Ferguson (FERG) 5 Mar 242024 Q2 Earnings call transcript

Hello, and welcome to Ferguson's Second Quarter Results Conference Call. My name is Adam, and I'll be coordinating your call today.

I'd now like to turn the call over to Brian Lantz, Vice President of Investor Relations and Communications. The floor is yours. Please go ahead.

welcome Second and Call Earnings everyone, Webcast. and morning, to Quarter Ferguson's Conference Good a review chance we had you've Hopefully, to morning. issued the this announcement earnings The of Investors on in SEC announcement website our page. corporate and section web filings is available our the materially will call uncertainties results of want subject some and made available statements to those and that are today actual may from certain this to of on later differ our the everyone and remind the could including recording cause various to discussed be website. uncertainties A looking Form risks that our available today. I projected, XX-K be SEC's forward risks in represent disclaim Also, statements the any we expectations today, any only forward-looking update as to and of obligation company's statements. these

we financial CEO; measures. non-GAAP directly reconciliations call, Brundage, including call the our presentation Murphy, turn Kevin. now discuss In additional GAAP website earnings to our measures, addition, Please over call to most announcement Kevin regarding will financial the to on and measures. With our the information for and today's certain also non-GAAP CFO. I refer me will are those on comparable our Bill on today

and Ferguson's results call. second everyone, you, conference welcome, quarter Thank Brian, to

at second today, to Bill performance detailed for the On questions. highlights the end turning take Bill your then a over give call the and back and before and comments the end before quarter I'll performance. by provide from market view call also our by some I'll our cover I more of customer closing come group financials,

successful largely X% make revenue saw serve to their going decline the quarter, modest our to we helping deflation beyond managed and preparing last of X.X% continued share and diluted In well, came operating costs to Our have year. million, X.X%, a by execute sustainable. We associates our appropriately $X.XX, projects in driven more simple, a customers, at stronger second margins down Adjusted against in of adjusted earnings delivered solid for per profit half. seasonally while challenging $XXX and market. gross above with

XXXX, growth growth of nearly nearly this operating of the share the years Over second represents fiscal for growth XX%, adjusted XX% earnings quarter. of since sales adjusted per XX% diluted and X profit

and improvement the support day open balance year trends of fiscal sales through per comparables. against expectation of orders the our forward, Looking easing

fiscal walk Our views are shortly. in through detail on Bill guidance XXXX unchanged. will more you this

to in markets maintenance remain work quarter, the by while the and markets States. in remain improvement Turning down slightly our end new housing sales permit in and X.X% repair, as Trends Net soft. United improved were residential starts end performance challenged. activity

residential X% half Our second revenues, the U.S. declined of sequential which quarter, from comprised over representing improvement just a revenue, QX. during

an held markets in down comparative activity sales with quarter XX% half. against show second improvement ] [ good resilience. the the declined nonresidential with in Commercial outstanding infrastructure flat and X% net of comparables industrial activity expect strong and against through Nonresidential nonresidential X% bidding Overall, comparable. by quarter civil the levels during

rates positions intentional well. over end balanced While our will market we exposure growth expect us fluctuate time,

United over such the we recently residential new comparables have declined an double-digit begin States. X permits future improvement from Residential improvement seen the stabilize. markets in by further Moving groups in and Any to declines easier starts new and modest Trade we to as our customer quarters. lap to quarters indicators expect and residential plumbing begin last X%, as improvement,

rising year continued, growth X% prior comparable. XX% HVAC against a

demand pressure quarter maintenance Digital declined remaining service customer to will the groups growing strength on in broadly XX% We with The including Commerce treatment Residential X%, our consumer of Plumbing our contractor. customer green and build and repair, as capital Building across of levels and revenues Trade the revenues infrastructure. continued residential, and municipal, with pivot soil on declined towards continue Residential dual HVAC by urban were group to trade first to the Remodel and public weaker. Waterworks Residential plant, improvement. works, commercial, projects. business and wastewater mix, major is centers meters such Commercial/Mechanical data we work flat. stabilization and technology our customers activity healthy grew diversified metering Bidding as see continue similar X%

Our Industrial, X% strong net and delivered Facilities a decline Fabrication Fire growth combined & of sales XX% a businesses comparable. Supply against

