Good day. Welcome to the Builders FirstSource Third Quarter 2022 Earnings Conference Call. Today's call is scheduled to last about one hour, including remarks by management and the question-and-answer session. In order to ask a question, please press the star key followed by the one on your touch-tone phone at any time during the call. I'd now like to turn the call over to Mr. Michael Neese, Senior Vice President, Investor Relations, for Builders FirstSource. Please go ahead, sir. Thank you, Todd. Good morning. Welcome to our third quarter 2022 earnings call. With me on the call are Dave Flitman, our CEO, and Peter Jackson, our CFO. Today, we will review our third quarter results for 2022. The third quarter press release and investor presentation for today's call are available on our website at investors.bldr.com. We will refer to several slides from the investor presentation during the call. The results discussed today include GAAP and non-GAAP results adjusted for certain items. We provide these non-GAAP results for informational purposes. They should not be considered in isolation from the most directly comparable GAAP measures. You can find the reconciliation of these non-GAAP measures to the corresponding GAAP measures, where applicable, and a discussion of why we believe they can be useful to investors in our earnings press release, SEC filings, and presentation. Our remarks in the press release, presentation, and on this call contain forward-looking and cautionary statements within the meaning of the Private Securities Litigation Reform Act and projections of future results. Please review the forward-looking statements section in today's press release and in our SEC filings for various factors that could cause our actual results to differ from forward-looking statements and projections. With that, I'll turn the call over to Dave. Thanks, Mike. Good morning, everyone. Thanks for joining our call. Our strong third quarter results reflect the fundamental strengths of our business, including our value-added products and services that resonate with our customers and our consistent execution. We are winning new business and strengthening existing customer relationships by consistently providing customers tailored solutions and excellent service, which collectively make us a partner of choice. In the third quarter, we delivered a 6.9% increase in core organic sales, including nearly 20% growth in our higher-margin, value-added products. That performance, combined with our investments in core operations, our relentless focus on cost controls, and acceleration of productivity, helped us produce record adjusted EBITDA. On slide three, I would like to remind you of our long-term strategic priorities: expanding organically in value-added products and services, driving operational excellence, continuing to build our high-performing culture, and growing through strategic tuck-in acquisitions. On slide four, we outline how we continue to execute against our strategy this quarter. Specifically, we delivered record results in the quarter by increasing our value-added product sales. We leveraged our BFS One Team operating system, leading to $33 million in productivity savings in the quarter. We deployed additional capital toward tuck-in acquisitions, as highlighted by our recent purchases. Since the BMC merger, we have now deployed $2 billion of capital to strategic M&A. Through October, we have repurchased $2 billion in common stock this year. We still have slightly more than $500 million remaining on our current $2 billion share repurchase authorization, and we will continue to look for favorable opportunities to repurchase shares, considering market dynamics and our ongoing commitment to maximize long-term value creation. Since we launched our buyback program 15 months ago, we have invested approximately $3.8 billion in repurchasing roughly 61 million shares, retiring nearly 30% of our common shares outstanding. Let's turn to our third quarter results on slide five. We delivered approximately $6 billion in net sales. Core organic sales and value-added products grew by nearly 20%, while single-family sales increased almost 2%. Repair, remodel, and other increased over 30%, and multifamily increased 16%. R&R and other growth was mainly attributable to a weaker prior year when supply constraints limited our ability to support growth in this segment. Multifamily was driven by solid organic growth and a strong backlog of projects. Once again, value-added products drove our growth story, further validating that we are well-positioned to be the supplier of choice for these products. During the third quarter, we generated $1.2 billion of adjusted EBITDA with a margin of 20.3%. These results were driven by our strong execution, share gains, ongoing productivity initiatives, and pricing discipline in a market that has been supply-constrained but is returning to normal. Turning to M&A on slide six. In addition to our focus on profitable core organic growth, we continue to execute tuck-in acquisitions that are aligned with our strategy. Since the start of the quarter, we have completed four acquisitions that collectively advance our objective of expanding our geographic footprint in key markets, enhancing our value-added portfolio to better serve our customers, and diversifying our end market exposure. In September, we closed our acquisition of Trussway, which expands our footprint in multifamily trusses, accelerating our growth in the Southwest and Southeast. We also acquired Fulcrum Building Group in September, providing us with pro contractor-focused lumberyards, millwork facilities, and additional resources in the high-growth markets of the Gulf Coast. In July, we closed our acquisition of HomCo Lumber and Hardware, which enhanced our footprint in Flagstaff, Arizona. Then in October, we acquired Pima Door & Supply, which provides us with dedicated millwork capabilities in Phoenix. These acquisitions represent our ability to acquire high-return assets that will boost our long-term value proposition. We're excited to welcome the HomCo, Trussway, Fulcrum, and Pima teams with their long-standing customer relationships and track records of profitable growth to the BFS family. We have spent approximately $630 million on M&A so far this year. The highly fragmented nature of our industry supports our ambition to invest on average $500 million per year for the next several years while deploying capital in a disciplined manner. As we navigate near-term market dynamics, we will continue to be acquisitive where valuations make sense. We remain vigilant stewards of capital to ensure we continue to drive long-term value creation for our shareholders. Now