusted and reliable partner to its customers, suppliers and associates. The opportunity to bring a company such as this into the Core & Main family provides strategic value and will allow us to expand our reach to better serve customers in Central and Western Colorado. As part of our sales initiatives to deliver above market growth, we opened three new greenfield locations throughout fiscal 2021. These new locations will allow us to expand into new geographies and expand underpenetrated product lines. Despite our vast geographic footprint, there is significant remaining white space across the country, and our team uses a data-driven strategy to identify and evaluate these markets. We have a pipeline of priority markets that we are targeting for greenfield expansion, some of which could convert in the coming quarters as we align sales talent and operating facilities. Turning to Page 6. I'd like to highlight an example of how we deliver significant value to our customers and their projects. In February 2021, sewage poured into the streets and across the yards of Ventnor Heights, New Jersey residents due to a major pipeline leak. After inspecting the job site, county engineers consulted with our local team, and they discovered the diameter of the pipe was unusual and inconsistent with today's standards. They needed product expertise and an innovative repair solution. Our local product specialists were able to provide our customer engineered drawings and a quote within 24 hours to let them know exactly what was needed to repair the rupture in the line. We produced and delivered a custom retrofit solution with specialty fabricated fusible HDPE pipe and fittings. With our HDPE fusion equipment and technician on the job, the solution we provided was a success. Our local New Jersey team embraced their responsibility to their community and their environment to keep our water infrastructure up and running, while leveraging our regional product specialists and resources. We do work like this every day. Our associates live and work in their local communities and partner with them to ensure the best solutions for any water or wastewater infrastructure needs. On Page 7, I'll finish with a few topics of interest. Product availability. Product availability challenges persisted through the fourth quarter and continued today. But given our long-standing relationships with our suppliers and leadership position in our industry, we have been able to gain preferred access to products to continue serving our customers. Although we believe supply chain disruptions will continue to impact lead times and project cycles through at least the first half of fiscal 2022, our overall sentiment remains positive and our strong backlog is indicative of future demand. If supply chains normalize, we expect to release products reserved for jobs held in backlog. Throughout the course of the year, our inventories and backlog have grown as a result of us holding inventory for customers until we can secure all the necessary parts and components to ship the complete solution and support our customers' installation schedules. Material cost inflation. We continue to experience rising material costs across nearly all product lines in the fourth quarter due to strong demand, constrained manufacturing capacity, shipping container shortages and port congestion that has impacted our suppliers. Our teams continue to navigate the inflationary environment exceptionally well by partnering with our customers to give them timely notice of market price increases and locating the products they need so they can complete their projects as scheduled. PVC pipe prices have inflated more than any of our other product lines and have remained at an all-time high. While it's possible PVC pipe prices could decline at some point, there are a number of factors that are keeping prices high in the near-term, like strong demand, continued supply constraints due to raw material shortages and tight manufacturing capacity. It's important to note that every piece of pressurized PVC water pipe has to undergo pressure testing to pass American Water Works Association Standards, which is unique to our industry and can cause PVC pipe pricing to move in different cycles in general-purpose resin used for other applications. Additionally, we continue to experience price increases across many other product lines that could offset any potential future deflationary pressure from our commodity-based products like PVC pipe. During the fourth quarter, we continued purchasing inventory ahead of supplier cost increases, resulting in gross margin rate expansion. If procurement costs stabilize in fiscal 2022 or we don't receive advanced notice of material cost increases, we would expect to continue passing along the higher selling prices, although gross margin rates may contract as we lose