Good day, and welcome to the Builders FirstSource second quarter 2026 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 number one on your phone at any time during the call. I'd now like to turn the call over to Heather Kos, Senior Vice President, Investor Relations for Builders FirstSource. Please go ahead. Good morning. Welcome to our second quarter 2026 earnings call. With me on the call are Peter Jackson, our CEO, and Pete Beckmann, our CFO. The earnings press release and presentation are available on our website at investors.bldr.com. We will refer to the presentation during our call. The results discussed today include GAAP and non-GAAP results adjusted for certain items. We provide these non-GAAP results for informational purposes, and 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 statement 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 Peter. Thank you, Heather. Good morning, everyone. Our second quarter results reflect the strength of our differentiated platform and the adaptability of our operating model. We remain focused on the factors within our control, including managing the business with discipline and leveraging both our technology capabilities and our value-added solutions. This approach continues to strengthen our position as the partner of choice to home builders. While housing market conditions remain weak, we are continuing to invest in innovation and capabilities that enhance the customer experience, improve efficiency across the value chain, and reinforce our competitive advantages. Our business model is built to perform through the cycle, and we are confident in our ability to outgrow the market over time and create sustainable long-term value for our shareholders. Now, let's turn to slide four. Our second quarter performance underscores the resilience of our platform in a challenging housing environment. Sales and adjusted EBITDA were in line with expectations, supported by the strength of our team, our value-added solutions, and the discipline embedded in how we run our business. Before turning to our strategic priorities, let me spend a moment on the market backdrop. Ongoing geopolitical uncertainty, persistent inflation, and elevated interest rates continue to weigh on affordability and consumer sentiment, creating a challenging demand environment for new residential construction. In response, we have lowered our full-year guidance to reflect a more cautious view of housing starts. Pete will walk through the updated assumptions in his remarks. Despite these macro headwinds, we remain committed to executing our strategy with a sustained focus on share growth, continuous improvement, and prudent capital allocation. We cannot control the market, but consistent execution against these priorities will strengthen how we operate today and position us to accelerate growth as conditions improve. In single family, builders are actively managing elevated inventory levels and costs in certain markets. At the same time, they are moving towards a greater mix of build-to-order homes versus specs. This environment plays to our strengths, and we expect to capture share by delivering outstanding customer service, bundling our broad product portfolio to drive affordability, and applying technology in ways that make our sales teams more effective. Performance varied by region, with continued softness across Texas and Colorado, partially offset by relative strength in the Northeast. In multifamily, higher interest rates have pushed out project start dates and bidding remains competitive. As the industry works through existing projects and occupancy rates remain below desired levels in many markets, developers continue to take a cautious approach to new starts. Based on the current pipeline, we expect multifamily results to remain pressured through the balance of the year. Slide five highlights how we are navigating the current environment while preserving the flexibility to invest for the long term. Our operating model enables us to right-size capacity, control spending, and align working capital with demand, all without compromising our commitment to customers. We have consolidated 36 facilities so far in 2026 and 91 in total over the last three years while maintaining an on-time and in-full delivery rate above 90%. These actions build on the broader cost discipline that Pete will detail. Supported by our industry-leading scale and leadership team, we are confident in our ability to manage through today's environment while strengthening the operating leverage we expect to realize as the market recovers. Slide six lays out the key initiatives underway across our four strategic pillars. This quarter, we believe we maintained our share in a challenging market, generating $28 million in productivity savings through targeted supply chain and logistics initiatives, and made steady progress on our SAP implementation. Together, these efforts reinforce our ability to compound value over time. Turning to slide seven. In the second quarter, we deployed approximately $50 million towards return-enhancing opportunities aligned with our capital allocation priorities. Strong free cash flow generation through the cycle gives us the flexibility to invest in the business, pursue accretive acquisitions, and return capital to shareholders. Turning to slide eight. M&A remains an important lever in our capital allocation framework. We are focused on pursuing acquisitions that enhance our value-added product offerings and strengthen our position in desirable geographies. In June, we acquired Precision Design and Trim, expanding our installation capabilities in the Boise area. Since the BMC merger in 2021, we have completed 42 acquisitions, representing nearly $2.3 billion in annual sales, the equivalent of a top six LBM player. With the industry still fragmented, we see significant runway ahead and expect M&A to remain a key contributor to our long-term growth. Turning to slide nine. As we continue to advance our digital strategy, we are sharpening our focus on the areas where we believe we can create the most meaningful near-term value. Based on what we have learned from our AI and digital investments to date, we are increasingly prioritizing initiatives that improve the effectiveness and efficiency of our sales teams, enhance customer connectivity, and integrate seamlessly with the growing home builder technology ecosystem. We continue to direct our resources towards practical, scalable capabilities that support growth, improve execution, and better serve our customers, while protecting and building on the digital capabilities and IP we have developed. We remain confident that technology will be an important long-term differentiator for BFS, and we are ensuring our investments are aligned with opportunities that will drive the greatest value for our business. Highlighting one of our team members is something I look forward to every quarter. Today, I want to recognize Ralph Cummins, an inside sales representative at our Bainbridge Island, Washington