Phil Ng, Jefferies building product analyst. We're delighted to have TopBuild representing the company. We got Robert Buck, CEO of the company. So Robert, just give us a little lay of the land and what TopBuild does and the opportunity in front of the company. It's a pretty dynamic environment right now. Yeah, good morning. Thank you, Phil, for having us. So for those of you that don't know TopBuild, we're the leading installer and specialty distributor in the insulation space. So we service all three end markets, residential, commercial, and industrial, both the U.S. and Canada. So we're the leader in all three end markets that we service. You know, anything insulation related, that would be TopBuild, so across all applications, all types of projects, all types of contractors and builders, again, across the U.S. and Canada. About 14,000 employees, by far the largest piece of our labor base is the installer base. So we have quite a view on the labor market and understanding the labor as well as, you know, the different end markets that we service. So, been with the business 15 years. I've seen quite a few turns in the business here, so glad to take the questions and talk about what we're seeing today and how we're thinking about the future. That's a perfect segue, Robert. I mean, I think we are all... well, I am upbeat about housing long term, just because we're short in supply, and hopefully get rate cuts very soon. But, some of the public and private companies that have talked about their trends, there's this air pocket, whether it's multifamily, single-family, and maybe even project delays. Just give us a little color on what you're seeing in the marketplace and what type of conversations you're having with your customers. So I think there are definitely a lot of, conversations and people speculating about the interest rate cuts, which we would all expect to happen. I think the question is, how many and how quickly? You know, if you listened to our earnings call a few weeks ago, you definitely heard us use the term choppiness, and it's definitely choppy by end market, depending on where you are. So if you're in certain markets, like, no surprise, Florida, Texas, Southern California, even parts of Arizona, still good demand. Builders are still building. Production builders are still, you know, continuing to build at a pretty rapid pace. But if you take some other markets, like Northern California, Pacific Northwest, Midwest, Northeast, we're definitely seeing some choppiness, in demand there. So I think, you know, there's a lot of optimism, given, you know, the potential interest rate cuts that are coming. I think also in our industry, as we think about the mix shift that's gonna happen between multifamily and single-family, obviously, multifamily starts have slowed, but we'd expect to see some steady upswing of single-family starts. That's positive for our business in that, about, you know, 35% of the insulation that goes in a single-family start goes in multifamily. So as we see that single-family trend improve, even though there'll be a decline in multifamily, we'd expect to see growth in our business. So that's one positive, beyond the interest rates, the mix shift, as well as, there's great energy code adoption and trends that seem to be happening in the U.S. now, given some of the definition that the government's put around programs like ENERGY STAR. So that's another, nice tailwind in our business here, in the U.S. And then last thing I would just say is, you know, you hear a lot about mega projects, large, projects going on. Those are happening both in the U.S. and Canada, and given our leadership position in Canada, we're seeing a lot of momentum north of the border as well. Okay. You revised your outlook a smidge, mostly on commercial in terms of the back half. You talked about choppiness. Has that choppiness accelerated, maybe even in some of your resi business in recent months, or it's been pretty much more of the same? I think on the resi side, we've definitely seen more choppiness. We talked on our call that we saw it, you know, not just in the second quarter, but we saw it continue into July. So I think we're definitely seeing that on the residential side. That was part of our. We came into the year thinking we'd see starts coming out of the ground quicker on the resi side, been a little slower than we would have thought. Then you're right on the other part of the guidance was the commercial industrial side, and we're just seeing a delay of projects there. I think mainly if you said, "Hey, what's the drivers?" I'd say one, you know, interest rates on the residential side. I'd say it's finance rates on the commercial industrial side, people just holding off to see if they can get better finance rates. I think you see some labor shift sometimes between multifamily projects and commercial, so that's probably driven some delays. I think the positive, though, is we're not seeing cancellations in these big projects, and we're seeing, you know, fairly robust bidding activity for 2025 and 2026. Okay. So that's a perfect segue, right? So it sounds like, you know, some of the choppiness is rate sensitive, so if we get a rate cut soon, help us think through the lag, right? I would imagine that you would see some inflection, but just give us some color on the lag in terms of your business. Yes, I think, you know, we're going into a seasonally busy time of the year, September, October, early November. If you think about public builders trying to reach their closings before their year ends, and if you