Q3 2019 Earnings Call
[noise] greetings and welcome to the top build Corporation earnings Conference call. During the presentation, all participants will be in the listen only mode. Afterwards, we will conduct a question and answer session at that time. If you have a question. Please press star one fall by the four on your.
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As a reminder, this conference is being recorded on Thursday October 31st Foreign to 19, I would now like to turn the conference or two Tabitha Zane. Please go ahead.
Thank you and good morning on the call today, our Jerry Bowling Chief Executive Officer Robert.
Resident and Chief operating Officer, and John Peterson, Chief Financial Officer, We've posted senior managements formal remarks on the Investor Relations section of our web site at Coffeyville Dock.
As shown on slide two of today's presentation. Many of my remarks will include forward looking statements concerning the company operations and financial condition.
These forward looking statements include known and unknown risks, including those set forth in this mornings press release as well as in the company's filings with the FCC.
The company assumes no obligation to update or supplement forward looking statements have become untrue, because a topic one of that.
Please note that other than it otherwise specifically stated the financial measures soon to be Scott on this call will be on a non-GAAP basis.
We have provided a reconciliation of these financial measures to comparable GAAP measure in a table included in today's press release and in the presentation accompanying this call.
Please turn to slide three and I will now turn the call over Jerry Volas.
Good morning, everyone. Thanks for joining us today.
As our team continues to do an outstanding job of generating profitable growth.
Before reviewing the quarter I want to note that based on the recently announced starts strong household formations and optimistic builder sentiment.
The long awaited acceleration in housing appears to be underway.
Point towards continued growth in new home construction.
Total sales were up 5.4% compared to lagged housing starts that were down 1%.
Our commercial business again performed extremely well.
And operating margins that both business segments expanded.
Moving to slide five.
On the capital allocation fronts.
M&A is our number one priority and our focus remains primarily on our core businesses.
Which our residential and commercial insulation installers and distributors.
The synergies, we achieve are significant and the opportunity to enhance our market share in regions with strong growth prospects is compelling.
We're also considering expanding our glass product category that encompasses commercial storefronts and residential bath and showers.
This business currently contributes approximately $114 million.
Revenue.
Our research and experience validate that this adjacent product category offers many attractive characteristics similar to installation.
Well expansion in this area will be independent of our brands insulation network.
Looking ahead, our pipeline of acquisition candidates is robust and we expect to bring the best prospects over the finish line in the next couple of quarters.
Our second capital allocation priorities share repurchases.
In the third quarter, we repurchased just over 364000 shares at an average per share price of $89.76.
Since implementing our share repurchase program in 2016, we have repurchased a total of 4.9 million shares at an average per share price of $56.74.
Consistent with our attempt to return capital to our shareholders on a timely basis, we announced the $50 million accelerated share repurchase, which we anticipate executing within the next several days and completing in mid first quarter.
Well John will discuss our financial results in further detail I wanted to emphasize that our strong operating performance quarter over quarter is the direct result of our uniquely diversified model.
And the ability of our strong leadership team to manage our business well in any general economic and housing environment.
Good morning, everyone. Please to report on another excellent quarter of business results delivered by the experienced and talented team to which Gary just referred.
Starting on slide six with consolidated revenue third quarter results increased 5.4% to $682.3 million.
Primarily driven by increased volume and pricing the truteam and increased pricing that service partners.
Revenue for the first nine months of 2019 rose, 12.4% to $1 billion $961.8 million, which includes revenue from acquisitions of $126.9 million.
Adjusted operating profit in the third quarter grew 16% to $80.6 million with a corresponding margin improvement of 110 basis points.
For the first nine months adjusted operating profit increased 30.6% to $216.1 billion with a corresponding margin improvement of 150 basis points.
Both gross margin and operating margin improvements were driven by higher selling prices strong commercial sales growth operational efficiencies and synergies from us side, partially offset by higher material costs.
Adjusted EBITDA for the third quarter was $98 million compared to $84.3 million in 2018.
A 16.3% increase and our adjusted EBITDA margin improved 140 basis points to 14.4%.
In the third quarter, our dropdown to adjusted EBITDA margin for our sales growth was 39.1%.
For the first nine months of 2018, adjusted EBITDA grew 32.7% to $266.5 million.
