Q2 2020 Earnings Call
I'm all participants are in listen only mode. A brief question answer session will follow the formal presentation. If anyone should require operator systems. During the conference. Please press star zero on your telephone keypad.
A reminder, this conference is being recorded this now my pleasure to introduce your host this Leslie Kratcoski Investor Relations. Thank you may begin.
Thanks, Michelle good morning, and thanks for joining us for the Gms earnings Conference call for the second quarter fiscal 20, I'm joined today by John Turner, President and CEO , Scott became Chief Financial Officer, and learn Roth Chief Accounting Officer.
In addition to the press release issued this morning, we have posted presentation slides to accompany this call in the Investor section of our website at Gms Dot com.
On today's call management's prepared remarks and answers to your question may contain forward looking statement.
<unk> in the private Securities Litigation Reform Act of 1995.
Forward looking statements the drugs matters that are subject to risks and uncertainties many of which are beyond our control and may cause actual results to differ from those discussed today.
As a reminder, forward looking statements represent management's current estimates and expectations. The company assumes no obligation to update any forward looking statements in the future listeners are encouraged to review the more detailed discussions related to these forward looking statements contained in the company's filings with the FCC, including the rest.
Dr Section in the company 10-K, and other periodic reports today's presentation also includes a discussion of certain non-GAAP measures the definitions and reconciliations of these non-GAAP measures are provided in the press release and presentation slides.
Please note that references on this call to second quarter fiscal 2020 relate to the quarter ended October 30, Onest 20 night cheap.
Finally, once we began the question answer session of the call in the interest of time, we kindly request that you limit yourself to one question and one follow up with that I'll now turn the call over to John Turner John .
Thank you athletes.
Good morning, and thank you for joining us today.
I will begin today's call with a review of our operating highlights and then turn it over to Scott to cover our financial results in more detail.
I'll, then conclude our prepared remarks with an overview of the strategic priorities. We are undertaking as we move forward.
Turning to slide three.
Our team continued to execute well in the second quarter net sales increased 3.4% driven by positive volume growth across each of our product lines, primarily in wallboard and steel frame, where we generated approximately 6% and 10% volume growth respectively.
This performance reflects solid demand conditions in both our commercial and residential end markets in the U.S., where net sales in total increased over 5%.
Partially offsetting the favorable volume growth was the more challenging pricing environment, particularly in steel as well as some continued softness in Canada.
Organic net sales increased 2.7% with just over 4% organic growth in the U.S. driven by strong volume reflective of favorable end market demand conditions as well as execution of our organic growth strategies focused around expanding share in our core products and growing sales of our complementary other product lines in.
Canada, we recorded just under a 6% organic sales decline, which was less than the 10% decline experienced in the first quarter. This coupled with signs of modest housing starts stabilization and recovery gives us early optimism that we maybe turning the corner soon in Canada.
We were pleased to report 80 basis points of gross margin expansion, driven mostly by net favorable price cost dynamics purchasing synergies and product mix.
S DNA as a percentage of sales was higher primarily due to the year over year decline in the selling price of certain of our products.
As well as certain other cost pressures, primarily in logistics wages and insurance cost.
In addition, we continue to make ongoing investments designed to drive growth and productivity going forward.
Adjusted EBITDA increased 3.2% to a record 89.9 million for the quarter and we realized an adjusted EBITDA margin of 10.4%.
During the second quarter, we opened a greenfield location and Wilsonville, Oregon and in early November just after the end of the second quarter. We completed the acquisition of Rigney building supply limited in Kingston, Ontario.
This transaction aligns well with our overall acquisition strategy allows us to expand our presence into a top 25 Canadian M. essay and capitalize on the long term strategic importance of the Canadian market.
We remain committed to disciplined expansion of our geographic footprint through accretive acquisitions and greenfield openings.
We continue to balance this with our debt reduction priorities on which we also made progress as a result of strong free cash flow generation, we reduced our net leverage to 3.5 times as at the end of quarter.
