Q2 2022 TopBuild Corp Earnings Call
Greetings and welcome to the top build earnings call and webcast. At this time all participants are in a listen only mode.
A question and answer session will follow the formal presentation.
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Please note this conference is being recorded.
I will now turn the conference over to your host Tabitha Zane Vice President Investor Relations. Thank you you may begin.
Thank you and good morning on the call today are Robert Buck, President and Chief Executive Officer, and Rob Kuhns, Chief Financial Officer, We have posted senior management's formal remarks, and a powerpoint presentation that summarizes our comments on our website at top Bill Dot com.
Many of our remarks will include forward looking statements, which are subject to known and unknown risks and uncertainties, including those set forth in this morning's press release as well as in the company's filings with the SEC. The company assumes no obligation to update or supplement forward looking statements that become untrue because of subsequent events.
Please note that some of the financial measures to be discussed on this call will be on a non-GAAP basis. The non-GAAP measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. We've provided a reconciliation of these financial measures to the most comparable GAAP measures and a table.
Included in today's press release and in our second quarter presentation, which can also be found on our website I will now turn the call over to Robert Buck Good morning, and thank you for joining US first I want to thank our entire team for their hard work and dedication producing another great quarter for our company and shareholders are.
Financial performance continues to prove the strength of our operating model and the ability of our team to successfully navigate market opportunities and challenges.
In the second quarter revenue increased 52, 7%.
27% on a same branch basis, and adjusted EBITDA margins at both business segments expanded.
Our installation business grew 21, 6% on a same branch basis with volume handedly outpacing completions.
Specialty distribution on a same branch basis grew just over 20% driven by strong execution and price realization in this prolonged supply constrained environment.
We're particularly pleased with the ice performance bolstered by the continued improvement of the commercial and industrial mechanical insulation end markets.
Revenue is growing ahead of plan due to strong project performance and the steps, we're taking internally to enhance operational efficiency and execution are driving strong margin expansion.
As these strong results demonstrate an API integration is proceeding very well and we cannot be more pleased with the great effort coming from the functional teams managing this process.
We're ahead of schedule from the standpoint of projected cost synergies as well as the blending of the outstanding DIY operations team and to the top down organization.
The benefits of this strategic acquisition focus on our core business of installation are exceeding our expectations.
No other solar or distributor comes close to matching our size.
Scale and service capabilities, which are driven by our talented team gives us a significant competitive advantage.
In addition, the timing of the <unk> acquisition could not have been better.
Although the long term fundamentals of the housing industry are solid we are well aware of the shifting economic environment and growing consistency that the U S economy is headed towards a recession.
<unk> increased our penetration into the commercial and industrial end markets, which on a pro forma basis now count for over 36% of our annual revenue.
These two end markets operate on a different cycle than residential housing, providing a buffer against the housing market slowdown.
With this diversified mix of business capital should be able to outperform in any environment.
Another buffer as the large backlog of homes under construction still need need to be completed.
The starts published on July 19th reports that homes under construction totaled almost $1 7 million.
Assuming about half of these units have already been escalated that still leaves nearly 850000 homes that need our installation or distribution services.
As mentioned, we are seeing growing strength in the commercial industrial mechanical insulation end markets, yes, our optimism for the second half of this year.
In the event of a slowdown our cycle tested team across the country will respond quickly using the branch operations data mined from our integrated ERP system.
Our playbook honed over the years has multiple levers we can pull cost out of the business.
Our decade long focus on operational efficiency sales and labor productivity and strong balance sheet management will continue to serve us well and enable us to best serve our customers.
And the shifting economic environment. We continue to believe acquisitions are the best use of our capital and we have a robust pipeline and exciting prospects across all three end markets, we serve residential commercial and industrial.
Acquisition serve as important dishes to the overall momentum of our business and given our industry, leading scale and focus on operational excellence the synergies we achieve are significant.
Our success in integrating acquisitions onto our systems and supply chain as a core competency and unmatched in our industry.
As a reminder, since June of last year, we've acquired 11 companies, including five year to date in total. These 11 acquisitions are expected to contribute over $800 million in annual revenue.
While our number one capital allocation priority remains acquisitions share repurchases are also an attractive option.
In addition to the recently completed $100 million ASR, Our board has approved a new $200 million share repurchase program.
Our positive free cash flow puts us in a great position to return value to shareholders by repurchasing shares.
Okay.
Turning to ESG, we have published our fourth annual sustainability report in May.