location, who is celebrating 40 years with BFS and our legacy companies. In 1986, moviegoers were introduced to the original "Top Gun," and that same year, Ralph began his journey with our company. Both have stood the test of time, although Ralph has had a much bigger impact on the people around him. Ralph has built his career in retail sales and takes pride in keeping the store's inventory aligned with what customers need. He maintains a close pulse on the local market, consistently sharing insights that help the Bainbridge Island team better serve the builders and contractors that count on us. Ralph is also known for one especially sweet tradition. Every week, he bakes cookies for the team and our customers. Thank you, Ralph, call sign Sweetness. It's team members like you who make me proud to lead BFS. I'll now turn the call over to Pete to discuss our financial results in greater detail. Thank you, Peter, and good morning, everyone. Our second quarter results reflect the continued discipline we are applying across costs, working capital, and capital deployment. We remain focused on operating efficiently today while advancing the initiatives that support durable growth. Turning to the second quarter results on slides 10 through 12. Net sales decreased approximately 9% to $3.9 billion, reflecting lower core organic sales and commodity deflation, partially offset by growth from acquisitions. Core organic sales declined 8% in single family, 10% in multifamily, and 2% in repair and remodel. These results were generally in line with our expectations, given ongoing market softness and consumer uncertainty. As we've noted on recent calls, several factors reconcile single family starts to our sales. First, there is an approximate three-month lag between a start and our for sale. Second, the value of a comparable start has declined by roughly 10% on average since 2019 as homes have become smaller and more value engineered. Third, affordability pressure has extended into pricing across the supply chain, contributing to lower average selling prices per start. Against this backdrop, we believe that we have maintained share in the quarter, reflecting the competitiveness of our value proposition and our role as a trusted partner to home builders. For the quarter, gross profit was $1.1 billion, a decrease of 16.3% compared to the prior year period. Gross margin was 28.1%, down 260 basis points, primarily driven by a declining starts environment and related headwinds. Adjusted SG&A of $781 million, decreased $37 million, primarily due to lower variable compensation, reduced headcount, and the benefits of cost actions, partially offset by acquired operations and higher fuel and delivery expenses. Building on the actions we have already taken, we remain on track to deliver our previously announced $100 million of cost reductions. As we continue to proactively manage the business, we have identified an additional $40 million of run rate savings, increasing our total cost actions target for 2026 to $115 million. As a reminder, these specific actions include deeper cuts to overtime and temporary labor, adjustments to incentive compensation plans, reduced merit and overhead spend, additional facility consolidations, and tighter controls on discretionary spending. These incremental actions are reflected in our updated guidance and reinforce our ability to protect profitability, generate strong free cash flow, and preserve the flexibility to invest in the business through the cycle. Adjusted EBITDA was $329 million, down 35%, and adjusted EBITDA margin was 8.5%, down 350 basis points, primarily due to lower gross profit and reduced operating leverage on the sales decline. Adjusted EPS was $1.17, a decrease of 51% compared to the prior year. Now let's turn to the cash flow balance sheet and liquidity on slide 13. Our second quarter operating cash flow was $68 million, compared to $341 million in the prior year, reflecting lower net income. Free cash flow for the quarter was $32 million. On a trailing 12-month basis, our free cash flow yield was approximately 7%, and operating cash flow return on invested capital was 10%. Our net debt to adjusted EBITDA ratio was approximately 3.6 times. While above our long-term target, we remain comfortable with our leverage position. Our position is supported by $1.6 billion in liquidity and our strong free cash flow generation. We expect to move back within our target range as EBITDA recovers with the market. Second quarter capital deployment included $36 million of capital expenditures and $14 million on acquisitions, with no share repurchases in the quarter. Slides 14 and 15 outline our updated 2026 outlook and assumptions. Our guidance reflects continued weakness in housing starts, ongoing affordability pressure, and a more cautious consumer. Compared to 2025, we now expect single-family starts to be down nearly 7%, multifamily starts down 4%, and repair and remodel activity down 1%. As a result, we are guiding net sales in the range of $14 billion-$14.8 billion, adjusted EBITDA of $1 billion-$1.2 billion, and adjusted EBITDA margin of 7.1%-8.1%. We expect our 2026 full year gross margin to be in the range of 27.5%-28.5%, reflecting below normal starts activity. We expect free cash flow of approximately $400 million-$500 million. Our guidance assumes average commodity prices in the range of $390-$410 per thousand board feet, in line with the long-term average of $400. While lumber prices have pushed slightly higher, OSB remains weak. For Q3, we expect net sales to be $3.6 billion-$3.9 billion and adjusted EBITDA to be $275 million-$325 million. In closing, we are remaining agile to mitigate near-term pressures while investing strategically for the long term. Supported by strong liquidity, disciplined execution, and consistent free cash flow, we continue to manage capital with rigor, drive organic growth and productivity, and execute on our M&A pipeline. We remain well-positioned to create long-term value for our shareholders. With that, I'll turn the call back over to Peter for some final thoughts. Thanks, Pete. As the nation's largest supplier of building materials and value-added services, we combine national scale with strong local market relationships across the housing ecosystem. We maintain leading positions in manufactured components, windows, doors, and millwork. Our footprint, digital platform, and installation capabilities create a durable competitive advantage and strengthen our value proposition with customers. Backed by our experienced cycle-tested team, we are confident in our ability to deliver resilient results in the current environment and to capture meaningful upsides as the housing market recovers. Later this year, we will host our Investor Day, where we plan to share more on our growth strategy, operational initiatives, capital allocation framework, and long-term value creation opportunities. We are excited to discuss our vision of the future with the investment community. Thank you again for joining us today. Operator, please