Q2 2024 Cornerstone Building Brands Inc Earnings Call

July 24, 2024

Regina: Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Cornerstone Building Brands second quarter 2024 lenders call. All lines have been placed on mute to prevent any background noise.

Regina: Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today.

Hello, and thank you for standing by my name is Regina and I will be your conference operator today at this time I would like to welcome everyone to the cornerstone building brands second quarter 2024 lenders call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Regina: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, press star one again. I would now like to turn the conference over to Mohsin Syed, Vice President, Corporate Finance and Investor Relations. Please go ahead.

Regina: At this time, I would like to welcome everyone to the Cornerstone Building Brands second quarter 2024 lenders call. All lines have been placed on mute to prevent any background noise.

Regina: After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, press star one again.

Zev Halstuch: If you would like to ask a question. During this time simply press Star then the number one on your telephone keypad. If you would like to withdraw your question Press Star One again I would now like to turn the conference over to you Motioned Ziad, Vice President corporate Finance and Investor Relations. Please go ahead.

Mohsin Syed: I would now like to turn the conference over to Mohsin Syed, Vice President, Corporate Finance and Investor Relations. Please go ahead.

Mohsin Syed: Thank you, Regina.

Mohsin Syed: Thank you, Regina. Good morning, and thank you for investing in Cornerstone Building Brands. Our prepared remarks include comments from Rose Lee, President and Chief Executive Officer, and Jeffrey Lee, Executive Vice President and Chief Financial Officer. Please be reminded that comments regarding the company's results and projections may include forward-looking statements that are subject to risks and uncertainty. Such forward-looking statements in this presentation include, but are not limited to, the impact of several projects and initiatives which management expects will lead to cost savings. The risks are described in detail in the company's SEC filing.

Ziad: Thank you Regina good.

Mohsin Syed: Good morning, and thank you for investing in Cornerstone Building Brands. Our prepared remarks include comments from Rose Lee, President and Chief Executive Officer, and Jeffrey Lee, Executive Vice President and Chief Financial Officer. Please be reminded that the comments regarding the company's results and projections may include forward-looking statements that are subject to risks and uncertainties. Such forward-looking statements in this presentation include, but are not limited to, the impact of several projects and initiatives, which management expects will lead to cost savings. The risks are described in detail in the company's SEC filings. The company's actual results may defer materially from anticipated performance or results expressed or implied by these forward-looking statements.

And thank you for investing in cornerstone building brands are prepared remarks include comments from Rosalie, President and Chief Executive Officer, and Jeffrey Li Executive Vice President and Chief Financial Officer.

Speaker Change: Please be reminded the comments regarding the company's results and projections may include forward looking statements that are subject to risks and uncertainties.

Speaker Change: Such forward looking statements. In this presentation include but are not limited to the impact of several projects and initiatives, which management expects will lead to cost savings the.

Speaker Change: The risks are described in detail in the company's SEC filings. The company's actual results may differ materially from anticipated performance or results expressed or implied by these forward looking statements Phi.

Mohsin Syed: Finally, management will refer to certain non-GAAP financial measures. Specifically in this presentation, we refer to adjusted EBITDA, adjusted EBITDA margin defined as adjusted EBITDA as a percentage of net sales, performance net debt leverage, unlevered free cash flow, and primary working capital, which are non-GAAP financial measures. You will find a reconciliation of adjusted EBITDA in our SEC filing. Our non-GAAP financial measures are not intended to replace the presentation of the comparable measures under US GAAP. Please note, we will be referencing our investor presentation on the investor site throughout today's call.

Mohsin Syed: The company's actual results may differ materially from anticipated performance or results expressed or implied by these forward-looking statements. Finally, management will refer to certain non-GAAP financial measures. Specifically, in this presentation, we refer to adjusted EBITDA, adjusted EBITDA margin defined as adjusted EBITDA as a percentage of net sales, pro forma net debt leverage, unlevered free cash flow, and primary working capital, which are non-GAAP financial measures. You will find a reconciliation of adjusted EBITDA in our SEC filing. Our non-GAAP financial measures are not intended to replace the presentation of comparable measures under U.S. GAAP.

Speaker Change: Finally management will refer to certain non-GAAP financial measures.

Speaker Change: Specifically in this presentation, we refer to adjusted EBITDA adjusted EBITDA margin defined as adjusted EBITDA as a percentage of net sales.

Speaker Change: So for my net debt leverage Unlevered free cash flow and primary working capital, which are non-GAAP financial measures you will find a reconciliation of adjusted EBITDA in our SEC filings, our non-GAAP financial measures are not intended to replace the presentation of the comparable measures under U S. GAAP.

Mohsin Syed: Please note, we will be referencing our investor presentation on the investor site throughout today's call. Today's call is copyrighted by Cornerstone Building Brands. We prohibit any use, recording, or transmission of any portion of the call without our expressed written consent.

Speaker Change: Note, we will be referencing our investor presentation on the Investor site throughout today's call.

Mohsin Syed: Today's call is copyrighted by Cornerstone Building Brands. We prohibit any use, recording, or transmission of any portion of the call without our expressed advanced written consent.

Speaker Change: Today's call is copyrighted by cornerstone building brands, we prohibit any use recording or transmission of any portion of the call without our expressed advanced written consent.