let's turn to slide seven to discuss our pioneering role in the digital transformation of the home building industry. The end of the third quarter marks just over one year since the completion of our Paradigm and Apollo acquisitions. The original Paradigm business continues to perform exceptionally well, and we are investing in the long-term growth of that business. On the home builder software side, we remain committed to executing our development plan to build out of our digital sales team and integration with BFS operations. As we highlighted last quarter, we successfully integrated our structural design, material takeoff, and visualization models into one streamlined process for our pilot customers. We now have 18 new digital sales representatives in place with more than 330 customer meetings held during the third quarter. We are excited to tell you about a new technology that we will be introducing to the marketplace at the beginning of 2023. Our new myBLDR.com website, which will provide our small builder customers easy-to-use digital tools to virtually design and build their next home and engage with key operational functions, including planning, specifying products, ordering materials, and budgeting. We believe our launch of this platform will help us grow the BFS brand and build on our momentum as the supplier of choice in the home building industry. Turning to productivity. In addition to the $55 million of carryover synergies, we have delivered $73 million in savings so far in 2022, and we expect to exceed $100 million in productivity savings for the full year as we drive improvement projects and leverage our BFS One Team operating system. Last quarter, we outlined the increased resilience of our business model, and we believe these are important points to reiterate in this current environment of macro uncertainty. In a scenario of a challenged market where housing starts are down significantly, we have many levers to pull, as shown on slide eight, that will allow us to quickly respond, including effectively managing costs through our variable expense structure to flex expenses with demand, optimizing capacity, and further streamlining our footprint, reducing discretionary spend, accelerating productivity projects, and taking appropriate workforce actions. Our scale, combined with these initiatives, allow us to operate in a much more proactive and effective manner compared to the last recessionary cycle 15 years ago. As we have all seen in the public builder announcements, the commentary has suggested a 30%-40% decline in order rates on average. While we had very strong third-quarter results, we have begun to see a slowdown in average daily sales as higher mortgage rates and declining consumer confidence are weighing on demand and commodity prices. Our September and preliminary October volumes were down low double digits versus a year ago amid a significant decline in early-stage build products. As such, we quickly pulled a few levers to curb our costs, including bringing our inventory in line with evolving sales levels, putting a moratorium on non-essential travel, reducing headcount and overtime to align with volumes and rationalizing facilities. This work is never easy, and these are difficult decisions with respect to our affected team members. We must be responsive to the market deceleration and best position the company to navigate this environment. We are proactively managing into the downturn. We are prepared to act decisively to protect and resize the business as necessary. We anticipate that the operating environment will remain challenging for the foreseeable future. We are committed to strategically accelerating our leading market position, allocating capital towards value-generating organic and inorganic growth opportunities, and delivering on our overall value proposition. We are confident that no matter the operating environment, we will continue to execute well, outpace the market, and create long-term value for our shareholders. As laser-focused as Builders FirstSource is on making fundamentally sound business decisions that drive value for our shareholders, we are equally devoted to supporting the communities where our team members and customers reside, especially in times of need. The past several weeks have been difficult for many due to the devastation caused by Hurricane Ian. Our hearts go out to all the individuals and families who have been impacted. We were relieved to learn that our team members are safe. We are saddened that a few of them suffered catastrophic damage to their homes. We stand behind each of them as they work to rebuild. In recent weeks, we've donated over $500,000 to humanitarian organizations supporting the Hurricane Ian relief efforts. The organizations Builders FirstSource has made contributions to include the American Red Cross, Samaritan's Purse, and BFS Cares, the company's emergency assistance program that helps team members who are facing hardship immediately after a natural disaster. Moreover, I want to recognize our countless team members who have selflessly gone above and beyond to support those displaced by Hurricane Ian, with special gratitude going to our team members in Wausau, Wisconsin, who partnered with their local community to send a semi truck filled with supplies and essentials more than 1,500 miles to Fort Myers, Florida. It's times like these that leave me truly humbled to lead such a caring and supportive organization. I extend my heartfelt appreciation to these exceptional team members and to all those individuals and organizations offering support on the ground and assisting with the relief efforts. We stand ready to support these communities and help them rebuild. I will now turn the call over to Peter to discuss our third quarter financial results. Thank you, Dave. Good morning, everyone. I'm pleased to report that we delivered strong financial results in the third quarter. We generated a record quarterly free cash flow of $1.4 billion. We repurchased $658 million of our common stock during the quarter, all while maintaining a strong balance sheet. Our financial performance reflects consistent execution, disciplined operational management, and alignment with our strategic priorities. We are operating with a proactive mindset and have enhanced our already strong expense management processes amid a challenging operating environment. Our fortress balance sheet, low net leverage profile, and substantial liquidity provide us with the flexibility to navigate a dynamic but decelerating market. All the while, we are maintaining focus on creating long-term shareholder value. I will cover three topics with you this morning. First, I'll review our third