open the line for questions. Thank you. If you would like to ask a question, please press star one on your keypad. To leave the queue at any time, please press star two. Once again, that is star one to ask a question. In the interest of time, we do ask that you please limit yourself to one question and one follow-up. We'll pause for just a moment to allow everyone the chance to queue. Thank you. Our first question will come from John Lovallo with UBS. Your line is open. Good morning, guys. Thank you for taking my questions. The first one is, you reduced your single-family starts outlook, and you now expect mid-single-digit to high-single-digit declines. Your fourth quarter revenue outlook, though, implies sales are up about 4% year-over-year. If we think about roughly a three-month lag between starts and revenue, wouldn't single-family starts need to inflect positively year-over-year over the next few quarters to hit that target? That's right. I think the context for this is the dramatic decline we saw in builder behavior last year. I think that's the right sort of lens to look at this through. It's not really an increase in this year. It would be a seasonal decline like you'd expect, but compared against last year's precipitous decline, it looks a little bit better. Okay. Understood. Through some of our checks, it seems like some of the more recent high-cost market entrants that have been sort of competing on price have been flushed out of the market. One, if you could maybe confirm that, has this resulted in any easing in sort of the competitive dynamic in those markets? Well, I don't know that I can speak to specifics about flushing out. I hope you're right. I think that the reality is there's been some pretty aggressive price discovery. Folks have been absolutely focused on filling capacity around the industry. I think that people have made aggressive moves, sometimes too aggressive, and shown meaningful regret. The ability of our team to be able to navigate through that. Certainly, margins have been under pressure, that's obvious. To be able to do that and hold share from our leadership position, I think our team is doing a great job on that. I also think there are some tailwinds coming, and we've all seen lumber moving in a stronger direction. If OSB hadn't sort of eroded underneath it, I think that might be a nice story on the strength line. All of this is really dependent on what the overall market is going to do, the sense of uncertainty that the consumer feels, and what builders are trying to do to react. I think that's really what it boils down to. Got it. Thank you, guys. Thank you. Thank you. Our next question will come from Matthew Bouley with Barclays. Your line is open. Morning, everyone. Thanks for taking the questions. I guess a question around, again, what your home builder customers are doing around trying to reduce their direct costs. Maybe you can update us on their pushback versus the sort of vendor price increases that we're seeing out there. Obviously, you're calling out lower price in, I think, manufactured products and specialty building products. Certainly in the market, we're seeing vendor price increases in siding, roofing, et cetera. Maybe just kind of update us, kind of tick through all your major categories and what you're seeing from a pricing perspective and the ability to push that down to builders. Thank you. Thanks, Matt. It's a good question. There has been a lot of activity. Certainly, some categories are able to pass through just by virtue of what they are and what they're made of. The reality of petroleum internationally right now is under pressure. There are certain categories that are moving in response to that. I would say most of the other categories are pretty flat. There hasn't been much movement in terms of inflation. There are a couple of categories, some subcategories that, on a year-over-year basis, are still showing pretty meaningful declines on the prices that the manufacturers are charging. You think about some of the things we've talked about in the past. I think EWP, on a year-over-year basis, is still down. There are certain millwork subcategories that are still down. There are absolutely competitive dynamics in certain of the categories that have limited manufacturers' ability to pass through. I think that applies to us in some degree. We've, I think, done a good job of managing our capacity, but I think it's fair to say we have more capacity than we need for the existing market. We're making the prudent steps necessary to resize down, but also trying to make sure we're prepared to take advantage of a return to growth, which we think is likely to happen at some point in the future. Therein lies kind of that challenge of finding the right pricing levels. We are seeing pass-through. Builders, rightfully so, are fighting for every penny and trying to manage their own affordability. This has to be a win-win, and I think as the market works through that price discovery process, we're getting to a more predictable outcome on margins. I would say we're not quite where we want to be yet, but it's a lot more stable over the past six months than we've seen over the past few years. Got it. Okay. Thank you for that color, Peter. Second one is on M&A. Obviously, from a leverage perspective, presumably, you're going to be more careful with share repurchase here. I would think from an M&A perspective, certainly you can acquire EBITDA in a perhaps leverage-neutral fashion. What are you seeing out there in terms of the pipeline and when you have the kind of challenging market conditions like this, whether from a historical perspective or sort of what you're actually seeing now, is there a scenario where you might see more assets come to market, and how would you be looking to approach that? Thank you. Yeah. Thanks, Matt. Good question. We still think M&A is a great opportunity for us, right? There are a lot of players out there. There are a lot of desirable players out there in our space. We're continuing to probe and stay close. We certainly have been speaking to a handful of players that are looking to make a move now, various reasons, and think this is a good time for us to continue to lean into those opportunities. We'll continue to do that. You're right. The elevated leverage, not because of debt, but because of the cycle, certainly is something we're attentive to, want to be respectful of it, but do not feel concerned with where we are. Our liquidity is strong, our maturities are strong. Our disciplines, our cash flows are still good, our ability to take advantage of opportunities that present themselves at a time like this in particular, absolutely. We are still interested, there are some deals in the pipeline at this point, we keep looking for the right ones to keep showing up. Looking forward to that opportunity, no doubt. Got it. Well, thanks, Peter. Good luck, guys. Thank you. Our next question will come from Charles Perron-Piché with Goldman Sachs. Your line is open. Thank you. Good morning, everyone. First, I'd