As we previously announced Scott Deacon joined US in October as Chief Financial Officer, and brings with him more than 25 years, the financial and operational leadership experience.
I'm confident that Scott's your spent in senior financial roles, including as a public company CFO will be exceptionally valuable to us as we move forward with the execution of our strategic initiatives.
With that I'll now turn it over to Scott to provide more detail on our financial results for Q2 Scott.
Thanks for the introduction J.T. and I would also like to thank you all for joining us today.
We were pleased to deliver strong performance in fiscal Q2 growing sales expanding gross margin and achieving higher net income adjusted net income and record adjusted EBITDA.
Looking at slide four we grew net sales, 3.4% to $861.9 million, including 2.7% organic growth year over year.
A greater portion of this growth was generated from volume gains this quarter versus a year ago, while the pricing we were able to realize several of our product categories was lower.
Sales of wallboard were up 4.8% compared to the same period last year, including 4% growth on an organic basis.
This reflected a volume increase of 6.4% driven by strength in both commercial and residential end markets in the U.S., coupled with a 2.4% decline in price mix.
Second quarter ceiling sales increased by 3.7% year over year or 1.7% on an organic basis, including 1.4% volume growth.
Ceiling volume was negatively impacted by decline in Canada.
Largely due to the timing of projects well U.S. volumes increased mid single digits.
As far as pricing, we saw lower pricing in sealing grid, which was related to steel price declines while pricing on tile remain favorable.
Sales of steel framing were essentially flat in decline, 0.6% on an organic basis due to strong volume growth of 10.3% offset by declines in price and mix totaling approximately 10.9%.
As you may recall steel pricing and mix were down 6% year over year in the first quarter.
Steel pricing trends were fairly consistent throughout the first and second quarter.
The greater year over year price decline in the second quarter was a result will be more difficult comparison in the prior year. Then was the case for the first quarter of this fiscal year.
Sales of other products, which consists of insulation joint compound tools stucco east and various other complimentary products increased 3% in the quarter or 3.1% on an organic basis.
In the U.S., we saw sales of these products up high single digits offset by declines of similar magnitude in Canada, driven by lower lumber pricing.
Net sales growth for the wallboard ceilings and other product categories ranged in the mid to high single digits in the U.S., reflecting not only the solid demand environment, but also our efforts to expand shared our core products in grow we are complimentary products.
Two important elements of our strategic priorities.
Which change he will cover further in a moment.
Gross profit in the second quarter increased by over 6% to $284.5 million.
Gross margin of 33% improved 80 basis points from 32.2% a year ago, primarily due to net favorable price cost dynamics, principally in wallboard another products acquisition related purchasing synergies mostly from Canada.
As well as the end market and product mix.
Well there is the usual uncertainty around the factors that may impact our price cost dynamics in the short term, we do expect to generate gross margin within a range of 32 and a half just 33% in the back half fiscal 2020.
Turning to slide five adjusted SGN, a expense as a percentage of net sales increased 90 basis points to 22.7 per cent compared to 21.8% in the prior quarter.
To be clear.
Approximately two thirds of this was related to deflation selling prices in wallboard steel framing and certain other products.
The remainder was primarily driven by increases in logistics wage inflation and increases in insurance costs together with continued investments in Greek fit greenfields and business initiatives intended to drive growth and productivity.
These costs were partially offset by productivity gains, resulting from our ability to more efficiently deliver being incremental volumes.
As a result, we delivered $89.89 million of adjusted EBITDA in the second quarter a record.
3.2% year over year, and 10.4% as a percentage of sales.
Looking forward if pricing levels in the back half a year remained fairly consistent with Q2 levels. We would expect to experience continued year over year adjusted SGN aid to leveraging.
For the back half of year, but to a lesser extent than experienced in the second quarter.
