Greetings, welcome to the TopBuild Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ms. Tabitha Zane, Vice President of Investor Relations. Thank you, Ms. Zane. You may begin. Thank you, good morning. On the call today are Robert Buck, President and Chief Executive Officer, and Rob Kuhns, Chief Financial Officer. We have posted senior management's formal remarks and a PowerPoint presentation that summarizes our comments on our website at topbuild.com. Many of our remarks will include forward-looking statements, which are subject to known and unknown risks and uncertainties, including those set forth in this morning's press release, as well as in the company's filings with the SEC. The company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events. Please note that some of the financial measures to be discussed on this call will be on a non-GAAP basis. The non-GAAP measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. We have provided a reconciliation of these financial measures to the most comparable GAAP measures in a table included in today's press release and in our second quarter presentation, which can also be found on our website. I will now turn the call over to Robert Buck. Good morning, thank you for joining us today. 2023 is shaping up to be a solid year for TopBuild. We continue to operate in a favorable environment and remain focused on driving profitable growth, a cornerstone of our operating model. The volume growth and strong margin expansion we've achieved, not only this year, but also over the past eight years since becoming a publicly traded company, is a testament to our entire TopBuild team and our continuing emphasis on operational excellence and driving improvements throughout all areas of our business. Also on display is the strength of our diversified model, which affords us multiple avenues for growth and gives us the ability to outperform in any environment. Total sales for the first six months are up almost 6%. Our gross margin expanded 140 basis points to 30.7%, and our adjusted EBITDA margin grew 170 basis points to 19.9%. We are increasingly optimistic about how the rest of the year will unfold, based in part on recent positive commentary from our builder customers, single-family starts data over the past two months, and our continued strong commercial performance. This improved outlook is reflected in our full-year guidance for 2023, which Rob will discuss in further detail. Reviewing our second quarter results, a positive mix of installation business kept our branches busy. While we did see some slowdown in single-family work, we definitely outperformed the single-family market. We also demonstrated the strength of our operating model with outstanding multifamily and commercial execution. Our new lead app continues to identify commercial opportunities, and our installation branch managers are aggressively pursuing these projects. Their focus resulted in a 22.6% increase in commercial revenue this quarter. On the heavy commercial front, we continue to drive improvements throughout this business, which has enhanced our win rate for many projects across the country. Our installation crews are working on a wide range of projects, including the Nashville International Airport, the UCI Medical Center in Irvine, California, and the revitalization of Two Penn Plaza in New York. We are agnostic as to the types of projects on which we work and are not over-indexed to Altus or any other type of heavy commercial work. Looking ahead, our commercial backlog remains robust, and we're bidding jobs into late 2024 and early 2025. Turning to our Specialty Distribution business, overall sales in the second quarter declined 2.3%, primarily as a result of our smaller contractor customers continuing to reduce inventory and as more construction activity has shifted to multifamily. We did see a 2.1% increase in sales from our commercial and industrial channels. Coming out of allocation, as residential distribution volumes continue to normalize, our teams are doing a nice job of identifying and building attractive new areas of growth, as our overall results clearly demonstrate. Our specialty distribution teams are supporting a number of major industrial manufacturing projects, including two large chemical plants for Chevron. We're also seeing quite a few major projects being planned across several diverse industries, fueling the demand for mechanical insulation. Maintenance and repair work on many commercial industrial sites is also being scheduled. This recurring revenue stream should serve as a continued stabilizing revenue driver for our Specialty Distribution business. We remain very optimistic about the opportunities for growth in both the commercial and industrial end markets in the U.S. and Canada. To touch briefly on labor materials, labor remains tight. While fiberglass is no longer on allocation, some supply is still constrained, and no new capacity is expected until second quarter of next year. Our M&A team has also been busy this year. To date, we've closed three residential insulation acquisitions, which combined are expected to contribute approximately $170 million of annual revenue. These are SRI Holdings, which enhances our presence in Georgia, Michigan, Ohio, Florida, Alabama, and South Carolina. Best Insulation, which serves high-growth regions in the Southeast and Southwest, including Florida, Texas, and Arizona. Rocky Mountain SpRaif Foam operating in Colorado. We were also excited to announce our planned acquisition of SPI last week. This highly strategic core transaction will bring together two specialty distributors of mechanical insulation, reinforce our position as a leading specialty distributor in the highly fragmented $17.5 billion insulation industry, further differentiate our unique operating model, and reduce the cyclicality of our business by increasing the percentage of recurring revenue driven by maintenance and repair work. As a reminder, this is an all-cash transaction valued at $960 million, and we expect to achieve between $35 million and $40 million of run rate cost synergies by the end of year 2, post-close. Looking ahead, acquisitions will continue to be our number one capital allocation priority and a key component of our growth strategy. Our pipeline is filled with outstanding potential partners. In summary, we had a great second quarter. As you can see from our revised guidance, we are on track to have another strong year. Our team continues to execute well. Our diversified model positions TopBuild to outperform in any environment. Rob? Thanks, Robert. Good morning, everyone. We had a great second quarter on