Q3 2023 Beacon Roofing Supply Inc Earnings Call
Speaker 1: enhances our ability to serve new and existing customers.
New and existing customers.
We started the year with plans for at least 15 locations and each time, we add a new location, we are adding sales resources and reducing the average distance in time for us to serve our customers' orders.
Speaker 1: Each time we add a new location, we are adding sales resources and reducing the average distance in time for us to serve our customers' orders.
Speaker 1: This enhances our overall value proposition, giving us the opportunity to earn market share.
<unk> enhances our overall value proposition, giving us the opportunity to earn market share.
Speaker 1: We have now opened 36 new branches since the beginning of last year and will exceed our initial Ambition 2025 goal. These new branches are ramping up ahead of expectations and will contribute nearly $250 million to the top line this year alone.
We have now opened 36, new branches since the beginning of last year, and we will exceed our initial ambition 2025 goal. These new branches are ramping up ahead of expectations and will contribute nearly $250 million to the top line this year alone.
On acquisitions, we discussed the recent purchase of garden, providing a delivery footprint for waterproofing products in the northeast.
Speaker 1: On acquisitions, we discussed the recent purchase of Garbin, providing a delivery footprint for waterproofing products in the Northeast.
But we also completed four other acquisitions since the end of the second quarter.
Speaker 1: But we also completed four other acquisitions since the end of the second quarter, including All-American Vinyl Siding Supply, S&H Building Materials, Crossroads Roofing Supply, and this week H&H Roofing Supply. I'm pleased to report that our acquisition portfolio is performing well and delivering better than expected results.
Including all American vinyl siding supply SMH building materials crossroads roofing supply this week HMH roofing supply.
Im pleased to report that our acquisition portfolio is performing well and delivering better than expected results since announcing our ambition 2025 plan. We have acquired 14 companies, adding 43 branches, which together are generating around $400 million in annual revenues and like our greenfield strategy, expanding our ability to serve our customers.
Speaker 1: Since announcing our Ambition 2025 plan, we have acquired 14 companies, adding 43 branches, which together are generating around $400 million in annual revenues. And like our Greenfield strategy, expanding our ability to serve our customers across the country.
Across the country.
Our online capability continues to be a clear competitive differentiator for beacon.
Speaker 1: Our online capability continues to be a clear competitive differentiator for Beacon. Since we provide the most complete digital offering in the industry.
We provide the most complete digital offering in the industry.
Speaker 1: Sales through our online platform deliver approximately 150 basis points better margin compared to offline channels.
Sales through our online platform deliver approximately 150 basis points better margin compared to offline channels, we continue to expand our offering to serve customers in the ways that brings the customer the most value.
Speaker 1: we continue to expand our offering to serve customers in the ways that brings the customer the most value.
Speaker 1: Our digital integrations with solutions providers drove an impressive 22% year over year increase in digital sales in the third quarter and the highest percentage of residential sales ever at 22%.
Our digital integrations with solutions providers drove an impressive 22% year over year increase in digital sales in the third quarter and the highest percentage of residential sales ever at 22%.
Speaker 1: We have plans to build on our digital leadership by continuing to invest in this area of differentiation.
We have plans to build on our digital leadership by continuing to invest in this area of differentiation.
Speaker 1: Moving on, for those of you who have listened to our calls in the past, you know that we are enhancing productivity and expanding capacity through our continuous improvement and operational excellence.
Moving on for those of you who have listened to our calls in the past you know that we are enhancing productivity and expanding capacity through our continuous improvement and operational excellence initiatives.
Speaker 1: Our focus on the bottom quintile branches generated significant contributions to EBITDA in the third quarter.
I'll focus on the bottom quintile branches generated significant contributions to EBITDA in the third quarter.
Speaker 1: Our disciplined process for diagnosing and addressing issues has been core to our operational improvements the last two years. I am pleased to report that the process contributed approximately $10 billion of EBITDA year-over-year in the third quarter.
Our disciplined process for diagnosing and addressing issues has been core to our operational improvements for the last two years and I am pleased to report that the process contributed approximately $10 billion of EBITDA year over year in the third quarter.
As we've discussed on previous calls we have chosen to operate our branches to the network and larger msas. They operate on a single P&L and work together to provide optimized service to the customer we have coined this approach OTC or on time and complete.
Speaker 1: As we have discussed on previous calls, we have chosen to operate our branches as a network in larger MSAs. They operate on a single P&L and work together to provide optimized service to the customer.
Speaker 1: We have coined this approach OTC or On Time and Complete. OTC provides
OTC provides four key benefits first improved customer service levels.
Speaker 1: First, improved customer service levels. Second, a lower cost to serve. Third, the ability to optimize inventory levels. And fourth, it enhances local talent development, critical to us achieving our Ambition 2025 goals.
The lower cost to serve third the ability to optimize inventory levels and fourth it enhances local talent development critical to us achieving our ambition 2025 goals.
Speaker 1: These initiatives, combined with our branch revitalization, have been key to delivering on our productivity improvements and generating the operating leverage that Frank will discuss shortly.
These initiatives combined with our branch revitalization have been key to delivering on our productivity improvements and generating the operating leverage that Frank will discuss shortly.
And lastly, I will talk about how we are creating shareholder value as.
Speaker 1: And lastly, I'll talk about how we are creating shareholder value. As we discussed on the last call, we successfully repurchased the entirety of the outstanding preferred shares, reducing the as-converted share count by 9.7 million or 13% of the equity outstanding and eliminated the related cash dividend of $24 million annually.
As we discussed on the last call, we successfully repurchased the entirety of the outstanding preferred shares reducing the as converted share count by $9 7 million or 13% of the equity outstanding and eliminated the related cash dividend of <unk> $24 million annually.
Speaker 1: In addition, we continue to execute on our current authorization to repurchase our common stock. Year to date through July 31st, we repurchased approximately $100 million or approximately 1.5 million shares.
In addition, we continue to execute on our current authorization to repurchase our common stock year to date through July 31st we repurchased approximately $100 million.
Or approximately one 5 million shares.
Since the start of ambition 2025, we have deployed nearly one 3 billion, reducing the as converted share count by more than 21%.
Speaker 1: Since the start of Ambition 2025, we have deployed nearly $1.3 billion, reducing the as-converted share count by more than 21%.
Speaker 1: It is worth repeating the impressive highlights I mentioned in my opening remarks. Even with the purchase of our shares, the investment M&A and the record spending on growth capex, we have maintained leverage well within our stated target range of two to three times.
It is worth repeating the impressive highlights I mentioned in my opening remarks, even with the purchase of our shares the investment M&A and the record spending on growth Capex, we have maintained leverage well within our stated target range of two to three times.
In summary, we have a differentiated approach and have built the tools to enable multiple paths of growth margin expansion and value creation through the cycle. Our ambition 2025 plan has seamlessly stitched it altogether to amplify the resiliency of our business model and unlock our potential now I will pass the call over to Frank to provide it.
Speaker 1: summary, we have a differentiated approach and have built the tools to enable multiple paths of growth, margin expansion and value creation through the cycle. Our Ambition 2025 plan has seamlessly stitched it all together to amplify the resiliency of our business model and unlock our potential. Now I'll pass the call over to Frank to provide a deeper focus on our third quarter results.
Deeper focus on our third quarter results.
Speaker 2: Thanks Julian and good evening everyone. Turning to slide seven, we achieved nearly $2.6 billion in total net sales in the third quarter of 7%, primarily driven by the impact of acquisition.
Thanks, Julian and good evening, everyone turning to slide seven.
We achieved nearly two $6 billion in total net sales in the third quarter up 7%, primarily driven by the impact of acquisitions and.
Speaker 2: Adjusting for one less selling day in the third quarter of this year, net sales increased almost 9%.
Adjusting for one less selling day in the third quarter of this year net sales increased almost 9%.
Organic volumes and slightly higher average selling prices for our products also contributed to the growth.
Speaker 2: Organic volumes and slightly higher average selling prices for our products also contributed to the growth.
Speaker 2: Organic volumes, including those from Greenfield's, increased approximately 1 to 2 percent, while overall price contributed less than 1 percent.
Organic volumes, including those from Greenfields increased approximately 1% to 2%, while overall price contributed less than 1%.
Speaker 2: Acquisitions, including coastal construction products, are performing well and contributed nearly 5% to daily net sales year over year.
Acquisitions, including postal construction products are performing well and contributed nearly 5% to daily net sales year over year.
Speaker 2: Our backlog continued to convert in the quarter as we entered the shoulder season. While the backlog is slightly lower sequentially, it remains well above historical level.
Our backlog continued to convert in the quarter as we entered the shoulder season, while the backlog is slightly lower sequentially. It remains well above historical levels.
Residential roofing sales per day were higher by more than 15%.
Speaker 2: Residential roofing sales per day were higher by more than 15 percent. Volume growth in the low double-digit range, combined with higher prices, resulting from our diligent execution of the August shingle increase drove the revenue performance.
Volume growth in the low double digit range combined with higher prices, resulting from our diligent execution of the August shingle increase drove the revenue performance.
Speaker 2: Our rezi volumes in the quarter were strong. And adjusting for channel restocking, we estimate that we grew at least in line with the market.
Our resi volumes in the quarter was strong and adjusting for channel restocking, we estimate that we grew at least in line with the market.
Speaker 2: Nondiscretionary residential R&R demand was supported by higher storm activity this year.
Non discretionary residential R&R demand was supported by higher storm activity this year.
Speaker 2: 2023 storm demand continues to be stronger than our 10-year average planning assumption more than offsetting new construction headwinds this year.
<unk> 2023 storm demand continues to be stronger than our 10 year average planning assumption more than offsetting new construction headwinds this year.