And adjusted EBITDA margin was 13.6% a 210 basis point improvement over the first nine months of 2018.
Our dropdown to adjusted EBITDA margin. During this nine month period was 30.3% in total and 46.1% on a same branch basis.
The year over year decrease was primarily the result of lower acquisition and closure costs related to use side.
Moving to slide seven adjusted income for the third quarter was $52.7 million or $1.53 per diluted share compared to $44 million in 2018 or $1.23 per diluted share.
Third quarter 2019 adjustments for approximately $140000.
I am really related to cost associated with the acquisition of Viking installation.
Our effective tax rate was 23.2% for the third quarter due to some discrete items captured in the quarter.
For long term planning purposes, we still guide to a normalized tax rate of approximately 26.5%.
Which is reflected in our adjusted EPS number of $1.53 per diluted share.
As compared to our reported EPS of $1.60 per diluted share.
For the first nine months of 2019, adjusted income was $138.8 million or $4 in two cents per diluted share compared to $107.1 million in 2018 or $2, a 99 cents per diluted share.
Adjustments for the first nine months were $33 million and were primarily associated with the acquisition and integration of use side.
Interest expense in the third quarter, 2019 was $9.5 million and for the first nine months with $28.7 million.
As you can see on slide eight capex for the first nine months of the year was $34.1 million, 1.7% of sales slightly below our targeted long term range of 2% to 2.5%.
Working capital as a percent of sales for the trailing 12 months was 11.6% versus 11.3% a year ago.
Total liquidity at September Thirtyth, 2019 was $360.2 million, including cash of 171.6 million and accessible revolver of $180.6 million.
Operating cash flow was $182.8 million for the nine months ended September thirtyth.
As Jerry mentioned, our number one choice for our free cash flow is acquisitions and our second is share repurchases.
While our pipeline of acquisition candidates is robust we're also focused on enhancing our capital structure.
We have therefore announced a $50 million accelerated share repurchase program, which should be completed sometime in mid first quarter 2012.
We've raised our outlook for housing starts for 2019.
Our previous outlook was 1.230 million to 1.270 million starts.
The low end of adjusted EBITDA has been raised by 9 million to $354 million and the high end was increased 5 million to $360 million Robert will now discuss operations.
Thanks, John .
Turning to slide 10.
Our strong performance quarter after quarter.
As a testament to.
Our team's hard work alignment and cadence by which we run the business.
Our commitment to excellent customer service.
Strong customer and supplier relationships and our insistence that growth and profit go hand in hand.
Starting our through teams third quarter financial results on Slide 11 sales grew 7.3% handily, beating lack housing starts which were down 1%.
Volume accounted for 3.8% of this growth loss selling price increases contributed 3%.
Through teams adjusted operating margin improved 80 basis points from a year ago to 14%.
Service partners third quarter sales as shown on slide 12 were up 3.8% driven by a 4.4% increase in price offset by slight decline in volume.
We continue to walk a tight rope between price and volume as we've seen excess fiberglass material flow through to the distribution channels, putting pressure on price.
Our team has done a great job managing this balancing act as evidenced by the 150 basis point increase in service partners adjusted operating margin to 10.6% the highest adjusted operating margin reported since our spinoff in June 2015.
As we look ahead acceleration of starts is positive for both of our business segments ended supported by the continued optimism of our builder customers.
As starts continue to decline, which we believe we believe they will we will continue to leverage our operating platform to help drive solid financial results.
On a same branch basis commercial revenue grew 18.8% in the third quarter at 21.4% year to date.
Commercial now accounts for approximately 23% of our total revenue almost evenly split between heavy and light commercial.
As a matter of reference commercial represented only 16% of our total revenue at the time of the spin.
We plan to continue to grow our commercial business through a number of initiatives.
We've mentioned before that like commercials, Beverly very similar to residential and most of our branches have the ability to perform this work.
Accordingly, we are providing additional resources and tools for our salespeople and branch managers to help them better identify light commercial opportunities and secure additional work.
Acquisitions present, another avenue for growth in the commercial space over the past few years, we've acquired three firms that specialize in heavy commercial insulation expanding our reach in a number of major cities, including Chicago, Los Angeles and San Diego.
As they start up new projects in new geographies. The work is already there for our company to perform in the expense to set up a new location is minimal for us and leads to quicker profitability.