both the top and bottom line, reflecting the strength of our unique model. Our teams continue to execute well with a relentless focus on driving operational improvements every day. This passion for constant improvement is core to our strategy and has been a key driver behind our continued success. Moving to the financials, I'll start with an overview of our second quarter results, update you on our balance sheet, and provide the latest on our full-year guidance. Second quarter net sales increased 3.4% to $1.3 billion, reflecting the success of our teams leveraging our multiple avenues for growth. Gross margin improved 190 basis points to 32%, the highest in the company's eight-year history as a public company. This margin expansion reflects, in large part, our success in managing labor and material costs in this favorable operating environment and our continued focus on driving operational efficiencies and acquisition-related synergies. Second quarter adjusted EBITDA increased 13.7% to $275.5 million. Our adjusted EBITDA margin was 20.9%, a 190 basis point improvement compared to last year, driven by the gross margin expansion described earlier. Our Installation segment's second quarter net sales were $809.1 million, an increase of 8%. Our installation teams did a great job pivoting to multifamily and commercial work, the latter of which increased by 22.6%, as single-family construction slowed slightly. Second quarter adjusted EBITDA margin for our Installation segment was 23.4%, a 260 basis point improvement. Our Specialty Distribution segment's net sales declined 2.3% to $574.5 million. This was driven by the residential shift from single-family to multifamily, our contractor customers continuing to rightsize their inventories, and distribution volumes normalizing post-allocation. Adjusted EBITDA for our Specialty Distribution segment was 17.6%, a 40 basis point improvement. Overall, solid results for this segment in the current environment. Interest expense in the second quarter increased from $13.4 million to $18.6 million, primarily as a result of higher interest costs on our variable-rate term loan. Second quarter adjustments to net income were $2.1 million, driven by acquisition-related costs. Second quarter adjusted net earnings per diluted share were $5.25, an increase of 18.5% from prior year. Moving to our balance sheet and cash flows, our June thirtieth year-to-date operating cash flow was $385.8 million, compared to $217.7 million last year, a 77% increase driven by increased earnings and improvement in our working capital management. Working capital at the end of June improved to 14.9%. Our long-term working capital target remains at 12%-14%, and our goal is to be within this range by year-end. On the capital allocation front, year-to-date CapEx was $30.7 million, approximately 1.2% of revenue, and slightly below our long-term guidance. Through the end of the second quarter, we have allocated $46 million to M&A. M&A remains our number one capital allocation priority, as evidenced by our recent announcements for Best Insulation and SPI. There were no significant changes to our debt structure, as our outstanding short-term and long-term debt balances remain just under $1.5 billion, with our average cost of debt at 4.77%. We ended the second quarter with net debt leverage of 0.92 times trailing twelve months adjusted EBITDA. This is down from 1.31 times at the end of 2022. Total liquidity at June 30th, 2023, was $958.8 million, including cash of $526.3 million, and an accessible revolver of $432.5 million. Before discussing our outlook for the remainder of 2023, I want to again express our enthusiasm for the acquisition of SPI. We are confident this transaction is a great use of capital and will create significant shareholder value. As a reminder, we plan to fund this $960 million deal with cash on hand and a $550 million delayed draw term loan. Following the close of this transaction and inclusive of Best Insulation, our pro forma net debt leverage would be 1.8 times as of 30th June 2023. This is well within our targeted leverage range between one and two times trailing 12 months adjusted EBITDA. Moving to our annual guidance. Based on our first half performance and our outlook for the remainder of the year, we expect 2023 to be another great year for TopBuild. Despite the slowdown in single-family starts in the first half of the year, we are more optimistic for residential today, given the recent improvement in starts and the continuing strength of multifamily. As a result, we are raising our outlook and now expect residential revenue to be down only single digits, only low single digits. Turning to our commercial and industrial business, given our strong results, we are also more optimistic now and expect revenue to be up mid-single digits. This will put our full-year sales in the range of $5.025 billion to $5.175 billion, a $325 million increase on the low end of the range and a $275 million increase on the high end. We also raised our guidance for adjusted EBITDA to be between $950 million and $1 billion, a $130 million increase on the low end of the range and a $90 million increase on the high end. Our long-range modeling targets are unchanged from those we published on May fourth. As a reminder, we do not include the impact of any planned acquisitions in our outlook. I will now turn the call back to Robert for closing remarks. Thanks, Rob. To conclude, our team manages the business with a constant mindset of driving improvements and achieving operational excellence. We're proud of our track record of consistently producing strong financial results. We recognize our success as a result of having the best and most talented operators in the field and a dedicated and experienced group at our branch support center in Daytona Beach. Our goal is to create sustainable shareholder value in every operating environment. We're also very excited about the planned growth of our Specialty Distribution business through the acquisition of SPI. This is another transformative acquisition for our company and one that will create long-term value for our shareholders. As always, I thank the entire TopBuild team for their focus on working safely to deliver value, quality, and service to our customers. Our highly engaged team is the reason TopBuild has been chosen a Best Places to Work company. Operator, we are now ready for questions. Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. Thank you. Our first question comes from the line of Mr. Ken Zener with Seaport Research Partners. Please proceed with your question. Good morning, everybody. Morning, Ken. Morning. Two questions. One, I just kind of wanna, you know, obviously, the quarter was good in terms of the installation units being positive. Could you comment perhaps on the single-family, multifamily, and the commercial mix? I and the reason I ask is I'm trying to understand, obviously the quarter results, but perhaps how the cadence will unfold in the second half, given what we're seeing in terms of starts. That's the first question. Okay, Ken, this is Rob. Breaking that down a little bit for you, we don't break out, you know, single family versus multifamily, but what I can tell you on the install side is our residential sales were up about 3% in the quarter. Single family was down slightly as we've seen the impact of the slowdown in starts that we saw, you know, the back half of last year going into the start of this year. As we've been telling folks, you know, our teams have been out ahead of that, you know, bidding multifamily, bidding light commercial work, and we had a great quarter with that, right? Evidence of our multiple avenues for growth there and that we were able to grow residential, even with single-family down. On the commercial side of things, for install, we were up around 23% for the quarter, a great growth story there. Does that mean if you didn't contract as much as single-family, does that mean the recovery won't be as strong? You know, when one thinks about the% basis declines in residential going down, let's say 20, and then popping up, does that mean your growth would also be more moderate for context, just to tie that question off? Hey, Ken, this is Robert. You know, we would say, if you look at what happened in residential about second quarter, there's probably a pretty good chance it reached a trough there relative to, to volumes and stuff. I think one thing, if you look at our single-family and multifamily performance combined, and, you know, as, as we look at it individually, you know, we'd say nice share gain by our teams in the field on residential, and you got to look at that commercial growth is pretty phenomenal. It's what the team delivered there as well. You know, I don't think it mutes anything relative to the, the back half of what's coming from a TopBuild perspective. Excellent. Now, related to the SPI deal, which was pretty amazing, and I don't think these questions were asked necessarily on the call last week. Obviously, this is an expression of your uni-unique vision that just keeps unfolding. The, you know, when I was walking and you guys hosted, and, and Distribution International, the warehouse, you know, a lot of that material looks similar to what would go into residential, which ties into purchasing power. Is that, you know, the cost synergies at $35 million to $40 million, I assume that would unfold similar to DI in terms of, let's say, 40% material, if that was my recollection is correct. If so, how important is, you know, buying more and more from the same manufacturers, playing into your thinking about, you know how that might be affecting your returns and the ability to increase share even more? Yeah, yeah, Ken, so this is Rob. I'll start off, and I'm sure Robert will add to it. You know, when we bought DI, if you remember, we talked about, you know, one of the things we loved about getting into that space was the opportunities for growth and the M&A opportunities that would be out there. At the top of our list, as we looked at that, was SPI, right? The fact that we've been able to land that one, we're very excited about that. From a synergy perspective, right, you know, the synergies are very similar to what we signed up with DI. The buckets won't be too dramatically different. I mean, you know, it's going to be roughly, you know, 50% supply chain, roughly 50% operational improvements. As, as you've seen, you know, we've exceeded the high end of that range on the DI transaction. You know, that, that was part of our, our strong margin expansion we saw on specialty distribution here in the quarter, was the continuing achieving of those synergies. That's why we're so excited about this, this SPI transaction. Yeah, I think I'll add on to that, Ken. I think, you know, as we think about acquisitions and our track record there, obviously, we've always talked about synergies, and we talked about supply chain synergies. One thing, but, you know, having a dedicated integration team, how we bring that together and that consistent track record of delivering it, seeing the synergies, I think that's built upon, you know, a few things in the model. One that I point to is just constantly driving operational improvements, including the acquisitions. These are great brand companies, so, you know, we're able to take those ideas, we're able to get those back into our total TopBuild business, and we're able to drive improvements in their business as well. That's really helped us exceed the synergy. That's one thing we don't talk about sometimes, but it's really helped us over-deliver, on acquisitions and the synergies in the past. That's something I'd really point to here, as well. I assume it changes your dialogue with, on the commercial side, having so many distribution. Craig, at your Investor Day, talked about you being able to port, you know, labor on that specialty side. Have you hit that maximum or that threshold where you're really able to be a unique servicer to, you know, commercial customers? Yeah, we absolutely think so. I think it plays into, I think I put it in the prepared remarks, just the work that the team's doing in the field relative to driving improvements in that business. We think it's helping the win rate. We think it's helping drive performance in that business. Really great, you know, from a service perspective, both installation, you know, if you think about the envelope side of it, and then service partners, relative to distribution side. Now you've got the whole model of SPI DI together, which is that, you know, commercial industrial distribution. By the way, those businesses are known for service, so that absolutely helps us drive the ability to keep growing and drive optimal share gain as well. Thank you very much. Thank you. Thank you. Our next question comes from the line of Mr. Stephen Kim with Evercore. Please proceed with your question. Yeah, thanks very much, guys. great quarter. I guess my first question relates kind of on more on the the industry macro side. Can you give us an idea of what you're expecting in terms of housing starts, the trajectory, both, you know, single-family and multifamily? Then also in terms of the outlook for a fiberglass price increase, our sense has been that enthusiasm has been building as