quarter results. Second, I'll provide an update on capital deployment. Finally, I'll discuss our guidance for full year 2022. Let's begin by reviewing our third quarter performance on slide nine. We generated net sales of $5.8 billion for the quarter, which increased 4.6% compared to the prior year period. Core organic sales in the value-added products category grew by 19.9%, reflecting our work to enhance our product mix and meet customer needs. Gross profit was $2 billion, a 17.6% increase year-over-year. Gross margin increased 390 basis points to 35% as we increased sales in our value-added product categories and continued pricing discipline in what has been a supply-constrained market, but is returning to normal. SG&A grew 14.3% to $1 billion, with about half of that increase driven by two factors. Additional operating expenses from locations acquired within the last 12 months, and higher wages and variable compensation costs as a result of increased net sales and profitability. The remainder of the increase was driven by fuel-related expenses and strategic initiatives such as IT, productivity, and digital investments. As a percentage of net sales, total SG&A increased by 150 basis points to 17.4%. We remain focused on the importance of controlling expenses and driving EBITDA improvement. We executed successfully during the third quarter as adjusted EBITDA increased 20.1%, primarily driven by net sales growth, a higher mix of sales from value-added product categories and disciplined pricing. Adjusted EBITDA margin improved 260 basis points from the prior year period to 20.3%. Adjusted net income was $814 million, or $5.20 of adjusted EPS, compared to adjusted net income of $697 million, or $3.39 of adjusted EPS in the prior year period. The 16.8% increase in adjusted net income was primarily driven by an increase in net sales and gross margin, partially offset by higher income tax and SG&A expense. Let's turn to our strong balance sheet and liquidity on slide 11. Our third quarter cash provided by operating activities was $1.5 billion, while capital expenditures were $84 million. We generated robust free cash flow of approximately $1.4 billion, primarily driven by core organic sales growth, increased profitability due to effective pricing and cost management, and disciplined working capital management. Free cash flow yield was 33.3%, while operating cash flow return on invested capital was 39.8% for the trailing 12 months, ended September 30th. Moving to capital deployment. As Dave mentioned, this year we have put approximately $630 million to work through six acquisitions. During the quarter, we repurchased approximately 11.2 million shares for $658 million at an average stock price of $58.57. To put this in perspective, the repurchase equates to $1.24, nearly 70% of the $1.81 adjusted EPS change. In addition, we have repurchased approximately 1.8 million shares so far in Q4 for $112 million at an average stock price of $61.54. We are committed to prudent capital deployment, and we will continue to look for favorable opportunities to repurchase shares. Our net debt to EBITDA ratio as of September 30th was approximately 0.7 times our last 12 months adjusted EBITDA and approximately 1.4 times our estimated 2022 base business EBITDA, well within our stated target of one to two times. Excluding our ABL, we have no long-term debt maturities until 2030. At quarter end, our total liquidity was $1.3 billion, consisting of $1.2 billion in net borrowing availability under the revolving credit facility and approximately $100 million of cash on hand. We had a fantastic quarter. We achieved strong metrics across the board, deployed capital, and enhanced our overall leadership in our industry. I want to thank our entire team for their skill and dedication. Turning to slide 12, we continue to believe it is important to assess our results using a base business methodology. This approach showcases the underlying strength and profitability of our company by normalizing commodity volatility. As a reminder, our base business definition assumes normalized margins and static commodity prices at $400 per thousand board feet. We are maintaining our full year guidance on our base business sales and adjusted EBITDA. Turning to slide 13, I would like to discuss our full year base business and total company outlook as we enter the final months of 2022. We expect results to decelerate over the balance of the fourth quarter amid higher rates, normal seasonality, declining commodity prices, and a cooling housing market. While we are seeing slower single-family starts, we expect our results through the end of the year to be supported by the substantial backlog of homes under construction. Our base business guide on net sales remains unchanged at 8%-12%, or $17.2 billion at the midpoint. Our base business EBITDA guide also remains unchanged. We continue to expect growth of 18%-22%, or $2.2 billion at the midpoint. Given that we have less than two months left in the year, today, we are also providing guidance for the full year 2022, including total net sales, adjusted EBITDA, and adjusted EBITDA margin. This will provide you with our anticipated full year total company performance. We expect full year total company net sales to be $22.5 billion-$23 billion, or approximately 13%-16% over our 2021 net sales of $19.9 billion. We expect adjusted EBITDA to be $4.2 billion-$4.4 billion, or approximately 35%-42% over our 2021 adjusted EBITDA of $3.1 billion. Adjusted EBITDA margin is forecast to be 18.5%-19.5%, or approximately 310 to 410 basis points over the 2021 adjusted EBITDA margin of 15.4%. We now expect full year 2022 free cash flow of $3.1 billion-$3.3 billion, an increase from our prior range of $2.5 billion-$3.0 billion. The improved free cash flow forecast is based on our higher profit outlook on total results and the timing of commodity price fluctuations. Our 2022 outlook is based on several assumptions which are outlined in the earnings release and presentation. Given inflation, higher mortgage rates, and cancellation rates in the double digits, we expect full-year single-family starts across our geographies to be down low double digits. We continue to expect multi-family starts to be up in the low double digits, and R&R to be up in the low to mid-single digits. Regarding near-term demand, multi-family is gaining momentum and will improve diversification of our mix in coming quarters. CapEx guidance for 2022 is $275 million at the midpoint versus our prior estimate of $300 million due to continued supply chain delays. As we begin to close the books on 2022 and are in the midst of finalizing next year's budget, we thought it might be helpful to provide