Q2 2024 GMS Inc Earnings Call
[music].
Yeah.
Greetings and welcome to the G. M S second quarter 2024 earnings conference call.
At this time all participants are in a listen only mode.
A question and answer session will follow the formal presentation.
If anyone today should require operator assistance during the conference. Please press star zero from your telephone keypad.
As a note this call is being recorded.
At this time I'll turn the conference over to Carey Phelps, Vice President of Investor Relations.
Gerry you may begin.
Thank you Rob.
Good morning, and thank you for joining us for the Gms earnings conference call for the second quarter of fiscal 2024.
I'm joined today by John Turner, President and Chief Executive Officer, and Scott Deakin, Senior Vice President and Chief Financial Officer.
In addition to the press release issued this morning, we have posted Powerpoint slides to accompany this call in the investors section of our website at Www Dot G. M S Dot com.
On today's call management's prepared remarks and answers to your questions may contain forward looking statements as defined in the private Securities Litigation Reform Act of 1995.
Forward looking statements address matters that are subject to risks and uncertainties many of which are beyond our control and may cause actual results to differ from those discussed today.
As a reminder, forward looking statements represent managements current estimates and expectations. The company assumes no obligation to update any forward looking statement in the future.
Listeners are encouraged to review the more detailed discussions related to these forward looking statements contained in the Companys filings with the SEC, including the risk factors section section in the company's 10-K and other periodic reports.
Today's presentation also includes a discussion of certain non-GAAP measures definitions and reconciliations of these non-GAAP measures are provided in the press release and presentation slides.
Please note that references on this call for the second quarter of fiscal 'twenty 'twenty four relate to the quarter ended October 31st 2023.
Finally, once we begin the question and answer session of the call in the interest of time, we kindly request that you limit yourself to one question and one follow up with that I'll turn the call over to John Turner Who's discussion will be starting on slide three J T.
Thank you Carrie and thank you all for joining us today.
We are pleased to report another solid quarter, which exceeded our stated expectations for net sales net income and adjusted EBITDA.
Continued demand in commercial and multifamily construction drove volume increases in ceilings and steel framing and complimentary products all of which helped to offset the more challenging steel pricing environment and relative softness in single family residential demand.
Despite the single family market wallboard experienced only a slight overall volume decline, which was offset by continued resilient pricing.
For the quarter net sales were $1 $4 billion net income was $81 million and adjusted EBITDA totaled $168 million cash.
Cash flow improved again this quarter as we recorded cash from operations of $118 million and free cash flow of $102 million up 10% and 6% respectively from the prior quarter.
Net debt leverage improved to one five times from one six times a year ago.
Our well balanced portfolio of products and end markets combined with our team's expertise and the company's scale continues to provide us with the ability to flex our operations as dynamics in our end markets change.
In the near term multifamily activity is expected to continue at or near current levels as backlog is worked through over the next few quarters.
Commercial is also expected to continue at its current pace into the spring and we are optimistic about the sequentially improved levels of activity, we've seen in single family demand.
As the recent easing of mortgage rates limited supply of existing homes for sale and favorable demographics seem to be setting up promising conditions for this end market, particularly as we look out into fiscal 2025.
Our teams have done a remarkable job so far this fiscal year under challenging circumstances to continue to focus on our strategic pillars, which are highlighted on slide four.
First we have continued to grow in our core products with higher wallboard sales as a percentage of gypsum associated shipments versus the prior year, reflecting at least in part our strength and serving the nation's largest homebuilders as they to gain share and as they report a more positive outlook.
We've also increased share in steel framing according to the steel framing industry Association data.
And we've continued to gain share in ceilings as evidenced by our manufacturing partner disclosures and channel checks.
Second our team continues to put great focus on growing our complementary products category, which made up 30% of our sales for the quarter and delivered its 14th consecutive quarter of year over year growth.
We are placing particular emphasis on tools and fasteners eastern stucco and installation, which collectively continued to grow faster than the overall category during the quarter.
Third expansion through M&A and Greenfield openings continues to be one of our key levers of growth during.
During the quarter, we acquired a M. W. Construction supply a highly respected distributor of tools and fasteners and other complementary products in the Phoenix, Arizona market and.
And we also opened two new Greenfield locations.
Post Covid, we have acquired 14 companies representing a total of 30 distribution centers and 91 AME stores with estimated annual revenues at the time of deal closings of nearly $600 million.