Our and to the while us market bring exposure. to total customer value broad also maintaining groups balanced breadth allowed project of end a

Now to in financial a Bill bit detail. the pass let results to me more cover

Thank you, Kevin, and morning, everyone. good

declined partially goods and certain X.X% commodity as last the of of slightly has we driven our associates. margin strong approximately remained while the Organic revenue comparables, below positive. quarter finished strategy by from categories strong pricing product X.X%. acquisition by points lap up first XX was prior XX.X% was basis pricing by Gross execution Second year. over Pricing driven in environment to with X.X%, X% quarter were offset weakness sales deflation, revenue net similar year,

down We SG&A profit, of QX. operating compared appropriately X.X% are stepping year. future impact earnings from continued control lower program. and growth. $XXX of profit by initiatives prior more million to with balancing repurchase cost partially share due than than productivity $XX operating our million the cost $XX investment offset million the with down actions adjusted the per diluted XX.X% was with share lower core lower to in of reduction prior Adjusted Adjusted managing was or year, targeted for base We're capabilities $X.XX

EBITDA. remains sheet adjusted Our X.Xx to at net debt strong balance

Adjusted million, X.X%. impact of to in by from challenging, decline similar declined from U.S. an the million. decline an Moving was delivering X.X% Canada margin and organic organic segment of $X with sales acquisitions. partially X.X% contribution $XXX rates. have adverse saw foreign offset that X.X%, operating were X.X% the a of came to trends down U.S. in we adjusted with profit sales remained Adjusted exchange Net Markets X.X%, profit an at and net operating our by operating results. X.X% of

year to as first results. Turning The half our expected. is progressing

adjusted expected beginning market we challenging comparables. year, revenue against operating margin the half said to the of of year a against fiscal particularly operate we and our backdrop, the first in strong As at

below X.X% last disciplined were of down managing been organic XX.X%, an was an acquisition of partially X.X%, decline of XX margin our offset by deflation. points basis X.X%. associates through a sales with have Gross prices contribution in price Net as year, commodity period

down improving We quarters. Adjusted the believe expenses and market good billion cost margin. expected we compared throughout near-term growth of nonlabor environment $X.X half as shape. well have operating is base a the in demand diluted year, managed operating labor EPS $X.XX the prior against balancing the year, Adjusted was the head delivering to adjusted market upcoming was demand XX.X% and business in X.X%. the positioned second I with down X.X% of into profit

Inventory a cash strong last year the modest we continues and Next, in generate working positions fiscal normalized capital we have outflow returned trends business seasonal exited historical to as normal with to flows. our the half tax of year, of Interest payments, outflows half strong cash operating $XXX first resulting than lower in the year. million. were last the timing first slightly tax and flow of due to

invest investing to in growth half. million the in first $XXX continue We through CapEx, organic

approximately free cash we result, million. $XXX of generated a flow As

allocation. to Moving capital

net ensure towards intend have we opportunities advantage position end to leverage sheet to we operate capacity EBITDA X.Xx. sheet. target adjusted balance to to and range as the take as with Xx the of cycle a is balance maintain that low of of to well Our a net debt We growth to Xx range strong, resilient of through

We allocate X capital priorities. across clear

the network CapEx First, organic $XXX during capital working programs. in million business focused above-market our we investing the and mentioned, technology the drive and $XXX in we're branch to on market principally first centers, invested Previously growth. million distribution in half,

continue reflecting the share dividend. and dividend, our we confidence the in The sustainably business Second, cash $X.XX a a generation. year, grow quarterly increase declared X% our prior over to ordinary Board per

Third, we're markets fragmented consolidating geographic acquisitions. through bolt-on and our capability

first Supply We are associates SecureVision, half. Grove from Appliances pleased Harway welcome and the to during

continue Our consolidation remains execute our us deal healthy, pipeline to allowing strategy. to

Finally, the committed million count range. first the We during our $XXX by $XXX to to period capital surplus end the half, program. of under current via million share share approximately target reducing low are and returned shareholders we the outstanding million when to repurchase share leverage our shareholders with below X.X are we returning ended repurchases

remainder attention the our turn the of let's Now fiscal year. to

orders earlier, day improvement and expectation of year sales fiscal are through the against our Kevin half. open stronger well positioned per for of trends the easing seasonally current upcoming we believe support our second balance As outlined I comparables.