the benefit of lower-cost inventory. Through the first two months of fiscal 2022, we have seen prices remain high and even increased across most product categories. M&A pipeline. We have a strong track record of acquiring and integrating businesses, and we continue to cultivate a solid pipeline of targets for the short and long-term. We have closed 17 acquisitions since becoming an independent company in 2017, adding more than $650 million in annualized net sales. We have a streamlined process by identifying attractive bolt-on opportunities, and we are well positioned to source, acquire and integrate new businesses. We believe we are widely viewed as the acquirer of choice due to our long-standing relationships and entrepreneurial culture and our investment in the development of our people. Our industry is large and highly fragmented. Our pipeline continues to be robust. And as we look ahead, we see a long runway for growth through M&A. Capital allocation priorities. We have significantly improved our financial flexibility as a result of debt repayment from the proceeds of our initial public offering. We have a stronger balance sheet, lower cash interest payments and substantially reduced net debt at the end of the fiscal year. The reduction in net debt leverage provides us with greater optionality to invest in value-creating growth opportunities moving forward. Our current capital allocation priority is to continue investing in organic and inorganic growth opportunities, although we will evaluate other capital allocation options as we generate strong cash flow over the next year and beyond. Over the course of the last few years, we have been able to successfully execute on our growth and M&A strategies, while also paying down debt using our cash flow. We are comfortable operating in the 2x to 3x net debt leverage range while making investments to grow the business. Infrastructure bill. We are optimistic about the opportunities provided by the infrastructure investment and Jobs Act, a once-in-a-generation bill that makes transformational investment in our nation's infrastructure. An infusion of funds of this magnitude has immense implications to accelerate the repair and replacement of aging water infrastructure and it will lead to a more sustainable future for our communities. While we believe that the new infrastructure bill will provide multi-year tailwinds for the municipal water sector, we also believe it will take time before we see those funds flow through to our business as a result of constrained supply chains and industry-wide labor shortages. It's likely that we may not see incremental volume from the bill until 2023 or beyond. However, we are well positioned to capitalize on the favorable tailwinds due to our market leadership position and competitive advantages. Current market events. There are a few recent themes in the global macroeconomic backdrop I'd like to address. First is the conflict in Ukraine. Core & Main does not have any direct business exposure to either Russia or Ukraine, but it's still difficult to determine what supply chain or demand impacts could arise from the ongoing conflict. Given the recent ban on Russian imports, we could see further impacts to our supply chain, and we will most likely be impacted by inflationary pressure on fuel costs. We may also see inflationary pressure in certain product categories linked to supply chain shortages. We are confident that we remain well positioned to navigate any environment due to our size, scale and ability to access products. We have not seen a slowdown in demand related to economic inflation or rising interest rates. Demand has continued to be strong. If inflation or interest rate increases continue, it is possible we could see affordability challenges across our end markets, which could impact demand. We are not seeing anything like this currently. But if we do, we believe we are well positioned given our mix of repair and replacement projects in the municipal end market. As I look ahead to fiscal 2022, I am confident that Core & Main is investing in the right areas and at the right time. We are deepening our competitive advantage and building on our foundation of long-term profitable growth. We have multiple levers for organic growth, continually cultivating ways to grow faster than the market and gain market share. We are poised to benefit from favorable industry trends. We have an attractive and resilient financial profile with strong return characteristics. We have gained significant market share, built robust capabilities and are in a good position to deliver strong performance this year and many years to come. I will now turn the call over to our Chief Financial Officer, Mark Witkowski, to discuss our fiscal 2021 fourth quarter and full-year financial results, followed by our fiscal 2022 outlook. Go ahead, Mark.