And we've also opened 26 greenfield locations.
We continue to have a promising pipeline of opportunities and an appetite to expand our footprint in key markets, where we are underpenetrated. While we also broadened our service territories and product offerings in existing markets.
Finally, we are successfully driving improved productivity and profitability throughout the business, reducing complexity cost and becoming more efficient and effective operators with enhanced tools and data to facilitate better decision, making and offerings that provide an overall enhanced customer experience.
The benefits of these efforts are evident in the levels of SG&A, we recorded this quarter, which Scott will detail during his remarks.
Before turning the call over I want to thank our team for maintaining our high level of performance and commitment to delivering outstanding customer service during the quarter, we have demonstrated our flexibility and expertise and supporting all of our end markets and believe that we are well positioned as demand dynamics progress in the coming quarters with.
That I will turn the call over to Scott.
Thanks, J T. Good morning, everyone, starting with slide five I'll now provide some further perspective on our second quarter results.
Net sales for the quarter decreased just slightly year over year to $1 $4 billion is steel price and mix deflation of more than 30% drove an $85 million reduction in net sales.
Single family demand softness was also a headwind while robust activity levels in both our commercial and multifamily end markets with volume increases in steel framing ceilings and complementary products.
Favorable offset.
Our recent acquisitions, including E M J Tanner Blair home lumber and a M. W. Also contributed positively to our quarter's results.
Organically sales were down three 1%.
From a U S end market perspective multifamily sales dollars grew nine 3% year over year, while single family sales dollars declined 10, 3%.
Resulting in a total residential sales dollar decline of five 7%.
Commercial sales dollars in the U S. On the other hand, we're roughly flat as increased sales volumes were offset by the noted steel price deflation.
As we highlighted last quarter many of our regional markets are continuing to experience favorable commercial demand with active projects underway or scheduled to start in the coming quarters across nearly all sectors.
For example, we expect to participate in the Tampa Airport expansion multiple new hospitals and other medical facilities student housing and other higher education facilities, a new casino several manufacturing facilities, a number of mixed use residential projects and even some tenant build out.
Projects in the office space.
While financing is tight and could become a headwind for the commercial end market. We are capitalizing on the attractive level of demand that we've been seeing currently.
Now looking at our second quarter results for each of our product segments.
Wallboard sales dollars or $585 $2 million were roughly flat with a year ago.
While multifamily and commercial wallboard volumes were up 17% in six 5% respectively.
Single family Wallboard volumes declined 11, 4%.
Overall wallboard volumes were approximately flat with <unk>.
William prices that remained steady with a year ago.
Again, reflecting the realities facing wallboard manufacturers, which are high input and production costs or lack of excess capacity and increasingly pressured access to synthetic gypsum.
Organically second quarter Wallboard sales were also roughly flat with the prior year period comprised of a 1% decline in volume and a 7% increase in price and mix.
For the second quarter, the average realized wallboard price was $476 per thousand square feet up slightly from both a year ago and sequentially from our fiscal first quarter.
Given this continued resilience in pricing, we now expect roughly flat sequential wallboard price and mix through the end of our fiscal year.
Second quarter ceiling sales of $175 $3 million increased nine 9% year over year.
Apprised of an eight 5% increase in volumes and a one 4% benefit from price and mix.
Organic sales in ceilings grew seven 2% with a five 8% increase in volumes and a one 4% benefit from price and mix.
Second quarter steel framing sales of $232 $1 million were down 16, 6% versus the prior year quarter.
As deflationary pricing drove a 37% decline in price and mix while volumes increased 14, 1%.
Organically steel framing sales were down 17, 4% with a 35% decline in price and mix, partially offset by a 13, 1% increase in volume.
While steel framing has been a headwind over the last year raw material pricing has increased with the underlying commodity indices for cold rolled and galvanized up nearly 50% per ton since the low point this fall.
Additionally, lead times continue to extend with inconsistent availability regionally.
Accordingly, we have received multiple notices of upcoming price increases from our manufacturing partners.
Given what is traditionally a four to six months lag post commodity index change. We currently expect steel prices to continue to be pressured in the third quarter before flattening out sequentially in the fourth quarter and then turning positive on a sequential basis during fiscal 2025.
Okay.
Complementary product sales of $428 three male million dollars for the quarter grew four 8% year over year as we benefited from positive contributions from acquisitions.
Organically sales with complementary products declined one 4%.
Reflecting pricing pressures on lumber.