think about, you know, big projects finishing up for the holidays, so this is a busy time of the year seasonally from that perspective. I think interest rate cuts are more of probably give us momentum going into 2025, both on the resi side and on the commercial side of the business, so I think that could be, given the delays, given, you know, given the rate cuts, which we're optimistic about. I think that could create some momentum going into 2025 for sure. On the resi side, could you see that momentum inflect as early as early next year, or it's gonna be a little more elongated? I think, you know, given the rate cut, I think you could see that take effect in spring selling season. So I'd say in, like, the six-month timeframe, you know, early in late Q1, early Q2, I would think we would see momentum from that rate cut. Okay ... on the resi side. Okay, that's helpful. In terms of interest rates, sorry to kind of harp on this, is there a technical threshold that you think will really move the needle? Do you have to get to, like, the high fives or low six, with two rate cuts, we could probably be there already, where we'd see activity kind of bounce. And on the resi side in particular, the public builders have been taking share and are in a pretty good spot. Are you having any conversations with some of the smaller regional guys getting more reinvigorated and start to kind of re-engage on looking at new projects and whatnot? Yes, I think on the rate side, I think a couple rate cuts, I think, get the momentum back in the industry, whether it is that high fives, low sixes. I think one rate cut starts to build momentum. If there's a second cut, I think that definitely, you know, puts it at a higher speed of recovery from that perspective. And I think given that those pending cuts, yeah, talking to the regional and custom builders, I think you definitely see more optimism there going into 2025. I think you, you know, you got the production builders who have been buying down rates, and you get a lot of the, you know, bolder production builders, they're going to continue to build no matter what. That's what they've said publicly, but I think you do see kind of the wind in the sails coming back to this, some of the smaller regional and the custom builders, which are still, by the way, the largest percentage of homes built in the U.S. I think you see them being more optimistic here for 2025, for sure. Multifamily, obviously, we had, like, a super cycle, right? We're kind of seeing starts on multifamily bottom out here in that 300,000 -ish range. How do you kind of see that rippling through your business? I know price cost on multifamily was a big good guy in 2023, but kind of 2024 and beyond, I think that normalizes. So kind of help us think through that handoff from multi to single family and what that does from a top-line perspective. Is there any huge impact, good or bad, on margins or mix as well? Yeah, so a few parts to that question. You're right, we did definitely have a big boost from multifamily in 2023 on the margin side, and so that is normalizing here, about another $15 million here in Q3, that we've publicly talked about over the past year. But I think given you hit on a key point, the mix side of it, so, you know, we could see a pretty dramatic decline in multifamily, but given the amount of insulation, more insulation pounds that go into a single-family start, we could see a decline of call it 20% in multifamily. As long as we saw a low single-digit increase in single-family, we'd still see revenues increase. Okay. So I think that's just a combination of the mix and the pounds that go into a single-family unit versus a multifamily unit. And then, you know, I'd have to just talk about a little bit the energy codes in the U.S. I mean, we are seeing momentum. We are seeing builders getting more educated on that. We are seeing builders try things in certain communities and model homes as well. So I think there's a nice tailwind from some of the codes that happened. So, you know, could be a steep decline in multi. I think that can be offset by single and some of the other tailwinds in the industry. You know, similar to what we saw in 2022 and 2023, where the backlog build in single and multi was down, I think you could hopefully see that reverse here if things hit it right from a timing perspective, that as the multifamily declines, the single-family mix will take that over. Is there any mix or margin impact with multi versus single family? Yeah, good question. I missed that, so not for us, no. No significant margin difference in single versus multifamily projects or units, and you know, our teams in the field have done a great job of how they manage labor and materials on those multifamily jobs, so no significant difference for TopBuild. Okay, super. Insulation's kind of the, the rare, building products category where we've seen pretty good pricing momentum. There's a price increase out there, for fiberglass, for the midyear. How is that kind of progressing? You've been able to kind of push that through and, be a good guy? And, then, are you seeing any pricing momentum in some of your other categories, whether it's mineral wool or spray foam? Yeah, so on the fiberglass side, I'd say it's a little too early to tell. We think there'll be traction, but I think it's all going to depend on the demand here in the back half of the year relative to the fiberglass increased traction. So on that one, I'd say early to tell. Really no major other inflation in other product categories. There were some earlier in the year, late