Thank you, Steve. Good morning, everyone. Turning to Page 9, I'll begin by covering our fourth quarter operating results. Net sales in the fourth quarter were $1.2 billion, an increase of approximately 50% over the prior year period. The increase was driven by higher average selling prices, strong volume growth and acquisitions. Sales benefited from volume growth across each of our end markets, in addition to more moderate weather this year than last year. The municipal market continued to experience strong demand due to growth in water and wastewater infrastructure spending. Residential land and lot development continued to be robust in the quarter. We've also started to see growth accelerate across the non-residential market as demand continues to catch up to pre-pandemic levels. We experienced strong volume growth across each of our product lines in the fourth quarter, except for our meter products, due to shortages of semiconductor chips that are components of certain smart meter products. Our sales initiatives and our industry-leading product availability allowed us to outperform our end markets and deliver above-market growth during the quarter. Roughly two-thirds of our net sales increase in the fourth quarter was due to higher average selling prices, which was much more than expected and driven by our team's ability to pass along rapidly rising material costs. We continue to experience rising material costs on nearly all product lines due to unprecedented demand and constrained supplier capacity. Despite these challenges, our teams navigated the inflationary environment well, working closely with our suppliers to secure products and giving advanced notice of price increases to our customers. Acquisitions contributed approximately 5 points of sales growth in the fourth quarter. Gross profit in the fourth quarter increased 60% to $327 million. Gross profit as a percentage of net sales was 26.2% compared with 24.5% in the prior year period, an improvement of approximately 170 basis points. The increase was primarily attributable to strategic inventory investments ahead of announced price increases, a favorable pricing environment and the execution of our gross margin initiatives, such as expanding private label, achievement of growth-based supplier incentives and accretive acquisitions. Similar to the third quarter, our gross profit was positively impacted by our inventory purchases ahead of supplier cost increases, which results in a lagging weighted average cost of goods sold relative to current market prices. We are also operating in a significantly less sensitive pricing environment due to industry-wide product shortages, which we benefited from due to our investments in inventory. We continue to make great strides across the pricing and private label initiatives, delivering sustainable gross margin rate expansion relative to the prior year. We also achieved gross margin synergies from our recent acquisitions, which we expect to benefit from on a go-forward basis. Selling, general and administrative expenses for the fourth quarter increased 33% to $183 million. SG&A as a percentage of net sales was 14.7% compared with 16.6% in the prior year period, an improvement of approximately 190 basis points. The decrease in SG&A as a percentage of net sales was due to our ability to leverage our fixed costs, partially offset by higher variable compensation costs, higher costs from acquisitions and increases in other variable costs due to volume inflation. Adjusted net income increased $72 million to $73 million in the fourth quarter. The increase was due to strong sales growth, gross margin rate expansion and SG&A cost leverage. In preparing adjusted net income, we exclude the effects of non-controlling interest as we evaluate and manage the business as a whole. Adjusted EBITDA grew 113% to $151 million, improving adjusted EBITDA margin by approximately 360 basis points. The increase in adjusted EBITDA margin is due to strong net sales growth, gross margin rate expansion and leveraging our fixed cost structure and the sales and gross margin growth. Turning to Page 9, I'll now cover our fiscal 2021 full-year results. Net sales for fiscal 2021 were just over $5 billion, an increase of nearly 37% over fiscal 2020. The increase was driven by higher average selling prices due to rising material costs, which contributed approximately half of our net sales increase, strong volume growth and acquisitions. Our sales benefited from volume growth across each of our end markets throughout the year. We estimate that the residential end market experienced low double-digit volume growth due to robust land and lot development activity to support housing demand. We have recently seen an acceleration of volume growth across the non-residential construction market as local economies continue to recover and as demand returns to pre-pandemic levels. We estimate that our non-residential end market grew at a low single-digit rate this year. Municipal repair and replacement volume grew at a low to mid-single-digit rate due to healthy municipal budgets and better access to low-cost capital. Overall, we believe our end markets delivered mid-single-digit volume growth in fiscal 2021. We achieved considerable share gains due to our sales initiatives and also from having preferred access to products during a period of material shortages, which allowed us to acquire many new customers. Our product, customer and geographic expansion initiatives delivered solid performance throughout the year. We've continued to accelerate the adoption of new products in our industry, such as fusible HDPE solutions to our waterworks customers like the project Steve discussed earlier, fabrication and kitting assemblies for fire protection contractors and new water retention and erosion control systems. We've also increased