Looking ahead, our commercial backlog remains robust and we're bidding on projects well into 2022.
Before turning the call back to Jerry I want to touch base on a few areas outlined on slide 14, first as labor, which continues to be tied not only for top bill but for all the trades in our industry. We believe we have a leg up on the competition by offering a comprehensive benefits package, which helps make us an employer of choice.
Second is spray foam, which continues to grow but at a slower pace in the year ago as builders pivot to entry level homes in an effort to provide a more affordable product to meet the demands a first time buyers.
As a reminder, other great solution for our customers spray foam is about twice the cost of fiberglass insulation.
Finally, moving to slide 15, our senior leadership team recently undertook an in depth review of our corporate values and culture.
We believe our strong values are a key component of our success and they will continue to guide us as we move forward. They include.
Putting the safety of our people first.
Delivering results with integrity respect and accountability.
Focusing on exceeding the expectations of our customers.
Continuously improving and encouraging idea sherry.
Lining as one team and valuing diversity.
Making a difference in the communities, we serve and empowering our employees to do their best individually and as a team.
Quality and service to our customers.
I'll now turn the call back over to Jerry for closing remarks.
Before opening the call up questions I wanted to mentioned that in September .
We hosted our annual strategy session with our board and key members of our leadership in operating team.
During this two and a half day meeting, we take a deep dive into all aspects of our strategic plan.
Drive topline growth and increased market share in our core residential and commercial installation and distribution businesses.
Expand existing product adjacencies through a deliberate and measured approach.
Improve operational efficiency throughout our organization.
And make strategic acquisitions that supplement our organic growth.
Operator, we're now ready for questions.
Thank you.
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One moment please for the first question.
Our first question comes from trading Morrish.
With Evercore ISI. Please proceed.
Hey, Thanks, guys and congratulations on another great quarter.
I think it's ray talked a little bit about.
Demand that you've seen so so weve seen its Steve can ramp.
From builder orders as housing demand has strengthened over the last several months and given the magnitude of growth team by the homebuilders reporting this quarter.
It seems like Theres, a real significant potential.
For a ramp in insulation demand and if that happens kind of wondering how quickly could you scale your businesses.
To capture such growth and would it be reasonable to assume that service partners would be better able to scale compared to truteam because of true teams relatively fixed labor component in the near term.
Hi, Good morning trade. This is Robert so I'll start.
Answering the question so relative to demand I think you can see at our our volumes in Q3, I think we were happy with what happened on the residential side, even though we worked on more multifamily units in the quarter. We also saw an increase in single family units.
In the quarter as well and then as you know as we're getting into Q4 were seasonally busy as a company as the.
Public builders are driving towards their closings before the holidays here. So I'd say, we're very optimistic the sentiment that we get from the builders is very positive as well.
We look forward for definitely a positive.
Looking at our footprint and then looking at both businesses I think we're very comfortable with an appropriate RAF and volume and residential and how we could service that so.
I'll start with your last on distribution looked at the network around the country.
And where we can service and stuff, absolutely ramping up and and continuing to service.
Contractors around the around the network, we're very comfortable we can do that but I would say, we're also equally as confident on our contracting side and on the Truteam side of the business I mean, I think one of the great things about about our modeling about our business is how we can share labor across the footprint and how we're constantly working on both ends up getting new labour into.
I could give you an example of a large public builder recently that we're looking to push their closings and about a five day period. There were looking to push about 90 to 100 closings and we were the only contractor that could pull together from about five different branches in this geography and quite honestly, we got their houses closed in two days versus the five to six day.
They were asking us for so thats the power of our network has the power of how we can share labor share equipment share material.
Share inventories as well so I think just summary were very copying our ability to handle ramp up.
Hey, guys. It does Steve Kim just wanted to jump in here with the sort of a broader question.
Preparing to implement a January increase and more importantly.
Your company's competitive advantage even further.
Sure I'll.
And I'll caveat this was saying that we can't speak for the manufacturers, what they're going to do what they want to do.
More predictable for you want to call it.
Schedule of increase is probably good for everybody. As you commented we were very confident in our ability to stick handle whatever happens.
But I, probably would say that a steady.
A steady schedule of increases as far better than the rapid fire. We had a year. So go in and also keep in mind that Robert and his team do a wonderful job of.