More specifically within the second half, we would expect price related deleveraging to be more pronounced in the third quarter than in the fourth quarter fiscal 2020.
As pricing comparisons get easier as we progressed through the balance of the fiscal year.
Based on these assumptions for pricing coupled with our expected range for gross margin, we look to achieve an incremental adjusted EBITDA margin, but at least 10% for full year.
22 fiscal 2020.
Turning to slide six.
Free cash flow for the first six months of fiscal 2020 increased $18.8 million were 51.5% year over year.
This improvement is primarily a result of $17.3 million of higher net income after adjustments for noncash items and a 7 million dollar increasing cash resulting from changes to net working capital.
Partially offset by $5.5 million of higher capital expenditures.
Looking to the remainder of the year, we're raising our our estimate for full year fiscal 2020 capital expenditures from $20 million to $25 million previously indicated to $25 million to $30 million as a result of some incremental maintenance capex.
And real estate investments.
Consistent with our stated capital allocation strategies, we reduced our net debt by $73.1 million during the quarter.
At the ended the quarter, our net debt to LTM pro forma adjusted EBITDA was 3.5 times, which is down from 4.2 times as of the end of the first quarter fiscal 2019, following the close of the Titan acquisition.
3.7 times at the end of the first quarter of this fiscal year.
Balanced with our other stated priorities, we intend to continue to de lever through we anticipated positive free cash flow generation of approximately 40% to 45% of adjusted EBITDA for the full fiscal year.
We also amended our USA deal facility during the second quarter to increase our borrowing capacity from $345 million to $445 million.
Extend the maturity date to 2024.
And improve the rate structure.
Our balance sheet remains quite healthy with $36 million of cash on hand in $410 million available to borrow under our facilities, resulting in substantial liquidity.
Additionally, approximately 85% of our total long term debt is not due until 2025.
Finally on September 920, 19, our former private equity sponsor EA investors completed a secondary public offering 6.8 million shares of our common stock.
This representing all of a is remaining ownership in Gms.
Now, let me turn the call back over to J.T. before we open the lines for questions.
Thanks Scott.
Once again, we're pleased with our performance in the second quarter strong sales volume gross margin expansion increased adjusted EBITDA and higher free cash flow we've.
And to expand our market, leading position and our balanced product portfolio.
We also believe our diversified exposure across commercial and residential new and repair and remodel construction markets continues to be an advantage our dedicated team throughout North America continues to embrace our strong entrepreneurial culture to earn our customers business every day with our complete line of products and by providing exceptional service.
That is second to none.
Since assuming the CEO position in August I've been working with the team to identify and prioritize the significant growth opportunities for the future, resulting in the four strategic priorities outlined on slide seven.
As many of you who have followed Gms for some time, we'll know our growth strategy for many years, both before and after the IPO was focused on acquisitions that strategy has been very successful, resulting in the creation of the leading specialty distributor of interior construction products in North America.
And going forward, we will continue to make acquisitions.
However, we intend to increase our emphasis on organic growth and capitalize on what we believe our tremendous opportunities to leverage the whole of Gms untapping, both scale and best practices opportunities across our entire footprint.
While we are the market leader overall, we do not hold the leadership position in every market.
We believe expanding our share and core products wallboard ceilings and steel is an important organic growth opportunity, enabling us to capitalize on our fixed investments in markets, where we're either under penetrated or below expected share levels.
At the same time, we have excellent capabilities throughout our business, which we believe will enable us to grow our other product categories. We are excited about the opportunities we see in expanding our product offering in order to meet the growing needs of our customers.
Extending these capabilities should allow us to grow select categories to diversify our operating and utilize our scale to do so more profitably.
Acquisitions will continue to play an important role there's still plenty of geographic white space, which provide further opportunities to grow.
We intend to achieve further platform expansion through both tuck in acquisitions, and greenfield opportunities balanced with our debt reduction priorities.