our share with strategic accounts who typically pursued complex projects that required greater technical expertise and specialized procurement needs. The combination of our growth initiatives and winning new customers allowed us to achieve above-market growth well in excess of our historical average annual share gains. Acquisitions contributed approximately 3 points of sales growth in fiscal 2021. Gross profit for fiscal 2021 increased 46% to approximately $1.3 billion. Gross profit as a percentage of net sales was 25.6% compared with 24.1% in fiscal 2020, an improvement of approximately 150 basis points. The increase was primarily attributable to strategic inventory investments ahead of announced price increases, a favorable pricing environment, the execution of our gross margin initiatives, achievement of growth-based supplier incentives and accretive acquisitions. We estimate that roughly 50 basis points to 100 basis points of our fiscal 2021 gross margins may be temporary in nature as a result of our inventory investments and the favorable pricing environment and resetting of certain growth-based supplier incentives. However, we have multiple margin initiatives in place to help offset the impact of temporary gross margin rate benefits. Selling, general and administrative expenses for fiscal 2021 increased 29% to $717 million, while SG&A as a percentage of net sales improved approximately 100 basis points to 14.3%. SG&A as a percent of net sales declined due to strong cost leverage, partially offset by higher variable compensation costs, $21 million related to higher equity-based compensation expense due to accounting for equity awards, and $5 million due to costs in connection with the IPO and secondary offering. Interest expense for fiscal 2021 was $98 million compared with $139 million in fiscal 2020. The decrease was attributable to the redemption of the 2024 senior notes, the redemption of the 2025 senior notes and lower interest rates on the senior term loan due to refinancing transactions completed in July. Income tax expense for fiscal 2021 was $51 million compared with $9 million in the prior year, reflecting an effective tax rate of 18.5% and 19.6%, respectively. The effective tax rate declined in the current year due to certain fixed tax expenses and permanent differences decreasing as a percentage of pretax income. During the fourth quarter, a secondary public offering of 20 million shares of Class A common stock was completed by certain of our shareholders. We did not receive any of the proceeds from the offering. In connection with the offering, approximately 7.5 million partnership interests were exchanged for shares of Class A common stock, together with the retirement of a corresponding number of shares of Class B common stock. As a result of these exchanges, we acquired certain tax attributes held by CD&R and its affiliates. We expect that these tax attributes will reduce our future cash tax payments to taxing authorities. Under our tax receivable agreements, we recorded a payable that represents 85% of these anticipated tax savings, while we retain the remaining 15% as cash tax savings. A summary of each TRA is located in the appendix of the presentation. Because we only make TRA payments if we achieve the benefit of a cash tax savings, we do not consider TRA liabilities current or future to be debt-like items. Following the offering, CD&R and its affiliates' ownership decreased to roughly 70%. Adjusted net income increased $223 million to $266 million for fiscal 2021. The increase was due to strong sales growth, gross margin rate expansion and SG&A cost leverage. Adjusted EBITDA grew 77% to $604 million, improving adjusted EBITDA margin to 12.1% from 9.4% for fiscal 2020 and growing nearly 2x the rate of our sales growth. The increase in adjusted EBITDA margin was due to strong net sales growth, gross margin rate expansion, and leveraging our fixed cost structure on the sales and gross margin growth. On Page 11, I'll now cover our cash flow and balance sheet highlights for the year. We had an operating cash outflow of $31 million in fiscal 2021, with the increase in profitability more than offset by investments in operating capital required for strong sales growth and to ensure product availability for our customers. We made additional investments in inventory that we believe were prudent and necessary to ensure our customers can complete their projects on time. Additionally, our operating cash taxes were roughly $47 million higher than the prior year period due to higher pretax book income. While we made substantial investments in operating capital this year, our after-tax operating profit, excluding intangible amortization relative to our year-end balances of accounts receivable, inventory, PP&E and accounts payable, was just over 40% for fiscal 2021. Our net debt at the end of the quarter was $1,492 million, bringing our net debt leverage down to 2.5x. The reduction in net debt leverage compared with the end of fiscal 2020 was attributable to debt repayment from the proceeds of our IPO, in addition to an increase in adjusted EBITDA. We expect to improve and maintain our net debt leverage in the near-term despite making strategic investments to grow the business. At the end of the fourth quarter, we had $842 million in total liquidity. We believe that our liquidity and our cash generation from operations will be sufficient in the near-term to fund operations, anticipated capital expenditures, scheduled principal and interest payments on our term loan and continue to pursue our growth strategies. I'll wrap up our prepared remarks on Page 12 with a discussion on our outlook for fiscal 2022. Fiscal 2021 was a transformative and record year, and we entered fiscal 2022 with strong backlogs and great optimism. The underlying pace of demand appears