Ongoing relationships with suppliers is constant conversation so as it affects our business directly yes. There is there can be choppiness externally in terms of whats announced but.
But the relationships that we have long term relationships with all the suppliers really really kind of smooth that out internally for us. So.
Robert I don't know if you have anything to add onto that that commentary, yes. Thanks, Jerry So Steven I agree with everything Jerry said I think it's obviously supply and demand right as we come out of the year head into next year from that perspective, we haven't seen anything any public announcements, but we wouldn't be surprised if there's an announcement for the manufacturers.
And I think you know the one thing that we keep pointing to we think there is ample supply and just to remind are two of the to the large manufacturers have announced additional capacity coming on late 2020 early 2021. So that's how we think about it.
Great. Thanks, very much guys appreciate it.
Our next question comes from Phil Ng with Jefferies. Please proceed.
Hey, guys congrats on another very strong quarter.
Great to see you raise your starts forecast that's pretty encouraging on what's on the comments from the public builders.
I appreciate your to be on lag, but do you expect to see your improve outlook on housing start showing up as soon as fourth quarter or is this more of a 2020 that.
That Phil this is John So I think.
Part of it shows up in the fourth quarter, because Weve I think the last few months, we probably have averaged about 1 million 310 in terms of seasonally adjusted.
So one of the reason that we bumped up our full year estimate of our full year guidance I should say is driven by that but we remain pretty bullish and optimistic in terms of obviously the long term impact in residential and commercial so see a little bit of the increase we saw was driven by the optimism. It starts and we'll come back in February with our 2020 outlook.
At that point.
Got it and then to be clear I mean, your volumes are generally outpaced lag how start to housing starts pretty noticeably any color on what's driving that upside I mean, certainly commercialized in very strong bid up have you been accelerating share gains this year.
Yes, so I think.
We talked about it in the prepared script and 18, 19% increase in terms of commercial growth, which which by the way is a little bit less than we experienced first half from a comp standpoint, but we talked about that on previous calls that the comps get a little more difficult the back half of the year. So certainly commercial has been a big part of that.
Having said that residential new construction I think despite the fact that we're seeing a I'd say I'm a little bit more of a mix shift to multifamily versus a year ago, our residential new construction on the Truteam side has been very strong.
We do think we probably picked up a little bit of share in the Truteam side and then there was a partial offset as we've talked about in terms of sound slightly on service partners. Most of that driven by those those late 2018 actions. We took in terms of the price disciplined fill the one thing I would add to that is net not to the acquisitions that we've done over the last couple of three of not just us.
But all the other ones as well.
The job that we view integrating these acquisitions into our footprint.
As as time goes on that really pays dividends because that what that does is that strengthens our position in key geographies and as time goes on the integration job that we do really pays dividends in terms of our ability to service our customers.
Great and just one last one for me I think you mentioned on the call there's excess fiberglass supply out there and it's had some pressure on pricing for service partners, but youve managed quite well, but curious has that led to better by on year end from Truteam and as it help on the price cost front. This year. Thanks a lot.
It feels as Robert said, we're constantly working with the manufacturers talking with the manufacturers relative.
They have excess capacity and stuff. So it's an ongoing discussion with us with folks I think I'd point back to we havent seen significant selling price declines in our teams have done a really nice job balancing that.
In the field and I think you know that the term that we'd use is really good price discipline selling price disciplined in the field and we'll keep that up for sure.
Okay, great good luck in quarter.
Thanks backfill.
Our next question comes from Ken Zener with Keybanc. Please proceed.
Good morning, everybody.
And then again.
So another boring quarter for you guys that EBIT leverage.
John if it goes back to this 1% you guys.
He is may be.
The the share gains are having on the installation side I think you were highlighting that was a mix of residential.
You did gain a little share I think is what you said as well as commercial is that correct.
Correct.
I want to try to do the math ransom.
Yes, it up but.
If you have about 75% 77%.
Your business is single family that really suggest your commercial.
The margins down 9% OLED starts I'd say.
You were down five I mean, your commercial is really.
Firing on all cylinders there when you said down at your guys review that you mentioned in October I mean are you still spanking commercial.
Who is going to be let's say a quarter of your business in two or three years, given what we're seeing in new construction.
Any M&A doing new construction for residential versus commercial taking a larger share because this is probably what.