believe As We a result, remains our broadly view of year. fiscal revenue will XXXX for the flat guidance unchanged. be

assume markets decline mid-single-digit in the we Here, range. end

quarter. basis markets over one benefit just generate in revenue, the these which approximately additional outperform completed XXX million expect we expect by We points. of Sales landing the third and acquisitions, in to XXX from day $XXX sales to to

broadly a deflation Overall, the while saw a for as neutral environment full modest we assuming year the in whole. half, pricing first are we

adjusted for to to margin range continue We operating between provide X.X% a X.X%.

million. expense interest of million expect We approximately to $XXX $XXX

is tax approximately Our to be rate year. last adjusted expect expected in and levels fiscal year $XXX CapEx, million to invest million effective similar $XXX between we XX% to to this

balance execution XXXX us our had business remain and Kevin. are exposure you, in on half first end to well. Thank flexible pass views unchanged. on and strong balanced I'll So guidance the the solid of we believe sheet, execution model combination to focused and positions summarize, back fiscal now We our and market

you, Thank Bill.

serving our more make for and simple, dedication to thank again to associates successful projects me Let sustainable. our their unwavering customers, their helping

in the execution half. unchanged. is anticipate as XXXX firming first our as is guidance well are we fiscal Bill with Business We our out, demand, set pleased positioned and

and and forward, a As nonresidential, residential with mix we between positioned well we maintenance and balanced improvement. are new construction look repair, business

model that agile changing adapt base conditions. business flexible We us an to have market to and cost allows

allows to leverage markets invest us while operating through the low fragmented maintaining to strong balance and sheet, organic range. for acquisitions our end return to target of and our a growth, model cash-generative capital Our continue at this consolidate shareholders, do to

breadth markets have these in long-term in remain outperformance and and capitalize competitive We customer capital. disciplined emerging allows and expect track of groups across longer supported consistently of order end our to on of to in term deployment benefit the markets. and a to We record these medium multiyear confident strength growth position on our priorities our the Scale from leverage tailwinds and opportunities. us executed our over

and over for Bill happy today. are you. I'll your call questions. the Operator, hand back to take I you now your time Thank to

from Bouley comes question Matthew first Our from Instructions] Barclays. [Operator

if orders through improvement. of January all that, weather mentioned seeing of sales what all maybe growth and second day -- sales? with fiscal what and the half you kind is of seeing quarter-to-date? help did How cadence help daily I QX? And around per kind and orders with exactly are guess you open trend can current us you supporting You are

what through for around bit I'll at given than, question. portion some and for experiencing. second the we the you in if detail you the is the holiday thank beginning progressed second the say, perspective. pressured January what is than how quarter, really And maybe sprinkle challenging past. as yes, then what a more our have a that This professional previously, revenue Matt, can and was from quarter line expected, look quarter seasonally a we Kevin. bit we're weather said take Bill top extended always some And more the an would was trade we season was years impact weakest

that activity like, expected. the the group the day going got the generally do the from and some through volume and we sales comparables, expected, as is really the improvement Waterworks there we easing all out quarter we Trade bidding forward, we've and as speaking, year. to throughout way we Residential support year against we look If up progressed that the is But are trends think progressing have, balance open order our of what largely what Plumbing second that per be

Yes, the Matt, quarter. improvement and through of we've play start the to seen early part that second in

with in So the -- positive lead about the acquisition would month. that add total February, organic growth impact, in which growth for flat, to you slightly was when

that our the as supporting second again, half. level move So is improving growth improve we through confidence and will

Perfect. helpful. Very

X% the in it that sounded was like deflation Second commodity. one, of all quarter, the

you I goods was finished positive. think slightly said

inflation the guide year to of in get goods your finished and incremental as are full year-over-year to that? guide? kind your get is comps takes broadly of you neutral just to really to inflation, see Or it second any get what you half kind half, increases to of to to so of the second And starting kind the positive support price inflation

Yes.

in largely And QX, back deflation. both your So as about it, driven to and point, deflation terms to goods, QX X% we Commodities low positive down, call inflation. year-over-year commodity those in are finished slightly by of in expected, the mid-teens still were quarter.