We are now disclosing our scope one emissions more detailed workforce demographic data and enhance safety performance information.
We're extremely proud of since 2017, we have shown five consecutive years of improvement in total recordable and lost time case rates demonstrating the priority we put on the safety lifestyle of our over 13000 employees.
On the environmental front I want to again emphasize that our products, we install and distribute drive thermal efficiency.
Our energy usage and reduce carbon emissions for heating and cooling.
The benefits, we deliver to our customers and energy efficiency are recurring and far outweigh the impact of our operations.
What is truly inherent in our business is that we bring energy efficiency to life every day at the over 60000 job sites, where we installed and deliver our products.
Finally, before turning the call over to Rob I want to thank those of you who joined US for our Investor day in late may either in person or via the webcast. We were thrilled to highlight the strength and depth of our team I give you a better understanding of why we are so excited about <unk> future and why we are confident we should outperform the market in any environment.
Rob.
Thanks, Robert and good morning, everyone.
Our strong second quarter results are evidence of the strength of our business model and a testament to the hard work of our teams across the U S and Canada.
Both business segments performed well as Robert mentioned, we could not be more pleased with the financial results integration progress in synergy realization in Dci.
As we move into the second half of the year, our installation and specialty distribution businesses remain busy in the long term fundamentals of our markets remained strong.
We are cognizant of the changing economic environment, and we'll be proactive in the event of a slowdown.
With our diversified end market revenue streams, and our flexible cost structure. We are confident we will continue to outperform in any environment.
Moving to the financials I'll start with an overview of our second quarter results update you on our balance sheet and provide the latest on our full year guidance.
Second quarter net sales increased 52, 7% to $1 3 billion with acquisitions and same branch sales contributing 32% a 27% respectively.
Our installation segment second quarter net sales were $749 million, an increase of 23, 7%.
Especially distributions net sales were $587 8 million an increase of 115%.
On a same branch basis, both segments grew over 20%.
We had a strong quarter for project delivery that Dci, which is reflected in their solid performance.
As a reminder, because a significant portion of <unk> sales are project driven their revenue can be a little lumpier due to the timing of deliveries.
Second quarter, adjusted gross margin expanded 90 basis points to 31%.
On a same branch basis gross margin expanded 200 basis points to 31, 2% driven by higher sales volume operational efficiencies fixed cost controls and higher selling prices.
Second quarter, adjusted EBITDA increased 61, 7% to $242 3 million and our adjusted EBITDA margin was 19%, a 100 basis point improvement compared to last year.
On a same branch basis, our adjusted EBITDA margin was 19, 9% an improvement of 190 basis points from last year.
Second quarter same branch incremental EBITDA margin was 29, 4% and our acquisition EBITDA margin came in at 15, 6%.
Second quarter adjusted EBITDA margin for our installation segment was 28% and 17, 2% for our specialty distribution segment, an improvement of 170 basis points and 70 basis points respectively.
Second quarter interest expense increased from $6 1 million to $13 4 million, primarily as a result of the additional borrowings on our term loan and our 500 million senior notes offering last October .
Of which were used to fund the acquisition of <unk>.
Second quarter adjustments to net income were $1 6 million and primarily related to acquisition integration costs.
Second quarter adjusted earnings per diluted share were $4 43.
65% increase from prior year.
Moving to our balance sheet and cash flows our June 30 year to date operating cash flow was $217 7 million compared to $202 2 million last year.
This was driven by our 72% increase in net income, which was partially offset by growth in working capital.
Working capital as a percent of trailing 12 month sales was 15% 510 basis points higher than a year ago.
This increase was driven by the higher working capital requirements of D. <unk>.
Continued price inflation in certain strategic inventory buys.
Over the long term, our working capital target remains 11% to 13%, but in the near term, while we continue to experience supply chain constraints, we expect working capital to remain at elevated levels.
On the capital allocation front June year to date, Capex was $36 million approximately one 5% of revenue and consistent with our long term guidance.
In addition year to date, we have allocated $18 7 million to acquisitions and $150 million to share repurchases.
There were no significant changes to our debt structure as our outstanding short term and long term debt.
Debt balances remained at $1 5 billion.
Our debt structure remains roughly 60% fixed and 40% variable with our current average cost of debt at three 8%.
We ended the second quarter with net leverage of 168 times trailing 12 months adjusted EBITDA. This is down from 184 times at the end of the first quarter as we continue to Delever post the <unk> acquisition.
Total liquidity at June 32022 was $554 million, including cash of $123 9 million and accessible revolver of $430 1 million.