Speaker 2: Non-residential roofing sales declined by approximately 6% per day as they expected destocking by our customers and lengthening project cycles continued to impact volumes in the quarter. That said, even in a period of significant channel destocking and lower volumes, overall non-residential prices were relatively stable sequentially and year over year.
Nonresidential roofing sales declined by approximately 6% per day as the expected destocking by our customers and lengthening project cycles continued to impact volumes in the quarter.
That said, even in a period of significant channel Destocking and lower volumes overall nonresidential prices were relatively stable sequentially and year over year.
Complementary sales per day increased to 14, 5%.
Speaker 2: complimentary sales per day increased 14.5%.
Speaker 2: The growth was primarily driven by the coastal acquisition, which drove higher sales of our waterproofing product.
The growth was primarily driven by the coastal acquisition, which drove higher sales of our water proofing products.
Speaker 2: Higher overall siding volumes also contributed to the increase.
Higher overall siding volumes also contributed to the increase.
Speaker 2: excluding lumber, overall complimentary product prices were stable sequentially.
Excluding lumber overall complimentary product prices were stable sequentially.
Speaker 2: As a reminder, with the addition of Coastal, our complementary product category now has approximately 70% residential and 30% nonresidential exposure.
As a reminder, with the addition of coastal our complementary product category now has approximately 70% residential and 30% nonresidential exposure.
Speaker 2: Turning to slide eight, we'll review gross margin and operating expense.
Turning to slide eight we will review gross margin and operating expense.
Speaker 2: Gross margin came in at 26% in the third quarter, nearly matching the year ago quarter. While line of business mix provided gross margin favorability, overall price cost was unfavorable by approximately 40 basis points.
Gross margin came in at 26% in the third quarter nearly matching the year ago quarter.
While line of business mix provided gross margin favorability overall price cost was unfavorable by approximately 40 basis points higher.
Speaker 2: higher average selling prices year over year for more than offset by higher product costs, especially in the non-residential line of business.
Higher average selling prices year over year for more than offset by higher product costs, especially in the nonresidential line of business.
Speaker 2: Importantly, we surpassed the Gross Margin Guidance we provided on the second quarter call. Efficient execution of the August single price increase yielded residential price cost, favorability in the quarter.
Importantly, we surpassed the gross margin guidance, we provided on our second quarter call.
The efficient execution of the August shingle price increase yielded residential price cost favorability in the quarter.
Gross margin performance in the quarter essentially in line with the prior year quarter is even more impressive when you consider the significant inventory profits generated in the year ago period.
Speaker 2: Gross margin performance in the quarter, essentially in line with the prior year quarter, is even more impressive when you consider this significant inventory profits generated in the year-ago period.
Speaker 2: Adjusted OpEx was $395 million, an increase of $21 million.
Adjusted Opex was $395 million, an increase of $21 million.
Speaker 2: Adjusted OpEx as a percentage of sales decreased to 15.3%, or 20 basis points of leverage improvement versus the prior year quarter.
Adjusted Opex as a percentage of sales decreased to 15, 3% or 20 basis points of leverage improvement versus the prior year quarter.
The change in adjusted Opex was driven primarily by expenses associated with acquired and Greenfield branches. Together. These new branches accounted for approximately $30 million of the increase.
Speaker 2: The change in adjusted OpEx was driven primarily by expenses associated with acquired and greenfield branches. Together, these new branches accounted for approximately $30 million of the increase.
Speaker 2: Inflationary pressures in areas such as wages and benefits and travel and entertainment also contributed to the increase. These increases were offset by lower incentive compensation, selling expenses, bad debt, and professional fees.
Inflationary pressures in areas, such as wages and benefits and travel and entertainment also contributed to the increase.
These increases were offset by lower incentive compensation and selling expenses bad debt and professional fees.
Speaker 2: Ranch productivity continues to be a focal point and help drive favorable operating leverage in the third quarter. As you can see, our sales per hour metric matched high level indexed back to the first quarter of 2020.
Branch productivity continues to be a focal point and helped drive favorable operating leverage in the third quarter. As you can see our sales per hour metric matched its highest level indexed back to the first quarter of 2020.
Speaker 2: Investment in Ambition 2025 initiatives to drive above market growth and margin enhancement continued in the quarter. These investments include our dedicated Greenfield and M&A teams as well as initiatives related to our sales organization, customer experience, pricing tools, and e-commerce technologies. Notably, our justice operating expense to sales ratio reached its second lowest level in 10 years. Proof of the team's focus on driving growth and delivering operating efficiency.
Investment in ambition 2025 initiatives to drive above market growth and margin enhancement continued in the quarter. These investments include our dedicated Greenfield and M&A teams as well as initiatives related to our sales organization customer experience pricing tools and E Commerce technologies, notably our adjusted operating.
Expense to sales ratio reached the second lowest level in 10 years proof of the team's focus on driving growth and delivering operating efficiency.
Speaker 2: Turning to slide 9, operating cash flow was solid for the third quarter at $167 million, as working capital benefited from continued inventory rightsizing.
Turning to slide nine operating cash flow was solid for the third quarter at $167 million as working capital benefited from continued inventory right sizing.
Speaker 2: We had about $80 million less in inventory as compared to the prior year quarter, even with higher product costs, inventory acquired through M&A, and new inventory to support green fields. This is a testament to the collaborative efforts of the Field Management Team and the Supply Chain Organization to efficiently manage working capital in this dynamic environment.
We had about $80 million less in inventory as compared to the prior year quarter, even with higher product costs inventory acquired through M&A and new inventory to support Greenfields.
This is a testament to the collaborative efforts of the field management team and the supply chain organization to efficiently manage working capital in this dynamic environment.
Speaker 2: Over the past four quarters, we've generated $845 million of operating cash flow, converting nearly 95% of adjusted EBITDA. And we expect solid cash generation in the fourth quarter, as we begin to return to a more seasonal pattern of cash flow.
Over the past four quarters, we've generated $845 million of operating cash flow converting nearly 95% of adjusted EBITDA.
And we expect solid cash generation in the fourth quarter as we begin to return to a more seasonal pattern of cash flow.
Speaker 2: While Julian previously mentioned share repurchases, let me give you some additional details that may be helpful.
While Julian previously mentioned share repurchases, let me give you some additional details that may be helpful. Kam.
Common share repurchases in the third quarter were $25 million. They were made early in the quarter through a than existing rule <unk> one plan.
Speaker 2: Common share repurchases in the third quarter were $25 million. They were made early in the quarter through a then-existing Rule 10b-51 plan. The repurchases resulted in the retirement of approximately 300,000 common shares.
The repurchases resulted in the retirement of approximately 300000 common shares.
Speaker 2: Net of share issuances for stock-based compensation, we reduced common shares outstanding to 63.2 million on September 30th versus 64.2 million at December 31st.
Net of share issuances for stock based compensation, we reduced common shares outstanding to $63 2 million on September 30 versus $64 2 million at December 31.
Speaker 2: Net debt leverage at the end of the quarter was less than 2.7 times trailing 12 months before the end of the quarter was less than 2.7 times trailing 12 months
Net debt leverage at the end of the quarter was less than two seven times trailing 12 months adjusted EBITDA squarely within the leverage range, we laid out at Investor day.
As you know the sequential tick up and Leverages attributable to the preferred redemption, we continue to have ample capacity to invest in greenfield and acquisitions as well as upgrading our fleet and facilities to support our customers and employees.
Speaker 2: As you know, the sequential pickup and leverages attributable to the preferred redemption, we continue to have ample capacity to invest in green fields and acquisitions, as well as upgrading our fleet and facilities to support our customers and employees.
We are also continuing to invest unlock service improvements future growth and branch productivity, we remain confident in our ability to successfully operate in any environment and capitalize on growth opportunities as we close out the year with that I'll turn the call back to Julian for his closing remarks.
Speaker 2: We are also continuing to invest to unlock service improvements, future growth, and branch productivity. We remain confident in our ability to successfully operate in any environment and capitalize on growth opportunities as we close out the year. With that, I'll turn the call back to Julian for his closing remarks.
Speaker 1: Thanks, Frank. Please turn to page 11 of the slide material.
Frank Please turn to page 11 of the slide materials.
Speaker 1: Before we head to Q&A, I'd like to update you on our outlook for the remainder of the year.
Before we head to Q&A I'd like to update you on our outlook for the remainder of the year.
As we look forward, we expect current momentum will continue in the fourth quarter.
Speaker 1: As we look forward, we expect current momentum will continue in the fourth quarter. We expect all three lines of business to show positive growth in the quarter, including our non-residential business, which is trailed all year.
We expect all three lines of business to show positive growth in the quarter, including on nonresidential business, which has trailed all year.
Speaker 1: For the fourth quarter, we expect sales per day growth to be approximately 11 to 13% year over year. In line with our October pacing of approximately 13%.
For the fourth quarter, we expect sales per day growth to be approximately 11% to 13% year over year in line with our October pacing of approximately 13%.
Keep in mind that the fourth quarter of last year included the acquisition of coastal construction products.
Speaker 1: Keep in mind that the fourth quarter of last year included the acquisition of coastal construction product.
We expect gross margin to be in the 25, 5% range and remember that the prior year quarter had significant inventory profits.
Speaker 1: We expect gross margin to be in the 25.5% range and remember that the prior year quarter had significant inventory profit.
Speaker 1: As we enter the winter months, we will balance product availability with our inventory reduction and productivity with growth investments.
As we enter the winter months, we will balance product availability with our inventory reduction and productivity with growth investments and importantly, as Frank mentioned, we expect to finish the year with significant cash flow.
Speaker 1: And importantly, as Frank mentioned, we expect to finish the year with significant cash flow.
Speaker 1: We are increasing our full year 2023 adjusted EBITDA guidance in the range of $910 million to $930 million.