things believe that, as will of couple we roll deflation us to Think through a leads half the improve. second that

deflation we fact, start We've easing not to first inflation in the are fourth year. quarter those roll And to into our and we seen in broadly commodity some roll foremost, of first commodity just step continuing comparables. comparables, revenue over over, third easing the of half the month as and but prices First we'll of the over out quarter. stability

throughout So finished would that deflation expect commodity be again, stability more And to move as half. assuming the we that, we continues, should that goods range. traditional low single-digit lessen second in that inflation

So to in deflation of improving the But that have course, half. back believe commodities inflation predicting leads is us that we'll second towards moving difficult.

that year, range full guiding for guide. the we're there's outcomes around broadly year neutral pricing full possible as So some of

different we have as has at rates going Yes. inside well Matt, in that. the some puts and discussed moved the of past, and that as basket had has is to product we've commodity-based

we've so seen we've stabilization of marketplace. resin the playing seen signs some here We've some steel some stabilization. And a price as through sat And today, pipe increases seen perspective. inside from we're then

price we feel season. we degree finished the as to been major And go we've past, some hasn't as although have as about annual about that announcing categories as spring more second give increase confidence half. into increases seen in So we confident price talked ubiquitous that goods, product of it relates traditionally us the it that. And

The from UBS. is next from Lovallo question John

have you The agile first one is, a cost pretty guys structure. do

of are highly percent. XX to it's variable, generally XX% think XX% I XX-ish to around kind incrementals

in were margins why decremental was the of XX%? close at a quarter, pricing Now to so high headwind a recognizing bit

Yes, John, thanks the for question.

the line. lightest quarter there's top think mentioned, again, second you as and bit more about our quarter, As on in seasonally Kevin a the pressure

though the an that a more perspective. But did in has impact that a about our a more when a QX bit step bottom pleased outsized perspective, into seasonally from a of nature QX. from lighter cost leverage cost decremental little business, cost fixed we top good from the bit a think of line back a structure, take down pressure have cost down we and So quarter, overall plays the are structure as step we line even you that on bit variable operating get

our I as are As QX, that full-time on and largest we our full-time think about costs, slightly at labor closely as volumes effectively input that where flat quarter. base, to certainly down labor of which were cost. year-over-year equivalents primary component very managed headcount is we're If look we for exited cost still equivalents the the we

we've a improving for So nice costs, the really positioned really base through and job teams fiscal expect and managing are year, half is doing second growth next the we into cost input in which an play what that those to environment.

growth. make to organization, associate given base capability the our the to future capacity is So fact the have intellectual of that and that associate we want base care of right sure the we take

QX, place. forward, but we believe pressure bit So feel in where right put good Yes, base we about as the little in we're cost OpEx a it the more is. look

a just base to we where we is we little said, an good about the balance to of improvement believe as the bit of what the reiterate cost And through do be Bill year. for prepare John, feel what

maintenance share. the as and a you same gross about grown range, PVC environment at pressured Residential job of though which in great like volume the going think margin. the out down done been a has market and while pricing and pounds well They've of improvement, part time, taking business, construction even the pipe holding outlook for repair, If has Plumbing new the volume what in mid-XX% as our both inside looks business, they've of Trade been

for think quite half prepared in second keeping we what outlook is so engaged an improving the those is And important. teams and

pretty what positive So the in done we're of team about has terms expense management.

the And year-over-year was segment the I actually at quarter on in understanding I It the was I'm around the down in helpful. up, then Industrial comp. X% just particular, quarter. That's year-over-year, a faced tough curious, similar X% think, comp XX%. mean, first

in the anything in comps tough there quarter of was particular that challenged outside So Industrial? the

nothing point to there's that right John, Yes, now. we would

of about there. We little with talk outsized don't extended little weather, weather. branch out talked issues holiday to about an You've a bit bit typically a timing are I've about season. of talked but it did impact got some I've that have an closures. like

where industrial coming what's business together, Commercial, solid, tailwind at I a is Waterworks, projects are if HVAC our and good that's second together, backlog about historically positive look building especially about But & look seeing Fire what's from perspective half. in you the that behind coming environment, at, open Industrial, major our When that an order project the we're capital and Fabrication that mega talked We've in area. trend.