favorable across each of our end markets. We expect residential housing tailwinds to continue given the undersupply of new homes and population shifts despite home builders having to navigate ongoing labor and material shortages. The macro environment for non-residential construction continues to be well supported. We saw an increase in non-residential construction in the second half of fiscal 2021, and we expect those trends to continue into 2022 as demand returns to pre-pandemic levels and as commercial construction activity expands to support growth in housing development. We expect municipal repair and replacement activity to remain strong, and we see favorable tailwinds leading into 2022. Municipal budgets are healthy. Municipalities have access to low-cost capital, and the need to repair aging infrastructure is growing in importance and significance. Municipalities have increased water and wastewater utility rates each of the year over the last decade, highlighting their ability to effectively increase revenue to improve their aging infrastructure systems. While we are excited about the long-term positive impact the infrastructure investment and Jobs Act could have on our water infrastructure, we have not included any incremental benefits associated with the bill in our assumptions for 2022 guidance. We saw some projects scheduled for delivery in fiscal 2021 get delayed and pushed into fiscal 2022 due to supply chain constraints, which could provide tailwinds in the first half of the year. We continue to execute on our growth strategies and focus on the controllable areas of our business, including ensuring product availability for our customers, remaining ahead of inflationary or deflationary pressures and driving productivity gains and effective cost management. We expect favorable impacts from higher average selling prices to continue through at least the first half of the year, potentially moderating in the second half as we approach more difficult comparisons. Even with the potential for price deflation, if supply chains normalize or if demand softens, we expect to generate a favorable net sales benefit in fiscal 2022 due to the timing and magnitude of price increases in the prior year. In terms of acquisitions, we currently have a strong pipeline of high-quality targets, and we look forward to adding more of these companies to our team throughout the year. Our recent acquisitions are performing well, and we expect them to contribute two to four percentage points of topline growth this year. Based on these factors, we expect fiscal 2022 net sales to grow in the high single to low double-digit range, with strong growth in the first half of the year but moderating in the second half with more difficult comparisons. Regarding our gross margins, we do not expect to repeat the significant price realization benefits we achieved in 2021 during the rapid rise of inflation. I mentioned earlier that we believe our fiscal 2021 gross margins included roughly 50 to 100 basis points of potential temporary onetime benefits. However, we have margin initiatives in place to help offset some of the potential pressure related to these onetime benefits. We expect first quarter margin – gross margins to be weaker sequentially than our fiscal 2021 fourth quarter due to the resetting of growth-based supplier incentives and of inventory costs catching up with market prices. While we expect to achieve SG&A leverage for the full-year, we anticipate our adjusted EBITDA margin may decline modestly in 2022. With all of these factors in mind, we anticipate our fiscal 2022 adjusted EBITDA to be in the range of $595 million to $635 million. This includes only the contributions from acquisitions that have already closed. At the midpoint of our range, we expect 12-month adjusted EBITDA to be above our $604 million of fiscal 2021 adjusted EBITDA each quarter throughout the year. We expect that our fiscal 2022 results could be front-end loaded with stronger performance in the first half, slightly subsiding in the second half as supply chains normalize and commodity prices decline. Additionally, we'll be challenged with a tough year-over-year comparison throughout the second half of the year. We expect interest expense to be in the range of $58 million to $60 million for the year. Our term loan carries interest at LIBOR plus a margin of 250 basis points on the unhedged portion of the facility. In July of 2021, we entered into a five-year fixed interest rates hedged with a notional value of $1 billion to lock in LIBOR rate at 74 basis points. We anticipate an effective tax rate of approximately 20% in fiscal 2022. This is slightly higher than our 2021 effective rate due to more Class A shares, which result in more taxable income to Core & Main, Inc. Regarding our cash flow, we typically convert roughly 60% to 70% of our adjusted EBITDA into operating cash flow, with fiscal 2021 being an exception as we invested heavily in working capital to support growth and ensure product availability for our customers. We expect to convert roughly 85% to 100% of our adjusted EBITDA into operating cash flow in fiscal 2022 as we optimize our inventory balances in the second half of the year. We have historically generated the majority of our cash in the back half of the year, and as we unwind working capital, we expect the same trend in fiscal 2022. To close out our prepared remarks, we are very proud of our record fiscal 2021 fourth quarter and full-year financial results. Despite the challenges we faced this year, our teams continue to execute flawlessly. We continue to focus our efforts on delivering sustainable market share gains, improving profitability, and generating strong operating cash flow. That concludes our prepared remarks. At this time, I'd like to turn the call over to the operator for questions.