a reminder of our ability to weather a challenging operating environment. We will provide our full 2023 demand outlook during our Q4 call in February. In the spirit of transparency and to give you a high-level sense of what our business is capable of, I'd like to provide you an illustrative example of single-family starts declining 20% to 800,000 next year from approximately 1 million in 2022. In that example, we believe we can sustain a double-digit EBITDA margin and deliver solid cash flow of over $1 billion, given our differentiated platform, consistent execution, and disciplined operational management. We are operating with a proactive mindset and have enhanced our already strong expense management processes to tightly control costs. Our premier positioning and robust operating platform have provided us with line of sight to more than $3 billion in free cash flow this year. A fortress balance sheet with no long-term debt maturities until 2030 and over $1.3 billion of liquidity to outperform into 2023 and beyond. Let me turn the call back over to Dave for his closing remarks. Thanks, Peter. I want to close by reiterating the underlying strengths of our business that will enable us to gain share in any environment. We are the market leader in a highly fragmented industry. We have a growing portfolio of value-added products and solutions that resonate with our customers, making us a partner of choice. We have a diversified revenue stream and are constantly optimizing our capacity and operations for long-term growth. We are laser-focused on operational excellence, which adds to our competitive advantage. We take a disciplined approach to organic and inorganic growth with a long-term focus. We generate significant free cash flow, which enables financial optionality in times of uncertainty, and we consistently generate solid returns while executing our long-term strategy. Our industry is clearly experiencing deceleration versus the prior year. We are not discouraged. We are confident in our ability to navigate through any market environment. We will remain proactive in implementing our downturn playbook to streamline costs and stay close to our customers and supply partners. We will continue to execute through near-term market volatility while keeping our sights on our long-term goals, our core values, and our operating principles as our guideposts. Finally, perhaps most importantly, we have a very strong, seasoned, and highly experienced leadership team that has succeeded through many prior cycles and knows how to deliver compounded shareholder value over the long term. Thank you again for joining us today. Todd, let's please open the call now for questions. Thank you. At this time, if you would like to ask a question, please press the star and one on your touch-tone phone. You may remove yourself from the queue at any time by pressing star two. Once again, that is star and one to ask a question. We'll take our first question from Matthew Bouley of Barclays. Please go ahead. Morning, everyone. Congrats on the results. Good morning. Thanks for taking the questions. The comments you made at the end there about sustaining a double-digit, excuse me, EBITDA margin in a scenario of 800,000 single-family starts. If I look at the Q4 guide, for example, I think you're implying something like a 70% decremental margin on EBITDA. I know we're kind of in that period of commodity normalization and loosening supply chain. How does that decremental for Q4 kind of break out between commodity and non-commodity? Then just kind of give us some comfort around what that decremental could look like in 2023 that sort of allows you to sustain that double-digit EBITDA margin. Thanks, guys. Hey, Matt. Sure. Yeah, no, that's a good question. I think what you're highlighting there is what we're seeing in the market in terms of a confluence of numbers happening at the same time. If we think about what Q4 normally is, just in a traditional year, it's a decelerating time for us due to seasonality. We generally see a decline in commodity prices in those fall periods. Overall, the business is sort of buckling down for This year. You overlay the market environment where you see a slowing market, you see a lot of the supply chain returning to normal, you see commodities decelerating into that, as well as the seasonal decline. The trend, if you compare it to last year, obviously, is in the opposite direction in all of those categories. What we're anticipating in that slower market is that decline in commodities, a decline in sales, some retrenching of the gross margins. We talked about that, I think, extensively over the last year or so in terms of a return to normal over time. We're beginning to see all of those things play out. That's really the dynamic in the fourth quarter. We've considered all of that in our discussion about where we think we would be at with 800,000 starts. We think that the normalized commodity prices, our ability to manage through the market, as well as the strength of our business and our mix, really will put us in a position to still be in that double-digit EBITDA space, even considering all those factors. Okay. Got it. That's helpful. Thanks for that, Peter. Secondly, I wanted to ask about pricing. You guys mentioned a couple of times at the top that there has been pricing discipline in a supply-constrained market, that market is now returning to less supply-constrained. I think if I play with your implied Q4 guide, I take what you said at the top around volumes tracking down low double digits. I could be wrong, it seems like you might be implying that core pricing might also be negative in Q4, please correct me if I'm wrong there. Just how are you guys thinking about price deflation on non-commodity products, and are you starting to feel more pushback from home builder customers there? Well, I give my customers plenty of credit. We always see pushback, right? I think that the dynamic in terms of the margins and the way that we're seeing margins flow through as a result of supply is as you'd expect, right? As more supply becomes available, it becomes more competitive, that's what we've baked in. We do think there'll be a bit of gross margin regressing back towards normal. We won't get there in the fourth quarter. Certainly heading that direction. Competition is increasing as you would expect, we're ready for that. We're ready for the battle. It's part of kind of who we are and what we do. I'm not sure that there's a lot of detail that I can provide you. Not a lot of pullback from vendors in terms of their pricing passthrough. It slowed down a bit in terms of increases, but we haven't seen cuts in any material way, but that could