We are increasing our full year 2023, adjusted EBITDA guidance in the range of $910 million to $930 million.
Speaker 1: This increase is an impressive accomplishment for the team, proving that we can navigate in any environment.
This increase is an impressive accomplishment for the team proving that we can navigate in any environment.
Speaker 1: I will remind you that we had confidence coming into the year that we could grow the top line and now we have line of sight to bottom line growth too.
I'll remind you that we had confidence coming into the year that we could grow the top line and now we have line of sight to bottomline growth to.
Speaker 1: I'm very pleased that we are going to full year 2023 EBITDA that is likely to surpass a record year of 2022.
I am very pleased that we are guiding to full year 2023, EBITDA that is likely to surpass our record year of 2022.
Given our current valuation and our balance sheet strength, we expect to resume our share repurchase program under the remaining authorization granted earlier this year.
Speaker 1: Given our current valuation and our balance sheet strength, we expect to resume our Share Repurchase Programme under the remaining authorization granted earlier this year.
Our focus remains on the areas within our control, including safety customer experience labor productivity and pricing execution, we will continue to deploy capital on initiatives that we expect will result in accelerated growth, including executing on acquisitions and delivering on our greenfield locations, which we now expect to be at.
Speaker 1: Our focus remains on the areas within our control, including safety, customer experience, labor productivity, and pricing execution. We will continue to deploy capital on initiatives that we expect will result in accelerated growth, including executing on acquisitions and delivering on our greenfield locations, which we now expect to be around 25 branches in 2023.
Around 25 branches in 2023.
Speaker 1: Our results demonstrate that our strategy provides us with the ingredients for us to grow faster than the market. While we still have more to achieve, I am pleased to say that we expect to exceed the revenue and shareholder return targets that we laid out in our ambition 2025 plan in this year. A full two years ahead of plan.
Our results demonstrate that our strategy provides us with the ingredients for us to grow faster than the market.
While we still have more to achieve I am pleased to say that we expect to exceed the revenue and shareholder return targets that we laid out in our ambition 2025 plan in this year a full two years ahead of plan.
Speaker 1: Looking forward, we plan to continue making investments in our sales organization and our service model, our digital offerings and our private brand categories. We're investing in improving our operations, delivering results today, but also getting ready for the future. We are adding platforms for growth that we expect will result in accelerated performance with targeted acquisitions and our Greenfield locations.
Looking forward, we plan to continue making investments in our sales organization and our service model, our digital offerings and our private brand categories. We're investing in improving our operations delivering results today, but also getting ready for the future. We are adding platforms for growth that we expect will result in accelerated.
Performance with targeted acquisitions, and our greenfield locations.
Speaker 1: Our business model is resilient, leveraging predominantly non-discretionary R&R demand, and our momentum is strong. We're looking forward to the rest of 2023 and helping our customers to build more. And with that, we'll open it up for questions.
Our business model is resilient leveraging predominantly non discretionary R&R demand and our momentum is strong we.
We're looking forward to the rest of 2023 and helping our customers to build more.
And with that we will open it up for questions.
Ladies and gentlemen, if you wish to ask a question. Please press star followed by one on your Touchtone telephone. If your question has been answered or you wish to withdraw your question press. The Star key followed by two each caller is limited to one question.
Speaker 3: Ladies and gentlemen, if you wish to ask a question, please press star followed by one on your test tone telephone. If your question has been answered or you wish to withdraw your question, press the star key followed by two. Each caller is limited to one question.
Speaker 3: The first question is from the line of Kitem Matoro with BMO. Your line is now open.
The first question is from the line of Keith <unk> with BMO. Your line is now open.
Thank you and congrats on another good quarter.
Speaker 4: Thank you and congrats on another good quarter.
Speaker 4: Maybe, Julian, to start with, can you talk to, you know, sort of just regional trends this quarter, you know, areas where, you know, you saw things that were better than what you guys were expecting, or areas which were not as strong as you guys were expecting? Thank you.
Julian to start with.
Regional trends this quarter.
<unk> now you're starting to have a better than what you guys were expecting or areas, which were not as strong as you basically thank you.
Sure. Thanks for the question Tom Thanks for the wishes.
Speaker 1: Sure, thanks for the question, Kitun. Thanks for the wishes. Yeah, I mean, obviously the storm impacted markets were the strongest markets we had, and that included...
Yes, I mean, obviously the.
<unk> Dong impacted markets.
With the strongest markets, we have and that included.
Speaker 1: California, from the rain earlier in the year, we saw that come through. We saw storms through the Front Range, Denver, so Colorado was strong, Texas was strong.
The California from the rain earlier in the year, we saw that that come through.
We saw storms through the the.
Front range.
Denver.
Colorado strong, Texas was strong.
Speaker 1: uh... and we we saw continued strength in the upper midwest as well the weaker market to me that the probably the surprise to us
And we saw continued strength in the upper Midwest as well the weaker markets I mean, probably the surprise to us in the quarter was the softening in Florida.
Speaker 1: in the quarter was the softening in Florida. Obviously, we're seeing a little bit of a lapping of the Hurricane Ian impact.
Obviously, we're seeing a little bit of a lapping of the hurricane impact.
Speaker 1: And I think we mentioned on the last call the impact of immigration.
And I think we mentioned on the last call the impact of.
<unk>.
Speaker 1: status and uh... they seem to have been uh... a tightening labor market there that uh... reduced uh... output in the state as well so that that slowed down uh... and generally speaking the the north east uh... of the country has been
And they seem to have been a tightening labor market.
Reduced.
I would put in the state as well so that has slowed down.
And generally speaking the north east.
The country has been.
Final year.
Speaker 1: fine all year, but it's not been as strong as some of the other areas. So we are seeing a very regional outlook, but we continue to believe that in general we're outperforming across the country. We see very good trends in Beacon's performance.
But it has not been as strong as some of the other areas. So we are seeing a very regional.
Outlook.
But we continue to believe that in general where we're outperforming across the country we see.
Very good trends in beacons performance.
Speaker 1: uh... really across the country so we're very very pleased even in some of the weakest states where we've seen uh... you know good momentum with uh... without marketing initiatives and sales initiatives uh... greenfields acquisitions etcetera so we're we're really very very pleased with the performance across the board
Really across the country. So we're very very pleased even in some of the weakest states where we've seen.
Good momentum with with our marketing initiatives and our sales initiatives greenfields acquisitions et cetera. So we're really very very pleased with the performance across the board.
Thank you for your question.
Speaker 3: Thank you for your question. Next question is from the line of Joe Allersmeyer with Deutsche Bank. Your line is now open.
Next question is from the line of Joe <unk> with Deutsche Bank. Your line is now open.
Yes. Thanks, good evening, everybody. Thanks for taking the question.
Speaker 5: And obviously, congrats on these strong results as well. Certainly a favorable environment, but your actions clearly helping you capitalize. My question is.
And obviously congrats on these strong results as well.
Certainly a favorable environment, but your actions clearly helping you capitalize my question is on the market from here into next year. Julian last year, you had offered some thoughts on volumes market level volumes into next year and what that might mean for pricing wondering if you'd like.
Speaker 5: here into next year. Julian, last year you had offered some thoughts on volumes, market level volumes into next year and what that might mean for pricing. Wondering if you'd like to...
Indicate how you are feeling about pricing and volumes into next year, just given the storm contribution in 2023.
Sure would be happy to do some of that obviously, we're still a little ways away from providing guidance into 2024, but I'll give you some.
Speaker 1: Sure, we'd be happy to do some of that. Obviously, we're still a little ways away from providing guidance into 2024, but I'll give you some thoughts on.
<unk>.
Thoughts on how we're thinking about it.
Speaker 1: First of all, we don't believe this is a particularly outstanding year in terms of...
First of all we don't believe this is a particularly outstanding year in terms of the macro environment. Obviously storms have have had a positive impact.
Speaker 1: you know the macro environment obviously storms have uh... have had a positive impact uh... they are above the ten year average but they're not so far about the average that uh... you know you'd say that it was an extraordinarily high year either mean rather than they were no hurricanes this year were laughing uh... some hurricanes from prior year so while it was above the ten year average it's by no means an extraordinarily strong year
We are above the 10 year average.
But they're not so far above the average.
You would say that it was an extraordinarily high year, either I mean, rather there were no hurricanes this year, we're lapping some.
Some hurricanes from prior years, so while it was above the 10 year average it's by no means an extraordinarily strong year.
Speaker 1: And we've obviously had macro headwinds in some other areas, higher interest rates.
And we've obviously had macro headwinds in some other areas higher interest rates.
Speaker 1: I contracted these stockings. We believe that the market next year will probably see some retrenchment in some of the markets, but there will be some carryovers from storms as well. So we're still working through some of the plans.
The contracted Destocking. So we believe that the market next year, we'll probably see some retrenchment in.
Some of the some of the markets, but there will be some carryover from storms as well. So we're still we're still working through some of the plans, but we still believe overall it will be a very constructive markets.
Speaker 1: But we still believe, overall, it will be a very constructive market, you know, in historical terms.
In historical terms.
So that.
Speaker 1: very decent overall residential outlook. We would expect to see solid new home starts. We would expect to continue to see the overall market for repair and replacement of necessary products that we carry to be
Very decent overall residential outlook, we would expect to see.
Solid new home starts we would expect to continue to see the the.
Overall market for repair and replacement of necessary products that we carry to be.
<unk> continued.
Continue to see some growth in that area, probably I mean, we've.
Speaker 1: continue to see some growth in that area probably. I mean, we've been emphasizing the fact that, you know, the building stock is what we work on and the building stock has never gone down. It goes up every year. There are more homes at the end of every year. There are more commercial buildings at the end of every year. And it's always been thus and that's the market we work on. So we believe the market's going to be constructive. So we're going to continue to see some growth in that area.