single-family has rebounded, you know, for another industry price increase on the fiberglass side. I was wondering if you shared that view, that from what you can see, if the the support is there for an increase, you know, here as we head into the the fall? whether you think that, either the decline in multifamily activity that we might see or the rate spike we just incurred here, whether, whether those are significant enough to maybe impede a price increase announcement? Thanks. Yeah. Yeah, Stephen, this is Rob. I'll start off on the, the single-family, multifamily assumptions, and then Robert will add in on the supplier side of things. You know, from a, from a, you know, guidance perspective, kind of the way we're seeing the, the rest of the year play out, you know, we expect the t his strength we've recently seen on single-family to continue. That's what we've got baked into our guidance. You know a starts number for the full year, somewhere between 1.4 million to 1.5 million, you know, probably towards the upper end of that is probably what we're expecting to see there. Obviously, the next few months will be key in terms of starts, in terms of what drives our, our fourth quarter results. Multifamily, like we've been saying, you know, the backlog remains really strong there. We're still seeing good bidding activity there as well. You know, we feel really good about multifamily heading through the rest of the year as well. Yeah, Steve, this is Robert on the fiberglass side. You know, adding on to Rob's point about single-family, which I think feeds into this question. I think as single-family continues, that's one thing I like about, you know, we've done a great job of updating our guidance and looking at the future. We'd say single-family starts continue to attract. We'd see upside on some of that guidance as well, which we think is very positive story. Then on fiberglass, I think it does depend on those single-family starts the next couple of months. I think that trajectory continues. There'd definitely be a possible increase that would come here in the fall. I think we have to see what the next couple of months unfold here. I think you probably know there's really no increased capacity coming on until second quarter of 2024. Let's see what happens with those starts, and I think that could that could drive the decision by the manufacturers. at's helpful. Then if we could shift a little bit, excuse me, to the commercial industrial. Within your Specialty Distribution sales, can you give us a sense for how resi did versus commercial industrial? Then can you also touch on what pricing the pricing environment looks like on the C&I side, you know, with like foam and glass? Sorry, foam glass and like calcium silicate and stuff. Just give us a sense for how that looks, 'cause we tend to focus a lot on fiberglass. Yeah. Yeah, I'll start off with the resi C&I split, and Robert will add on there on the price side. You know, from a specialty distribution side of things, you know, we did see things, you know, on the service partner side, they're serving a lot of the smaller contractors that have been impacted by the slowdown on the single-family side of things. Our residential sales were down around 8% in the quarter for specialty distribution. We did see a nice second quarter in a row growth on the commercial industrial side, sales up 2% on that side and up 5% year to date. I think, you know, building on that, Stephen said, I think whenever we look at those specialty distribution volumes and on the residential side, we're pretty I think the team's doing a nice job. If you look at that compared to other industry data points out there, you can see, how the Specialty Distribution team early there has been performing well. I think relative to your pricing question on C&I, I'd say definitely stability there. If you remember, there wasn't as much inflation coming in there. We keep talking about big projects coming on, whether it be MRO projects and some other, larger projects coming. If we think about the C&I side, definitely more sustainable, or nice job of sustainable price, relative to, to the C&I piece of the business. Okay, great. That's very helpful. Thanks, guys. Thank you. Thanks, Stephen. Thank you. Our next question comes from the line of Mr. Joe Ahlersmeyer with Deutsche Bank. Please proceed with your question. Hey, good morning, everybody, and congrats on the results and updated guidance. Thanks, Joe. Just thinking about what seems to be some growing visibility, certainly into the back half, but even into next year, good leading indicators on commercial, long multifamily backlogs and, and sort of calling a bottom here, it sounds like on single-family in the second quarter. Maybe just at this point, assuming things don't unexpectedly get significantly worse, are you sort of willing to target organic EBITDA growth in the next year? I know that you've got the deal coming through, which will help, but organically, should we expect EBITDA growth in 2024 at this point? Yeah, Joe, as you know, we haven't given any guidance into 2024, but certainly what we're seeing, you know, with leading indicators like you talked about, we're certainly optimistic for 2024 and what we're seeing, and we look to continue, you know, the trend we've had. You know, if you look at the midpoint of our guidance we just put out, this will now be our eighth straight year of revenue growth and EBITDA expansion, and we'll be looking to do that into 2024 as well. Appreciate that. Maybe are there any call-outs? Because the top line certainly seems to be the, the more constructive part of that conversation, but your gross margins are up, call it 400 basis points, run rate versus pre-pandemic. Is there any sort of watch out there on that line item? Maybe we're, if we've got 100 or 200 basis points or something that needs to roll out, or would you say that's not the case? Yeah, I think certainly in the second quarter, right? There's a lot of variables that go into our gross margin, right? If you think about it, you got, you know, the mix of the segments, which obviously has installs up more, that helps out there. You got all the variables that go into these large projects on the commercial side, both on distribution and residential. You got bidding, you got how available material is, you got labor availability, labor efficiency on the install side. You know, we do a great job of managing that. Our ERP certainly gives us an advantage in managing that. I'd say we even surprised ourselves in the second quarter with how good a job we did at managing that. You know, certainly we did not bake all of that into our