happen. Yeah, I think that last point is an important one there, Matt. I think the volumes, the allocations that we saw for the last couple of years have pretty much gone away. To Peter's point, outside of the commodities, we have not seen price concessions from our suppliers to this point. Got it. I'll leave it there. Thanks, Dave. Thanks, Peter. Good luck, guys. Thanks, Matt. Thank you. Thank you. Our next question comes from Trey Grooms of Stephens Inc.. Hey, good morning everyone, have to also say congrats on the great performance in the quarter. Thanks, Trey. Good morning, Trey. Kind of just circling back for a little bit more clarity on that double-digit EBITDA margin you're referring to in that kind of single-family housing start around 800, Peter. Also kind of going back to your long-term gross margin guide, 27%. You've talked about kind of margins regressing towards normal. Is that 27 kind of the if we kind of triangulate into that double digit, it seems like that's kind of the number you're pointing to in that environment. Am I off there? Or in that environment, is there a difference in how we should be thinking about that long-term number? The two pieces. The 800 is just an example. Sure. We want to give you a sense of where we think that double-digit EBITDA can be defended. This is all forecast. I don't want anybody writing this on stone tablets or anything, but it's what we think. I think we've got a good business. We know we've looked at our numbers six ways from Sunday, and we feel good about where we think we'll be even into a modestly down market. When it comes to the gross margins, we talked about 27% plus, somewhere north of 27% being a normalized gross margin that we feel good about defending. There's a lot of question marks still about where things will settle out with margins given the dynamics in the marketplace. Certainly, it'll be more challenging than it has been over the last year or two just because of the increased competition and the slower starts. There's still reason to believe that improved discipline in the market, improved work within our organization about how we think about pricing will allow us to maintain a level north of 27%. Certainly not ready to give kind of refined guidance there, a movement back from 35% towards that 27% is what we continue to point to and what we expect to see both in Q4, also in that sort of down 20% single-family starts metric that we threw out there. Got it. Trey, I would just add just on the double-digit EBITDA margin, I think you'll recall that neither legacy company had double-digit EBITDA margins at those sort of start levels. I think we've been talking a lot since the merger about the strength of the platform that we've built and the differentiation that we have, and we're confident that we will see that play out through the cycle. Yep. No, I got that very loud and clear. You guys are executing well with all of that, so hats off there. On that, I guess the $100 million in productivity savings that you're talking about for the full year, how volume or sales-dependent is that? And I guess, how much of that would be sustainable in a year if we were looking at that kind of housing start environment? I'll start, and then I'll flip it over to Peter. When we outlined our forward projections and our financial plan at the investor day a year ago, we said importantly that we were targeting, over the long term, 3%-5% in fixed cost productivity. What you're starting to see is that play out, and we started slowly through the integration of the merger, and we put those synergies behind us, and we've stepped on the gas on operational excellence, and we continue to build momentum. The clearest answer that I can give you is we believe we are building fundamental strengths in that area of the business. There's lots of opportunity to continue to optimize what we do and get more efficient. We're confident that we're going to move towards that long-term target over time. I guess all I would add there, Trey, is that while there will certainly be volume adjustments to certain items that are volume-driven, these are operational changes, right? We're tracking them as a finance organization to ensure that there's real P&L impact from things that have changed before and after. We're not just tracing volume improvements and telling you the leverage number. These are changes in operations, process, staffing, expenses that we can track because we've done things differently to get rid of waste and improve our efficiency. Got it. I'll pass it on. Thanks, guys. Again, congrats on the great work in the quarter. Appreciate it. Thank you. We'll take our next question from Mike Dahl of RBC Capital Markets. Morning. Thanks for taking my questions. Good morning, Mike. Dave, Peter, thanks for the additional color so far. One more follow-up on the 2023 sensitivity. Appreciate it's very high level at this point. If I think about, as you acknowledged, builder orders down 30%-40% in recent months, the lag that that hits you with in a starts environment of 800,000 or down 20% next year, it's possible that the lagged impact to you is potentially even worse. Does that sensitivity contemplate that? I guess maybe ask it a somewhat different way, that's the level it sounds like you're comfortable saying you can defend double-digit margins. What type of decline would it take in your sensitivity to drive margins below double digits? Yeah, I think it's a little early for us to dig in, Mike, on 2023. We're in the midst of our budgeting process here. We'll finish that up before the end of the year, as you'd expect. We certainly don't want to get ahead of our customers on any projections. As you know, it's a challenging market, and it's changing day by day. We just gave that example as illustrative in the confidence. As I said on the last question, we're in a different realm of capabilities in this organization and this company we've built than we were any time in the past. That was really illustrative and really didn't mean to opine on what starts may be next year. It's too early to tell. Got it. Okay. My second question, just on the capital allocation. Obviously you've got the free cash flow to support your goals this year and really nice buyback activity. You have leverage on the base business ticking up a bit. If you're looking out to next year and anticipating some core declines in the business, while you may throw off some strong free cash flow, it seems like it's possible that leverage could keep ticking up towards the upper end of your one to two times range. How are you thinking about the relative aggressiveness of your buyback program? You've got funding earmarked for M&A. You've been really aggressive on the