Distinguishes your business model going forward versus People's impression of just new residential.
Trends.
Ken. This is this is Jerry here. So obviously the numbers in terms of the percentage that commercial is our becomes our total business will depend on what happens with residential but I, but I can say that visit they were happier than ever with the development of our commercial business. It's it's been us it's been us it's been.
A deliberate disciplined ramp up.
It's a it's a bit more challenging complicated business and requires some some different attention and some things going on on the job sites. So.
So we did some acquisitions here last year that that we really have done a nice job of integrating in our footprints growing Robert spoke a little bit in his prepared comments about some greenfielding that we're doing that's also very effective so.
We really are assembling some scale there now and in the headroom that we have in the commercial business. We spoke to that before is huge as a matter of fact that sandboxes, even bigger than residential and our share there is ramping up.
And there's a lot of headroom theres lot of headroom on our we're really happy with the capability that we are developing.
And yes, we do see that continuing to to grow and continue to add momentum and will it get through core of our business.
Who knows but but thats, it's getting there almost now we're very close now.
Yes, I do see probably happening.
I mean, it seems like John I need to get the signals start guidance filled our orders are doing well it really seems as though significantly units in three Q.
It seems like where the beat came from the commercial versus the re acceleration in residential is at a fair observation deck here Tim without question commercial was a bigger piece from a percentage standpoint, as we set up about 19% in total so but again residential new construction very strong.
On shoe team. Despite the fact that we've got some.
Some slight headwinds in terms of like I said that mix of multi and single family and even even a slightly smaller footprint, which drives a lower revenue per unit for us, but we're real pleased with the volumes that we had in the business in both lines of business residential and commercial.
But I think there's lots talked about commercial I'll get off thank you.
Thanks, guys.
Our next question comes from Matt Mccall with Seaport Global Securities. Please proceed.
Thank you good morning, everybody.
Turning to Matt.
Maybe I'll continue on the commercial theme.
It seems as though the maybe the macro some of the macro indicators are slowing a bit I'm curious about I guess any indications that youre seeing of slowing activity and maybe what the what does.
Some of those companies specifics how are they to the company specific growth opportunities that are needed a point, where the cycle matters less if there is any type of softening.
Hey, Matt This is Roberts.
Uptick.
That question, so Peter relative to commercial as I've said pipeline is robust we're bidding jobs well into 2022 right now.
And whatever we think about an amount billed on what Jerry said, it's a very big space in the commercial side of the business and 23% of our revenue.
We feel like we have great share gain opportunities there were capitalizing upon that right now, but beyond that we're greenfielding locations, we got the opportunity for acquisitions growing our core current heavy commercial locations as well.
Park of 11 to 12 share from the commercial perspective, and we see a lot of runway. There. So that we don't see a softening if it did we think we'll continue to.
To capitalize on the initiatives that were put in place and gain share in the commercial space.
Okay. Okay. Thanks, Robert.
Next question I guess, John Doe organic incremental I remember last quarter, you talked about some of the the items.
Excuse me that we're going to impact the trend I guess from what you reported in Q2 to what you're going to report Q3, I think you talked about us on commercial some some other.
Maybe sources of pressure can you talk about the outlook, maybe just as we talk about or we think about Q4.
If you want to make comments about next year, but any other items you should call out to make us understand.
What's the trend should look like as we exit the year.
Sure Matt sure. So if we go back to second quarter, our same branch pull through was about 76% if I recall so.
We reported 40%, which we're ecstatic with both obviously, but pretty consistent with what we've been saying all year the comps got a little bit tougher and we'll continue to get a little bit tougher in the fourth quarter for us. So so when you think about the 40%.
And I'm going to start with great operational performance both at the branches and then the branch support center. So we continue to perform really well both in the field and here in Daytona Beach.
In addition to that you know again tied to this that the significant material cost increases we saw a year ago first second and ended the third quarter.
The comps on that have gotten a little bit easier throughout the year for us because last year. As you know we were chasing that did a pretty good job of catching that the back half of year. So looking ahead to the fourth quarter on that one that comp gets more difficult to.
I think the other thing we do expect a strong commercial but even a year ago. Our commercial performance in the fourth quarter was was probably our strongest of the year. So that comp gets a little more difficult and then USA synergies the last piece, helping to drive that 40%.