like to touch on the commodity. Given the move in lumber that we've seen year-to-date, I would've expected maybe incremental upside to your commodity price outlook for this year and contributions to results. Does the fact that your outlook remains the same reflect more of an expectation of a moderation in lumber and commodity prices in the second half, or are you seeing greater difficulty to pass on some of those cost increases to your customer in this environment? Thank you for the question, Charles. The commodity outlook is in line with what we had projected last quarter. We expected it to continue to float up through Q2 and then retreat a little in the second half of the year, and it's performing pretty much in line with that expectation. That's the reason for no change to that guidance. Okay. That's good color, Pete. In your prepared remarks, you noted that builders are increasingly offering build-to-order solutions to differentiate themselves. You're seeing increased traction to your digital offerings as a result? How can you better serve your customers with your digital offering as a result of this shift? Yeah. Build-to-order is an obvious reaction from builders that have seen inventories grow, right? It's certainly a good discipline that they have displayed, and I think will be effective in helping to manage the business over time. It'll give us a more predictable target around which to make sure we're providing the right support. You're absolutely right. Our digital tools are particularly suited to people trying to do plans and designs, and then trying to leverage the tools through to being able to offer the best possible service and value proposition for our builder customers. We're continuing to find ways to refine those tools and to offer those three-dimensional digital twins in a way that is going to create value for builders, right? At the end of the day, that has to be the deliverable and the commitment that we live up to, is to make the builder's life easier as they're building those homes. You hit the nail on the head. I think our tools are absolutely good for that and built for that, and this is the type of market we think that plays to our strengths, as does our value-added offering, as does our bundling package, as does our extremely experienced sales team and the subject matter expertise that we have. Those are all reasons that this build to order trend is going to play well for us. Got it. Thank you for the color, good luck with next quarter. Thank you, Charles. Thank you. Our next question comes from Rafe Jadrosich with Bank of America. Your line is open. Hi, good morning. Thanks for taking my questions. Good morning, Rafe. On the market share commentary, I think you said you held share in the second quarter. If I remember right, in the first quarter, I thought you gained some share. Did the competitive environment change in the second quarter relative to 1Q, and what's sort of the outlook for that in the back half of the year? I don't know if it changed meaningfully. I'd say it's ebbs and flows. What I would describe is that the overall market constricted a little bit in the second quarter. I would say the feel of the market, given the uncertainty and the volatility in the Middle East, I think the sense was, "This is harder." That's more of an emotional comment to you than a data-driven comment. The conversations that we have with builders, the conversations we're having in our operating review calls, and speaking with the teams around the country, I think there was a sense of optimism at the beginning of the year that faded pretty meaningfully into the midst of the second quarter as things sort of ebbed and flowed pretty aggressively. I don't know that there's more than that. I think that generally speaking, the holding share is just an indication of the competition day in, day out. Okay. I think that's helpful. Can you just talk about the inbound and outbound freight impact from higher diesel prices? How does that flow through your P&L? Just the time, how much of a headwind was that to 2Q, and what you're anticipating for the third quarter? Yeah. Thanks for the question. We haven't changed our position on what we expect for the full year. We're still expecting about $100 million headwind from the higher fuel cost, the combination of the inbound and the outbound. We did see a little bit of softening during some of the ceasefire periods during the quarter, but that doesn't give us enough visibility into the balance of the year with the increased tensions, that we're holding onto that $100 million. We have seen our fuel surcharge and pass-through increase about 20% in the quarter, so we are effective at passing some of it through. We have more work to do. The inbound, I think as we talked about last quarter, is really going to show up in the cost of inventory, the cost of the materials, and that flows through cost of goods sold. The outbound will be more in the SG&A line, that's certainly a headwind in SG&A. The recovery of that's going to be up in sales and margin. There's a little bit of distortion in geography on the P&L, I think the team's doing a good job managing the cost. There's always more work to do, we're managing it in this kind of fluid situation pretty well. Thank you. That's helpful. Thank you. Our next question will come from Mike Dahl with RBC Capital Markets. Your line is open. Morning. Thanks for taking questions. Morning, Mike. First one on the 3Q. Morning. 3Q sales dynamic, obviously a little bit of a wide range, but given your normal bag to commodity prices and the blended lumber OSB basket, I would've thought that would flip to a pretty nice low single-digit tailwind from an inflationary standpoint for commodities. Which then would imply at the midpoint or below of sales that the volume would actually step worse on a year-on-year basis in 3Q. I'm wondering, is that the case or is it something where we did note your inventory's up percentage of sales. Is there still a larger than normal lag on commodities or some pre-buying or contractual dynamic where it's just not impacting you as quickly in 3Q yet? Yeah, I would say you're spot on. The lag on the commodities and seeing those higher prices coming through into our inventory is still the case. We anticipate to pass that through. It will flip, even with the expectation of being at a $400 per thousand midpoint in our guide. That will be higher than the prior year on average for the year. We should see a flip and a benefit in the back part of the year. It's also on a lower sales activity level, so it's going to be muted from an overall contribution, but it will start to turn into a benefit. Q3 again. Got it. That flip from it was going well to the lights turned off happened in the third quarter, you're also lapping that component. Obviously, it's more prevalent and it was more evident in the fourth quarter result, there's a little bit of that there too. There's a couple pieces that come into play. I appreciate that. It just seems like especially at the