Moving to our annual guidance based on our first half performance and our outlook for the remainder of the year, we expect 2022 to be a solid year for topical.
We are now projecting total sales to be between $4 eight and $4 9 billion a $150 million increase on the low end of the range and a $100 million increase on the high end.
Given our backlog and continued industry constraints, we expect sales volume in the second half of the year to be in the low to mid single digit range similar to the first half and for material inflation to begin to moderate.
We have also raised our guidance for adjusted EBITDA to be between 860, and 900 million a $50 million increase on the low end of the range and a $40 million increase on the high end.
Our long range modeling targets are unchanged from those we published on February 20 <unk>.
I will now turn the call back to Robert for closing remarks. Thank.
Thank you, Rob and closing the long term fundamentals of our industry are strong.
Recognizing the short term there are many macroeconomic factors beyond our control or influence in the environment in which we operate.
While we can't control is how we manage our business.
<unk> has a unique operating model that differentiates us from our peers our size and scale are key advantages.
As is having all of our branches robot to a common ERP system.
It allows us to attract daily activity in every branch, enabling us to proactively address business changes in real time.
The three end markets, we serve residential commercial and industrial represented $16 billion total addressable market opportunity and accordingly, we see a long runway of growth for our company.
With an engaged and energized team our culture founded on entrepreneurship and local empowerment and a focus on continuous improvement and operational excellence. We are confident we will perform well in any environment.
Operator, we're now ready for questions.
Thank you at.
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Our first question comes from the line of Adam Baumgarten with Zelman. Please proceed with your question.
Hey, good morning, Thanks for taking my questions I guess could you give us some more color on the strategic inventory buys maybe what types of products end markets was it in residential or was it more related to <unk> or both just some more color on that would be great.
Hey, good morning, Adam It's Robert So yeah, I would say mainly attributed to <unk>, where we made some strategic buy decisions.
Relative to Rob talked about some of our project deliveries, making sure we were going to continue to provide great service there as well as some capacity issues that we want to make sure. We recovered for service. So I would say mainly on the DIY side of the business for sure and then where we have some opportunity and service partners and through team, we took advantage of that but again mainly heavy.
We waited on the DIY side of the business. So some strategic buys and we think we are really valuable and I think you'd probably see that in the performance of <unk>.
Some of the margins and what we produced during the quarter Yeah. Adam. This is Rob I would just add to that with inventory inventory is up about 83 million year to date. If you look at our cash flow statement and I'd say the biggest increase there is just higher inventory to support the higher level of sales we have going on right now versus the end of last.
At year, probably the second biggest chunk standards, just raw inflation, that's flowing through the inventory and then the third is the strategic inventory buys.
Okay got it that's helpful. And then just I don't know if I missed it but I didn't hear any mention of the commercial business performance.
Notably within installation, maybe if you could walk through the trends you saw in the quarter on the heavy and light sides of the business.
Yes, so it's Robert again, so really good performance on the commercial side of the business led by.
Both the industrial and commercial saw some good project delivery on the side of the business we continue to see.
Some elongated and the strictly side of the commercial business. We saw some elongated project timelines there I think youre hearing that more and more to hear that from some other heavier commercial type businesses.
So just being elongated by some of the labor there, but overall, we were happy with the commercial performance in the quarter, but we do see some projects being just slowed down because of.
The labor shortages and stuff and other trades.
The other leading indicator for us around the commercial business is definitely the bidding side. So whenever we look at bidding and backlog we continue to see the backlog grow in that side of the business. So that's why we're pretty optimistic for the for the future both light and heavy commercial.
Great. Thanks, a lot.
Yeah.
Thank you. Our next question comes from the line of Ken Zenner with Keybanc capital markets. Please proceed with your question.
Good morning, everybody.
Good morning, Ken.
Given your residential market share, which is pronounced obviously on the service and the distribution with builders kind of talking about taking starts down obviously your orders are coming in they have more inventory than needed because of slower cycle wise, but a lot of that stuff seems to be resetting but.
Because you have such a high market share in U C beds.
How do you think that might play out as builders are you know.
Just kind of slow up I'm, not saying, a huge cyclical downturn, but they obviously have more inventory than they need near term and you know there's kind of talked about normalizing their own level of starts which kind of feeds into your volume. How do you think that 8% we saw in.
The installation side.
Obviously, a lot of price, but how do you think that might trend given with the builders, you're saying over the next let's say two to three quarters I'm thinking into the beginning of 'twenty three.