We have been emphasizing the fact that.
The building stock is what we.
Work on in the building stock has never gone that goes up every year. There are more there are more homes at the end of every year. There are more commercial buildings at the at the end of every year.
And it's always been thus and that's the market. We work on so we believe the market is going to be constructive.
Speaker 1: We think we'll see obviously less destocking in the non-res space, and we'll see what next year has in the residential space. It's going to be somewhat dependent on which direction interest rates go. We would expect them to remain in this range. We're not expecting them to tick up.
We think we will see obviously less destocking in the non res space and we'll see what next year has in the residential space, it's going to be somewhat dependent on.
Which direction interest rates go we know we would expect them to remain in this range.
Not expecting them to tick up but.
You'll have to ask.
Sure Paul to explain that one to you.
Speaker 1: Chair Powell to explain that one to you.
<unk>.
Speaker 1: But overall we see a constructive environment, Joe. So we think that we will grow top line next year. That's our going in assumption right now.
But overall, we see a constructive environment, Joe So we think that we will grow top line next year.
Going in assumption right now.
Thanks for all the thoughts.
Thank you for your question.
Next question is from the line of Mike Dahl with RBC. Your line is now open.
Speaker 3: The next question is from the line of Mike Daw with RBC. You know what I was saying.
Speaker 6: Hi, thanks for taking my question. Interesting to hear in the near term, the comments on kind of 4Q, including positive growth from all of your business segments. So transition from your non-res to some form of growth, I was wondering.
Hi, Thanks for taking my question.
Interesting to hear in the near term the comments on kind of <unk>, including positive growth.
From all of your business segments.
In addition from your non res to some form of growth I was wondering if.
Speaker 6: Yeah, presumably that's still going to be modest, which would imply your Rezi business is up maybe like high.
Presumably that is going to be modest which would imply your resi business is up maybe like high teens.
Speaker 6: Plus, but maybe you can give us a little bit more color a Julian or Frank on the specifics in terms of growth across your segments for 4Q.
But maybe you can give us a little bit more color Julian are Frank on the specifics in terms of growth.
Growth across your segments for <unk>.
Thanks for the question, Mike, Yes, I mean, I'm glad you picked up on that.
Speaker 7: Thanks for the question, Mike. Yeah, I mean, I'm glad you picked up on that. The obviously we have seen the impact of the...
Yeah, obviously, we.
We have seen the impact of the.
Speaker 7: Inventory that was in the channel dissipate and so you know we did we do
Inventory that was in the channel dissipate and so we did we do indeed believe that we will see growth in the non res channel. So that's important obviously, we've got growth in our complementary channel as we acquire businesses as well and we see particularly some strength coming in year over.
Speaker 7: that we will see growth in the non-res channels, so that's important.
Speaker 7: Obviously we've got growth in our complimentary channel as we acquire businesses as well and we see particularly some strengths coming in year over year on the residential side. Obviously there's a little bit of storm but remember there was...
The year on the residential side, obviously, there is a little bit of storm I remember there was hurricane Ian had an impact on fourth quarter of last year as well so.
Speaker 2: hurricane in had an impact on fourth quarter of last year as well so uh... you know we're excited about uh... what we see for the fourth quarter and i think uh... guidance would uh... would indicate that so uh... we feel very good but i'll that frank at uh... a little bit more detail sure thing uh... hey mike so if October is probably a good place to start uh... that we gave you the
We're excited about what we see for the fourth quarter and I think our guidance would indicate that so we feel very good but I'll, let frank add a little bit more detail sure thing Hey, Mike. So October is probably a good place to start. So we gave you the 13% per day and remember there is.
Speaker 2: 13% per day and remember there's um... one more selling day this year uh... so the total revenues really 16% but it's important to to think about it on a daily basis will give that uh... will give that day back in December but on a on a daily basis in the month
One more selling day this year. So the total revenues really 16%, but it's important to think about it on a daily basis, we'll give that we'll get that day back in December but on a daily basis in the month.
Speaker 2: Rezzy was up double digits, Commercial was up low singles, and Complimentary was up mid-teens. So I think you're going to see a lot of those same trends. We got a lot coastal, so obviously got to look at the...
<unk> was up double digits commercial was up low singles and <unk>.
Complementary was up mid teens, so I think youre going to see a lot of those same trends we've got to lap coastal. So obviously you can look at the complementary piece as of November the first but when we step back and look at the guide and.
Speaker 2: the complimentary piece as of November the first, but when we step back and look at the guide and an L.O.B. level for Q4, you're right. It's gonna be, you know, resi up mid-teens. Most of that's gonna be volume, with a little bit of carryover price from the August increase, non-resil to be in that low single digit range and complimentary, once you've...
Low level for Q4, you're right, it's going to be.
Up mid teens, most of thats going to be volume.
With a little bit of carryover price from the August increase non res ought to be in that low single.
Digit range and complementary once you lap the coastal piece ought to be up kind of high singles or low double so it's a it's a really good quarter for us its continuing all the trends that we've been seeing lately and I think the highlight.
Speaker 2: lap the coastal piece ought to be up kind of high singles or low doubles. So it's a really good quarter for us. It's continuing all the trends that we've been seeing lately. And I think the highlight is really seeing all four lines of business turn green for us. It'll be the first time all year that we've been able to do that.
It was really seeing all four lines of business turned green for us would be the first time all year that we've been able to do that.
Great. Thanks.
Thank you for your question.
Speaker 3: Thank you for your question. The next question is from the line of Ryan Merkel with William Blair. Your line is now open.
The next question is from the line of Ryan Merkel with William Blair. Your line is now open.
Hey, Thank you I wanted to ask on non res projects cycle times lengthening what what are some of the key drivers there and any visibility to improvement.
Speaker 8: Hey, thank you. I wanted to ask on non-res the project cycle times lengthening. What are some of the key drivers there and any visibility to improve?
Yeah, I'll start and again frankly in a little bit so.
Speaker 1: Yeah, I'll start again, look, frankly, in a little bit, so...
Speaker 1: right? I mean, one is labor. That's continuing to be a challenge too is really around. Still some pockets of supply chain challenge, but that's eased considerably. I see the supply chain issues going away. I don't see the labor going away, so I think that some of the challenges in that space bait.\p0iting.com
Brian I mean, one is labor.
That's.
That's continuing to be a challenge to us really around and im still still some pockets of supply chain.
Challenge, but.
That's eased considerably.
I see the supply chain issues going away.
I don't see the labor going away. So I think that some of the challenges in that space.
And then the last piece would probably be around uncertainty in terms of financing.
Speaker 7: And then the last piece would probably be around uncertainty in terms of finance.
Speaker 7: how that's going on, so projects coming out of the ground, getting bid, and then waiting to see how the interest rate environment evolves. That's where we probably see it at the high level. Ultimately, the one that's the stickiest there is going to be the labor issue. That's going to continue to be a long-term challenge. We see the others will ease, but they'll ease at different times.
How that has gone on for projects coming out of the ground getting bid and then sort of waiting to see how the interest rate environment evolves. So.
That's where we probably see it at the high level.
Ultimately the one that's the stickiest there is going to be the labor issue, that's going to continue to be.
A long term challenge.
We see the others will ease.
But they'll use at different times.
Yeah, Hey, Ryan.
Speaker 2: other context would be uh... you know we mentioned bidding and quoting activity last quarter being up uh... double digits we've seen that same trend uh... in this quarter we are seeing a shift toward um... smaller projects or even though the
Other context would be we mentioned bidding and quoting activity last quarter being up.
Double digits, we've seen that same trend in this quarter, we are seeing a shift toward smaller projects, so even though the.
The bidding and quoting activity itself is up double digits the actual dollar value.
Speaker 2: the bidding and quoting activity itself is up double digits the actual dollar value uh... is up more in the low single digit range
Is up more in the low single digit range. What that tells US is the projects are more repair and remodel repair and replace.
Speaker 2: What that tells us is the projects are more repair and remodel repair and replace and smaller in size which I mean those projects are generally not going to have the same financing
Smaller.
In size, which those projects are generally not going to have the same financing side.
Speaker 2: you know side items that that you'll be mentioned but you know larger projects and and newer projects are going to have ones that probably have a little bit of financing so i i see it as as two phases of the project one would be the kind of underwriting phase where you've got to get financing that's going to take a little bit longer with a little bit more rigor
Side items that Julian mentioned, but larger projects and newer projects are going to have ones that probably have a little bit of financing. So I see it is as two phases of the project one would be the kind of underwriting phase, where <unk> got to get financing thats going to take a little bit longer with a little more rigor.
Speaker 2: from either the bank or the non-banked lenders and then the labor pieces really pick up after you.
From either the bank or the or the non bank lenders and then the labor piece is really pick up after you've underwritten the project and try to get it through to completion. So I think theres a couple of different phases of that and I do think to Julians. Good point I mean, those things are going to resolve themselves over time.
Speaker 2: underwritten the project and try to get it through to completion. So I think there's a couple of different phases of that. And I do think to Julian's good point, I mean those things are going to resolve themselves over time.
Speaker 2: Interest rates are going to be the driver of the first one and unemployment and other things are going to be the driver of the second one.
Interest rates are going to be the driver of the first one.
Unemployment and other things are going to be the driver of the second one.
Helpful. Thank you.
Thank you for your question. The next question is from the line of Michael Rehaut with Jpmorgan. Your line is now open.
Speaker 3: Thank you for your question. The next question is for a lot of Michael Rehart with JP Morgan. You know what, is that open?
Hi, guys, but worldwide on for Mike.
Speaker 9: I'm just looking at the Ambition 2025 driver. As long as it's a 2024, if you guys could give a little bit more color and say on how much some of these initiatives could contribute to top line growth, for example, large account folks.