low end, it would imply at the 3Q specific color that it would imply something then maybe quite a bit worse on volume. I was trying to get at there's something unusual with the commodity relationship versus what we've normally seen, or is that right, that volume-wise, we should expect almost like a worsening of year-over-year trends within that guide? The follow-up question then is on the gross margin dynamics. You're sitting at 28.2% in the first half of the year. Your guide, obviously at the midpoint 28.0%. I think last quarter you talked about maybe it's down a little sequentially in 2Q, then up a little sequentially in 3Q, then seasonally down again in 4Q. Can you just talk to, with all the moving pieces now, what within the guide is the updated expectation for gross margins specifically in the second half and split between 3Q, 4Q? Obviously in the second half, that 28% midpoint would require a slightly below 28% in order to average down. We're seeing it flat for the balance of the year at this point. There's still enough uncertainty on how it's really going to play out. We took the approach based on where we exited Q3 and what we're seeing with the lower Q2, excuse me, with the lower starts expectations for the full year. That it's going to be a continued competitive environment, that we're going to have to continue to compete and win business every day. That's going to keep the pressure on the margins, but we're going to find a way to improve and capture every nickel we can. Hopefully it's just what we said in the past. Mike, that stronger markets allow for more opportunities to manage both mix and price in a way that gives us stable margins. If we're calling down the top line, it's a tougher environment. It's not dramatically tougher, but we're trying to signal that those two go together. Hopefully that's clear on what we said, we think it's pretty flat from where we're at now. Yeah. Okay. Understood. That makes sense. Thank you. Thank you. Our next question will come from David Manthey with Baird. Your line is open. Thank you. Good morning, everyone. I was just wondering if you could give us your thoughts on multi-family housing. I don't know if you give any credence to the NAHB numbers, but you guys have multi-family down mid-singles this year. They're calling for up mid-singles this year and then down in 2027. Just wondering if you could talk about why there'd be that disconnect there, why your view is different. Given the long rates and affordability issues, it would seem like multi-family might be a reasonable relief valve. Maybe if short rates come down, even if long rates don't. Could you talk about the medium term and maybe the prospects for multi-family? Yeah. No, absolutely. This one's a bit of an irritant for me. I'll anonymize this because it's not fair. We only play in a portion of the business, I will readily admit that maybe my perspective is skewed because we're only in five-story and below wood structures. That could be the beginning of the end of the explanation of the next thing I'm going to say. The multi-family published numbers do not make sense to us. I believe they are incorrect. I believe something happened in the Fed numbers or the way they're doing their surveys or something, I don't think they're right. I don't think there's any way they can be right. I've talked to a couple of other players, people in positions of authority that you would know their names, who do this for a living, and they agree with me. This does not make sense. Maybe there's some aspect of the tower conversions or something that I'm not seeing that is causing these permits and starts numbers to be higher than what we're seeing. I think we're actually doing decently in the multifamily space where we play. 100% agree with you that if rates turn a little, the short rates will absolutely release, and we will see an increase. I think we're positioned well to be able to take advantage of that with both truss and millwork, as well as some other product categories that we've been leaning into. Feeling like that's a good opportunity for us when the time comes. Okay. Yeah. That's good color. Thanks for that. Second, I wanted to just make sure I understand the cost actions here. I think you realized $13 million in the first quarter. I believe you said $28 million in the second quarter. But then there was a comment about another $15 million. Now it's $115 million remaining or something. Could you just give us sort of what's been achieved so far, what is yet to come, and the cadence through the remainder of the year? If you could just talk about how much of that is sort of variable, meaning comp and overtime and things like that, versus structural that would remain in place even if the market gets better. Yeah. There's two components. I think what you were referencing was really the productivity savings that we've identified and called out. Those are separate and in addition to the cost actions that we are continuing to execute against. What we had stated previously was $100 million of cost actions. $75 million of those were cost out year-over-year, $25 million of cost avoidance. That number has now been increased to $115 million in 2026. $140 million if you count the full run rate that we expect from the $40 million of new cost actions that we're putting in place immediately. The original $100 million is largely complete and underway. It's just realizing it through the passage of time through the balance of this year. The $40 million, it is increasing what we were going after a bit more, and it is targeted specifically SG&A and more on the fixed cost side of the equation. We see the reduction in the sales. We are very aware of the situation, and we are reacting to help make sure that we are not deleveraging more than we should. That is the call and the reason for those cost actions, but they are separate from the productivity. I know how much you guys hate the cost avoidance, so I will just take that out, right? We took the $75 million of cuts, got them done. We are adding another $40 million of cuts. We are going to get them done. That is predominantly SG&A, predominantly fixed. That is not the variable. The variable is already falling with the decline in sales and the work that the teams do day in, day out to run the business appropriately. That $115 million annualized run rate of cuts is what we are executing. Because we are starting the $40 right now in July, you are not going to get all $40 this year. That is where Pete says $15 of that is going to hit this year, and the rest of it will flow through in the run rate into next year. That is very clear. Thank you both. Thank you, David. Thank you. Our next question will come from Keith Hughes with Truist. Your line is now open. Thank you. Just kind of building on the last question that seems like by the end of the year, on a down note, will you have to, in the beginning of the year, reassess more fixed cost if there's not signs of life here for 2027? Well, just to maybe put a sharper point on it, we do it all