Yeah. Good morning, Kenneth Robert So I think Youre right, where the builders, who says they've really emphasized in the next couple of quarters.
And what we see based upon on backlog, but two as you know this is a seasonally busy time of year and that the public builders are pushing hard to get their closings done here and theres still quite a bit in backlog. So we think that definitely plays too.
Our advantage if you remember probably in years past, we would tell stories, where we get into September October early November the builders have such a push that typically it leads to some share gains for us because we're able to move labor around move material around move equipment around across the footprint given the power of our ERP system. So I'd say based on what.
The question that you're asking it really plays to our advantage here and again, we have good local relationships with all of those builders builders of all sizes quite honestly across the footprint. So I'd say it really plays to our advantage here coming up service is still at a premium, especially as folks are trying to get closed quickly here.
And again strength a strength for comp build in that area.
I appreciate it.
Recently, one of the things we were all talking about was with D. I you know I think you said 70% of its material.
It really occurred how much purchasing power since a lot of the.
The installation puppy themselves are the same ones running through D. R.
Can you maybe describe you know since Ti seems to be running ahead of schedule on the integration and stuff I mean are there.
Items related to your purchasing power or relationships with manufacturers that's actually there.
Liberate some upside.
Upside if you could go with move out a little bit I would appreciate that thank you.
Yeah, Ken This is Rob I would say on the as we've talked about I mean, the synergies are rolling in I would say ahead of schedule right now we feel really good about the $35 million to $40 million target, we put out there as far as the buckets go there, they're not significantly different than what we put out to begin with I'd say supply chain is going to be.
Around 40% back office 35, and in the operational improvements around 25% were not not too far off of that and I'd say, that's just a testament to the diligence we did upfront and the work. We did ahead of time on the deal.
Thank you.
Thank you. Our next question comes from the line of Phil <unk> with Jefferies. Please proceed with your question.
Hey, guys, congrats on a really impressive quarter and a choppy backdrop.
I guess my first question is for you Robert Great that you've diversified into industrial and commercial I view those businesses longer cycle. It sounds like orders are still tracking pretty good you talked about potential recession dynamics and then certainly.
Slowing housing so kind of help us think through 2023, how much line of sight do you have in either your commercial your industrial business and how do you see that how do you see those end market is holding up for you whether it's on your legacy installed distribution side or die.
Yes, good morning, Great question, so as I.
Think about that.
Back half of this year, we expect to remain steady I think you can see that our what we put out relative to our guidance for the back half of the year as I think about 2023, and we look out multifamily, obviously thats, where you have line of sight. If you think about in the residential side. So multifamily very strong very strong backlog that we see there are a lot of bidding activity.
From that perspective, so that gives us a lot of insights into 2023, and then as I think about the commercial side of the business.
Both commercial and the industrial side of the business. So backlogs are growing I think both light and heavy commercial and you know if there is or if there is some air pocket or slowness in residential I think youll see resources move over to the commercial sides I think youll see when we talk about elongated cycles down the commercial you've heard that from other companies I think.
That could be made up as people shift resources.
And potentially even material over to the commercial side of the business. So we're pretty positive on that as we look at the industrial side some nice.
Bigger projects coming online here in the back half of this year and going into 2023, and again, just looking at bidding activity and backlog, which are good leading indicators for us.
We feel good and that's why when we talk about.
We believe we have the opportunity to definitely outperforming the environment is because what we see on the commercial industrial side and again now our mix be call. It 62, 63, 64% on the residential and 36% or so on the on the commercial commercial industrial we think that mixing that diversification putting have come at a better time and then.
Just looking at how the <unk> acquisition is performing I mean, we're really happy with the EBITDA margins. The improvement we've seen in the business that's coming from all of the buckets that Rob talked about and just generally operational improvements happening.
And the DIY side of the business. So we feel really good about it and good about the mix of the business and relative to commercial industrial as well.
Super and then Robert you talk about how your customers still value service and being able to deliver.
Product on time.
And a slower demand environment, especially on the housing side of things how do you kind of see pricing shaking out next year and then a question for Rob just given the amount of pricing you've got her ready this year help us kind of size up.
Care of or pricing and then the last piece, Rob I think you said inflation was moderating in the back half is that just from a comp standpoint or are you actually seeing some of your costs.
Say it a bit here any color would be really helpful guys.
I'll answer the first part of that feel relative to.