guidance for the back half of this year. I think, Joe, it's Robert. I mean, as, as we try to always say, in the prepared remarks, and I know that, you know, whenever we talk with you one-on-one, just the constant focus on operational improvements in the business. You know, it's definitely a favorable environment, but the team continues to, to work, ideas, improvements, bottom quartile, that type of thing. If you talk about what's happened over the past few years, we definitely don't want to downplay all the operational improvements that have gone into the business as well, on top of, of the good points Rob made. Of course. Yep. Congrats on the first half. Good luck in the second. Thanks, Joe. Thank you. Our next question comes from the line of Mr. Jeffrey Stevenson with Loop Capital Markets. Please proceed with your question. Thanks for taking my questions. Congrats on the strong quarter. You reported a record quarter of gross margin, which was great to see. Moving forward, I was hoping you could provide a little more color of how you're thinking about the cadence of gross margin, given an expected moderating year-over-year inflation. Yeah, Jeff, this is Rob. As you know we don't guide on that level, but like I was saying on the previous answer, you know, there, there were certainly some benefits in Q2 that we're going to do everything in our power to continue to do into, into Q3, Q4. Could there, you know, is there $10 million or 80 bits of benefit there that we haven't baked into the, to our back half guide? There, there definitely is. That's how I think about that moving forward. Okay, understood. You cited, kind of continued destocking at the smaller contractor level, and specialty distribution. Is that largely complete, or do you think any of that will spill over into the third quarter? Also your inventories moved lower sequentially, and just wondering if you've made any adjustments on the installation side as well as we're kind of moving into a period of slowing single-family residential demand. Yeah. Hi, Jeff, this is Robert. You know, on the Specialty Distribution side, you know, you're seeing some normalizing of distribution volumes coming out of allocation. Obviously, during allocation, a lot of folks come to distribution, you're seeing that normalizing piece of it. Then, obviously, folks are continuing to work down inventories as a lot of people, including ourselves, you saw it in our results. To your point, we worked down our inventories as well. I think, again, looking at the data multiple data points in the industry, the Specialty Distribution team did a nice job of offsetting some of that with some of the other growth areas. That's one thing I'd say on the Specialty Distribution. Relative to Installation, sure, the teams continue to do a nice job of working inventory levels as material has come off allocation. You know, we continue to work that, and the teams are focused on that at the local level, on our install side of the business also. Okay, great. Thank you. Thank you. Our next question comes from the line of Mr. Adam Baumgarten with Zelman and Associates. Please proceed with your question. Hey, good morning, everyone. Just looking at the updated revenue guidance, I believe it implies some modest revenue declines in the back half. I'm just curious why that would be the case, given improving single-family trends, easier comps? Just maybe if you could walk through the kind of changes there. Excuse me, everyone. Pardon for the technical difficulties. Please stand by. Thank you for standing by. Adam, please proceed with your question. Okay, thanks. Yeah, good morning. Just looking at the updated revenue guidance, it implies, at the midpoint, at least, a modest revenue decline in the second half of 2023 year-over-year. I'm just curious why that would be the case, given improving single-family trends, easier comps? Sounds like the backlogs in multifamily are still pretty strong. Just if you could walk us through that? Yeah, Adam, this is Rob. At the midpoint, you're correct. We've got a slight decline. There is one less day to prior year, and actually, versus first half, you know, you got three less business days. That's a big part of the change. You know, and then towards the high end of our guidance, you know, we do show growth for the second half of the year on an average daily sales basis. Like Robert said, you know, if we, if we have reached the trough, we should see that, that slower growth. Typically, the back half of the year, we do see, you know, a seasonal uptick, you know, of 5% or so, year-over-year. That's not baked in right now, given, you know, the slowdown we saw on the single-family side to start the year. That's, you know, the, the impact you're going to see in the year-over-year as well. Obviously, if starts continue to accelerate from, from where we are today that'll be, you know, upside to the guidance we've got out there. Okay, got it. Then if you threw out that 80 basis points benefit to gross margin, can you walk through exactly what drove that and why it may not continue? Yeah, like I said, I mean, there's a lot of variables that go in into our margins every quarter, right? It can be segment mix, it can be, you know, bidding, it can be how available material is to us, you know, labor efficiency. You know, we, we do a good job of forecasting that. Like I said, you know, this quarter, we, we even exceeded our expectations around that, and we're going to continue to do everything we can to maintain that and, and to expand on that. In our guidance, we, we have not baked in that, that level. Okay. It wasn't necessarily one specific item. It was just a kind of confluence of factors? Correct. I mean, it's, it's certainly business performance, right? It wasn't like a one-time accounting good guy or something like that. It was, it was performance of the business. Okay, got it. Thanks. Best of luck. Thank you. Thanks. Thank you. Our next question comes from the line of Mr. Phil Ng with Jefferies. Please proceed with your question. Hey, guys. Congrats on another strong quarter. Robert, if I heard you correctly, you're currently anticipating maybe single-family volumes may have troughed in 2Q for your installation business. Appreciating your report, volume and mix together, your volumes were actually up year-over-year in the first half. Should we expect it to be positive in the back half as well? I appreciate you got a little tougher comps there. Similarly, how should we think about the shape of the year in your distribution business? Is 2Q a trough from a volume standpoint as well? Yeah. Morning, Phil. I think as we think about that, Rob hit it, hit