the time. By market, we are looking at what our capacity is, what our profitability is by location, every month, every quarter. We will absolutely do that. I think there's enough excess capacity based on where we are now that that will be a struggle for us for some time until the market turns. Now we're trying to find that balance, near-term profitability and long-term capacity and opportunity. We'll keep looking at it. Yeah, that's our lot in life right now with the market as tough as it is. How many locations have you closed over the cycle here? I think we're up to 91. What did you begin back in 2022? What did you begin with? Well, you got to remember, we're buying. We're probably about 30 or 40 down net, but we've added a bunch. Whatever the delta is, 60. That 91, Keith, is over the last two and a half years. Two and a half years. We've completed a lot of acquisitions. We had some store openings on greenfield projects that were in process underway. There is a lot of puts and takes. Okay. Thank you. Final comment, for what it's worth, I agree with you on multifamily. These numbers don't make any damn sense. You just don't see it out in the market at all. Thanks for the answers. Thanks. Appreciate it. Thank you. Our next question will come from Ryan Merkel with William Blair. Your line is open. Hey, everyone. Thanks for the questions. First topic is just monthly sales trends. Can you talk about how revenues trended through the quarter and into July? Were there any big surprises or mostly as expected? Thanks. That's unfortunately the reason for the call down. What generally happens throughout the year, and we've talked about it, is the seasonality and the seasonal curve. We know by week what our expected run rate on a daily sales basis is. Coming out of the holiday, Fourth of July holiday, we had an expectation of sort of the normal run, that sort of gets to the peak that you hold through late summer and then fades into the fall. That didn't happen. The run didn't happen. Basically, the peak leveled out lower than we expected in July. The conversations with our customers and the public comments, we've sort of basically concluded that we shouldn't expect for a late pop to hit. We're probably going to see the normal seasonal based on where we are. If there's a ray of hope in all this, I think the good news is we don't expect last year's light switch. We're not going to build anymore, we've got too much inventory. I think that the behavior of the builders this year has been a little bit better aligned. Sell a unit, build a unit, or sell a unit, start a unit kind of an approach. I think they're more comfortable with their inventory levels. It was an unpleasant July in that regard. Got it. All right. That makes sense in the context of the guide. All right, then gross margin, how should we think about 3Q? Should we assume normal seasonality or anything you want to flag? I don't know that there's anything to flag. As we mentioned, kind of flat from where we are today, it's going to be down on average for the second half relative to the first half in order to meet the midpoint of the guide. We're seeing margins holding and stable. A little bit of wiggle in different categories, but for all intents and purposes, pretty much stable in a margin environment. Got it. All right, I'll pass it on. Thanks. Thank you. Thank you. Our next question will come from Phil Ng with Jefferies. Your line is open. Hey, guys. I guess flat gross margins perhaps answers this question, but last quarter, Peter, you were talking about still a pretty competitive pricing environment where particularly the specialty category saw some price compression. I'm just curious, what are you seeing in the marketplace? Some of the regional competitors, as you kind of alluded earlier, was super aggressive and maybe they have regrets now, but are you seeing any stabilization or it's still a little touch and go, especially as you kind of wind down later in the year when seasonally things slow down? Yeah. Thanks, Phil. Yeah, generally speaking, I would say the trend is towards stabilization. There are certain categories or markets that occasionally will show volatility. That's the way to say it, right? Someone will get aggressive, they'll back-and-forth fight. Someone will back off and say, "No, this doesn't make sense for us anymore." Stabilize, we'll get to status quo is in that market. Our discipline internally is really around assuring that you're getting a breakeven or better, or an appropriate margin market, or some aspect of that we maintain the core discipline of running our business and maintaining it in a way that we like over the long run. Right? We sometimes fall victim to the commentary from certain builders who, "Well, you need to take losses because this is a hard market." My response to that is, "No, this is a win-win relationship, and we're both going to do this for profit because that's why we're here." We're going to say no to things that don't make sense. I don't think everybody in this space has as fine a pencil as we do. I think you see behaviors for windows of time that get a little sideways. Therein lies this whole share versus margin conversation that we kind of have with regularity. Given our scale, it's pretty detailed, it's pretty broad, and you can sort of see it in different markets and the dynamic playing out. We, at the end of all this and looking at it in consolidation, see a trend towards it stabilizing, getting to numbers that we think are defensible given where we are. As volumes continue to sort of hopefully stabilize and turn, we have a good sense of what that means for margins and where. Okay. Very helpful perspective, Peter. From an M&A perspective, it seems like you still have a fair amount of appetite. In terms of what you're seeing out there, is there a lot of assets coming to market? Just given where we are in cycle, do you have reluctant sellers? How are multiples kind of moving around? Then how are you kind of looking through all this, just given still a lot of uncertainty in earnings, right? What kind of multiple you're willing to pay, or do you kind of view it as, this is great, we get to buy some assets on the cheap at the bottom cycle. Just kind of help us think through that and then certainly put that in perspective with buybacks, just given where your stock price is at as well. Yeah. No, that's a good question. It's a modest market. I wouldn't say that it's red hot. It's not ice cold. There's a fair number of assets where people have raised their hands. You're right about valuations, right? You've got to be very thoughtful about what you're buying. Every seller wants to use a five-year run rate. You're right, a five-year average, which is lunacy. You also, I think, can be a little bit forward-looking when you think about current year numbers. I think that's also an appropriate way to think about the business. Geographies matter. Product categories matter. Those have always been true, but I would say especially so now. The way we look at it is buying a really