And volume declines in our Canadian roofing and lumber product lines, given the currently soft residential demand.
As we've discussed in previous quarters, we are especially focused on our tools and fasteners east stucco and installation product lines, where we are leveraging significant opportunities to share best practices across our operations and drive growth in these areas.
For our fiscal second quarter. These lines grew 10, 6% in the aggregate.
Okay.
Now turning to slide six which highlights our profitability for the quarter.
Gross profit of $458 $6 million decreased one 3% compared to the prior year quarter. This.
This decline was nearly entirely driven by market deflation in steel pricing.
Gross margin of 32, 3% compared to 32, 5% a year ago, just slightly ahead of our expectations for the quarter.
Volatility in steel pricing and realization of purchasing incentive tiers were the principal factors in both comparisons.
Selling general and administrative expenses increased to $21 $9 million during the quarter to 309.
$9 million, including an increase of $12 6 million relate.
Related to recent acquisitions and our newly opened Greenfield locations.
Excluding these expansions we were very pleased that the remaining increase in SG&A expenses lagged our consolidated increase in sales volumes, even as our high cost to serve end markets led the way.
Volume growth for the quarter.
I would like to thank our teams for their discipline in controlling costs and driving inefficiencies out of the business.
Our right sizing of the business last winter, coupled with efficiencies gained from ongoing productivity initiatives enabled us to achieve these favorable SG&A results.
SG&A as a percentage of net sales was 21, 2% for the quarter, an increase of 170 basis points from 19, 5% a year ago.
With 120 basis points of the difference due to steel price deflation.
30 basis points due primarily to increased labor costs, mostly associated with the higher level of commercial and multifamily activity activity levels, we experienced during the quarter.
And the remaining 20 basis points due to recent acquisitions and Greenfields.
Adjusted SG&A expense as a percentage of net sales of 26% was also up 170 basis points from the prior year quarter.
All in and.
And with $16, 7% higher interest expense.
Net income decreased 21, 5% to $81 million for the quarter or $1 97 per diluted share compared to net income of $103 2 million or $2 41 per diluted share a year ago.
Adjusted EBITDA of $167 $6 million decreased $28 million as compared with a year ago.
And single family demand pressure steel framing price declines and the activity based operating cost increases in the quarter adjusted EBITDA margin decreased to 11, 8% compared to last year's second quarter level of 13, 7%.
Now shifting to our balance sheet, which is highlighted on slide seven.
And we had cash on hand of $76 $5 million and $823 $7 million of available liquidity under our revolving credit facility. We have no near term debt maturities and our net adjusted EBITDA debt leverage at the end of the quarter was one five times compared to one six times a year ago.
Cash generation improved again this quarter cash provided by operating activities was $118 $1 million compared to $107 $3 million in the prior year period.
While free cash flow for the quarter was $102 1 million improved from $96 $5 million a year ago.
Year to date, we've generated 19% more free cash flow than a year ago and with relative strength of cash flows in the second half for the full year, we expect free cash flow generation to be between 50% to 60% of adjusted EBITDA.
Capital expenditures of $16 million for the quarter compared to $10 $7 million a year ago.
We now expected for the full year fiscal 2020 for capital expenditures will be approximately $55 million.
In October our board of directors approved an expanded share repurchase program under which the company is authorized to repurchase up to $250 million of its outstanding common stock.
This expanded program replaces our previous repurchase authorization.
During the quarter, we repurchased approximately 689000 shares, leaving $241 $3 million of authorization remaining as of the end of the quarter.
Yeah.
We are well positioned with a solid balance sheet with no near term maturities on our capital structure, we expect to continue to balance investing in our strategic initiatives, including additional M&A opportunities with paying down debt and opportunistically leveraging favorable market conditions for share repurchases.
I'll close my remarks today with thanks to our team for again successfully delivering solid results amidst ever changing market conditions.
I'll now turn the call over to J T for a review of our outlook starting on slide eight.
Thank you Scott.
Our end markets remain dynamic.
Limits and starts on U S multifamily structures have declined but a solid backlog remains and is expected to deliver year over year growth, albeit at declining rates through at least the end of this fiscal year <unk>.
Commercial while solid with improved volumes over a year ago has still not yet returned to full pre COVID-19 levels.
And the most recent put in place figures support continuation of the activity levels, we've been experiencing at least in the near term.