last year, around mineral wool, but spray foam has stabilized. There's some very, very minor inflation there, but not even enough to mention. So, but back to fiberglass, I think it's going to be demand driven, so we're going to have to see how that plays out here, basically with single-family trend the rest of the year. Okay. And then on the commercial side, part of the reason why you lowered your outlook in the back half was commercial. As you kind of pointed out, it's encouraging, it's been more project delays than cancellations. What are your customers saying? Is most of the delays just rate sensitive? Just give us a little perspective on how you kind of view your commercial business. There's obviously a light commercial element, and there's a heavy commercial. The dynamics and fundamentals are probably a little different. Yeah. So as we talked about the back half of the year and talked about guidance, definitely whenever we moderate our guidance, it was more on the heavy commercial side. So you know, project delays, as I talked about, the financing side, some on the labor. There had been, in our industry, some supply chain issues around commercial products earlier this year. So I think those are probably the three combo items there. But if you're in this industry, contracts, and as you're thinking about these big, heavy commercial projects, I would say we're not seeing cancellations. That would be the leading indicator. You know, contracts are getting signed. Contracts are getting signed for 2025 as well. So that's the positive leading indicator there. Light commercial's been strong. I mean, it follows the trends of residential. Our teams in the field have done a nice job of gaining share in that area because it is so similar to residential construction, and quite honestly, we've made big investments in that area as a company. One would be our sales force. We've continued to add sales force in the commercial area, and I think you've heard us talk about we have a proprietary tool called Lead App, which allows us to aggregate leads/permits from across the country and disseminate those out by region, by territory. So I think our teams have done a nice job of gaining share in that light commercial space, and we've seen that be a nice growth spurt in 2023, and we're seeing backlogs build even there in 2024. That's great, because, I mean, most of the trends, whether it's Dodge starts and whatnot, and like commercial, it's been weaker. So it sounds like some of the TopBuild-owned initiatives are really driving share gains? Yeah, we think so. We think those have been advantages, and we think the investments that we made in the space are paying off or will pay off here as we're heading into 2025 as well. Okay. M&A's obviously been a big part of the growth story, and you guys create a lot of value. Give us a little perspective what you're seeing out there, whether it's from a pipeline standpoint. Is it more skewed towards resi, any chunkier, larger C&I opportunities that may have sprung up? Yep. So yeah, we've been very active, as you know, over our life, over our span here the past ten years. I think in the past, call it 14, 15 months, about $280 million of revenue that we've acquired through acquisitions. I've been in this industry 15 years. We're probably, I won't say probably, we're as busy now on the M&A front as we've ever been. Just a lot of deals coming to market. I think you've got, on the resi side and some on the commercial side, you've got folks that have had a pretty good run here, and you're looking at people that are looking to exit. And then we've got some, you know, aging and ownership of folks that are ready to pass on the business, and they don't have, you know, anybody in place from a succession planning perspective. So. It's really across residential, commercial, and we've got some nice things working on the industrial, C&I side of the business as well. As you know, we canceled the SPI transaction, that was about a very small piece of that business. Some of the chunkier potential targets out there don't have the metal building insulation business. So there's some good things working from a TopBuild perspective on the M&A side, and, you know, we definitely expect to be active from a capital allocation perspective. You mentioned you walked away from that deal, but in terms of that C&I space, there are, from what I understand, there are bigger guys out there. Just give us a little more color on, you know, the market structure, because on the resi side, it's a lot more fragmented, smaller players. Have you had some dialogue with some of these bigger guys? Yeah, so on the C&I side, definitely some, you know, we call it plus $200 million type of players out there. And again, the positive is the minute piece of the business that the DOJ got focused on, those businesses do not have that metal building installation business. So definitely begun dialogue there. I think, you know, what we've shown as a company, if you look at our history, so probably 43, 44 acquisitions in the past seven years that we've done, we're very disciplined and we're very targeted. So we're looking to buy good companies, that's a good fit, TopBuild that we can definitely drive great shareholder return. So I think you can expect that same structure, discipline, but most importantly, level of execution here moving forward. Wow. Your track record in terms of unlocking synergies, pretty much unparalleled for this industry. The resi playbook's really simple. You buy a lot of insulation, you get big procurement. Give us a little