it pretty well. If we continue to see those positive trends on single-family, we'd expect that definitely to be positive in the back half. I would say based on conversations with builders, obviously, at our local levels, with our branch operations teams who are very engaged, as well as specs we see coming out of the ground, we'd say that's a good possibility, you know, if we hit that trough here in Q2. I think on the distribution side, yeah, we would expect upside there. I think a really important point here, looking at the data points in the industry, our Specialty Distribution did a really nice job in Q2, so we'd expect that execution to continue here on the back half of the year, even back to the back half of the year. We're pretty positive as the thing our field teams have been working and the execution that they're delivering at a local level. Okay. From a completion cycle standpoint, have you seen things normalize? Would you take starts and lag it, call it three to four months at this point? It's, it's definitely, you know, that, that lag has definitely gotten back to a more of a normal level. Is it 100% back to where it was pre-COVID? I wouldn't say back to that level, but it's, it's, it's not months anymore. It's down to probably, you know, weeks getting back to that normal level. It's, it's pretty close, Phil, to your, to your question. Okay, super. Then on the commercial industrial side, Robert, really strong results. You raised your guys guidance there. Where are you seeing that pickup in activity for this year? From a bidding activity, any pockets within that commercial industrial that's a little stronger? Is it LNG? Is it manufacturing? Any color there? When we look out to 2024, do you think you can sustain that mid-single-digit growth range in that C&I segment or maybe even accelerate a little bit? Yeah. Let me hit two parts of it. Let me hit the install side of the business, which again, is, is more on the, you know, light commercial, heavy, and that envelope piece of it, right? Yeah, I mean, the team is doing an excellent job there. We got some, you know, just our leadership there is very energized. They're doing a nice job of utilizing our tools, like our lead app, and just continue to drive, you know, improvements in that business in different parts of the country. As you know, we're close to the major metros relative to that business, and so they're, they're servicing those markets as well as branching out from some of those as well in the heavy commercial side. If I go to distribution, I think Rob hit on some nice growth rates there. Then you, you asked about specific areas. Yeah, I mean, a few I would point out is on the commercial side, you know, data centers, we continue to see a lot of work in higher education and medical. Then on the mechanical industrial side, definitely liquid natural gas. I would point to that, by the way, U.S. and Canada. We're seeing some nice projects coming up in Canada, both MRO and new builds, and definitely in that liquid natural gas area. Some nice government work that's going on in Canada as well. Then between both food, food and beverage, as well as some of the mega projects, EV plants, that type of thing, that's driving some of the demand and some of the bigger projects we see coming down the pike, both in execution and bidding. With that, outlook on your distribution side, should we expect the growth rate you're seeing this year accelerate in 2024 or pretty steady? Yeah, I think as we get back to my comment to that would be, Rob, may want to add something, but I think as we're getting back to normalizing distribution volumes, yeah, I mean, I think we would expect to see that, you know, business continue to grow and outperform, which again, I think they've done the first half here. We'd look to see momentum in the distribution space for sure. Yeah. Okay, thanks. I just point out in the second half, the comps on Commercial Industrial are a little tougher than the first half. While we do expect growth, you know, the year-over-year numbers won't be as strong as we saw the first half of the year. Okay. Great color, guys. Appreciate it. Thank you. Our next question comes from the line of Mr. Keith Hughes with Truist Securities. Please proceed with your question. Thank you. You know, we talked a lot about turn, a nd volume and insulation. I just want to switch to distribution. You gave us the breakout in the quarter between industrial, commercial, and residential. Do you think that kind of numbers are going to hold for the back half of the year, or would you expect either one to accelerate or decelerate? Yeah, I think on the, on the residential side, we're expecting to see some improvement given what we've seen, you know, from the, from the start side of things on the single-family side. For sure, we expect to see some improvement there. Then, as Robert was just talking about on the commercial industrial side, a lot of good projects and activity going on there. We're, we're expecting to continue kind of that, that mid-single digit steady growth the back half of the year. Is that growth, is that all volume or is there some price in that mid-single digit number as well? Yeah, there's, there's a small piece of price. There hasn't been nearly as much inflation on that side of things as, as we had on the, on the resi side. Even on the resi side, as you can see in our, in our results, the price number is, is coming down. Okay. All right, thank you. Thank you. Our next question comes from the line of Mr. Noah Marcuse with Stephens. Please proceed with your question. Good morning. Thanks for taking my question. Morning. Morning. On, on the install side, you know, very, very good volume growth there in the quarter. You called out shifting your focus to more light and heavy commercial projects. I was wondering if you could help us understand, you know, is it fairly easy to shift that labor and assets between end markets? Presumably there, you know, the slowdown in, in single-family was, I think, quite anticipated by a lot of people for some time now, and I imagine other installers would look to shift that work as well. I guess, do you think you're, you're taking market share in those end markets? Yeah. Good morning, Noah, it's Robert. First part of that question is, so all of our residential branches can basically do the light commercial work. It's very similar products, very similar applications. That labor will transfer and transfer easily between jobs and between geographies. On the heavy commercial, which, you know, as, as Rob pointed to some, you know, impressive numbers there, you know, you, you don't transfer kind of the