Meanwhile, the single family market in the U S appears poised for a rebound in the coming quarters with recently declining mortgage rates and a fundamental demand for new housing given the supply shortage of existing homes for sale.
And for our Canadian business. The news is even more encouraging as we've seen improving starts levels and government backed programs to promote immigration and population growth that are providing a stimulus to housing setting up nicely the prospect of several years of residential growth.
With that as our backdrop, let me move to your expectations for our third quarter.
First looking at wallboard as I said at the start of the call, but backlog in multifamily is still expected to be relatively strong for the quarter and should continue to provide positive year over year growth.
We expect multifamily wallboard volumes to be up mid teens as compared with a year ago.
Commercial two should do well with wallboard volumes in that end market expected to be up mid single digits.
Single family Wallboard volume is expected to be down low single digits, a marked improvement in year over year comparisons in.
In total we expect wallboard volume to be up mid single digits with price mix flat to down just slightly from a year ago as single family residential reverts to a more normal component of our mix.
As we've reported pricing for wallboard has remained steady and a relatively balanced capacity environment.
Additionally continued investment is required by our manufacturing partners to adjust to the declining availability of synthetic gypsum.
As such we expect continued relative stability in wallboard pricing for the remainder of our fiscal year with the potential for increases as the single family market recovers.
In ceilings for our fiscal third quarter, given our expectation of continued solid demand in our commercial end market, including encouraging prospects for increases in remodel projects as indicated by our backlog and channel checks, we expect a mid to high single digit increase year over year and ceiling volumes.
With price and mix up low single digits.
For steel framing demand should remain solid with volumes expected to be up low double digits as compared with a year ago.
We will continue to be challenging for our fiscal third quarter with expectations of sequential improvement as we move into the year end.
As compared with the third quarter of fiscal 2023 price and mix for steel framing is expected to be down nearly 25%, which will again impact our net sales SG&A leverage and other financial metrics for the quarter.
We expect to see solid growth in our complementary products as we continue to focus on expanding our sales of these offerings for our fiscal third quarter, our complementary products year over year sales growth should be up high single digits to low double digits for the quarter.
Given all of these expectations we.
We anticipate total net sales for our fiscal third quarter to be up low single digits as compared with a year ago.
Gross margin will likely be consistent with last quarter.
And adjusted EBITDA is expected to be in the range of $123 million to $127 million for the quarter.
Overall, we expect another solid level of performance for the third quarter.
And as we approach the end of calendar 2023, and look ahead, we have reasons to be optimistic.
First although multifamily in the U S will slow down once the backlog is worked through given the fundamentals underlying and supporting housing demand coupled with an improving interest rate outlook, we expect improving sequential trends in single family through the balance of our fiscal year and likely beyond.
Commercial II is expected to continue to do well for the time being while tighter lending standards may cause an air pocket in demand at some point next calendar year activity levels are solid for now and we believe easing within the credit markets will drive expansionary improvements.
All in all we believe that we are well positioned with flexibility built into our operations to pivot our efforts as demand levels change in our end markets, which we're confident will help us to continue to drive growth and profitability as we deliver long term value for all of our stakeholders.
I'd like to close out our call today by thanking our customers our suppliers.
Teammates and shareholders for your continued support.
And I'd like to wish you all a joyous holiday season.
Operator, please open the line for questions.
Thank you.
Conducting a question and answer session.
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One moment. Please we poll for questions. Thank you.
Our first question comes from the line of Trey Grooms with Stephens. Please proceed with your questions.
Yes.
Good morning, this is norm or cosco on for Trey. Thanks for taking my questions and congrats on the strong results.
Thank you Martin and good morning Tomorrow.
So starting off your first thank you for all the.
The detailed commentary on your demand outlook, but if we maybe dig a little bit deeper here on the single family side.
We're still expecting some volume pressure as we look at the third quarter, but.
It sounded pretty constructive in terms of the potential for sequential improvement from there so I guess.
Is it reasonable to expect.
Maybe some growth as we look at the <unk> or just given where.
Vault are aware.
Wallboard is typically installed in the building process does that is that potentially later more of a fiscal 'twenty five event.
We'll probably lap.
The lowest points over the course of fourth quarter first quarter and second quarter of next year. So we should be getting some sequential growth based on what we expect to see.
From continuing starts what we have seen from starts already should indicate some growth as early as our fourth quarter, yes, very very slight but yes.
Got it that makes sense and then.
We think again, maybe maybe longer term in a fiscal 'twenty five.