Thank you. Our first question for today comes from Matthew Bouley of Barclays. Matthew, your line is now open.

Hey, good morning, everyone. Congrats on the results. Thank you for taking the questions this morning. So first one, I guess, on the gross margin outlook. I think, Mark, you said Q1 might be down sequentially. But my question is, I mean, a lot of your commentary is around sort of the continuation of tight supply chain and inflation continuing to rise, which has obviously supported the gross margin over the past year. So kind of how are you balancing that? I mean, what's it going to take to really see gross margins normalize, assuming these positive drivers seem to continue to be in place? Thank you.

Yes. Thanks, Matthew, for the question. As you look at the first quarter relative to the fourth quarter, I think we see a slight decline there just sequentially due to resetting some of the growth-based supplier incentives. And then you're spot on. I mean, it's really going to take some freeing up of the supply chain, given kind of what we're seeing. So I wouldn't say as we sit here today, that's necessarily the case. But certainly, as we get potentially into Q2, Q3 timeframe, if we see some of those prices start to stabilize, that's maybe when we start to see some of these costs catch up.

Okay. But it's a fair characterization that if supply chain and inflation sort of remain at this type of levels, then the – that kind of abnormally high gross margin may persist?

Yes. Certainly, that could persist, Matthew. I think one thing that we're keeping an eye on is our ability to get advanced notice. We're starting to see some of these price increases come even faster at this stage. So that will be a potential headwind that we face if we are unable to continue to procure these types of products with that advanced notice like we've been able to in fiscal 2021. We could see some pressure there. But we do expect to continue to get those passed along as timely as we can. But certainly, we did see some very strong gross margin expansion in 2021. I just don't expect at kind of those levels.

Okay. That's fair. And then second question, just on the guide, maybe just focusing on the revenue guide. Curious if you could sort of break out the assumption of price versus volume in that? Because obviously, you're speaking to some normalization in price, perhaps in the second half. So it would be sort of helpful to understand what you're really assuming on the pricing side as we kind of model the cadence through the year. Thank you.

Yes, sure. No problem. As you look at volume in the 2022 outlook, we've got a kind of low to mid-single-digit with market and our above-market growth initiatives that we've got, pricing in kind of the mid-single digit and then acquisitions contributing about two points on top of that. All right. Thank you.

Thank you. Our next question comes from Jamie Cook of Credit Suisse. Jamie, your line is now open.

Hi, good morning. Nice quarter. I guess two questions. One, I think you talked about some projects that were delayed that could potentially be tailwinds into the first half of the year. I'm just wondering if that's embedded in your guidance. And if you could sort of size that? And then understanding some of the near-term issues that are sort of pressuring or that could potentially pressure margins in 2022. Can you talk about sort of some of the structural initiatives you guys have put in place to improve margins? And what's embedded in the forecast for that for 2022? Thanks.

Jamie, I'll start with some of the projects that we're seeing. For the most part, all of our projects are continuing. Bidding activity continues to remain incredibly strong through the fiscal year-end. A couple of areas where we're seeing real product shortages and exceptionally long lead times in the six to eight month range get to be large diameter projects that require PVC pipe or large diameter ductile iron, where those lead times can stretch out four to six months. So those are some of the ones. They're kind of – I don't want to call them anomalous, but there are projects that are starting to see a push that we're going to continue to see a push on those as we go forward. They continue to be on the table. They continue to be in the backlog. But due to the timing constraints on being able to get some of that specialty type large diameter product, it's been very difficult. Mark, do you want to talk a little bit about the margins?

Yes, Jamie. In terms of the gross margin initiatives that we've got that we believe are going to offset some of that temporary pressure, certainly, our private-label initiative continues to expand. We continue to add more capabilities and products there to roll out through our branch network. Our acquisition of L&M Supply really expanded our abilities on the erosion control products, which is a higher-margin product for us, and we believe we can continue to expand through our branch network. So that is an area that we'll see a pretty good expansion in 2022. And then we continue to work on our pricing initiatives, not only to get the pricing into the market and make sure that we're current with that, but also looking at ways to optimize price, especially on some of our non-bid and ancillary-type products locally, given some of the pricing data that we see across the country, we've been able to optimize that and really get those products priced accurately and at the right levels. So between those three, we typically expect, I'd say, 20 to 30 basis points of gross margin expansion in any given year. And we think that helps offset some of the benefits that we've achieved in 2021 that we said could be temporary.

Okay. Thank you.

Thank you. Our next question comes from David Manthey of Baird. David, your line is now open.

Yes. Thank you. Good morning, everyone. I was wondering if you could break down by segment and stack rank from strongest to less strong growth rates in fiscal 2022 and the relative impact of price in those assumptions?

Yes, Dave, thanks for the question. In terms of breaking out the end markets, I'd tell you that we feel really, really strong on the residential end market kind of in that mid-single digit, and that's coming off of a low double-digit growth in 2021. So we still see a lot of demand there with lot development. As I mentioned, non-residential is starting to follow and then kind of return to those pre-pandemic levels. I'd say slightly, slightly lower than the resi growth, but kind of right in that mid-single-digit range. And then the muni segment still kind of strong and steady, but kind of low single-digit range. And again, that's coming off of a really strong growth rate in 2021. In terms of price, no major differences across the end markets as it relates to price. Think about like we said, mid-single-digit range in terms of the price benefit, with more of that kind of front-loaded and then coming up against more difficult comps given the pricing levels as we got towards the end of the year.

Okay. And then just to follow-up on that. Maybe I misheard this, but did you imply that second half pricing could actually be negative if you're being more positive in the first half and then that nets out to mid-single digit? Did I hear that correctly?