Just looking at the ambition 2025 drivers going into 2024, if you guys could give a little bit more color and insight on how much. Some of these initiatives could contribute the top line growth for example, large account focus.
Speaker 9: and the process shifts to the digital and bottom quantile branch improvements.
And profit some shifts to digital bottom quintile branch improvement and such.
Okay.
Hey, Doug I think it's most of those are going to be more margin related.
Speaker 2: Hey, Doug, I think most of those are going to be more margin-related than anything. I mean, the bottom quintile branches in the current quarter, you know, they did a nice job for us. They were worth about 10 million on the bottom line. They certainly...
Then anything I mean, the bottom quintile branches in the current quarter.
They did a nice job for us they were worth about $10 million on the on the bottom line. They certainly grew on a year over year basis. They saw gross margin improvement on a euro basis. They saw operating leverage on a year over year basis. So that initiative is continuing to bear fruit, we would continue to.
Speaker 2: grew on a year-over-year basis. They saw gross margin improvement on a year-over-year basis. They saw operating leverage on a year-over-year basis. So that initiative is continuing to bear fruit.
Speaker 2: to expect that to bear fruit next year. From a digital perspective, I think the highlight for us in the quarter was that the residential digital sales were at 22% of total resi sales. That's a high watermark for us, and obviously there's margin accretion from that. There's generally some basket size improvement as well. That's a little harder to glean out, but I think that will continue to help us. Private label will continue to grow. That grew year over year, and obviously it was margin.
Do you expect that to bear fruit next year from a digital perspective, I think the highlight for us in the in the quarter was that the residential digital sales were at 22% of total resi sales.
High watermark for Us and obviously there is margin accretion from that there's generally some basket size improvement as well, that's a little harder to glean out, but I think that will continue to to help us private label will continue to grow that grew year over year and obviously it was margin accretive as well so I think what what Youre hearing us say is that these initiatives under the eight.
Speaker 2: a creative as well. So I think what you're hearing us say is that these initiatives under the A25 or ambition 2025 banner are all in flight. They're all working. They're all delivering benefits. The customer experience initiative is helping us drive that. The sales workforce having more boots on the ground is helping us. We're still in the middle of the sort of pricing model, you know, software work and
25 of our ambition 2025 banner or all are all in flight, they're all working they're all delivering benefits the customer experience initiative is helping us drive that.
Our sales workforce, having more boots on the ground is helping us we're still in the middle of the sort of pricing model.
Software working and procedural work here. So we're looking forward to that one into next year.
Speaker 2: in procedural work here, so we're looking forward to that one in the next year. So I'd say that the things that we have talked about consistently since investor day are the things that you'll hear us continue to talk about in the future, and they continue to have plenty of opportunity to be helpful to the P&L.
I would say that the things that we've talked about consistently since investor day are the things that you'll hear us continue to talk about the future and they continue to have.
Plenty of opportunity to be helpful to the P&L.
Speaker 1: Yeah, Deng, let me reference you back to some of our comments during the prepared remarks.
Yes, Doug let me reference you back to some of our comments during the prepared remarks.
Our greenfields are going to continue to drive topline that we said the Greenfields. We've opened since we announced ambition 2025 added around about $250 million to this year's top line. So.
Speaker 7: You know, our green fields are going to continue to drive top line. We said that the green fields we've opened since we announced Ambition 2025 added around about 250 million dollars.
Speaker 7: to this year's top line. So, you know, in terms of total top line next year, obviously we're gonna add some more green fields, we're gonna have more maturity in those.
In terms of total topline next year, obviously, we're going to add some more greenfields, we're going to have more maturity in those so that will take up.
Speaker 7: So that will pick up. We said our acquisitions were performing well and we've added about $400 million of
We said our acquisitions are performing well and we've added about $400 million of acquisition related top line growth, we would expect to see growth coming out of those as we continue to do it and we expect to do more acquisitions.
Speaker 7: Acquisition-related top line growth we would expect to see growth.
Speaker 7: Coming out of those as we can do it, and we expect to do more acquisitions.
Speaker 1: as we go through the year. The sales initiatives that we have in place, quite honestly, they've been mixed, and I'll tell you why. In some of the residential areas, there's been supply constraints.
As we as we go through the year.
The sales.
Initiatives that we have in place quite honestly, they've they've been mix and I'll tell you why in some of the residential areas.
There's been supply constraints, and so adding additional salespeople doesn't yield more.
Speaker 7: So adding additional salespeople doesn't yield more sales because we've been on allocation of products. So we would like to see an unallocated market where the initiatives that we're driving and the success that we're having with these things can yield even better results. So, you know, we remain
Sales because.
We've been on allocation of product.
So we would like to see.
Unallocated market, where the initiatives that we're driving and the success that we're having with these things can yield even better results. So we remain confident as I said that we will continue to drive topline growth next year and we're focused on driving margin we havent yet.
Speaker 1: confident as I said that we will continue to drive top line growth.
Speaker 7: next year and we're focused on driving margin we haven't yet.
Fully implemented our pricing model that we think can drive margin and as Frank said, we continue to grow private label, we continue to grow our national account business. We continue to grow our digital presence all of which help with our margin profile. So we.
Speaker 7: fully implemented our pricing model that we think can drive margin and as Frank said we continue to grow private label, we continue to grow our national accounts business, we continue to grow our digital presence, all of which help with our margin profile so we feel really good about what the future is.
We feel really good about what the future is and eventually we will get a year, where everything goes our way and we will make these numbers look.
Speaker 7: Eventually, we'll get a year where everything goes our way and we'll make these numbers look paltry.
Poultry.
Got it thank you guys.
Thank you for your question.
Speaker 3: Thank you for your question. The next question is from a line of trade groups with Stevens. Your line is not open.
The next question is from the line of Trey Grooms with Stephens. Your line is now open.
Hey, good afternoon, everyone congrats on the quarter.
Real quick I wanted to just dive in on maybe inventory you guys have done a great job with inventory reduction through the year and sorry, if I missed this but.
Speaker 6: Real quick, I wanted to just dive in on maybe inventory. You guys have done a great job with inventory reduction through the year, and sorry if I missed this, but.
Speaker 10: How are you guys expecting inventory to shake out, you know, kind of going into year end? And it sounds like you're expecting to finish with a pretty strong free cashflow conversion in 4Q. So just wondering kind of how, you know, working capital inventory is gonna be playing a role here as we kind of move into through the four.
How are you guys expecting inventory to shake out kind of going into year end and it sounds like youre expecting to finish with pretty strong free cash flow conversion in <unk>. So.
Just wondering kind of how working capital or inventory is going to be playing a role here as we kind of move into three to four <unk>.
Yes.
Speaker 2: yep hey try uh... it's right so uh... we've done a really nice job on uh... on inventory since the middle of of last year and i know you
So we've done a really nice job on on inventory since the middle of last year I know, you've you've watched us come down from the peak in Q2 of last year. We were at about $1 55 billion were down about 240, or so million from from that point I think youll see us can.
Speaker 2: You've watched us come down from the peak in Q2 of last year. We were at about 1.55 billion. We're down about 200.
Speaker 2: 40 or so million from that point. I think you'll see us continue to come down in Q4 more based on seasonality and making sure we don't carry too much through the winter. We've already seen that in October relative to September . We're down a bit on a month over a month basis. I think if you're trying to handicap, where we'll end up in Q4.
<unk> to come down in Q4, more based on seasonality and making sure. We don't carry too much through the winter we've already seen that in October relative to September we were down a bit on a month over month basis, I think if youre, if youre trying to handicap, where we'll end up in Q4.
Speaker 2: kind of quarter of a quarter. It's probably in the $25ish million range. We're trying to make sure that in...
Quarter over quarter, it's probably in the 25 ish million dollar rate.
Range, we're trying to make sure that in.
Speaker 2: You know, the northern part of the country, northern half of the country that we don't care too much through the...
The northern part of the country northern half of the country that we don't care too much through the.
Speaker 2: through the winter, no reason to do that and use the capital, I think on a cashflow basis to your good point.
Through the winter and no reason to do that.
Use the capital I think on a cash flow basis to your good point I mean, we've got a really good free cash flow year, we're going to have a good Q4 cash flow Youre Julian talk about some of the uses of that cash which is going to be important for us we want to stay within the <unk> and the leverage range, but we also want to make sure that we're deploying it to high value items and right now we see those as being green.
Speaker 2: We've got a really good free cash flow year. We're going to have a good Q4 cash flow. You know, you're Julian talk about some of the uses of that cash, which is going to be important for us. We want to stay within the leverage range, but we also want to make sure that we're deploying it to high value items. And you know, right now we see those as being, you know, Greenfield's M&A and CapEx and bye-bye.
Fields, M&A and Capex and buybacks.
Speaker 10: Perfect. Thanks for the color. Frank. That was exactly what I was looking for. Thank you.
Perfect. Thanks for the color Frank that was exactly what I was looking for thank you.
Speaker 3: Thank you for your question. The next question is from the line of Catherine Thompson with Tom is research group. You know I've not opened.
Thank you for your question next.
The next question is from the line of Kathryn Thompson with Thompson Research Group. Your line is now open.
Hi, Thanks for taking my question just following up on the inventory question just to clarify.
Speaker 11: Hi, thanks for taking my question. And I just following up on the inventory question just to clarify.
Youre, having supply chain still some supply constraints at the same time.
Speaker 11: You're having supply chain, you know, still some supply constraints, but yet the same time I've done a great job of lowering inventory.
Thanks, Jeff I'm wondering inventory.
Speaker 11: What are the categories and areas where you're seeing the supply constraints?
What are the categories in areas, where youre seeing the supply constraints.
And.
Speaker 11: and is it more on the resi side, on the commercial side, and what does that speak to visibility going into the next calendar year? Thank you.