And finally, we have significant opportunity to more effectively leverage our scale and employ both technology and best practices to deliver further margin expansion.
It's an exciting time to be a part of Gms. We're confident that we are well positioned to capitalize on the growth opportunities ahead through execution of these strategies and create significant value for our shareholders.
Operator, we're now ready to open the call two questions.
Thank you we will now be conducting a question and answer session and the interest of time, we ask that you. Please limit yourself to one question and one follow up if he would like to ask a question. Please press star one on your telephone keypad. It confirmation telling will indicate your line is the question Q. You May proceed start to if you'd like to some of your question from the Q for participants you think.
Speaker equipment, maybe necessary to pick up your hands that before pressing the star Keith one moment. Please all we pull for your question.
Our first question comes from the line of Matthew Bouley <unk> with Barclays. Please proceed with your question.
Hi, Good morning. Thank you for taking my question I wanted to start with a question on the gross margin I appreciate that the second half guidance you guys gave and you know obviously, you're kind of highlighting that favorable price cost was a big driver here. So I guess, just focusing on the wallboard side and you know what's what the impact.
Then kind of manufacturer price increase for January I guess, how does that play into.
The margin range for the second half thank you.
Thank you, Matt you know.
We're planning to support a price increase if it comes about.
The end market demand conditions. However, at the moment to me no different than they were at the end of our first quarter call.
Don't necessarily indicate that there's going to be a lot of.
Acceptance in the marketplace for increased prices. So we're taking into account basically moving forward that we expect similar to last several quarters, our pricing sequentially for the last several quarters has been in wallboard just slightly down.
On a year over year basis, obviously, it's down as we just reported but on a sequential basis relatively flat and that's what we're planning on going forward.
Got it okay. Thank you for that and then just on the wallboard volume side. The you know the 6% organic.
Volume growth.
Finally, we saw one of your peers report something a little bit softer than that so I guess can you kind of discuss what you're seeing and hearing on the competitive trends out there and just how you think your growth compared to the overall market. Thank you.
I think were growing at a rate greater than the market and that's our objective.
I believe that our team is executing well I think from the sequential pricing you can see it's not coming from pricing.
And that we're out there, earning the business every day.
I think that.
This company's legacy focused on serving the business is what's earning us that business today, I think that our greenfield in acquisition strategy, certainly is helping as well.
And overtime I would expect us to continue to grow.
In that mid single digit level low to mid single digits at least on the volume side.
Alright appreciate the detail thank you John .
Thank you.
Thank you. Our next question comes from the line of Josh large with Suntrust. Please proceed with your question.
Josh can you talk to see if your line is on mute.
Hi, sorry, I was.
So I just wonder if you could give us a breakdown of kind of end user wallboard volume growth in a specific commercial comments or anything there.
Sure I mean, we still have a very strong commercial pipeline in our commercial sales were exceptionally strong in the quarter also evidenced by that you'd volume number in in steel.
Unfortunately steel pricing is still under pressure, maybe that's changing with these new tariffs that just came out.
But we were stronger commercial and we were residentially.
Our pipeline remains good I think residential is going to recover you can see it already the last numbers just came out this week for housing and sales in particular housing starts look good going into next year, we have some great national accounts on the builder side I would expect that to.
To fill in any gap you know later in 2020 calendar 2020.
If if the commercial market was to soften a little bit.
Okay, Great and then some clarification on the guidance, you say, 10% EBITDA incremental for fiscal year.
Correct.
Thank you.
Thank you. Our next question comes from the line of Michael Wood with Nomura Instinet. Please proceed with your question.
Hi, Good morning, all sort of question on your out conversion margins would that at least 10% for the full year.
Given that the first half a little bit stronger does that imply that second half conversion margins year over year might be below that 10% I wanted to know if that's correct way to think about it or is it when you say at least 10% you're confident that you can maintain that that 10% into the second half.
I think as is typical first second half its a little softer than the first in terms of volume. So you should expect.