Same story I think in fourth quarter, a year ago, we were starting to deliver those synergies and integrator caving, so fourth quarter the comp gets a little more difficult having said all that.
You do the math on our guidance in the fourth quarter, we still have roughly a 24% to 25% pull through on our incremental revenue at the midpoint of our guidance. So we're happy with that we'd be happy to report on that when we get to our fourth quarter call, but but thats kind of the way. It's it's growing sequentially in how the comps look year over year.
Yes.
Yes, first 2020 or we're not we're not at the point right now we're going to provide guidance on that we will on our fourth quarter call sometime late February .
But yes, we'll be prepared to talk about that in specifics that.
Okay. That's great. Thank you.
You're welcome.
Our next question comes from Justin Spear with Zelman and Associates. Please proceed.
Good morning, guys. Thank you for the time.
I have a few questions I wanted to start with that you ESI integration comment just curious if you can give us some context on.
Where are your synergies are now.
And our how much you've occurred thus far and maybe how much is left in that pipeline.
If possible where those underlying EBITDA margins are for us side in the third quarter.
Yes. So so this is John .
We will talk a little bit about the guidance. We provided originally at that deal was $15 million of synergies kind of broken evenly between supply chain.
Between.
Branch consolidation.
And also around the corporate cost or the corporate back office expenses at their branch support center in Minnesota. So.
So as we said on previous calls we've significantly deliver we've delivered much much more than that at this point and we've done it much more quickly.
We are at a full run rate kind of the second quarter, we were pretty much at a full run rate in terms of those synergies. So really from this point on we're not really delivering incremental in fact, it's almost impossible for us to really determined exactly what would be use side because we've done.
So low double digit type of branch consolidations between our truteam in the USA branches, but suffice to say we've delivered a lot more than we originally anticipated and we did a quicker if you go back to our first and second quarter reporting reporting.
We did breakout acquisitions and I believe we had roughly a 19% EBITDA margin on about 135 million Bucks worth of of sales that were incremental year over year. So so that gives you kind of the flavor of the type of performance. We have on U.S. side, because that was all use size. So obviously, a great transaction for Topbuild.
Great shareholder returns and you're seeing that live through on our results the back half of this year.
And you mentioned that you're here at full run rate in the second quarter, but that implies year over year basis that you still have it looked a third and obviously the fourth quarter you just even the first quarter you still have some year over year carryover good guy to think about as potentially.
And offsets any on it on unexpected headwinds.
Yeah, just and Thats correct I think though is we get to the fourth quarter that number gets significantly smaller as we get to the first it's really not significant at all because we've done most of why we did the back office consolidation early early January lot of our branch consolidations towards the latter part of half year last year and the early part.
This year, so not near as much supply chain, obviously with consolidate early third quarter 2018, so really not much not much more in the fourth from a comp standpoint, and as we get the next year really not much at all adjusted as we said earlier as time goes on because of the strength of the integration the way we do with it becomes.
Part of the strength of our ongoing business and Thats part of what you see relative the overall solid results.
Makes sense announcement, just a tremendous hit for you guys.
And.
Appreciate that color. The next question I have is just the pricing across your business in terms of the sequential trend for you and how that looks across the competitive landscape in view of the manufacturers at least recently havent become a little bit I guess sequentially degrading their pricing back I guess, removing the January price.
Increase from earlier this year, I guess give us a sense for what you're seeing and if that manufacturer price is leading to any kind of competitive competitive types of pressures on your business.
Yes, I mean, the only thing I'll talk about on pricing I think you've seen our pricing results, we break that out specifically as a line and you've seen that on a comp basis.
Drop year over year I think early in the year, we were at a much more significant number probably closer to something like a 6%.
Improvement roughly it at a place like service partners like just under six 6.5% and total that number was closer to 4% I think in the third quarter. So the reason for that is because of that phenomenon, we talked about a year ago, where we were chasing that cost increase that material cost increase we saw very significant the first half of the year as we talking.
Matt This year, we've not seen we've seen some material inflation, but nowhere near a year ago. So I think sequentially. We have seen some price increase but it's been very minor across the entire business most of what you're seeing lifting our prices the comparison versus a year ago results.
So you know as far as in material cost increases like I said, we did have a first quarter manufacturer cost increase we talked about we absorbed that.