more flavor on the C&I side, the value creation opportunity, and where you're seeing a lot of opportunity to unlock value, whether it's synergies on the cost side or commercial side. Yeah, it's a great question. I think if people usually ask me, "What's the one piece of the story that folks don't understand?" I think it's a part that you're hitting on, Phil. Yeah, you're right. We have a great playbook on the residential side, commercial side, and the industrial side for acquisitions and realizing synergies and, you know, really under-promising, overachieving from an execution and synergy perspective. I think part of that is obviously, you know, we leverage our scale very well, and we've got some low-risk synergies relative to that. I think the part of the story, and I'll give a couple examples here that people don't understand, is the operational improvements that we drive in the business when we acquire business. So again, like I said, 43-44 acquisitions we've done in the last seven years. We have a dedicated team that works on integration and a dedicated team that we call Special Ops, that really works on driving operational improvements. So I'll give you an example. You talked about specifically the C&I side of the business. So we acquired Distribution International, which was a $1 billion acquisition for us. So they were the leader in the space of C&I back in October of 2021. That was a 10% company, EBITDA company, whenever we purchased it, and we, you know, disclosed, you know, results for that acquisition for the first year. And so in Q4 of 2022, last time that we broke out those results, that was about a 17.6%-17.7% company in one year. Part of that obviously is synergies that we get that you may come to mind. The other part of it is operational improvements that we drive in the business. So you may say, "Well, give me a couple examples." You know, we're always looking at obviously driving productivity, but we're also looking at, you know, logistics, looking at the logistics footprint, looking at what customers are we serving from which branch. We're obviously looking at, you know, footprint, how do you optimize the footprint? It doesn't necessarily mean shutting down facilities, but where those, where's that footprint? Where's your overlap? That type of thing. And so given our footprint, you know, we have between all businesses, we have about 460 locations between the U.S. and Canada. We're constantly looking at ways of driving those improvements, and it obviously shows through in the results of our everyday business and our core business, but obviously, it definitely shows through in the acquisitions that we do. Okay. Your margin expansion has been really impressive over the years. So the team's done a great job. You generally guide to, like, a mid-20% incremental on the organic side. How much more runway do you have? I know you guys have that continuous improvement team to come in and then kind of get to unlock more value. Just give us a little more thought in terms of how much more runway do you have to kind of bring that bottom quartile and whatnot to drive margins higher? Yep, so it is definitely a cadence in the company. I mean, we, we get the question a lot about the margins, and I think we've continued to, you know, my answer is, if you're sitting in my shoes, we continue to see more opportunity in what we can drive in the business. So you know, we have a very strong cadence of, to me, there's a bottom 25% of everything. There's a bottom 25% of your branches, a bottom 25% of your installers, a bottom 25% of products, a bottom 25% of, of customers, so you're constantly working on moving that bottom 25% up. But then there's also opportunities to drive. Whenever you have 10,000 installers going out to, we'll visit. On an average day like today, we'll visit over 18,000 job sites between the U.S. and Canada. So whenever you have those installers going out to all those job sites, if I can gain 15 minutes a day back from those installers, which by the way, you know, allows them to be more productive, which means they make more, it's a win-win for our company as well. So we see more runway, we see more opportunities, whether it be investing in technology to drive productivity, but also just from a specialty operations perspective and driving better operations practices across our footprint. Super. I mean, your resi business is much shorter cycle. Commercial and multifamily, a little longer. Give us a little color in terms of how backlogs and orders and biddings kind of shaking out, and how much visibility you have. Yeah, so let me talk multifamily. We've talked about our multifamily backlog. It's still healthy for the rest of 2025. We're definitely bidding and winning projects for 2024. Our backlog is healthy for the rest of the year. We're definitely bidding projects for 2025 and starting to build a backlog for 2025 as well. But you know, multifamily starts are down 34% year over year, year to date. You know, we'll definitely expect to see some decline there, but again, that mix shift from multifamily to single-family is a positive for our business, given the pounds of insulation. I would say on the commercial side and on the industrial side, bidding is strong, and backlogs continue to grow there. Part of that's obviously the projects are being pushed out, but you definitely do hear a lot about, you know, mega projects. We've talked about that a lot on our industrial side of our business and commercial, whether you're talking about data centers, LNG projects, and these projects are both U.S. and