comes The Jefferies. question from Philip Ng next from

seeing your side. be Like a half. looking in little on you certainly business, second through kind nonres Clearly, activity out commercial, expect But conversely, bidding of heavy just do to of some And and help that light growth? mega you're these expect the Kevin, seen Do softer. And half? kind commercial unpack you takes here? at that. the you some projects, have in of the back about ripple could upbeat bottom puts us in the you're

that to what's specifically you reshoring, those Phil, we through do Industrial out and the for through in capital nonresidential there, we take aided, like a through Fire. stimulus across just major taking terms mean growth seeing question. Waterworks that Again, the like you out. saw trends, Commercial Act fiscal starting more normal do through we're tailwinds that Infrastructure how time, When going to current order of that the picking see space I and are Waterworks we've second It's from volumes in half. up play are thank onshoring those And that course see sustainability open the as the project at look said projects, Yes, and they're We're during delays of capitalize that well in see we we longer. really as both with that construction. There bit business. in also release much our some market. may plays

If the across multiple very projects out. which well customer groups. data contractor the is, good you contractor with think very And customer mega in partner seeing the and those a valuable general to that is about seeing on center we're for sure way And it impact collaboration across play make owner, are as AI the job the to for projects group that Ferguson is the similarly us out we're owner. what play the as

bullish the And that and play we're looks so in what starting on to half, like in second today. that's

Kevin, you going non-res? I centers to what But any business the just your AI you involved portion percentage center is because business for that on beat was on me to business the your punch. data nonres much of color it's very of ask data dynamic. with your

Yes.

one, our as as For that they together general groups me, is for maybe like landscape. offers project it's major opportunity country. contractor the come good that growing, project the owner, unique it's for unique contractor, time more a environment profit the that are color the well multiple as install. or mega the for and Number But much the to in very importantly, that us actually capital pools are it construction customer doing that's

HVAC approach commercial, work bid the that seeing we can coming that where play offering coming as together so and as out customer a used to groups, proving And fire, some valuable. construction just in we've individual part package. good environment total uniquely on of industrial, in made together how that investments to We're fact, really and water, we is

from from The David question comes Baird. next Manthey

quarter, the year-over-year, X, you maybe. the end leave recent flattish your when After in markets Kevin which end and for the ones markets you quarter, you question following second cautious more Slide On or of look U.S. of for which on half First year give take. are encouraged results? these more this second mostly they're at

it, for an have would at Thanks, we down the as Dave, looking here improvement, a the Yes. or expected and is the mid- repair, what is for for the I maintenance at than market, residential today, we're question. LIRA side, touch RMI at to of call the calendar high a start If market that in sat we're area calling that year. single-digit year. beginning softer residential

activities But now positive, entered see of as the a market, the been for give there's supportive the bit more lot multifamily, get has of think multifamily in more side a product the it's as bit tone. residential But market, especially from market new single-family the that because to business it the product challenged perspective. starts to more single-family we've We a starts a although a world. we permit been bullish delivered construction us that and

for talked the data On the side, the call, us good outlook center half. major and gives on earlier project nonres really some as capital I the work second work the

into lapping balanced There's the so And some we from year. we're half. second how terms I'd there's say prior as optimism balance comparables of go in

again, it so that, And plays balanced business mix. to

that side. On -- multifamily one on note

seeing We the activity in levels in Florida. good are of in down especially high-rise your down multifamily, woods, neck

multifamily on pressured we're so bullish the And on side. bit work, multifamily a core maybe that high-rise but more

A new Bill. the the deals you've one think prior percentage roll-off growth the expect and Yes. we we Mathematically, should in of announced quick that quarters? to what acquisitions, fourth about if third contribution and M&A for

just under announced, amount $XXX acquisition you a X%, deals Dave, half, recently just look in worth if second given contribution. similar first just we of we've the million half. Yes, we'd under And delivered expect the under at dollar the

this X% would So at somewhere $XXX of revenue our of Roughly range. south point. be just expectation million that contribution full year

William Ryan from comes question Next Merkel from Blair.