And then just one side on the commercial side.
And what does that speak to the visibility.
Going into the next calendar year. Thank you.
Hey, Catherine.
Speaker 2: Hey Catherine, so the supply chain on the commercial side of the business, of the non-risk side of the business is largely fluid. You know, availability is back to what you would have expected in a kind of a pre-COVID world. I think regionally where we have both.
The supply chain on the commercial side of the business or the non risk side of the business is largely fluid.
Availability is is back to what you would've expected in a kind of a pre COVID-19 world I think regionally, where we have both.
Speaker 2: I'll say secular growth, a bit of a spring in new housing relative to where it was earlier in the year and storm activity. I mean, you're going to be somewhat hand them out in those geographies, assuming that we don't have an elongated winter. We would expect that to continue to be the case into the carryover of that activity into the first couple of quarters of next year. And then obviously we'll see how the construction season plays out as things reopen and call it the March April timeframe.
Secular growth a bit of a spring in new housing relative to where it was earlier in the year and storm activity I mean, youre going to be somewhat hand to mouth in those geographies assuming that we don't have an elongated winter we would expect that to continue to be the case into the carryover.
That activity into the first couple of quarters of next year and then obviously, we'll see how the construction season plays out as things reopen in call. It the March April timeframe.
Thank you.
Thank you for your question.
Speaker 3: Thank you for your question. The next question is from the line of Gary Shmois with Loop Capital, and while I was not open. Thank you.
The next question is from the line of Garik <unk> with loop capital. Your line is now open.
Sure.
Hi, Thanks, and congrats on the quarter.
Speaker 12: I think so now we're up on the quarter. Just wanted to ask on price cost, are you going to a good job narrowing the spread there? It's just given the timing of the inventory profits. And as they move through, you also mentioned that you got better than expected traction on the August .
Just wanted to ask on price cost are you done a good job narrowing.
Spread there.
Just given the timing of the inventory profits.
And as they move through you also mentioned that you've got better than expected traction on the August price increase.
Speaker 12: You know, curious as to how to think about price cost in the fourth quarter, as it relates to your margin guide, and when do you expect to fully lap the inventory profits from the last year?
Curious as to how to think about price cost in the fourth quarter as it relates to your margin guide and when do you expect to fully lap the inventory profit from last year.
Yes, so the inventory perhaps from the last year I mean, we should be at.
Speaker 2: add or close to fully lapping those at this juncture.
At or close to fully lapping those at this juncture.
Speaker 2: You know, the cost, if you think about it, from the August 2022 price increase, let's call it, you know, 90 days after that, we should be at the kind of fully loaded.
The cost if you think about it from the August 2022 price increase let's call it.
90 days after that we should be at the kind of fully loaded.
Speaker 2: cost at that juncture, so call it mid to late fourth quarter, and then we're going to have the same dynamic, but at a smaller scale given the differential between the May realization and the August realization this year. So I think on a year-over-year basis, it's probably Q4. We guided to that around 25.5 in the fourth quarter. You've got some normal
Cost at that juncture, so call it mid to late <unk>.
<unk> fourth quarter, and then we're going to have the same dynamic but at a smaller scale given.
The differential between the May realization in the August realization this year.
So I think on a year over year basis.
It's probably Q4.
We guided to that around 25, five in the fourth quarter.
<unk> got some normal geographic mix this time of year and seasonality and things like that and then the cost associated with the.
Speaker 2: Geographic mix this time of year and season of holiday and things like that and then you know the cost associated with The August shingle increase from the manufacturers to us. Yeah, obviously that continues to
The August shingle increase from the manufacturers to US obviously that continues to bleed into the net cost as we go forward into into Q4.
Speaker 2: to bleed into the net cost as we go forward into Q4. So I think that probably gives you the context that you're looking for. It's going to be price cost negative in the fourth quarter because of those items and ought to be mixed positive on a year of year.
So I think that probably gives you the context that you're that you're looking for them, it's going to be price cost negative in the fourth quarter because of those because of those items and ought to be mix positive on a year over year basis.
Speaker 7: But Gareg, I want to also add in terms of inventory profits. Last year we were pretty transparent in terms of we were generating inventory profits in an inflation repair period, which is something we...
Okay.
<unk> adds in terms of.
In terms of inventory profits I mean last year, we were pretty transparent in terms of we would generating inventory profits in an inflationary period, which is something we.
Speaker 7: we felt was good management on our part. We scaled that in the $100 million range of additional profits generated through managing price costs. This year, we don't think, based on what we've seen, that we've generated very many inventory profits at all.
We felt was with good management on our part.
We scaled that in the $100 million range of additional profits generated through <unk>.
Through managing price cost. This year, we don't think based on what we've seen that we've generated very many inventory profits at all.
Speaker 7: So when you think about the margin profile, they're really not impacted this year in any way, shape or form by the inventory profits that we did last year. So I think that that's been a very different environment one in which we've executed very, very well and demonstrated an ability to continue to deliver great results in an environment where, you know,
So when you think about the margin profile that really not impacted this year in any way shape or form by the inventory profits, but we did last year. So.
That's been a.
Very different environment, one in which we've executed very very well and demonstrated an ability to continue to deliver.
Results in an environment, where.
We didn't have.
Speaker 7: didn't have the ability to generate the inventory profits that we did last year.
The ability to generate the inventory profits that we did last year.
Understood. Thanks again.
Thank you for your question.
Speaker 3: The next question is from the line of Philip Ng with Jefferies. If you want to know...
The next question is from the line of Philippine with Jefferies. Your line is now open.
Yeah.
Speaker 13: Hey guys, congrats on the strong quarter. Question for Frank, you guys have announced the handful of deals in the last month or two. Can you give a little color in terms of the contribution from a sales and Yibdha standpoint on an annualized basis? Your fourth quarter as well as your full year guide? It could kind of help us unpack that. And then I think, Julie, you said you're expecting to grow in 2024. Was that common? More on the organic basis? Or that's inclusive of all the evidence as well for an agent?
Hey, guys congrats on a strong quarter.
A question for Frank.
You guys have announced a handful of deals in the last month or two can you give a little color.
In terms of the contribution from our sales and EBITDA standpoint on an annualized basis.
Your fourth quarter as well as your full year guide kind of help us unpack that and then I think Julien you said youre expecting to grow in 2024 was that comment more on a organic basis or that's inclusive of all the M&A as well for next year.
Yeah.
So I'll start.
Speaker 7: So I'll start with your question, it includes everything. We expect to continue to grow. I think we've been particularly pleased with our ability on executing our greenfield strategy. Obviously, we've ramped that up. I think we said we'd be somewhat close to.
With your question.
It includes everything we we expect to continue to grow.
I think we've been particularly pleased with our ability on.
Executing our Greenfield strategy.
Obviously, we've ramped that up I think we said we'd be somewhere close to 35 now for the year. Obviously, we said we'd go from 19% to 25 by the end of the year. So we'll get to 40 in two years. Our original ambition 2025 plan indicated 40 over the four year period, So we're particularly pleased.
Speaker 7: 35 now for the year. Obviously we said we'd go from 19 to 25 by the end of the year. So we'll get to 40 in two years Original ambition 2025 plan indicated 40 over the four-year period. So we're particularly pleased on how that's generating growth those
Pleased on how thats generating growth those.
Speaker 7: The branches that we said were open will generate $250 million this year. So we believe we can grow. I don't think we need to do more acquisitions to continue to grow. We think that the market's going to give us...
Those branches that we said were open will generate $250 million. This year. So we believe we can grow I don't think we need to do more acquisitions too.
To continue to grow we think that the market is going to give us the opportunity to earn market share. We think we're executing very well on that.
Speaker 7: the opportunity to earn market share. We think we're executing very well on that. We see that in our numbers. So we believe we can grow. Obviously, the Greenfield strategy is quite a bad, but acquisitions certainly will help. Now.
We see that in our numbers. So we believe we can grow obviously, the greenfield strategy is core to that but acquisitions certainly.
We will help that the flip side to that is we'll be lapping coastal which was the largest one that we've done so that's not going to provide it they have to now continue to grow in their markets.
Speaker 7: The flip side to that is we'll be lapping Coastal, which was the largest one that we've done. So that's not going to provide it. They have to now continue to grow in their markets in order to generate additional growth year over year, but we think they can do that as well.
Order to generate additional growth year over year, but we think they can do that as well.
Speaker 2: Hey, Phil. So maybe it's helpful for me to dimensionalize Q3 for you a little bit and then talk about Q4 on M&A. So the 114 million of M&A Q3 year-over-year...
Hey, Phil So maybe it's helpful for me to Dimensionalize Q3 for you a little bit and then talking about Q4 on M&A.
So the $114 million of M&A Q3 year over year.
Speaker 2: about it, let me just break it down by L.O.B. because I think it'd be helpful for you. There's probably about 25 of that that's in the rezzy side, 10 or so just a little less than that on the non-rest side. And then predominantly it's 80, 85 million of complimentary. The majority of that is coastal. So obviously we're going to lap that to Julian's point of second ago. But I think it gives you a little bit of an L.O.B. mix that'll be helpful. We've added at least recently, Garvin and H&H, the Julian mentioned some of the other ones that Julian mentioned and is.
How about let me just break it down by <unk>, because I think it would be helpful. For you, there's probably about 25 of that thats in the resi side.
10, or so just a little less than that on the non res side and then predominantly it's 80 $85 million of complementary the majority of that is.
As coastal so obviously, we're going to lap that to Julians point, a second ago, but I think that gives you a little bit of a and b mix that'll be helpful.
We've added at least recently Garvin and HMH that Julian mentioned some of the other ones that Julian mentioned in his <unk>.