Lower incremental in the second half, let me put up in the first.
Okay and on pricing on the last conference call I think you it.
Commented that pricing remained steady in August yeah, you'd called out the weak pricing here and feeling wallboard.
Can you just talked about what what pricing did sort of throughout the second half of your corridor and to what extent it surprised you.
I think steel pricing is the only thing that may have been a little more surprising on a year over year basis, but again, even steel pricing as we just called out in our comments sequentially is about about flat and wallboard flat pricing, you know plus or minus 1%. So.
Flattish as well sequentially.
And that's what we're expecting to have going forward.
Okay, great. Thank you.
Thank you. Our next question comes from the line of Kathryn Thompson with Thompson Research Group. Please proceed with your question.
Good morning. This is actually Brian virus on for a cabinet Steven Thanks for taking my questions I want to start today.
General Wallboard industry question and get your thoughts on.
The recent purchase by typically cobain continental and kind of the thoughts on the residual impact of wallboard industry consolidation.
Industry pricing discipline.
Well, if it closes and we expect that it will then we expect that there could be some more disciplined in the market for sure just naturally with one last.
Manufacturer and we expect that could be good for everybody Cinco vein and more specifically certainteed is a fantastic manufacturing great supplier of ours here and we couldn't be any more happy for them and we think in the long run that's good thing for everybody.
Got it and second one focusing on the other products category I think the growth rate in fiscal year 19 was I think about three times the level of the other segments much higher.
And I guess with all things equal.
What are your expectations for the other products segment into calendar 2020.
So in the U.S., we grew high single digits.
In other products and that was fully offset by Canada.
Mainly lumber pricing, so lumber pricing on a year over year basis was down 25 plus percent now we're anniversarying that as we speak so we expect that headwind to stop for US lumber is a huge part of the Canadian business, but we roll it up in our other product category because in the U.S., it's not as big.
Category for us so.
I expect us to keep focusing there and driving that other product category in that high single digit range.
Thank you.
Thank you. Our next question comes from the line of Trey Grooms with Stephens. Please proceed with your question.
Good morning, and thanks for taking my question. This is actually no.
<unk>.
So my first question.
I was talking about you know, you're probably not expecting a whole lot of traction from you know wallboard price increase.
Could you talk about maybe your expectation for any prebuy how did that.
You know, we're not doing a lot of prebuy at the moment because of that expectation the way I mentioned if for some reason, there's some sort of change in the in the dynamic we'll probably do some prebuy.
The reality is if anything will pre buy some steel with the related tariffs that were just announced a will follow that very closely and make some decisions over the next couple of weeks in that in that category.
Okay that makes sense and then for my follow up.
On your B to B E Commerce system I think it's early innings, there, but can you talk about.
You are in that process, what that means for you guys and any timing on targets.
Yeah, we would expect to end of next calendar year to be close to being rolled out to what I would say is a sufficient level for to be meaningful to the business.
As you know with e-commerce , it's a never ending journey.
This is just the first innings for us.
That and it truly is a b to b system it isn't.
We're automating the customer experience with us, but it's truly be to be first phase is probably not including things like selling a lot online to to open retail or anything like that and we really don't have strategies to do that anyway.
So you have to look at it probably being something that our customers were really appreciate and come to use to a significant extent.
End of 2020 calendar 2020.
All right. Thanks, that's it for me.
Thank you. Our next question comes from the line of David Manthey with Baird. Please proceed with your question.
Thank you hi, good morning, guys.
First off Scott I wanted to clarify your commentary on MSG today.
<unk> said that you expect SGN, a de leveraging year over year in the third quarter, but less than the second quarter. I guess is that to say that the X gene as a percentage of sales in the coming quarter.
We'll still be higher than it was a year ago is that what you're saying.
No.