wanted you ask not I gross And as on think any to normal gross seasonality reason this we margin quarter. solid seasonality? of modeling margins, use Can result XQ? us to about really remind

seasonal the gross margins. similar pressure HVAC in get large slightly a business margin I operating actually the the months, -- business on have we'll which play mean our tend Yes, we in approach it calendar, the mean growth swings. given seasonal in just large summer seasonality in to those sometimes, margins, as and gross larger it's lower touch factor, have months doesn't of Ryan. I there impact a again, growth really a Waterworks doesn't our

XX% expectation we've last XX% the low in general, that where in But over range is kind of and delivered to our several quarters.

is follow-up a turns there, if helper half? think about we the just as a And gross that your to second positive, margins inflation

revenue impact those we've don't comparables inflation still pace as a a about, single-digit We which That that impact a wouldn't moves move a as some on call. but from we significant a finished have margins. prices, margin at would expect talked and in gross sitting helpful perspective, I expect would Certainly, predict that's don't little expect we lap to commodity expect inflation we and gross bit short-term large on without here goods. to today. But be big again, low difficult

the encouraging, Ryan, earlier, environment. indicated and and very is falling gross of we in products good some as, period is through I've that grown taken what been held share the going have as gross price kind volume we commodity-based are deflation, especially a pleased as of even market inside actually this of achieve we've margins produced in we've product margin commodity-based of to with hold levels those

XX the points basis points and value speaking, margin XX back gross we forward product where basis but pricing to to our we for where this we to to that's year, sustainable see get bit increases than years look past, back a finished playing again, may generally to As through get it long-term normalized more what on charging year that environment, choppy strategy you goods. should that expansion, And a be experience environment. to, more provide can start annual this price we you utilizing call we get

And I my last March. think Anything helpful. just think was That's April about and for some terms about it. know there weather follow-up. Got to in we last when of for year modeling? March

bit to think about. -- there's anything easier what a if if the Just comparisons little curious get and

QX. Yes. decline certainly, It's had negative went Ryan. through or our first QX, to step down X.X% would QX then weather continue and impact organic that year we X% organic about of predict decline But as We about into organic last to be, to QX. difficult in what growth the comparables the ease

continue ease we month do kind So the comparables a of fiscal bit the through end month as to through march year. of the by

Mike Dahl from RBC comes question Capital next Markets. The from

of little even now I to an decline that you're First at at and partially been invest about least comping and -- kind of your us has if gotten just here. think, performance. Digital down off easier to double question, digital color of double-digit ties off against comps, update there the a X% just soft can looking we've comments you're category but as sales a and more from on expand with give how Obviously, planning wondering you give RMI, XX%. around effort digits

for bit the of in side the was right, that at the you COVID it the a digital that look piece, question. pull period. Mike, affected And world Thanks, When terms is RMI most you're business. of more portion a challenged lockdown forward of demand during on the residential of the

decorative that pro and is targeting project-minded consumer. and that, after is so that customers going the that light And really

that the probably most they're pressured look residential we so And when at space.

and on seeing on think some consumer the you where home, light sheets balance spending pressure. we're about their are renovation experiences versus money again, say, where If they that's the

that a experience enable with experience unique consultative remodel the really forward, experience bringing really the tool. a we best-in-class are this tools light business we is there are and unique think Because showroom, to what at get we're look and great where Build going digitally in-person, a project you and building bricks technology that with mortar together from through energized are together pro, for a and that best-in-class take project-minded really an if pair together that's for how digital we decorative consumer starting a perspective going look that and at the assets with a experience experience. digital omnichannel Ferguson, I to If where business, business for especially

where So should growth. as to going together those and businesses you're that's we see where look really come that forward, we see

composition, there's of you to allocation -- size still of shifting everything, or Or kind helpful. like as you kind to acquisitions, seems of past taking capital you've M&A. medium M&A Can roost? things housing-related, has broader kind similar That's you pipeline And closed obviously, changed been you you're across the And and seen? activity that the cadence significant a on through gears few X in lot would of any gone uptick then expect to kind of talk back as things It months? seeing, a industrial-related. still virtually -- manufacturing, larger the at all distribution, just are we've but

Yes, now significant year-to-date. no Pleased say X change. we've Mike, with the I deals would completed

In announced previously, deal fact, on our on we late we closed closed we signing that yesterday. that Yorkwest on,

is would size those that of you pretty to the expect, X pipeline industry. healthy deals our now. full this year. The deals of just those nature have So pleased given right Still

we've as So to small- the and out be years believe about come. make us will for pipeline lot past, competitors a we there healthy for robust in XX,XXX-plus medium-sized that good a to what talked

So a pipeline, large cadence, the the of industry our very I'd nature given in just similar what expect nothing is.