nice business with a good fit for us, this is a nice time to do it. We still have cash flows. We're still generating cash on a regular basis. I think that the overlay on this entire story is the numbers are just smaller than they have been. Cash flows are smaller. The M&As are smaller. Any conversations, even what we've done already so far this year around share buybacks are smaller. I think by virtue of our business being smaller, that's probably the way to think about what we're up to, and we'll continue to execute the strategy. I think the core of it is very consistent. It still works for us. We still like it. Okay. Makes a lot of sense. Thank you for the color. Thank you. Thank you. Our next question will come from Sam Reid with Wells Fargo. Your line is open. Thanks so much, everyone. Wanted to circle back on guidance here and drill down a little bit on the fourth quarter. When you look at the implied Q4 EBITDA range, it does imply a fairly wide spectrum of outcomes. Could you just talk to what you need to see to hit the high end of that range? I believe it would imply a sequential step up in EBITDA dollars. Just walk me through the building blocks there. Yeah. I'd probably back you up. We continue to be consistent the way that we narrow guide as we go through the year, consistent with the prior years. As we get to Q3, we'll tighten it up a bit more. I know you're trying to look for the exit rate and the possibility of what Q4 would be. I would tell you, we try to go down the middle. We give, obviously, a range because there's uncertainty and unknowns that continue to present themselves. If you go down the middle, that's probably more in line with where the thinking would be at this current time. We're not in a position where we're going to give actual exit rate information or guidance, which I know is not helpful for you as you start to look forward to 2027 and putting numbers together there. All good. Never hurts to try. Maybe let me ask a more philosophical question here. We are obviously seeing the builders lean deeper into more build to order. It's coming up on builder earnings calls and showing up in builder numbers. Two implications for that. One, does that have any implication on your lag versus starts, just given build-to-order homes, a little different from spec homes? Also, as you see more build to order, is there potential for more take per start? Well, that's a really good question. I think the answer is it may extend the lag a little. Build to order, by its nature, has more likelihood of change orders or adaptations throughout this process. However, I want to be a little careful with that because most of the folks making the pivot are spec builders, so they don't offer that much variability anyway. I don't know that it'll be meaningful. Maybe a little. In terms of dollars that go in, same kind of general answer. Say, yeah, build to order is generally going to have more dollars in it. If you're just shifting a spec builder or a largely spec builder or first move up type of home, the amount of incremental is fairly modest. Don't get me wrong, we'll take every penny or every stick. I don't know that it's going to be meaningful. Helpful context. Appreciate it. Thank you. Thank you. Our next question will come from Trevor Allinson with Wolfe Research. Your line is open. Hi. Good morning. Thank you for taking my questions. Maybe a question on what you're hearing from your private builder customers on a couple of fronts. The publics seem to be willing to trade some volume here to protect their gross margins. Are you seeing similar actions out of your private customers? The publics have also been very vocal about not taking on some of the price increases that the building products companies are pushing. Are you seeing more success getting those price increases passed along to your private customers versus the publics? Well, I don't think anyone is immune to the affordability pressures. I think it's fair to say that the higher up the food chain you are, the easier it is. The amount of pass-through on the private side, I would say just by virtue of the way that they approach negotiations, the larger builders are a sharper instrument. I would say the smaller guys depends more on the individuals involved in the markets that they play in. That isn't to say that there's a meaningful difference, but there's a difference. That scale matters. I think that the words, I would not use different words if I was a large home builder. The reality is, nobody in this industry is doing this for charitable purposes. There are points where you have to just say, "No. This is the price, and if you don't want it, that's fine, but you're not buying it from us for less than this price." That's the battle, right? That's what we're all engaged in right now, because it's gotten back to that point of knowing where your lines are. I think, in the conversations we have with vendors, we have a lot of great vendor partners. They're trying, they're scrapping. We all know we need to build more houses. I think all of us have been very intentional about tightening our belts and being good partners in a tough time in the industry. There's a threshold where you just can't go past. Now you're harming your company for the good of an industry, and that's not what we're here to do. There is passthrough happening. There is a back and forth happening. It's challenging, but I think we all know how to do it, and we're all representing our companies the best we can. Okay. Thanks for all that color, Peter. Second question is maybe related to some of your commentary, and it's another one on gross margin. You've talked about your expectations here near term, but the full year guide still does imply a pretty wide range for the second half. I guess the question is, what gets you maybe to the high end of your 2026 gross margin range in what seems like maybe a little bit of a slowing environment? Related to that, you brought down the high end of your range, but you left the bottom end unchanged. Is that an indication of perhaps maybe a limit to how much margin you're willing to trade for market share gains in this environment? Thanks. Yeah, that's a heavy question, man. There's a couple different pieces to it. I think that the way that margins will shift, there's some mixed components, there's some competitive dynamics. Depending on which markets are stronger than others, you've got different margin profiles. There's a combination of events that I think could position us to do a little bit better than the median. Right? I think that we've outlined that. We certainly have seen it at certain points, and there's a possibility that it could play out that way. The downside planning and scenario planning is something we do a ton of around here. We've laid out a lower case scenario than where we have ended up so far this year, and I still don't think we're going to get there, but we wanted to give you the lower bound. I think that's why you're seeing us not move the lower end of it. It's not what we had hoped