Speaker 2: prepared remarks. So you're probably in the $60 million range, $55, $60 million range in Q4 on a year-over-year basis for acquisitions.
Prepared remarks, so you're probably in the $60 million range $55 million to $60 million range in Q4 on a year over year basis for acquisitions.
Okay great.
Thank you for your question.
Next question is from the line of Marriott's, Moreover, with Zelman and Associates. Your line is now open.
Speaker 3: Next question is from a line of Marius Morar with Delman and Associate Skillinus, that open.
Good evening. Thank you for taking my question.
Speaker 14: Just a quick one on non-res, are you seeing any way down to lower price products? Say liquid supplied or even build up growth.
Just a quick one on non res.
Are you seeing any trade down to lower priced product.
Liquid supply.
Good morning, he hasn't impeded our growth.
Speaker 7: that miss uh... thanks for the question uh... no i don't believe that uh... we're seeing any uh... abnormal shifts toward the price products right now uh... you know we think that uh... overall
Yes, thanks for the question.
No I don't believe that.
We're seeing any abnormal shifts towards lower price products right now.
We think that.
Overall.
Speaker 7: We obviously came into the year and underestimated the amount of inventory that was at the contractor level. We'd seen that, but that was primarily in the product categories of the insulation in the single-ply membrane.
We obviously came into the year and underestimated the amount of.
Of inventory that was at the contractor level.
We've seen that but that was primarily in the product categories of the installation and the single blood membranes.
Speaker 7: Obviously that's been worked through. We've seen steady improvements in our overall marketplace and as we said, we now see positive growth in the fourth quarter as we expected. But we haven't seen any particular shift that I would call notable or noteworthy in terms of the types of products that are being used and certainly not one where I would say it's clearly trending towards lower priced products.
Obviously, that's been worked through we have seen steady improvements in our overall marketplace and as we said we now see positive growth in the in the fourth quarter as we expected but.
We haven't seen any particular shift that I would call notable or noteworthy.
In terms of the types of products that are being used and certainly not one where I would say, it's a it's clearly trending towards lower price products. <unk> is the only thing we did see was as the contractors had primary products and destock.
Speaker 2: The only thing we did see was, as the contractors had primary products in destock, they oftentimes came to us for adhesives or fasteners or cover boards or things like that that go into items that we don't necessarily track as tightly as we do single ply and ISO. That was very consistent with what we've been saying about contractor destocking, but nothing that's sort of a quantum shift in what's happening in the marketplace itself.
They oftentimes came to us for adhesives, or fasteners recover boards or things like that that go into <unk>.
Items that we don't necessarily track as tightly as we do sing apply an ISO so that was very consistent with what we've been saying about about contractor destocking, but nothing thats, a sort of a quantum shift in what's happening in the marketplace itself.
Thank you I appreciate it.
Thank you for your question.
Speaker 3: Thank you for your question. And next question is from the line of Truman Patterson with Wolf Research, your line is now open.
The next question is from the line of Truman Patterson with Wolfe Research. Your line is now open.
Speaker 15: a good evening guys thanks for uh... taking my questions um...
Hey, good evening guys. Thanks for taking my questions.
Speaker 15: question. You all have been able to grow your digital sales. I think you said it's 22% of residential now. Is
Good question.
You all have been able to grow your digital sales I think you said, it's 22% of residential now is there any way you could put out a target of where you think you could get that percentage to this segment over time and then also what are some of the digital advantages that you offer.
Speaker 15: that percentage to you of the segment over time. And then also what are some of the digital advantages that you all offer that some of your smaller competitors don't replicate or camp?
Some of your smaller competitors don't replicate or can't offer.
Sure Truman Thanks for the question first of all if you go back to our ambition 2025 plan, we indicated that target for the the.
Speaker 7: Sure, Truman. Thanks for the question. First of all, if you go back to our Ambition 2025 plan, you know, we indicated that our target for the digital sales through our platform was around 25% of total sales. So, you know, if you think about the...
The digital sales through our platform was around 25% of total sales so.
You think about.
Speaker 7: 9 billion that we said we were kind of targeting 25% of that 9 billion. What we've seen is residential sales without it continue to grow and have been growing quickly.
9 billion that we said we would.
And are targeting 25% of that $9 billion.
What we've seen is residential sales through that has continued to grow and they have been growing quickly.
Speaker 7: What we did see during the challenges on the supply chain side in the commercial product line
What we did see during.
The challenges on the supply chain side in the commercial product lines was an actual decline in that as.
Speaker 7: was an actual decline in that as because of the supply chain, we believe the tightness people were actually picking up and calling and trying to get a hold of what was actually an inventory shopping it around. So it was much less certain for people to, for our contractor customers to come in and be certain that they could get all the products they wanted.
Because of the supply chain, we believe the tightest people, we're actually picking up on calling and trying to get a hold of what was actually an inventory shopping it around so it was much less certain for people too.
For our contracted customers to come in and be certain that they could get all the products. They want it because things are so tight so we actually saw a bifurcation.
Speaker 7: things are so tight. So we actually saw a bi-focation in those two categories. So residents continue to grow. I think we also learned that we need to enhance our offering on the digital side in the commercial space as well as some things that we learned through that whole process.
And those two categories. So <unk> has continued to grow I think we also learned that we need to enhance our offering on the digital side and the commercial space as well as some things that we learned through through that whole process that suggested we need to reinvest in that and we are doing that so hopefully that.
Speaker 7: suggested we need to reinvest in that and we are doing that. So hopefully that gives you a sense. We're really targeting north of $2 billion of sales through that channel in our ambition 2025 target.
Gives you a sense, where we're really targeting.
North of $2 billion of sales through that channel and our ambition 2025 target.
Speaker 7: Longer-term target look, you know, we continue to see res grow fast. We need to pick it up
Our longer term target look we continue to see retro fast we need to pick it up I don't see why it can't be.
Speaker 7: I don't see why it can't be, you know, north of 40, 50% over the next, you know,
North of 40%, 50% over the next.
Speaker 7: five ten years is i don't think there's any reason why not probably beyond that you know it it's clear by the
510 years is I don't think there's any reason why not and probably beyond that.
It is clear by the growth even in the residential side, particularly with integrations and things that are happening on direct connect to contractors that are becoming more sophisticated but there is a real desire for it to go that way so.
Speaker 7: even in the residential side, particularly with integrations and things that are happening on direct connect to contractors that are becoming more sophisticated, that there is a real desire for it to go that way. So where the end game is on this, I don't know that we know that it's anything like this.
Where the where the end game is on this.
<unk>.
I don't know that we know that it's anything less than 100.
Speaker 7: But it's certainly more than where we are today. In terms of the differentiation, I think that's really important.
But it's certainly more than where we are today.
In terms of the differentiation I think that's really important.
Look when you can leverage the type of spend that you need to make across 500 plus locations.
Speaker 7: Look, when you can leverage the type of span that you need to make across 500 plus locations.
Speaker 7: You can bring it into our acquisitions quickly, one of the key things that we hear from both acquisition targets and the companies that sell to us.
You can bring it into our acquisitions quickly one of the key things that we hear from both acquisition targets in the companies that sell to US is it something that they could not do it wasn't a behavior. We're trying it. It's just the investment is too large to make to scale over 125.
Speaker 7: Is it something that they could not do? It wasn't a, you know, hey, we were trying it. It's just, the investment is too large to make to scale over one, two, five, ten branches. It just doesn't justify the return.
<unk> 10 branches it just doesn't justify the return.
Speaker 7: and their customers were demanding it. So it's one of the key differentiation points.
And that customers were demanding it so it's one of the key the key differentiation points.
Speaker 7: Now, the smaller competitors that we have just aren't going to do it.
The smaller customers sorry, the smaller competitors that we have just aren't going to do it.
When it comes to some of the largest space customers, obviously, they're going to build the digital capabilities.
Speaker 7: When it comes to some of the largest space customers, obviously they're going to build their digital capabilities. It's incumbent upon us to continue to maintain that lead. We think we have the most complete offering. We think that the learnings that we've had from being in it longer.
It's incumbent upon us to continue to maintain that lead we think we have the most complete offering we think that the learnings that we've had from being in it longer.
Speaker 7: give us an advantage by giving us greater insight. We've got more data that's going through it. This is something that Beacon is known for in the contractor base and it's something that
Give us an advantage by giving us greater insight, we've got more data that's going through it.
This is something that beacon is known for in the contract base and it's something that.
Speaker 7: Particularly, the larger contractors value, they want that integration, they want to drive efficiencies in their operations.
Particularly the the larger contractors value they want that integration they want to drive efficiencies in their operations and they know they can get that with us because we have the most complete offering from quoting all the way through the payment so.
Speaker 7: and they know they can get that with us because we have the most complete offering from quoting all the way through to payments. So, you know, it's really a full service offering that we have and we believe we will continue to build on that lead. And as you rightly said, it is a significant differentiator for us.
Really a full service offering that we have and we believe we.
We will continue to build on on that lead and as you rightly said, it's it is a significant differentiator for us.
Particularly against the smaller competitors, but also we believe against our larger competitors.
Speaker 7: particularly against the smaller competitors, but also we believe against our larger competitors.
Great. Thank you all.
Thank you for your question.
Speaker 12: The next question is from a line of David McGregor with Longbow Research. If you want, it's not open. Yeah, thanks for squeezing.
The next question is from the line of David Macgregor with Longbow Research. Your line is now open.
Yeah. Thanks for squeezing me in and congratulations on the consistency consistently strong execution is pretty impressive.
Speaker 5: I wanted to ask you to go back to the non-res and
I wanted to ask you to go back to the non res and.
Speaker 5: talk about to what extent you're seeing any change in vendor.
Just talk about to what extent you're seeing.
The change in vendor incentives.