Potentially seeing growth on the single family side. It sounds like commercial is holding in for now but in a scenario where you've got those two end markets diverging can you just remind us of the mix impacts as it relates to to price I know it is.
Different impacts on the gross margin and SG&A, but when you get down to Ebitdas is there really much of a difference there.
No there's not.
You summarized it perfectly.
Yes.
A little bit of SG&A difference on the commercial and multifamily side, a little bit better margins.
Gross margins, a little bit higher cost, but at the end of the day. They both ended up both the new single family ends up being very similar profitability to commercial and multifamily.
Alright got it thanks for the answers and good luck with the rest of the year.
I appreciate it.
Our next questions are from the line of David Manthey with Baird. Please proceed with your questions.
Hi, good morning, everyone.
Good morning, really David and encourage your results here and good outlook. Thank you so.
First off with the deal.
And the visibility you have into pricing there along with more balance sheet strength.
Can you typically raise prices slightly faster than the pace of that higher cost inventory working through your.
Your balance sheet and into your P&L, but there might be a slight margin opportunity, especially given the visibility you have on that now.
Yeah, Dave what I would say is there's two dynamics there you've got the quoted piece, which.
He is kind of a locked in piece, which is a large percentage of it which is your quoted commercial work and then there is your stock still work in your stock steel work I would expect if yes. The availability is to tighten up as we think then yes. There is the opportunity to be a little bit in front of the pricing that we're receiving on the other hand.
The negotiation around the quoted piece is one that we probably will could see a little bit of in the near term when prices go up a little bit of squeezing. So I would just say all in all through this increased cycle, if we're going to get into a new increase cycle and it certainly appears like we're going to at least in the near term, we'll probably be able to keep.
Margins flat during that period, I don't think we'll be able to to increase them significantly.
But because of those two offsets.
Just reiterate to.
Discussions, we turn steel inventory pretty fast to about nine times. So there typically isn't much inventory impact as we work through those pricing changes.
Yeah, Okay. Thank you Scott.
And then there is.
Clearly a lot of folks there at <unk>.
I lived through more than one cycle.
And I'm just wondering if we can.
Tap your brands I assume you tap there's just in terms of any wisdom that they've shared relative to the current interest rate situation and sort of how things might that might play out things that they may not have thought of at this point would be helpful.
I'm speaking, primarily about a commercial cycle because I think we are in the bottom of the residential new residential seems to have bottomed and most likely if we come off of this interest rate environment.
There shouldnt be much of a lag and there isn't apparently according to the most of the homebuilders reports.
There isn't much of a lag in activity from interest rates coming down to two building of homes. The commercial one on the other hand.
A longer period of time, so we're still experiencing the strength.
The projects that of course broke ground a year ago and remodel projects that were basically financed when things were a little bit easier out there.
I do think we will see an air pocket in commercial but we have a real strong remodel component and remodel historically has been less volatile than new.
In commercial and so I think that will help us and also we were back looking again.
Dave at the volumes, we were still not back our industry ourselves and our industry I would guarantee that are still not back to pre COVID-19 levels and volumes.
Wallboard and steel in the neighborhood of 10%.
So whatever happens in commercial going forward I, just don't see it being a draconian event I don't see it being.
<unk>, 20% like we saw single family just hit the brakes, so hard a year ago and now we're down in there.
The last couple of quarters, having significant double digit declines in volume I, just don't see commercial doing that will it softened certainly will I think you can't with the Abi and the financing being as tight as it has been I think it will soften into 2025 at the back half of our fiscal 2025.
Also think it's going to be fully offset by single family activity.
I don't think its going to be a real dramatic change and post stack period. I also think that there is a lot of pent up demand out. There you are reading about it every day, whether it's the conversion of office space to a single or two multifamily or just in general our channel checks are indicating increased remodel activity in office.
Some of that being driven purely because it hasnt been done.
In a long time.
So I do feel like we'll see some slowdown in commercial but we're not expecting it to be to be 15% or something something like that.
Yeah commercial is about two thirds of the model correct.
Yes, historically, that's right, it's a little less than that right now because the the softness in office. So it's closer to that 50 50 range, but in our historical market. Our remodel would be would be two thirds that's right.
Okay.
Thank you very much.
Thanks, Dave.
Our next questions come from the line of Matthew Bouley with Barclays. Please proceed with your question.
Good morning. This is <unk> on for Matt. Thanks for taking my question.