residential light commercial labor over to the heavy commercial. That's really dedicated to that business because it's, you know, it's higher technical and different applications. Now, those crews can travel, those crews do travel among cities, so definitely transferable within light commercial, definitely transferable within heavy commercial. Then, you know, as we think about, you're talking about the question somewhat around the mix there in the future. I mean I think as we look at, you're right around the single-family side, but if you look at our, you know, numbers and look at the starts, and we would definitely outperformed in the single-family side of the business. Then, as we've said, I think looking at our overall performance, definitely picked up share on the multifamily side of the business as well. This whole element that we've been talking about, diversified model, multiple avenues for growth, single, multi, commercial, industrial, you, you see it paying off here in the results and, and how the business is outperformed. Got it. That, that's helpful. For my follow-up, when you acquired Distribution International, you highlighted a pretty strong pipeline of M&A opportunities there, and clearly, you're executing on that with SPI. Just wanted to get an update there. I mean, I know you, you noted in your prepared remarks it's still a very fragmented market, but can you kind of help frame up the opportunity of, of sizable acquisitions that's in that space? Yeah. If you, if you think about that, mechanical insulation space, and, you know, as we think about it, you know, SPI is a good example. You got mechanical insulation. You've also got, you know, commercial type of insulation with metal building insulation, which we talked about, extremely fragmented. You got smaller players, you got larger players, you got players of all different sizes in that space, and both of them are highly fragmented. That's, I think Robert, in our prepared remarks, talked about a very active pipeline, relative to deals out there. Obviously, SPI, a great company, so we moved forward with that one. They've, I think we said it in our announcement last week, they've really got an M&A capability as well. That's only going to add on top of a great competency that TopBuild has, from an M&A perspective, again, across all three, residential, commercial, and this, commercial industrial space as well. Great. I appreciate all the color. I'll leave it there. Thank you. Thank you. Our next question comes from the line of Mike Rehaut with JP Morgan. Please proceed with your question. Thanks. Good morning, everyone. Thanks for taking my questions. Good morning. First, I just wanted to kind of circle back to the M&A question just asked. You know, obviously, you know, with SPI, you know, there's still a tremendous amount of opportunity in the mechanical and industrial side, and that's been a big part of your focus and thesis, and it looks like there's a lot more to come over the next, you know, two or three years. How should we think about the residential side, though? Obviously, you continue to do, you know, various acquisitions there as well, but, you know, from a revenue standpoint, they appear a little smaller. Should we expect that kind of trend to continue, where perhaps from a revenue standpoint, the bulk of the opportunity is more on the commercial, industrial, mechanical, and you know, still some opportunity on the resi side, but more, you know, singles versus, doubles and home runs on the, on the other parts of the business? Yeah, Mike, this is Robert. I'll start off. Look, let's, let's start on the mechanical side of it. Yeah, definitely plenty of opportunities there as I talk about the fragmentation there in that space. You know, big players, small players, mechanical, metal buildings are really across that space. We see the same on residential, and I just want to point to our performance here. I mean, so this year, two sizable acquisitions, much, much larger than the average in the space with SRI, that we acquired in our first quarter, so about, call it a $62 million residential installer there in multiple locations. Then we're really excited about Best Insulation, which we announced in July, a $100 million company as well. We like the small ones, we like the, the medium and the big ones, and, and you see us delivering at, at all levels there. I think on the residential side, you should think about, you know, continued opportunity. It is fragmented as well. You know, just the returns that happen with those acquisitions of all sizes and the execution is excellent for our shareholders. You're going to see us active across all of them. Just before I hit on the second one then, you're saying that, you know, companies like SRI and Best, there's still a bunch of those types of companies out there, and available? We still see some sizable companies in the space. I'm okay, when I say sizable, higher than the averages, if you will, some of the, some of the smaller ones, if you take the average of the ones, you know, done across the industry. There's still some nice size targets out there. Okay, great. Just secondly, you know, the, the EBIT margin for TruTeam, I mean, continues to come in above expectations, I think above your expectations as well. Even if you assume that, that 80 basis points of gross margin, I guess, one time is more concentrated in TruTeam, which, you know, I would take a guess and say perhaps it is, you're still looking at a 20% plus margin there. Just trying to get a sense, you know, over the next year or two, I mean, what's as we try and think about the level of sustainability, you know, in the margins that you're seeing in the first half of 2023, you know, what's kind of pushed that to the next level, so to speak? You highlight productivity, and just trying to get a sense if there's been a structural change in the profitability of the segment itself, perhaps related to pricing better for the services you provide in the marketplace against a tighter, you know, resource backdrop? Just trying to understand, you know, how much of this improvement is structural as we think about the next couple of years? Hey, Mike, it's Robert. Let me start with that. I really focus on the execution in the field, you know, supported by, you know, the great support functions we have. I mean, it's just If you look across, you know, things driving, and Rob hit on all of them, whether you talk about labor productivity, how we utilize our network with our ERP system, you know, not just residential, but commercial. You know, our teams have done a nice job, even on the multifamily side. I think in, you know, in historical past, you hear people talk about multifamily margins. Our team has done a nice job there. The team makes the most of the, you know, having a great operations team in the field. They make the most of the opportunities whenever they come along. They keep pushing improvements in the business, and the execution just drives the numbers piece of it. Our team stays very focused on that, and our leadership in the field stays very focused on that, as well. We're constantly working bottom quartile. I mean, it's just, it's part of our DNA. It's part of what our leaders in operations push, is constantly looking at pushing the performance in the business. I really point to our execution. No one single factor, to talk about there, nothing structural other than, you know, just continue to execute on our plan. Yeah, Mike, I'd just add to that, that, you know, our guidance implies we expect to continue to expand. I mean, that, that EBITDA margin is, is great this quarter, right? 