Speaker 5: Anything that may be emerging there, particularly on the non-reside, I'm guessing on the red side.
And anything that may be emerging there, particularly on the non res side I'm guessing on the red side.
You kind of allocations from all want there.
Speaker 5: non-res. Frank, you talked about smaller size of your average transactions in non-res. Can you also talk about just growth in the number of transactions?
Frank you talked about smaller size of your average transactions and can you also talk about just growth in the number of transactions you are seeing.
Thank you.
Speaker 7: So I'll start and perhaps over the Frank for additional comment. No, I don't think we're seeing any...
So I'll start then.
So over to Frank for additional comments.
Don't think were seeing any.
<unk>.
Different behavior than we've seen over the last couple of years I think as.
Speaker 7: different behavior than we've seen over the last couple of years. I think as supply has normalized, I think the manufacturers have taken a prudent approach of making sure that their operations are in good shape, obviously, during COVID. And the
Supply has normalized I think the manufacturers have taken a prudent approach of making sure that their operations.
Are in good shape, obviously it.
During during Covid and the.
I mean, it was really initially caused by the Texas freeze, but we had that shutdown the chemical manufacturing the coastal the supply chain challenges.
Speaker 7: I mean, it was really initially caused by the Texas freeze that we had that shut down the chemical manufacturing that caused all the supply chain challenges.
Speaker 7: You know, that was really a stressful time and put a lot of stress on the supply chain and particularly on the manufacturing side. I think they've done a really nice job working through that. I think that the manufacturers continue to believe that there's a tremendous amount of value and there's a lot of demand in the marketplace for...
That was really a.
Stressful time and put a lot of stress on our supply chain and particularly on the manufacturing side I think they've.
They've done a really nice job working through that.
That's the manufacturers continue to believe that there is a tremendous amount of value and there's a lot of demand.
In the marketplace for.
For commercial buildings ultimately as we've said that the bidding and quoting has been strong.
Speaker 7: commercial buildings ultimately as we've said the bidding and the quoting has been strong. It's just the execution of those buildings and those quotings.
It's just the execution of those buildings and those quoting.
Yes.
That hasnt come through as quickly as we hoped and then obviously, we've we've been challenged with.
Speaker 7: that hasn't come through as quickly as we hoped. And then obviously we've been challenged with...
Speaker 7: lots of inventory that was in places in the channel that was not usual. Now, whether it was literally...
Lots of inventory that was in places in the channel that was not usual.
Now whether it was literally sitting on job sites and contract or warehouses contract is taking out short term leases on.
Speaker 7: sitting on job sites in contract, the warehouses, contractors taking out short term leases on warehouses to bring in as much inventory as they could. So we're not seeing any particular change in the manufacturer behavior to drive it. I think we've seen very rational behavior in a marketplace that obviously been tricky to manage.
<unk> has is to bring in as much inventory as they could so.
We're not seeing any.
Any particular change in the manufacturer behavior to drive it I think.
We've seen very rational behavior in a marketplace, that's obviously been tricky to manage.
Yes, David on the sizing you might remember that the the mix of new construction in non res sort of ticked up pretty significantly in the in the late 'twenty one early 'twenty two time period.
Speaker 2: David on the sizing, you know, you might remember that the
Speaker 2: the mix of new construction in non-res sort of picked up pretty significantly in the late late twenty one early twenty two time period and product began to flow that way and
Product began to flow that way and probably not enough flowed to the repair and remodel segment. We've obviously seen as the supply chain has become more fluid we've seen that come back the other way and get some kind of a more normalized maybe 7% to 80%.
Speaker 2: probably not enough flow to the repair and remodel segment. We've obviously seen as the supply chain has become more fluid do we see that come back the other way and get to kind of a more normalized maybe 70 to 80%.
Speaker 2: R&R versus maybe 20 to 30% new. It got a little bit more heavily levered toward new in the last couple of years. But we think it's back to roughly where it was before as product has slowed that way. You know, as the bidding and quoting activity is a bit of a proxy for the future couple of quarters. You know, we, again, we've seen the...
R&R versus maybe 20% to 30% new it got a little bit more heavily levered towards new in the last couple of years, but we think it's back to roughly where it was before as product is flowed that way.
The bidding and quoting activity is a bit of a proxy for the future couple of quarters.
Again, we've seen that.
Speaker 2: the actual activity, the bidding and quoting activity in a low double digits and in order for that to be low singles on the dollar basis, then the order size has got to be down kind of high singles low double. So that'll give you some order of magnitude, but we see it being very consistent with the destocking coming to an end and more product flowing into the R&R spot.
Actual activity, the bidding and quoting activity in the low double digits.
Order for that to be low singles on a dollar basis than the order size is got to be.
Down kind of high single to low double so.
That will give you some order of magnitude, but we see it being very consistent with the destocking coming to an end and more product flowing into the R&R spot.
<unk>.
Thanks for your question.
Speaker 3: Thank you for your question. The final question is from the line of Stanley Elliott with Steve O'Hillin.
Thank you for your question.
The final question is from the line of Stanley Elliott with Stifel. Your line is now open.
Hey, everybody. Thank you guys for fitting me in quick.
Speaker 15: Hey, everybody. Thank you guys for fitting me in. Quick question on the private label side. I mean, is there a way, any metrics you guys can share along the same lines of the digital? Just curious there, and then as it relates to the growth that we've seen in the supply chain constraints, I guess, combined, I guess, with what you guys are doing from an organic space, just curious kind of how all that blends together where you are relative to those 25 targets. Thanks.
Quick question on the private label side.
Is there a way any metrics you guys can share along the same lines of the digital.
Just curious there and then.
As it relates to the growth that we've seen.
And the supply chain constraints I guess.
Combined with what you guys are doing from a organic space just curious kind of how all that blends together, where you are relative to the 25 targets. Thanks.
Yeah.
So on the on the private label.
We had a had a good quarter it was up year over year ballpark kind of $250 million or so is the Q3 number for the current year that'll give you a kind of a sense of of where we are.
Speaker 2: You know, we had a good quarter. It was up year over year. Ballpark kind of 250 million or so as a Q3 number for the current year. That'll give you kind of a sense of where we are. Adoption rate is relatively stable. We're introducing new products. There's some inflation in there that's consistent with inflation in the branded products, so that's important to us. But we're continuing to push the adoption. As you know, this is...
Adoption rate is relatively stable we're introducing.
New products there is some inflation in there thats consistent with inflation and the branded.
Products. So that's important to us, but we're continuing to push the adoption as you know this is more of a margin play than it is a revenue play and it's a differentiator for our contractors so continuing to introduce new products. In this space becomes really important on a go forward basis in many of the categories that are more.
Speaker 2: more of a margin play than it is a revenue play, and it's a differentiator for our contractors. So continuing to introduce new products in this space becomes really important on a go-forward basis. In many of the categories that are more mature in the private label space, we're already selling kind of one out of two that are private label versus branded. But we've got a really good team up against this, and I got a good pipeline of new products to begin to introduce into that space.
Mature in the private label space, we're already selling kind of one out of two that are private label versus versus branded but we've got a really good team up against this and I've got a good pipeline of new products to begin to introduce into that space.
Thank you for your question.
That concludes the questions now I would like to turn the call back over to Mr. Francis for his closing comments.
Speaker 3: That can clue the questions. Now I would like to turn the call back over to Mr. Francis for his closing comments.
Thank you Matt.
Speaker 1: Thank you, Matt. First of all, I appreciate everyone attending the call this evening. And I want to go back to the things that we've really said at the beginning of our ambition 2025 plan that was we've got multiple paths to growing the top line and multiple paths to ensuring we're delivering higher and higher.
First of all I appreciate everyone attending the call. This evening and I want to go back to the things that we've really said at the beginning of our ambition 2025 plan that was we've got multiple paths to growing the top line and multiple pads to ensuring we are delivering.
Higher and higher EBITDA margins I think in a year that everyone thought coming in would be very much Dan we projected that we would continue to grow.
Speaker 7: I think in a year that everyone thought coming in would be very much down, we projected that we would continue to grow, and we've demonstrated our ability to do that, despite some obvious headwinds. I mean, interest rate increases, contractor inventory levels.
And we've demonstrated our ability to do that despite some obvious headwinds I mean, the interest rate increases are contra.
Contract.
Inventory levels inflation.
Speaker 7: legislation, labor availability, a number of headwinds that we've seen. Obviously, we've had some tailwind storms have certainly been that, but as I said at the outset, our ability to execute in multiple different environments.
Labor availability, a number of headwinds that we've seen obviously, we've had some tailwind storms have certainly been that but as I said at the outset, our ability to execute in multiple different environments is coming through.
Speaker 7: is this coming through. And that's because we have a resilient business model and a great marketplace with non-disgressionary products that people are going to need. They are going to replace roofs, they're going to replace that water proofing when they need to. And I think that that's a critical element of our overall plan. Obviously we are executing very, very well.
And that's because we have a resilient business model and a great marketplace with non discretionary products that people are going to need they're going to replace roofs that are going to replace that waterproofing when they need to and I think that thats a critical element of our overall plan. Obviously, we are executing very very well.
Speaker 7: I want to thank almost 8,000 team members for their continued work and dedication to the cause and it's been a dynamic environment and a tricky one to manage. And I wish all of them and all of you on the call today, the best for the remainder of the year and also the holiday season. So again, thank you for attending.
I want to thank.
No. Most 8000 team members for their continued work and dedication to the cause and it's been a dynamic environment in a tricky one to manage and I wish all of them and all of you on the call today, the best for the remainder of the year and also the holiday season. So again, thank you for attending.
That concludes the conference call. Thank you for your participation you may now disconnect your lines.
Speaker 3: That includes the conference call. Thank you for your participation. You may now disconnect your lines.
That concludes the conference call.