Yes, Dave, that's how we're looking at it right now. And again, that assumes the supply chain does free up at some point kind of middle of the year and that the impact of that is some decline in commodity prices. Haven't necessarily seen that yet, but that's kind of how we're looking at it, just given some of the uncertainty in the back half.

All right. Thanks very much.

All right. Thank you.

Thank you. Our next question comes from Nigel Coe of Wolfe Research. Nigel, your line is now open.

Thanks. Good morning, everyone. Best quarter. So just on the outlook, I think your EBITDA margins, if I'm not mistaken, I think, about 100 basis points lower year-over-year at the midpoint. Again, if I'm mistaken that, please correct me, but I was wondering if you could maybe bridge that. And then within that, I think you've talked about the price cost favorability representing about a 40 basis points in that range, headwinds into 2022. I'm just wondering how that looks right now based on what you see?

Yes. Thanks, Nigel. Yes, I think as you look at the guide through for 2022, we've got EBITDA margins coming back in that kind of 80 to 90 basis point range, with most of that coming from the gross margin line. We do expect to see a little bit of SG&A cost leverage coming into 2022 as we anniversary some of the IPO-related onetime costs in there. So that's kind of the range. I don't think it's coming down a full 100 basis points, but I'd say a majority of it obviously coming from the gross margin rate line. And then could you ask that second question again, Nigel?

Yes. The price/cost impact, obviously, you've got some favorability coming through this year. How does that shake out into 2022?

Yes. I think as we think about the price/cost benefit, certainly, in the first half, we expect, if prices continue to stay high and accelerate, we see a similar opportunity there with some potential headwind just given the timing of when we get those price increases. But I think as we get into Q2, Q3, certainly Q4, we start running up against much more difficult comps, and we'll see that. That's really where I see the gross margin benefits starting to get – we start seeing some pressure there year-over-year.

Okay. And then my follow-on is with all these price increases, I understand that PVC piping is not a huge proportion of the project values. But do you have a sense on how the overall kind of project inflation is looking for the end customers? And is there any concerns on some demand destruction given the inflation wave on products and labor, labor availability? And I'm just wondering, on top of that, if the similar funding coming through in 2023, if that's causing maybe some of the starts to maybe push to the right?

Yes. Nigel, this is Steve. I'd share with you right now, we haven't seen any demand deterioration whatsoever in regards to pricing or inflationary activities. The projects all seem to be absorbing this at this point. And one of the key aspects of the value of these projects and the materials themselves is that what's on the mind of most of these contractors and municipalities is the completion of these projects and keeping their crews active. So the material costs aren't as significant as being able to complete the projects and being able to keep their labor fully active in this. And I think that's the primary concern right now, and bidding activity and everything else continues to remain very, very strong. When I look at the funding characteristics, we haven't just – we just have not seen much of the funding get through to the state revolving funds at this point or cause any type of delay along those lines. I think that's still a work in progress, but everything is still working through the backlog right now of all the existing projects that are out there, looking at the new bidding activity. So I can tell you as we stand here right now, there really hasn't – we haven't seen any impact whatsoever of a delay awaiting state revolving funds and the infrastructure package making its way through.

Great. Thank you very much.

Thank you.

Thank you. Our next question comes from Pat Baumann of JPMorgan. Pat, your line is now open.

Thank you. Hi, good morning guys.

Hey. Good morning, Pat.

On the acquisition environment, I think you said 2% is embedded in the outlook for sales growth. Can you talk about the pipeline? And whether the volatility we've seen in the market year-to-date has delayed any deals from happening? And then you also mentioned something about evaluating additional capital allocation opportunities. Maybe you could kind of talk a little bit more about what you meant by that?

Sure. I'll talk a little bit about the M&A outlook, and I'll let Mark talk about capital allocation. We just see a very strong robust pipeline still in M&A activity. And if you look at what a lot of these business owners have gone through between COVID, supply chain challenges and all that environment, it's been very difficult for them, and it's really created a good opportunity for us. From the standpoint of being able to look at a lot of the different areas where we drive value from M&A, where we look at either consolidating in certain markets or we look at expansion opportunities and even look at product opportunities, looking at everything from erosion control products and being able to expand in that area, there's just a robust pipeline out there. And we continue to work through a pretty strong pipeline out there and are encouraged by what we're seeing as we go into 2022. Mark, do you want to talk a little bit about capital allocation?