You should be thinking about SGN a in the second half largely consistent with where are we as a percent of sales largely consistent with where we were in the second half of 19, what I was really referring to is if you take the dynamics of the price to leveraging in second half.
And.
Relative to where we were in the first half you're probably going to see SGN a appointed two points higher.
In the second half relative to the first half.
I see okay.
And then.
That's just.
That's the the price dynamic it's just the fact that the second half volumes are generally lower but thats offset by some favorability will have year over year in Canada in some other dynamics. So we're still holding a consistent with our overall.
Yearly indication of 10% incremental but you will see some some higher SG inane as a percent of sales in the second half versus the first but again that will be largely consistent with where we were in the second half of 19.
I see.
And.
So maybe we could explore some of those items as well you mentioned cost favorability in Canada and some other items. It would appear that historically from second to third quarter.
She is flat to maybe down five to 7 million Bucks on a sequential basis.
It sounds like you're implying that there is.
Factors this year that can make it possibly slightly better than that could could you outline just what you're talking about their from second quarter third quarter, what could move the needle.
Just a couple items the favorability year over year in Canada is one.
We had some Q3 19 inefficiencies in the business that we should lap this year and those are offset on the unfavorable side in terms of some of these.
Cost inefficiencies that we were talking about in terms of logistics insurance et cetera, and then again, just the dynamic of lower price and.
The overall lower sales in the second half versus the first.
Those are some of the puts and takes the kind of go into the netting of where we think we're going to come out.
That's very helpful. Thank you very much.
Thank you. Our next question comes from the line of Mike Dahl with RBC capital markets. Please proceed with your question.
Hi, Thanks for taking my questions first first one on ceilings I think you called out that the on the volume side. It was pressured by.
Canada, but I may have missed this that the price deceleration in the quarter.
Look a little bit more about why ceiling price decelerated and maybe break out what happened in the U.S. versus Canada. Please.
All of the deceleration in pricing ceilings was related to the grid, which is a.
Lag.
Pricing issue associated with steel.
Similar to our steel pricing so the titles traditional tiles continued to have normal.
Price improvement.
As we went through the quarter.
Canada is really a result delayed projects and timing we were down significantly in Canada on a year over year basis, but we would expect to recover there we feel in general the ceilings business is healthy.
Okay got it that's helpful.
And then second question just bigger picture John you laid out the four strategic initiatives I know I was hoping to get a little bit more in terms of as you.
As you have a analyze these and our rolling out some of the initiatives and you're talking qualitatively to what you're hoping to achieve but as we look whether it's a year or two years three years from now how should we be thinking about from a quantitative basis.
The measure of success, but your that you're evaluating that's against yes.
We will have to do some more work internally, particularly on the growth side with the other products. That's one that we have several what I'd say irons in the fire and a lot of a lot of success is happening that are giving us that high single digit growth rate in the U.S.
But we're going to align ourselves behind a fewer number of those and really push hard on them, but we will be in a position in the next few quarters to give you a little bit more detail around that Additionally, our logistics technology in the rollout of a lot of that is happening now and that's one of the key key areas that we're focused on for productivity in the business is optimizing the cost.
That fleet, which is a huge expense for us and then we've put together purchasing teams across the whole country now to identify particularly in and around those other product categories. What can we do to buy those products better into actually manage those categories better. So I think we'll be in position down the road to talk to you about.
We think that might give us in.
In actual dollars.
Okay, great well look forward to hearing that thank you.
Thank you. Our final question comes from the line of Kevin Hocevar with Northcoast Research. Please proceed with your question.
Hey, good morning, everybody.
Kevin.
If I look at I think you mentioned gross margins to be in the 32.5% to 33% range. The back half of the year, So that would imply in auto midpoint, 32.7% gross margins.
For the year and I think previously or you before said 32.2, I believe is kind of the long term expectation there.
So just wondering if.
These types of margins are sustainable do you think we revert back to the mean over time or how should we think of.
Or was that 32.2 could that longer term expectation come up I'm curious your thoughts there.