Canada. So we're sitting very, you know, robust, bidding activity, and we're seeing backlogs grow both in our commercial and in our industrial business, and that's really going, you know, way at 2025, 2026 as well. Okay. How are you positioned to service some of these mega projects? Are you better positioned because of your size and scale, or pretty comparable across the market? No, great, great question. Definitely one of our advantages. So given the footprint that we have, again, U.S. and Canada, you know, and if you take these mega projects, like even the oil refineries or even the data centers, some of these are kind of multi-step and multi-state projects as to how they're coming together. And so our ability to service these from multiple locations, multiple states, and by the way, we have the fabrication capabilities, which is basically fabricating unique parts for oil refineries that are doing turnarounds or these data centers as well, it definitely gives us an advantage. I think we talked about a data center project for us can be in the ballpark of $7-8 million. And we're involved in several of them right now in the U.S. and Canada, LNG projects as well. So our ability to service, our footprint, as well as, you know, turnaround times that we're able to provide a customer, definitely an advantage for us in these high-profile projects. But also in these types of projects, there's quite a maintenance and repair piece of the business, i.e., if you think about oil refineries, that's highly regulated, so you're going to see repair cycles or maintenance cycles, on a fairly regular basis there, sometimes two to three years, three to five years. And so we're set up to service that maintenance and repair business as well, which is recurring revenue for us. Great. Can't not ask you about the election, right? We got some different outcomes. What does that mean for your business? Maybe the answer is, it doesn't matter, you just want the election to be out of the way. But help us think of what that could all mean for you guys. Yeah, so obviously watching it like everybody, and then, you know, everybody's best guess. I would just say, you know, two things. We were with a group of investors two or three weeks ago, a bigger group, and I would say that the one comment that stuck with me is, you know, people have talked about the elections in years past, but as far as this year being somewhat of a hangover from the election or thinking about the election for the future, that mentality definitely exists this year. So I think you're right. People want to see, you know, things move forward here and get November past us. You know, I do say that. A little bit concerned. I think whenever we talked about choppiness on the residential side, there's definitely been some potential promises out there for what it means for a new home buyer. You know, my fear is just I want to make sure those folks aren't sitting on the sidelines waiting for what could potentially happen. Not sure if those things do happen and stuff as well. So I guess big takeaway is be good to get on the other side of November. Great. Once again, you guys generate a lot of cash, and you guys announced a big buyback program, and bought back a lot of stock. How are you thinking about buybacks the rest of the year, and just longer term, how are you thinking about buybacks more broadly? Yep. I think given the, you know, given the market volatility, we obviously saw it a great time to invest and buy back our stock, and to continue to be active, and we still have, you know, funds left for that, given that approval. But I think, you know, obviously, equally, you heard me talk about M&A, and fortunately, we're, you know, we generate a lot of cash. We're able to manage both M&A and the buyback scenario, so I think you can expect us to be active on both fronts here, in the near term. Wow, great problem to have. When we think about 25, let's say we get a bounce back in the demand, how is TopBuild situated to kind of meet that demand, whether it's your labor, access to material, and do you see any bottlenecks at the builder level and other trades? Yeah, I think if, you know, given the bounce, if we got to, you know, 1.6, 1.7 million, I think TopBuild's positioned very, very well. I mean, those of you that have kept up with our story and understand our business, I mean, labor, as an example, is definitely absolutely an advantage for us. We do a great job of not just attracting labor into our business, but retaining labor. I would say we're definitely an industry leader from that perspective. So we're ready for that uptick demand. Could it cause some bottlenecks in other trades? Yeah, I think that's definitely possible, but I think in the past, when that's happened, you know, we've been able to, you know, flex whenever big demand comes through. We've been able to flex our labor to meet that demand, and it's probably actually, in the end of the day, gain share for us in the business. I think from a material perspective, great relationship with all our supplier partners. Definitely has been tight demand in material, but you also see now some things relative to codes. You're going to see some other materials, I think, that get some momentum, spray foam being one of those, and we're pretty, you know, open to what types of material that we install. We're agnostic from that perspective, so we'll be ready to service our customers given those demands. Okay. Well, Robert, I appreciate all the great insights. We're going to have to wrap it up here. Thank you so much. All right. Thank you.