Yes, Pat. Nothing really there to read into. We'll continue to look at where we allocate capital, but more of it's just timing and opportunities on the M&A side. We're going to continue to focus on our growth strategy there. So nothing really additional to add there.

Okay. And then a follow-up is on the commodity pipe product. How big is that as a percentage of sales now, given the strong environment you saw for price there in 2021? And then on the non-commodity pipe product, what kind of product cost inflation did you see there last year? And what are you seeing so far this year?

Yes. Thanks, Pat. On the commodity side, now with PVC, ductile, steel pipe, some of those categories represents about 32% of our overall net sales. And what I would tell you, on the non-commodity side, as we've continued to see very strong pricing on that side as well, I'd say it's slightly under the average with the commodities being slightly above the average.

Okay. And for that piece of the business, I mean, are you seeing that less tied to kind of like the volatility in steel, PVC, et cetera, so you should see price from that part of the business continue this year? Or is that still going to be moving up and down with those commodities, like the commodity pipe product?

Pat. We'll see. It's pretty typical around this time of year to get price increases coming in on a lot of the non-pipe-related products. And so we'll see if that – if there continues to be more price increases and what that frequency is. Right now, if you look at the demand profiles that are out there and the supply constraints, it's pretty favorable for a pricing environment out there, but it's too early to tell yet whether we'll see that through continue on all the way through the first quarter and second quarter for the non-commodity products.

Understood. Okay. Thanks for your time. Appreciate it.

Thank you. Our next question comes from Kathryn Thompson of Thompson Research Group. Kathryn, your line is now open.

Hi. Thank you for taking my questions today. I know there's been a lot of focus on pricing today, but a little bit more of a conceptual question as we head into 2022. Strategic buys were an important part of – in addition to a favorable pricing environment, were an important part to driving topline. It's been two-thirds of your topline gain for the past two quarters. But as we head into 2022, are you doing the same type of strategic buys? And does that strategy really work in this market? And how do you think about those strategic buys on that versus favorable in 2021? And how does it really stack into 2022?

Yes. Kathryn, we have a couple of different ways when we look at this. We look certainly at our backlog of existing projects that we've closed that are due to ship at some point over the next several months. We also factor in what we're seeing in bidding activity and the price sensitivity associated with the bidding activity. So we look at this thing very closely about whether to take longer positions in certain product categories and what the capacity constraints are. And if you do look at, understand that many of our suppliers are really dedicated to the sector and the sector alone, we have a pretty good feel for what the capacity constraints may be. It allows us to take a position depending on what we're seeing on those internal metrics that we're looking at for backlog and for bidding activity. So right now, we see a very favorable demand environment. We see tight supply constraints. It looks similar to where we ended fourth quarter, for sure. So I think we're encouraged by that. We'll continue to take positions where we think we can continue to find that margin enhancement opportunity and get access to product and be able to pass that price through.

Okay. Helpful. And then just looking forward, when you look at your four major operating segments and you look at puts in the pipeline, no pun intended, in terms of jobs in the future, what order patterns are you seeing today that may be different versus a year ago?

I think we continue to see really strong municipal demand, a lot of repair replace work in that area, that aging infrastructure and the ability to fund it for these municipalities continues to be very strong and robust. Residential in land and lot development continues to be really strong. I think the non-residential construction, and particularly for commercial construction for our fire protection products is – we saw really good signs of life last year. We're encouraged by what we're seeing in that sector. And then you look at what's happening with DOT with the infrastructure bill, we support that with storm drainage and erosion control products. And I think that's an area that we're excited about as we get into 2022 as well.

Great. Thank you very much.

Thanks, Kathryn.

Thank you. That concludes the Q&A today. So I will hand back to Steve LeClair for any closing remarks.

Thank you all again for joining us today to participate in our fourth quarter earnings call. Fiscal 2021 was a record-setting year for Core & Main, and we are thrilled with the resilience of our business and our teams. Since becoming an independent company in 2017, we've unlocked our ability to grow well in excess of our end markets, acquire and integrate businesses and enhance our margin profile. We are entering fiscal 2022 with a strong team, positive market tailwinds and extraordinary momentum. We remain confident in our ability to deliver strong results to our stakeholders in 2022 and beyond and are committed to providing our customers with local knowledge, local experience and local service nationwide. Thank you for your interest in Core & Main. Operator, that concludes our call.

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