23.4% for, for the install side of the business, but we guide to then being on the higher end of our incremental margin range of 22%-27%. You know, the, the quarter-over-quarter improvements won't be as great, but if we continue to add at 27, and a lot of times, as you know, we're, we're doing much better than 27, you know, we, we should be able to continue to expand. Great. Thanks so much. Thank you. Thank you. Our next question comes from the line of Mr. Rafe Jadrosich with Bank of America. Please proceed with your question. Hi, good morning. Thanks for taking my question. Robert, I just wanted to sort of clarify a comment that, that you made earlier. I think you said that you would expect residential to trough in the, in the second quarter. Is, is that for the industry in terms of starts, or is that your own business? Then if it's for the industry, when would you expect resi to trough within the installation and distribution business? Yeah. Good morning, Raif. This is Robert. I'll start with a couple of comments there. One, we said it could have troughed in the second quarter. Obviously, others have been making comments as to their view on that. I think it's hard to ignore the starts and the momentum in the starts, looking at May and June. If that momentum keeps going in that direction, you'd say the industry probably saw, saw that. It would really depend on that trajectory of the starts, but definitely given recent trends, recent commentary from builders, specs that we see coming out of the ground, we'd say that's a good possibility that, that, that we and the industry saw it in the second quarter, but we'll see what happens here coming up in the next, couple months. Yeah, Raif, if I could just add. Sorry, I was just gonna add to that. I mean, from a starts perspective, obviously, we saw that it looked like starts troughed, you know, around April, right? Now it's come back May, June, and, and we hope to continue that pace. Then, you know, we're obviously lagged from that, you know, three, four months. You know, whether that trough exactly hits us in Q2 or Q3, that's, that's, that's the question at this point, but it definitely looks like, you know, we're gonna be coming out, coming out of that here the second half of the year, if this, this trend on starts continues. Great. Hey, that's very, very helpful. Then just the increase of the outlook on the commercial industrial side for the year, you took that up slightly. Can you talk about, like, is there any end market that's driving that improved outlook specifically? Like, what are you seeing by end market, I guess, mostly on the distribution side, that's driving the commercial higher? Then have you seen any improvement in the bidding activity as you look into next year as well? Yeah. Yeah, Raif, I'll start off, this is Rob, and, and Robert will add on. I mean, I think the increase really is driven by our outperformance here in the first half, right? Which was really driven on the install side of the business, where we saw, you know, revenue up in the 23% range year-over-year. I mean, we are seeing nice, steady growth on the distribution side, but it's, it's in about the range that we guided to for the year. The outperformance has been on the install side. A variety of big projects, Robert can, can probably add some color there as well, but, you know, it's, it's been across both light and heavy commercial. We've seen both sides grow in that 20%+ type range here in the quarter. Great. Very helpful. Thank you. Our next question comes from Mr. Reuben Garner with Benchmark Company. Please proceed with your question. Thanks. Good morning, everybody. I hopped on a touch late, so apologies if this is a repeat, question, but I was just wondering if you're seeing any tangible evidence that the Inflation Reduction Act is driving some of your new, you know, your, your home builder customers to upgrade their insulation, whether it's to spRaif foam from fiberglass or fiberglass from cellulose or any other, you know, just upgrades, taking advantage of the credits? Hi, Reuben, it's Robert. I think it's a good question, interesting question you're asking. If I think if you look at some of the custom home builders, and we're seeing some of the, what I'd say, you know, we think about insulation packages as good, better, best, you definitely, I'd say we're seeing some custom builders going more to a better, best type of package. Part of that could definitely be driven by what you're talking about. I think, you know, some of the custom builders are trying to, you know, continue to differentiate themselves as well. I think you could see that. I think, you know, that, that 45 L tax credit or credit that comes with the, you know, Inflation Reduction Act, you know, they've made it a little more stringent from what it was previously, but they've also, you know, upped some of those credits as well. I think it's getting the attention of some builders, both, both production and custom home builders. I think maybe the custom home builders could be seeing it as an opportunity to differentiate themselves in the package that they're offering. I think, I think the way we always think about this, definitely tailwind in the industry, and there could be some early signs of it. Great. Thanks. Congrats on the results, guys, and good luck. Thank you. Thank you. Thank you. There are no further questions at this time. I would like to turn the floor back over to Mr. Robert Buck, President and CEO, for closing comments. Thank you for joining us today. We look forward to talking with you in October and our early November in our Q3 results. Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.