And again, our sequential increases rather moderate this year in both segments.
Perfect and if I can squeeze one more and.
The commercial pipeline, you mentioned being robust bidding into 2022 really love to get your thoughts on where you're seeing that in terms of a core verticals or even geographies is is it off actions that education healthcare industrial where you're seeing.
Such strength.
Justin This is Robert said added say across the different areas that you mentioned the answer applies to yes, I mean the relative to.
Commercial growth again. This is this is where we're capitalizing on an opportunity in major markets. So were very strong in California were very strong that talked about a greenfield and we've got some marty existing businesses in the northeast including.
New York.
We're seeing growth in Florida for example, I would tell you. Its I'll give you had two or three examples that may be will help worked on lot of stadiums. So I think exports entertainment stuff. We've got several big stadium jobs at either happening now or that we're going to start working on and 21 or that we're bidding for 22. The second thing I'd mentioned is lots.
Distribution centers I think about Amazon, we're working a lot of Amazon distribution centers.
Across the country and then the third which I think as infrastructure related where either working either getting ready to start or bidding several airport jobs, where the doing terminal expansions or new terminals.
So a lot of work in airports I'd also say.
Perfect. Thank you so much.
Yeah.
Our next question comes from Megan Mcgrath with Buckingham Research. Please proceed.
Good morning, Thanks for taking my question I wanted to follow a little bit up a little bit on your commentary around the excess.
Supply in the market.
Just curious if you have any thoughts on the extensions that and if you think the recent improvement in starts is enough to absorb that supply or is part of your guidance in the fourth quarter.
I assume some incremental pricing pressure as that continues.
Hi, good market a little bit.
Yes, good morning, making this robertson.
Since that from a couple of different angles, one I would say that that we do see ample supply even though we're in a seasonally.
Busy time could tighten up a little bit there I would say ample supply. If you think about what's happened the past 12 to 18 months and back to your first part of your question about excess so excess supply has been more in the bat side.
The fiberglass that's hilker somewhat into the into the distribution channel, but I'd say that also relates to if you look back in the past 18 months, that's where the excess capacity has come on line has been with Bath installation as well. So I think given that given where we are given capacity that.
Folks about own.
And looking forward I think we feel like Theres ample supply right now and again, we would point towards there's others, bringing back additional additional capacity in late 2020 in Q1 of 2021.
And and is that is that incorporated into your guide for the remainder of the year.
You're talking about making this is John you're talking the product coming on obviously in late 2000. Nearly 21 is has no no no access to now sorry about that yes, Oh, yes, I mean, thats, we've incorporated that as part of our guidance, obviously and so.
We havent seen that I think in the past quarters. So we would expect to have significant material inflation.
Great and then.
My follow up just on them on the potential for expansion of your glass business could you give anymore color there on on you talked about having.
Some similar characteristics to inflation, what exactly is making you think that's attractive business.
Yes, Megan Jerry here.
Just to repeat we've been in the glass business for a while I mean, it's not new to US we have some experience.
And then with US I acquisition, we picked up a couple of more branches that have been a real stars in terms of their performance. So so some of the characteristics relative the glass that kind of Amir insulation have something to do with the with the size of the opportunity which is in glasses substantial multiple billions of dollars and the fact that it's a relative.
We fragmented business that that would have some advantages if we were to scale it off relative to not only our relationship with suppliers, but also the talent that we could have across the network that we do and installation and so.
And there is some commonality relative of the supply chain, there's commonality relative to the fact that it's it's installer centric in other words, our ability to manage labor to then we have decades of experience doing that on the installation side looks very similar on the glass side. So the capability from a corporate standpoint, that's driven the installations.
Over the many many years.
There are some there are lot of Comparables and a lot of similarity in glass business and as I said this.
When we spoke before about product adjacent season, how we would do it on a very disciplined basis. This is a great example that because as I've said, we've been in this business before we're not just stepping into somebody we know nothing about.
We have done the research and we continue to work hard on it and we think it's very promising.
Great. Thank you very much.
Our.
No further questions at this time, please continue with the presentation or closing remarks.
Thank you again for joining our call and we look forward to reporting our fourth quarter and year end results at the end of February .
Okay.
With that does conclude the conference call for today, we thank you for your participation and as such please disconnect your lines have a great to everyone.