So first off just curious if you could give us a little more detail on the strength in multifamily that you guys are seeing this quarter and moving forward. I know you guys noted that backlog should carry us through fiscal year and further growth into 2024.
So I guess given just starts are so much weaker when do you see this pressure coming is it more of a fiscal 'twenty five story or could it potentially be earlier. Thanks.
We think in fiscal 'twenty five I mean, we just did the math on starts and completions.
I think it's the same math that you guys have done and everybody does and we just experienced of course the single family backlog.
Environment.
And worked ourselves through that and so between that experience in the math I think fiscal 'twenty five before we we start to see.
Significant slowdown.
Understood. Thank you and then for my second question I know steel deflation was a large headwind this quarter and you guys are seeing further pressure into the third quarter do you have a sense of maybe the magnitude of pressure that you see in <unk> ahead of it flattening in for Q3.
Thank you.
Well, we've talked about sort of the $85 million impact in the third quarter I would say based on our projections for Q3, it's probably it's still meaningful but less than that probably in the ballpark of about $50 million.
And then you can flow that down through the P&L in similar fashion to what we saw in Q2.
Still impactful, but less than we saw in Q2.
Perfect. Thank you guys I'll pass it on.
Thank you.
Our next questions are from the line of Mike Dahl with RBC capital markets. Please proceed with your question.
Good morning, Thanks for taking my questions.
I'll stick with multifamily at midnight.
Well the way you articulated the balance between.
Family and commercial on that yes.
Titan commercial season decline in single family could make up for it does seem like multifamily declines could be more.
More meaningful than those cycles can potentially last a little longer given it is credit then.
Cap rate induced.
So how are you.
If single family offset.
Commercial how are you thinking about the impact from multifamily in 'twenty, five and beyond and just remind us at this point what percentage of your business is multifamily.
Well, we use wallboard as proxy right and our wallboard volume it's about 17%.
It's less than that.
As a total revenue.
Probably down in that 12%, 15% range.
Multifamily and so I almost throw a multifamily and commercial together and so you got to put those two markets together and single family is 50% plus.
The overall wallboard business and probably when we get into a more normalized market, 50% plus of our overall revenue. So if we see single family come back meaningfully.
In my mind, a full offset to whatever we would see in multifamily.
In commercial again, my expectation of commercial is not to be off.
In the teens, probably I would imagine single digits to maybe at the bottom low double at the best and then multifamily can be off its 15 or 20 and you'd still get a full offset a single family I'm, hoping it's not that bad on the multifamily and the commercial side.
It just doesn't feel like whatever this next year is coming into that that we're going to have that deep of a correction from a commercial perspective, we certainly a bounce and it would be very volatile and multifamily the other offset to multifamily down the road of course as you are hearing more and more every day about the conversion from office to multifamily.
Family, So that's going to happen and that's more of a remodel activity again were very strong in that area. So I would expect that to be a degree of an offset as we get there and then I mean, the reality is further down the road every day you can't pick up the paper and not read about I'm aging myself, there when I pick up the paper by the way.
Don't actually do that.
Can I use my phone.
But when we when we read everything from the journal really doesn't matter. What you read you see government stimulus has engaged today across all of North America, and driving multifamily construction for the long haul because the only way to provide affordable housing.
And I feel like we're going to get through whatever this air pocket is going to be in 'twenty four our fiscal 'twenty, five and you're really going to have a pretty strong fundamental position for housing all housing going out.
At the end of the decade.
Last point is particularly notable in Canada, where the relative mix of multifamily is higher versus single family in that market.
Got it yeah. That's all very helpful. Certainly the last point.
Fully agree with in terms of the importance longer term of multifamily disturbing affordability.
With these puts and takes so shifting to the pricing.
Dynamic.
If you play that out you talked about potential for price increases in wallboard is single family strengthened so you'd have.
You would have potentially the half inch market.
Weakening and then single family.
<unk>.
How does that typically play out in terms of then what happens with pricing would you still expect broad increases across wallboard products are or would it be a little bit more.
Targeted in terms of.
In terms of maybe not seeing increases on on.
On happens.
But but seeing increases on your single family business <unk> typically seen that play out.
When single family is strong it's it's the capacity situation. It eats up a lot more capacity is much bigger part of the overall market.
Historically so.
It's across the board.
It's across the board I mean really if you look at the the commercial products, they actually run slower and so generally speaking if you're capacity constrained.