We M&A. is and capability bolt-on still pipeline that And solid. geographic focus still on both

areas United look fill as base growing, HVAC repair see customer that plumbing take focusing positioned professional. And You focusing meters see new can is our We trade forward. M&A be across on as our care green we storm that like also contractor a inside we we to that see on capabilities business, we'd States. and us stabilization to of in Waterworks like expanding us trade especially that dual HVAC go of urban to and you so serve landscape the residential out management, HVAC big capabilities that our and soil uniquely see infrastructure. that technology, then metering of part growing market capabilities water and we best And

next Thompson The from Research comes Group. from Thompson question Kathryn

changed this of you has or products? say, a clarification X today of earlier percentage remind versus, ago? sold Could from in the years X And what how goods to Just cost balance Q&A. commodity us

under commodities revenue. today, of are XX% roughly Kathryn, just Yes, our

we back that XX%, prepandemic, inflation went you like point. of XX% with our to up If revenue over at were of rapid more one sales percentage as XX% commodity a increase

prices a back commodity started revenue step of to today, as prepandemic. we've given kind of expect back half. we terms midway where And total were closer where are we percentage range similar of So to the through normalize second probably in

it, our call nonresidential pipe progress play Kathryn, play X, beginning we will as into steel X of roll through. quarters through on business, depend, with through that to continue next, And to we Waterworks will inside how start the business. Commercial/Mechanical usage see activity all our That heavy good

iron Some as as pipe of Industrial our heavy steel business well usage inside fabrication.

to may price already increase largely in see through group. set even volume that is the you deflation though begin So

that projects versus account find terms you're power, better we -- through does that levels? categories scale residential. And are with relative in on companies play taking commercial pricing building into to there for How product then able projects a pricing greater larger on through -- that you particularly pass are that historic able some mix were you're of other

business gestation Kathryn, happen ability I Certainly, for the the long that and inside different as our nonresidential contractor and those going wouldn't say residential we that points in projects. you But of very play period between that manufacturer pass projects. conjunction mix. to is different through pricing our through have with through generally pressure we're

as to And goods do into perspective world. there. we on side have having different of price of as a the So through some from massive inflation a positive whole price there go expect see we we abnormal We finished we the don't inflation half. pricing second commodity stabilization the said, move as or and isn't lot movements

finally, Show And just into market us up. market can show, that annual trends residential with week, share broader give you important residential the largest International if Okay. any, you? construction and additional that end end for the trade color wrapped could last some Builders' What,

that and Kathryn residential we've turnover our and We going still is of level this home that to talked, think believe pressured. bit RMI gotten remodel movement country what side the single-family So way, starts a We're start the as world resilient we're than, And that multifamily so remodel of core download if the from out be portion of perspective terms to your more of terms play world, think of from the epiphanies tail to underbuilt say, still in business. you the off. the complete I we're the haven't coming that level, ended, is at see going highest as by we a out. good just on the inside existing associates. highest seeing high-end that of side the market, a of we were think the again, in at for But us show --

high-end projects, we're remodels, more total residential pretty remodeler, to the about high-end they're of in book at annually is seeing real look core to construction we've you call business is showroom it, them builder their seen our flip they If if for doing, X customer marketplace. XX feel new from what but local the solid their still business, high-end pretty and that projects good

perspective, market a from seeing. we're what generally, that's So

the were trends later of the a as I'll to that defer happening are product inside the year in what to [indiscernible]. takeaways terms from bit set, In

And today JPMorgan. Baumann comes from Patrick question final our from

jump to Just wanted gross margins. back to

are you out You flesh expansion in mentioned, product pricing, you're that what deflation. Can that? and seeing commentary in I mean the on the strategy you just by drivers pricing Because think, of quarter.