Service and the builders I think the main thing to think about there is the labor side right. So even if there is a little bit of an air pocket or a slowdown the labor piece is still going to be highly valued and be a constraint in the industry and as you know we're really we do a really nice job of.
Providing the labor and providing great service. So we think the labor will carry the day there even if there is a slowdown labor still be supervised by the by the builders in by the customer side, Yes, Yeah, and I'd say on the on the pricing side like we said on the call. You know we are expecting in this environment.
For material inflation to start the moderate there arent any announced price increases out there right now.
So we're we've got our assumption for the carryover baked into our guidance, but that's why you'll see you know kind of if.
If you back half are.
If you do the math on the back half of our guidance versus what we did in the first half it's basically flat.
And so that's you know, saying we've got some carryover pricing there plus in the first half we had a little bit of extra volume like we talked about with some some key projects on the DIY side.
Okay. Okay. Thanks, a lot great color.
Yeah.
Thank you. Our next question comes from the line of Mike Rehaut with Jpmorgan. Please proceed with your question.
Hi, Good morning, guys, Doug Wardlaw on for Mike I was wondering if you could give a little bit further insight into the M&A pipeline across your different end markets.
Yes, good morning, it's Robert so.
Very active from that perspective, a very active pipeline and really across all three so.
I'll take each one of them so residential.
This type of environment, you see some more folks coming to the table wanting to talk to us on top of a healthy and robust pipeline that we had on the residential side, so definitely plenty of conversations and activity happening on the residential side and then on the commercial and industrial I mean, we have a nice pipeline there, but D. I just really helped.
They are bringing more to the table from that perspective, so lots of conversations and relationships being built there now you've heard US say this that <unk> integration is our top priority.
And I think you see that in the results that we are living up to our very good execution of the integration of <unk> that being said, we've got a lot of things working on the M&A front, we feel excited about things that are in the pipeline there really across all three of the end markets that are that we're servicing.
Doug This is Rob I would just add to that I mean since the I. We've done we've done eight deals.
More on the smaller side, but we're remaining active on that front, it's still our top capital allocation priority and we feel like there's a ton of runway out there with the $16 billion market that we address we've got a combined 20% share of it today.
Great and then lastly, I just wanted to give some further insight on the supply chain for you guys. And then just is this something that you have seen that evens out and slightly better for you guys and it's not like how do you how do you envision revisiting the supply chain moving forward.
Yes, so Doug Robert again, silver supply chain May go hit two or three different points. There. So you know.
Relative to the you heard the builders say, we would say say the same thing things didn't get worse in the second quarter, probably didn't get better in the second quarter relative to the.
The cycle time, if you will I think about our supply chain.
Fiberglass is still tight.
About it no really new capacity he does some new.
Capacity came on.
Q4 of last year Q1 of this year a lot of that capacity was offset by.
Maintenance that happened in the first half of the year, so there might be a little bit of loose fill material little more loose fill material in the back half of the year I would see where we've seen it.
Moderate more Rob talked about moderating inflation has really been on the spray foam side of the business. If you remember about spray foam theres an open cell product.
In a closed sale product, we definitely seen things loosen up on the open sell side, there's more of that product available in the market closed sale given the given the blowing agent and given some of the new innovation that product around the H F O blowing agent that product is still tight so.
So a little bit of a mixed bag fiberglass door remains tight spray foam loosening up on the open sales side are still tight on the closed sales side of the business.
Great. Thank you.
Thank you.
Thank you. Our next question comes from the line of Keith Hughes with Truest. Please proceed with your question.
Yes.
Oh, Thank you and you had some very nice volume and the installation of a second quarter, you talked about that a little bit.
Obviously, there's a lot of controversy on homebuilding, what where it is going to be going in the future.
Was this quarter could you just catch up on some of the backlog was weather an advantage what what specifically drove one of your better volume numbers.
Yeah.
Keith This is Rob so I'd say for sure. It was on the residential side, where we saw the stronger volume on our you know in our legacy business call. It writes the residential definitely stronger than completions for the quarter like Robert mentioned commercial projects on that side of the business had been a little slower due to constraints.
On that side. So it was definitely on the resi side and then like we've talked about on the DIY side things were very strong for the quarter from a volume perspective.
Okay. Thank you and then final question.
Just want to be clear your discussion of inflation, Youre, basically, saying inflation I assume in insulation, you're referring to it's flattening out you're about you're not seeing any declines in terms of.
Cost is that is that correct.
Yeah. This is Rob again, so yeah. That's correct, we're definitely not seeing declines in material costs, we're just saying with the environment out there in the in the slowdown in starts we're not anticipating significant increases moving forward.