Well your Crystal ball was good as mine. The next six months 32, five to 33 I think that.
The 32 to was what we thought was prudent.
Until we've really gotten underneath our belt now a couple of quarters very very good results across really several of our product category. So.
We'll stick with the six months at this point and then each quarter. If we can look six months out or longer we'll try to give you some indication.
To that effect I can't tell you yet if it's going to revert back to a lower me.
Okay, and then in terms of the wallboard volumes coming back to that John I think you mentioned that wallboard.
You know outperformed the market by quite a bit we would agree.
And it sounds like.
Not really from pricing.
That's not what's driving it so what is driving it then because it seems like.
In the calendar years 2017, 2018, it seemed like Gms was.
In line to underperforming the market now hearing.
This calendar year, you can you reverted to outperforming and seemingly outperformed by quite a bit. So what's really changed you know to get you back to this nice outperformance.
Well the service situation has always been there. The company has always been service leader I think if you take a step back a few years. The company tried to support a price increase in an environment that it didn't really make a lot of sensed to do it in and so we lost some share during that period of time and I think that we're just being smarter about that now we're not leading with price we're going to meet we're going to meet the mark.
I think you know sequentially for four quarters now were basically flat and pricing. So I think thats exactly what's happening.
And our service model is bringing our customers back to US. There is also you know smaller competitors that aren't public that are out there that are struggling and we're capitalizing on that were being very very strategic at a at and that's kind of an odd way to put it but strategic at a local level understanding who was weak in the market going out in attacking those players that are weaker in the market.
And also we certainly said that we know that residential is going to be recovering and we have to we have to stay in the marketplace. When it comes to residential wallboard I think our team is doing a great job of of selling those products into the residential market and finally, the whole collection of products. Some of our competitors don't have the full collection or products.
And that's meaningful.
So many of our customers, where they can get everything from us.
And that certainly helps them to get one delivery or two deliveries and have everything on site that they need from us.
Okay, Great makes sense. Thank you.
Thank you. Our next question comes from the line of Matt Mccall with Seaport Global Securities. Please proceed with your question.
Thank you good morning, everybody.
Hi, Good morning, Yeah. So John you when you were discussing commercial and residential earlier you made the comment there any residential recovery could help fill in that or I think you had more than filling the gap if commercial softens I was just wondering if you get more detailed specifically around that softening commentary are you seeing anything that.
Would indicate saw softness is.
On the way or what I'm, just wondering what was what was behind that comment.
No our pipeline remains real strong commercially all I'm looking at as a longer term forecast Dodge another other people it put out there. So I hope they're wrong, you are seeing different levels of forecasting going into the back half of next year calendar year, some say commercial might be down five some say might be down seven some say might be down three.
But our pipelines really really good very strong and.
And bringing a lot of the investment right I mean, we're still wants to building built you go to put your interior products in it so.
Right now we don't see any weakness.
But I think it's just reasonable to look out into those long range forecast and understand what the business should be thinking about 18 to 24 months from now.
No I I agreed so I guess the follow up would be when you when you look back historically.
Those does maybe internal indications when have you been able to kind of see saw softness coming.
What kind of.
Lead time or warning you get.
Well Unfortunately that was so long ago I can't answer that question I'm not sure anybody sitting in this room right now can answer that question I can give you my experience from previous building materials companies that I've worked at and usually on the commercial side, if you're in the interiors product. Your 12 months six to 12 months, you'll begin to see.
Weakness following actual put in place construction began to deteriorate.
Yes, we havent met yet.
Okay all right. Thank you.
Thank you there no further questions at this time I'd like to turn the call back over to Miss Leslie Kratcoski for any closing remarks.
Thank you all for joining us today, a replay of our call will be available shortly on our website and as always we appreciate your interest in Gms have a good day. Thanks.
Thank you.
Thank you. This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation have a wonderful day.