for, but it's not what we had feared either. I think that there's your answer there in terms of why we weren't necessarily moving the bottom. Again, kind of back to my prior statement, there is a walkaway point with all of this, and I think we're confident in our ability to recognize where we're unwilling to take business that doesn't contribute to what we're trying to accomplish. Being able to walk away at that point is the right thing for this business, regardless of what other players do. That's the line I think we've been able to understand and manage the business around. The good news is we don't have to be down there all the time, right? We know how to continue to protect our margins. We're still profitable and cash flow positive and doing a lot of good things strategically at a time when the broader market is under a ton of pressure. I think we feel good about our ability to execute and to continue to drive forward. It's a challenge. It's a dog fight out there, and we're doing well. I think we're doing better than our competition, it's tough. Thank you for all the color. Good luck moving forward. Thank you. Appreciate it. Thank you. Our next question comes from Reuben Garner with The Benchmark Company. Your line is open. Thanks for squeezing me in, guys. Peter, the cost actions that you've taken, you mentioned the incremental being fixed on the SG&A side. What about kind of in any of your manufacturing assets? Can you update us on anything you've done within that $115 million? If there isn't much there, I guess what it would take for you guys to move towards taking some of that out. I guess secondarily, as a part of that, have you seen any smaller competitors pull or take assets down? Yeah. No, that's a good question. Let me clarify. When we talk about the facilities, that is a mix between what shows up in SG&A and what shows up in COGS. You're talking about the manufacturing facilities, a meaningful portion of that is up in COGS by virtue of what they do. We have absolutely taken down facilities as part of the 91 that we've closed over the past couple of years. That is inclusive in that number. The way we think about it is, it's your variable, right? It's your variable cost. As sales come down, you have to take down those variable costs, at least the ones that show up that way. Then a component of that will show up down in the below, in the SG&A portion of the P&L. The fixed stuff, right, the line items identified as fixed, the cost categories identified as fixed, that aren't necessarily tied to specific sales volumes, that's what we're really leaning into with those other conversations. I won't tell you it's super rigid in terms of exactly every dollar coming from where, but the vast majority of the focus on those cost cuts that we've talked about, that $115 million, is SG&A related. Got it. You guys have a pretty national footprint, but you still have some differences versus broader starts numbers. Can you talk geographically about any areas in particular of strength or weakness within your portfolio? Yeah. Definitely. I actually forgot to answer the second half of your first question. Yes, we've absolutely seen competitors closing facilities around us in similar ways. I think that broadly speaking, everyone is trying to figure out how they can adapt. I think one advantage that we have is the multiple locations per market allow us to be more flexible while still retaining the customer base and maintaining on time and in full ratios and keeping the customer happy. I think that's been to our advantage in that regard. Others have to exit more dramatically from either chunks of a market or markets entirely. The second half of the question Where we're seeing some weakness still persist a little bit in Texas and Colorado. Those are pretty important markets for us. Where we're seeing strength is really in the entire Northeast is performing well. Obviously, there's just a different starts exposure in the Northeast versus some of the other markets. Your point about where we service versus where we don't, we see that too. We're in most of the large MSAs, but I'd say we're probably covering 80%-ish of starts nationally. There are certain parts of the country, we're not in Chicago, we're not in South Florida, we're not heavily into chunks of Illinois and Indiana. We've got pockets where we're doing great in Indiana, but we don't cover the entire market. There's examples like that where we have seen strength in some of the headlines where we just don't participate. It's part of it. It's not a major part of the story, but it's there. Great. Thanks again for squeezing me in, guys, and good luck. Thank you. You too. Thank you. Our last question for today is Jeffrey Stevenson with Loop Capital. Your line is open. Hi. Thanks for taking my questions today. Can you talk about the size, value, and complexity of single-family housing starts this year, given builders' increased focus on build-to-order homes and whether you've seen any change in mix as the year progressed? Yeah. Thanks for your question. We really haven't seen change year-over-year or sequentially in the size of home. The size has been pretty stable. As far as the complexity, there's still the value engineering that's been taking place. We continue to see some cost out year-over-year or opportunity out on the sales versus start. It's pretty modest. Maybe in the 1%-2% range. It's not a big factor at this point, but it's still there as we see more townhomes or shifts to the type of dwelling space that is being delivered to the market. Okay, great, Pete. Thanks for that. I was wondering if you could provide any more color on the $50 million reduction in CapEx guidance and specifically areas you were able to cut or delay this year in a more conservative residential demand environment. Yeah. As part of the cost actions, as we think about conserving capital in a shrinking market or a tightening market, we don't need to invest as much in some of the replacement of our rolling stock or fleet and equipment. We have the ability to redeploy and move that equipment around and make sure that our operations are taken care of and they have what they need. It's just an approach to tighten that up, as well as not needing to invest as much for growth, especially in markets that we already have a density and a footprint that we can service very well. We don't need to continue to expand at this time. We continue to evaluate every market by market, and they have different needs, and they have different capabilities, so we do that on a regular basis. We just felt for this year, it was more prudent to pull back on some of the capital expenditures and conserve that capital. Great. Thank you. Thank you. That does conclude our allotted time for question and answers. I'll now turn the call back over to our presenters for any final or closing remarks. Thank you for your time today. If you have any questions, you can follow up with the Investor Relations team. Thank you. That brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.