Okay. Thank you.
Thank you. Our next question comes from the line of Stephen Kim with Evercore ISI. Please proceed with your question.
Yes.
Yeah. Thanks, very much guys. Thanks for all the information and congrats on the strong performance.
Wanted to ask you about the where you might be seeing the greatest pricing power on the on your side.
And where you might be seeing the greatest pushback in terms of your ability to implement pricing pass through pricing.
Yes, so I'll take it seem this is Robert I'll take it more from kind of a supply and demand perspective, and the team is still doing a great job they've done a great job of balancing that.
Zero cost increases in selling price and we've seen that really the team's done a nice job all businesses across the country. What I can tell you is let's talk about what we see relative to markets and stuff. So.
The Midwest would be the slowest market. If you think about it from that perspective southeast still strong inclusive of Florida inclusive of Texas, If I think about the southwest I'd say Vegas is stronger than Arizona and have to think about California, Southern California stronger than northern California is that kind of gives you from a from a.
Supply.
Demand perspective.
The builders.
So but that being said you know again, everybody is pushing here from a service perspective heading towards heading towards to closings and stuff. So I wouldn't say one has been tougher than another per se, but that's definitely what we see from an activity level across the different markets from some of the bigger markets to kind of give you some insight to that.
Yeah, Okay. Great now that's helpful. And then I believe last call you would expected that the fiberglass manufacturer maintenance was on track to be done.
I guess it sounds like that happens now and I think you articulated that loophole product was pretty available or we can you talk to how inventory levels look for.
And what you can see in fiberglass boats that role as well as the Lewisville and do you feel at this point that there are.
Is any excess inventory in the system.
And how would you expect to run your inventories are as you get into next year. If I. If I'm. You know housing is in fact lower would you be looking to take up your inventory levels versus what you carry them out this year or do you continue to try to keep them very lean relative to this year.
Yeah, so relative to inventory levels, Stephen I'd say youre right. The additional loose fill capacity that came on.
Pretty well taken up the first half of this year based on maintenance you're right. Most of that maintenance is done here in the month of August . So we would expect some loose fill material.
But that being said given seasonality and I'll give you. An example, I'm sure you're very familiar with seasonality, but think about it on the retail side of the business what happens the seasonality there it takes up a lot.
Out of that capacity. So I think you probably know the manufacturers easily build some inventory around this time to service.
The demand from the retail side coming into the fall as well if there's any retail resets going on and happening in the fall, which I know there are some given some shifts of markets on the on the retail side of the business relative to 'twenty 2023, and as I think as we think about our inventories carefully some opportunity.
On the DIY side, as we think about inventories and Rob talked about are we both talked about some strategic buys there so theres opportunity on the inventory levels. There I think we never think about.
The true team and service partner side of the business, probably fiberglass runs about the same I would say from that perspective, it may be some opportunity and spray foam and you heard me talk about open sales spray foam has become more readily available. So we probably don't see the need to carry as much and in the open sale product closed sale still remains tight so.
I think youll see some based on the different businesses have different types of products in 2023, I would see dramatic differences on the overall fiberglass side.
Okay. That's very helpful. I appreciate all the color.
Thank you.
Yeah.
Thank you. Our next question comes from the line of Ryan Gilbert with <unk>. Please proceed with your question.
Hi, Thanks, Good morning, everyone I just wanted to go back to your comments around the end markets and just to clarify.
When you talk about steady.
Manned, particularly in residential in the second half of the year is that a reflection of your view that the that you expect housing starts to hold up here or kind of flatline at a or or plateau at current levels or does that really reflect.
The lag between when a house is started and when you recognize revenue.
Any additional color would be really helpful. Thanks.
Yeah, Ryan, there's really a little bit of both but it you know it.
At the end of the day, the biggest thing for our optimism in the back half on the residential side is really the that the.
The gap between starts and completions right. The houses under construction I think Robert mentioned it in his comments, it's a million seven houses under construction right now in the U S, which is the most in the history of the census data. So we know quite a few of those are still going to require installation.
And so that's why we feel feel good about the back half of the year.
Okay got it that's helpful. That's all I had thank you very much.
Alright.
Yeah.
Thank you ladies and gentlemen, we have reached the end of the question and answer session. I will now turn the call over to Robert Buck for closing remarks.
Thank you again for joining US today, we look forward to talking to you in early November when we report our third quarter results.
Thank you. This does conclude today's conference and you may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.
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