buyback. Is it time to toggle that back a little bit? Any thoughts on how you're looking at the buyback going forward? Sure. Thanks for the question. Look, our capital allocation priorities have not and will not change through the downturn. We'll invest first in the future growth of the company, inside the company. We'll look at M&A next, and we'll return capital to shareholders as our third priority. However, even in the M&A front, our pipeline is still very strong. Valuations have to make sense. The same thing around share repurchases. We, to this point, Mike, have been very disciplined stewards of capital. We will be disciplined stewards of capital through the cycle. We've got a bulletproof balance sheet. We're very comfortable with that. Sure, to your point, our leverage may tick up some. We believe our cash flow will remain strong, and we're going to do the right things with our cash. Thanks, Dave. Thank you. Thanks, Mike. Thank you. We'll take our next question from Ketan Mamtora of BMO Capital Markets. Thank you. Congrats on a strong quarter. Peter, coming back to the example that you gave and whatever starts drop we may see next year, whether it is 10, 15, 20, whatever that number may be. I'm just curious, how does that impact your base business EBIT of $2.2 billion? It's not the margin, but just the absolute EBIT. With single family as three-quarters of your total business, should we think about it as a similar drop in the base business EBITDA? Should it be greater? Should it be less? Any sort of high-level perspective on that would be helpful. Sure. Yeah, no, that's a great question. If you think about our base business, it really is representative of the core of our operations and how it is functioning as a combined entity post-merger, but more importantly, through the cycle. It is fair to expect we would see sales on the base business move based on starts. It's the best predictor of our business in the long run. Single-family starts, multi-family starts, representing probably a combined 80%, roughly, of our overall sales. As you think about the dynamics within the space more broadly, there has also been, and we've talked about this a lot, a pretty significant impact on gross margins due to the supply chain issues. Certainly, we would expect gross margins to normalize a bit. If you implement, as you described, a number of scenarios around single-family starts or all starts declining, and you account for gross margins, there is some de-levering that is going to happen in the overall business. That's the nature of the math, right? We'll still be healthy, we'll still be very strong, but there is going to be a smaller amount of EBITDA to be gained on a smaller business with more competitive gross margins. That's broadly how I would describe it. What I would say are the counterpoints to that is the increased investments we're making in value add, the share that we're gaining, and the productivity improvements we're making in the business just to be better at what we do. There's a balance there. That's what we're working through right now in our planning for 2023, to be able to give you better dialed-in numbers. No, this is great. Very helpful. One other follow-up question. Obviously, we are starting to see cancellation rates tick up, stocks come down, but I'm just curious, how long do you think it will take for builders to work through the current backlog of homes that are there? Is it a 1 to 2-quarter event, or less, or more? That's a great question. I really wish I knew the answer to that. On one hand, I think we've seen really nice trends in terms of those homes under construction in total stay quite high, which indicates there's some cushion there. The counterpoint is a little bit what we alluded to in the script today. We have seen a bigger decline in the early products. Say that another way, if you think about the construction cycle of a home, you're going to start with your framing lumber, you move to trusses, then windows and doors. We're seeing bigger declines on the earlier products, which would indicate that we're starting to build through some of that unit under construction backlog. Timing of it, tough to say. I think the most common forecast that I've heard would be Q4, Q1, we would burn through the bulk of it, but I think it's just too early to say. Got it. That's very helpful. I'll turn it over. Good luck in the back half and into 2023. Thank you. Thank you. We'll take our next question from Adam Baumgarten of Zelman & Associates. Hey, good morning, everyone. Good morning. Just going back to the September and October volume trends, can you maybe give us a sense for how the value-add business performed? Did it continue to outperform the overall business in a down environment? It did. There's a few reasons for that. Obviously, we've invested in the value-add part of our business over the last year or so, both in the form of internal investments, new capacity, better facilities, better automation, better productivity, but also in the inorganic side with the acquisitions we've made. Both of those have done well. You layer on the other components, windows, doors, and millwork. That's an area we've made a lot of investments in over the past, really, decade, and that has yielded some really nice performance and ability to compete. Our focus in those areas is paying off. We think it will continue to do that. Now, that isn't to say that we won't still face challenges in a market where there's fewer starts, but we think we're very well positioned to compete and to win in that environment. Got it. Thanks. Then maybe just some additional color on myBLDR.com, that launch that's coming up. It sounds like it's targeted towards smaller builders. Is that an incremental opportunity to the $1 billion that you guys have sized over time? And maybe just the market opportunity for that launch, just in and of itself, would be helpful. Yeah. Very good question. No, it's not incremental to the billion. As we said, we bought a platform that we were very excited about with Paradigm, but it was very narrowly focused, again, on window and door manufacturers and the retail side of the business. As we said, we've been investing heavily in the development of that platform to build it out to be able to handle the whole house design and configuration. We're hitting a major milestone with that launch. As we said from the beginning, we are targeting this at the small builders first. Consistent with what we said, we're excited about that milestone. There'll be more to come over time, but 15, 16 months in, with the heavy lifting we have and continue to have on the development side, we're excited to bring that forward. Got it. Thanks a lot. Best