Because you're running all the single family product. There is no reason to consider <unk>.
<unk>.
The decline in price in five days.
Yes.
Alright. Thanks.
Thank you. Our next question is from the line of Kurt Yinger with D. A Davidson. Please proceed with your question.
Great. Thanks, and good morning, everyone.
Good morning, Hi, Kurt.
On the ceiling side, the last couple of quarters, you've talked about kind of the greenfields and some expanded vendor relationships can.
Can you maybe talk about how those factors played into the strength you saw this past quarter and maybe also touch on just competitive dynamics and how youre thinking about any additional kind of share opportunities within that market.
Sure I mean, our organic efforts are absolutely paying dividends no question about that.
I would probably though point out more to the strength in the remodel sector and our channel checks, telling us that the increase in office remodel.
Tenant improvement work smaller work medium size work suburban work.
All of those things seem to be strengthening a little bit right now and so that would really be the bigger the bigger driver and probably why we are expecting again, a pretty strong quarter going forward.
Got it okay that makes sense and then just second within.
Complementary products can you talk about.
Any internal initiatives you have to maybe expand the strength in those categories across more of the footprint and what youre prioritizing to grow the business organically at this stage.
Yes, it's both product is both vendor relationships in our tools in fact force, our M&A and tools and fasteners. We bought Tanner, we've just bought <unk> out there in Phoenix.
And so we'll continue down that path from an M&A perspective, as well, but that those acquisitions also provide expertise for us to help grow organically and we've been growing our sales teams in this area and our and our leadership teams in this area across all of our divisions in both.
Tools and fasteners eastern stucco primarily of southern.
Southern United States effort.
And then installation so we've been we've been growing as we get bigger we were able to specialize our sales force and thats fairly meaningful when youre able to do that when you can you can take these types of products and not have to have a generalist out there selling them with the key volume still for most of our generalist obviously, our core products. So when you get big enough.
Have scale and you can afford to have the sales forces out there dedicated and expertise dedicated to this complementary product mix, we're seeing huge success with that.
Got it okay. Appreciate the color guys. Thank you.
Okay. Thank you.
Thank you.
My last question is from the line of Steven Ramsey with Thompson Research Group. Please proceed with your question.
Hey, Good morning. This is actually Brian Biros on for Steven Thank you for taking my questions.
First I guess it sounds like you aren't really seeing any meaningful pauses or cancellations and non res activity, yet, but obviously expecting an air pocket eventually I guess outside of office. So it sounds like it's actually not doing say bad right now.
Are there any verticals or geographies that looked like they would be the next to see kind of a downward pressure based on what youre seeing today.
The West Coast has been the softest throughout the entire period and so it's still soft right with <unk>.
Multifamily has been fine out there, but it's been soft across the board. When you asked about geography, that's really the softest geographies the west.
For us, but none of the none of the verticals themselves are indicating any anymore softness.
And then.
Then each other I mean, if you look at to put in place numbers too is fairly reflective of.
The key construction related.
Categories are all kind of in that high single to low double digit range as far as activity goes.
Okay and then.
And last follow up would be.
Can you provide more.
Mueller on the I guess kind of just the overall platform expansion strategy here is the end of the year I guess more kind of more specifically the AME stores in the acquired tools distributor you guys mentioned I think you mentioned earlier.
Acquisitions added some expertise.
Just be interested to hear how.
Hi, guys. Thank you can capitalize on that and kind of roll that expertise type stuff out across the platform. Thank you.
Yes, it relates back to that so organically just relates back to the answer to the previous question and that is primarily using resources that really know and understand that business and understand the supply of those products better and helping our purchasing teams do a better job.
Nationalizing, our approach to the buying of a lot of those products.
I'll give you. An example, our fasteners business is up pretty dramatically in the quarter.
As a percentage is still small part of the overall business, but a lot of that is just us being smarter and better about how we buy those products, providing a competitive price for all of our teams. So we're doing a lot on the back side I would say on purchasing.
And also some logistics support with our internal company that we call <unk>, which is an internal distribution arm primarily for complementary products, but.
Then also the focus on sales teams that I just answered the more and more that we can generate enough volume to afford to have specialization the better we do and that's continuing to rollout across the business.
And then our M&A will continue to do M&A.
In that channel.
Thank you.
That concludes our question and answer session and also concludes our call for today. Thank you for joining us.
May disconnect your lines at this time and thank you for your participation.
Okay.