you brand getting like perspective? perspective. strategy, I price said a So some this your on a contribution? -- this Is price from then services you are else product from think cost something benefit? own from associates And discipline or is

if the side we a one across and Thank is a world, across from that engagement And and the Patrick. of think Yes. our you, pricing things consistent is time. customer the about pricing perspective service important most network customer of

matrix doing sure we have specialist utilization thing good well right so solid pricing. And the as a as that from making

and you know, As company. service-driven a value-added we're

And of of be so specials. some in nonstock upwards XX% cases, revenue our can

the gross and pricing project And margin on impact so expansion. we're our an that sure has gross for making that margin appropriately

looks overall and are have that's that you we because margin. product from higher brand the product yes, overall of a And a strategy strategy think Ferguson of avenue that's gross product gross and we Additionally, own promoters like best margin is what the expression one probably profile. unique brand which in highest have our perspective, a probably to for

just not margin gross them can faster a brand. profile. market overall and and partner can than savings higher them, But for own value it's unique It's cost that grow we that for offer can drive that we have also we have the vendors we

our really it's a at gross secondarily, And margin over look as So right expanding application sales the the the company. way profile associates, those job and the gross product the that's both the highest inside for And time. Ferguson for driving margin and that we for then customer. have out,

pricing sense. follow-up Makes my the on commodity Helpful. product side. on then -- And is the

You good business. for water if in the for smaller like PVC a suppose. increase stuff the you you're bigger for like diameter wondering I'm mentioned could sign trade plastic pipe in the comment some resi versus resin Waterworks pipe, as I on differences seeing diameter any

a if I'm about overall, on pipe. PVC decline you something like think. could said the wondering between You give any just color I of XX% types differences

steel Yes. And commodity if basket you again, ductile tube. that cast copper it's PVC iron, the products pipe, look of base at pipe, we iron, have,

And different so they're differently. the more of those. on said at on one going pipe. basket, PVC PVC and small we've a move We've PVC potentially seen movement plumbing that and inside more move have is paces we of quite diameter than that bit Waterworks diameter to pipe large and stability. seen We've

said, resin that. of going affect sides both That increases to are price

moving we're do plumbing, in or And deflation sat so although pressure we've seen that in we today. a direction see a more pricing as different here bit

this had So first especially year. different it, call the movements across, X it has really quarters,

could I'm I'm here. in. question, I one more more just last if to then know And I the in fit going one so fit Helpful.

-- what of And could an that's MDC relative your any to us share going financial how how expectations? the the are MDC year Like your impacting business? this any from on kind kind with rollout, on kind the On perspective? it's update of of you metrics plans for

Nashville pleased being pretty MDC X our Houston, opened. that And this next online And open as we're are To Canada, year Pat, Houston as in date, we year. rollout first we later in date. MDC D.C. we've and calendar that and then into a we MDCs Dallas have at look calendar calendar with from open, year, to recent year, have perspective, Denver, most Yes, roll our our Washington, we'll come Toronto. Phoenix We'll this

strategy So it, several to much the X years the very track. call is of, per X next rollout on over year

quite reads Early are positive. good and on productivity levels

standpoint, lot you warehouses. in As to those productivity out getting And just we've we're a labor warehouses. know, got the pure those XX% automation within of investment from of of a components XX%

bringing organic a major metropolitan our a from improving strategic real continued those And the maybe more importantly, availability markets. We same-day product productivity. But think standpoint, we're is really what and good rates availability, this inventory core growth fill best into component is markets. next service scores in-stocks and strategy that's So years. in over these customer of of several

we'll down and path. march date, to to rollout the continue with pleased that very So

closing to for Q&A hand This over Murphy concludes Kevin today's remarks. session. now I'll

appreciate you started you I'll Thank associates with tireless the end job all we our thank again, with more and you, efforts for We your us thank on their were to and we operator, And a than to really projects better our today. customers' you where time them. know. it make because for that's

some forward the we As is second easing we I It's we seasonally are with look our we as take back, continued a half, the how year forward half, as we improvement second lap expected. look progressing. pleased And to step stronger to as comparables. generally progressing

seeing So again, with thank soon. you talking very we to and much for forward your time, you look and

to Call. the Conference you I'd Results thank Quarter participation. concludes That for like Ferguson your Second

lines. disconnect may your now You