of luck. Sure. Thanks. Thank you. We'll take our next question from Collin Verron of Jefferies. Good morning. Thank you for taking my questions. I just wanted to start back with your illustrative 20% decline in starts environment. Can you just provide some more color about the core organic sales declines and the decremental margin assumptions that go into that? I ask just because you're taking share, especially from the value-add products. There could be some changes in core pricing. There seems to be a lot of moving pieces here beyond just the single-family starts. Any color there would be helpful. Morning, Collin. Yeah, to be honest, the goal wasn't to try and get into the dissection of the sub-numbers. I think that my comments to Ketan a little while ago are certainly applicable here. That we do anticipate there to be declines on a number of different areas. We think starts will go down. We think commodities will continue to revert back to that long-term average. We think there'll be some regression to the historical norms in margins. Beginning to see that in the third and fourth quarters. Certainly expect that to play out through the year. It's an environment where even with those pretty significant slowdown estimates included in the metric, we're still at double-digit margins. We're still in a position where we've got a market-leading platform, where we've got investments in value add, in digital, improvements internally. Our productivity is helping to lead us through a very difficult time with a very profitable business. It's certainly inclusive of those factors, you're right. We'll have a lot more detail for you as we get into the February announcement where we give the guide on 2023. Okay, thank you. Can you just touch on the M&A pipeline and your strategy here, just given the weakening macro environment, what kind of purchase multiples you're seeing in the market, and maybe how that's different from history? Well, we've still got a very strong pipeline, as we said for a while now. Valuation becomes the issue at times like this, right? We've executed, so far, 13 acquisitions since the merger. All we believe with high level of discipline on valuation. We will continue to do that through the downturn. I expect that things may slow down a bit here for a while, and dependent upon the length and the severity of the downturn, the pipeline may get more active through the course of time. Again, I just want you to hear and understand, we have been and will remain disciplined on valuations. Great. Thank you. Have a good one. Take care, Collin. Thank you. We'll take our next question from Reuben Garner of The Benchmark Company. Thank you. Good morning, everybody, and congrats on the results from the quarter. The value add versus the commodity or non-value-added businesses, can you talk about what you're seeing on the margin front so far in this quarter or towards the end of the last quarter? Have the value-added margins kind of held in better and commodities kind of already returned to what, quote-unquote, "normal," or have they kind of progressed in a similar manner? Morning, Reuben. Yeah. Good question. The margins have, as you'd maybe expect, begun to return to normal, but led more by the commodity side than by the value add side, right? Historically speaking, value add prices and margins are a bit stickier. Commodities move more quickly. They respond more quickly, just given the volatility of that cost category in general. Okay. We would expect that to continue, right? We would expect it over time to normalize quicker. We just haven't gotten all the way yet. We've gotten a little bit of the way. Got it. For the scenario that you provided for next year. I guess you mentioned facility rationalization. Any more detail that you can go into there? Is that mothballing of manufacturing capabilities? Is that just consolidation of distribution footprint? Is it none of those? What kind of savings are embedded in that outlook? You mentioned making some cost cuts to weather the storm. Is there any kind of dollar amount that you could throw out there? I would just say that to this point, from the peak, we've taken out about 2,600 of our headcount, that peak being really at the end of the second quarter, early in the third quarter. We have rationalized or are in the process of rationalizing 17 facilities. To your question, I just want to be clear, Reuben, we are not taking out manufacturing capacity. This is more consolidation, primarily in some of the smaller markets where we may have redundant assets that given the last two years and the strength of the market, we have not needed to shut those facilities down. In fact, we've needed all that capacity that we've had. Times are different now. Really don't want to quantify any of that at this point. As I said on the call, we will be proactive and decisive in actions given what happens in the marketplace. Understood. Thank you, guys, and good luck going forward. Thanks a lot. Thank you. Thank you. Our next question comes from Keith Hughes of Truist. Thank you. Question on multifamily. It's continued to be strong as you discussed in your guidance. I guess. How long of a backlog, or how long of a view do you have on multifamily of it continuing at anywhere near this kind of level? Hey, Keith. Yeah, thank you. Multifamily is a bright spot. As we've talked about, there is a need for housing. People need a place to be, and it would appear that with the slowdown in single-family starts, multifamily is certainly staying strong. We have a great franchise in that space. The ability to invest is something that we've stayed committed to. Our existing multifamily business on trusses and millwork, we added to that with both Panel Truss and Trussway this year with acquisitions. Right now we've got over $1 billion, $2 billion, $1.3 billion of backlog in that space that we know we're going to be able to meet throughout the year. Certainly feel good about the strength and the profitability of that business. As we bring the teams together and integrate them into a consolidated Builders FirstSource team, we're excited about what they're able to deliver. We're certainly very optimistic in that space. On multifamily, if activity planning and start activity slows down, how long does it take to show up in your numbers? Generally, you're talking about multifamily being a substantially longer lead time. Yeah, that's what I'm asking. We usually say around nine months. Yeah, it's usually around nine months versus 30 to 60 days, probably on the single-family side. It does vary a bit, but that's a good average. Okay. Thank you. Thank you. Our next question comes from Stanley Elliott of Stifel. Hey, good morning, guys. Thank you all for fitting me in. Quick question on the slide eight, you talk about some of the downside actions you guys are taking. With the double-digit EBITDA margin framework that you've laid out, is that saying that you basically need to complete all of these downside actions? Can you hit those targets where you are? I was thinking more just from a leverage standpoint into next year, should things decelerate from here. Yeah, we didn't link those actions directly to those double-digit EBITDA margin. That was more illustrative and giving you an indication of the levers that we have to pull dependent upon how severe the downturn gets. The Harvey balls there just show you that we're fairly early into acting on all that capability. I wouldn't think about those as directly linked, but certainly, where the downturn gets severe, we will pull more and more levers as time goes on. I guess switching gears on the automation side, you talked about some high return CapEx projects. Could you help us kind of where you are? I saw the CapEx guide come down modestly. What are expectations for some of those projects, and how should we think about them into next year? Well, as we have been, we continue to invest heavily in automating our manufacturing facilities. We think that's the right long-term play. We think labor's going to be constrained in this industry, and particularly skilled labor, which we need in our manufacturing facilities for a long time to come. We talked about our first fully automated floor truss line that we started up in Georgia the last quarter, and at that time, we said we had eight more coming over the next couple of years, and we are fully committed to that and looking to future automation potential across our facilities. That's the right long-term play in any market. We will continue outside of maintenance of our facilities and refreshing our rolling stock. That is the single biggest area we'll deploy capital into the company going forward. Stanley, given the strength of our balance sheet, we have the ability to do that even in a slower market. I think taking advantage of those windows where we can actually get access to some of this equipment that we need is the right way to manage for the long term, right? We haven't been able to get all the trucks we need. We haven't been able to get all the equipment we need. We do have the ability to continue to refresh the fleet and do what we need to have that equipment when we need it, even right now when things are slowing down. Perfect, guys. Thank you very much. Congratulations. Best of luck. Appreciate it, Stanley. Thank you. Our next question comes from Kurt Yinger of D.A. Davidson. Great. Thanks, good morning, everyone. Hi, Kurt. Just on the gross margin front, has the speed at which you've seen that start to normalize, I guess, in the latter part of Q3 and into Q4 surprised you at all? Is that 27% kind of dependent upon a certain starts assumption? Morning, Kurt. Thank you for the question. I think that the 27% is in a band of starts. I don't know if it's a specific number. Honestly, the 27% plus is unfortunately at this stage, a bit hypothetical. We're going to have to watch the market and see how it pans out with the combined entity and the starts that we grapple with. We still feel good about it by what we've seen so far. I would tell you if I'm surprised on the gross margin side, just from a forecasting perspective, I would tell you I'm surprised it's stayed as strong as long as it has. It's done quite well. Right. It's migrating down, but in a very measured way. Right. Okay. That's helpful. Just lastly, as builders start to kind of zero in on the cost side with the loss of some pricing power and maybe trades availability becoming incrementally better, how do you think about that impacting the value proposition of some of the value-added offerings? Yeah, we're excited about the long-term potential of those value-added offerings in any market. You think about it, labor may be more readily available, but even in a downturn, efficiency at the job site matters for our customers. They're going to be doing a lot with a lot less people. They're going to take some of the same actions that we described that we're taking here. Any way that we can make their work more efficient, we believe will continue to get traction and continue to drive growth in those products. To Peter's earlier comments, we haven't seen any slowdown in our value add on a relative basis compared to the rest of the business. We think our penetration will continue. Got it. All right. Well, appreciate the color, good luck here in Q4, guys. Appreciate it, Kurt. Thank you. Our next question comes from Alex Rygiel with B. Riley. Thank you. Can you talk a bit about your inventory level, your comfort with it, how it compares to historical levels, and any other sort of inventory that could be sort of out in the channel, understanding that you are most of the channel? Thanks, Alex. Good morning. Inventory's been a real focus for us as we observe the market, trying to make sure that we have the right amount on hand, right? We generally manage it on a days basis in the field, ensuring that we're able to support the dynamics in the market. That requires us to stay close to it during up and down moments. That said, I think we're in the right position. I think we've repositioned and cleared the decks on what we needed to. We talked a little bit about windows being an overhang. Certainly, we've made progress on that. A little bit more to go, but from a total company perspective, it's pretty immaterial. We're feeling pretty good. Certainly, there's always improvement. We can always optimize, but certainly well within the band of where we'd like to be. secondly, on slide 17, that shows your estimated base business on certain commodity prices. It would appear that you didn't change it since the second quarter, despite a number of acquisitions. Is there a sort of two or three simple explanations for that? Yeah. We don't full-year adjust the new acquisitions. It's just the part years. We're trying to keep it linked to the current look and then applying the normalized margins and the lumber prices. We've talked about a couple of different ways to update that sensitivity. We think we're going to have something that might be a little more helpful to folks when we do our Q4 announcement. It has stayed the same. It has not moved materially, primarily because it's just the part year additions for any M&A. Awesome. Thank you. Sure. Thank you. Thank you. It appears we have no further questions at this time. This will conclude today's third quarter earnings call. We thank you for your participation. You may disconnect at any time.