Rose Lee: With that, I would like to turn the call over to Rose. Thank you, Motion. Good morning, everyone, and thank you for joining us today. Starting on site four, our financial results for the second quarter of 2024 were reasonably in line with our expectations as we continue to navigate through uncertain market conditions. The disciplined execution of our Cornerstone Building Brands business system, along with our diversified portfolio of offerings, enabled us to reduce the impact of market headwinds.

Rose: With that I would like to turn the call over to rose <unk>.

Mohsin Syed: With that, I would like to turn the call over to Rose. Thank you, Mohsin. Good morning, everyone, and thank you for joining us today.

Rose: Good morning, everyone and thank you for joining us today.

Rose Lee: Starting on slide four, our financial results for the second quarter of 2024 were reasonably in line with our expectations as we continue to navigate through uncertain market conditions. The disciplined execution of our Cornerstone Building Brands business system, along with our diversified portfolio of offerings, enabled us to reduce the impact of market headwinds. Before we discuss the second quarter results and updates to our full year 2020 expectations, let me revisit our strategic priorities. Our first priority is to accelerate organic sales growth.

Speaker Change: Starting on slide four our financial results for the second quarter of 2024 were reasonably in line with our expectations as we continue to navigate through uncertain market conditions.

Speaker Change: The disciplined execution of our cornerstone building brands business system, along with our diversified portfolio of offerings enabled us to reduce the impact of market headwinds.

Rose Lee: Before I discuss the second quarter results and updates to our full year 20 clinical expectations, let me revisit our strategic priorities. Our first priority is to accelerate organic sales growth. To accomplish this, we're enhancing our commercial and sales excellence playbook by investing in process tools and people. Second, the rigorous implementation of Cornerstone Production System is enabling us our organic growth, margin expansion, and cash generation. We're taking automation to the next level and realizing operational efficiency.

Speaker Change: Before we discuss the second quarter results and update to our full year 2024 expectations, Let me revisit our strategic priorities.

Our first priority is to accelerate organic sales growth to accomplish this we're enhancing our commercial and sales excellence playbook by investing in process tools and people.

Rose Lee: To accomplish this, we're enhancing our commercial and sales excellence playbook by investing in process, tools, and people. Second, the rigorous implementation of Cornerstone's production system is enabling us to achieve organic growth, margin expansion, and cash generation. We're taking automation to the next level and realizing operational efficiency.

Speaker Change: The rigorous implementation of cornerstone production system.

Speaker Change: Is enabling us organic growth margin expansion and cash generation.

Speaker Change: We're taking automation to the next level and realizing operational efficiencies.

Rose Lee: Our third priority is to optimize our portfolio. We continue to make margin-accretive acquisitions with clear strategic fits and sustainable growth. A strong example of this is our recent acquisition of Mueller's Supply Company. Mueller is headquartered in Ballinger, Texas, and is a leading manufacturer of residential metal roofing, components, and steel buildings in the Southwest region. This strategic acquisition increases our exposure to the high-growth residential metal roofing markets and more than doubles the number of retail branches we have to serve customers. It also adds greater greenfield growth opportunities, further accelerating our organic growth strategy. These priorities are all aimed at strengthening our industry leadership, driving profitable growth, and generating strong cash flow.

Speaker Change: Our third priority is to optimize our portfolio.

Speaker Change: We continue to make margin accretive acquisitions with clear strategic fits and sustainable growth.

Speaker Change: Example of this is our recent acquisition the annealing Mueller's supply company.

Speaker Change: <unk> is headquartered in Bellinger, Texas and is a leading manufacturer of residential metal roofing component of steel buildings in the southwest region.

Rose Lee: This strategic acquisition increases our exposure to the high-growth residential metal roofing markets and more than doubles the number of retail branches we have to serve customers. It also adds greater greenfield growth opportunities, further accelerating our organic growth strategy. These priorities are all aimed at strengthening our industry leadership, driving profitable growth, and generating strong cash flow. Executing on these three strategic priorities will enable us to achieve our vision to be a premier operating company that creates mutual value with our customers and results in up-on-market growth.

Speaker Change: This strategic acquisition increases our exposure to the high growth residential metal roofing market and more than doubled the number of retail branches, we have to serve customers.

Speaker Change: It also adds greater greenfield growth opportunities further accelerating our organic growth strategy.

Speaker Change: These priorities are all aimed at strengthening our industry leadership driving profitable growth and generating strong cash flow.

Rose Lee: Executing on these three strategic priorities will enable us to achieve our vision to be a premier operating company that creates mutual value with our customers and results in above-market growth.

Speaker Change: Executing on these three strategic priorities will enable us to achieve our vision to be a premier operating company that creates mutual value with our customers and resulted in above market growth.

Rose Lee: Turning to side by, here is a high-level look at our second quarter results. Net sales for 2224 were $1.36 billion, a 4.5% decrease versus their prior year period, and adjusted EBITDA was $198 million, a 17% decrease versus their prior year. Adjusted EBITDA margin compressed by 220 basis points. Jeff will provide a detailed segment-by-segment breakdown later in the call.

Rose Lee: Turning to slide 5, here is a high-level look at our second quarter results. Net sales for Q2 2024 were $1.36 billion, a 4.5% decrease versus their prior year period, and adjusted EBITDA was $198 million, a 17% decrease versus their prior year. Adjusted EBITDA margin compressed by 220 basis points. Jeff will provide a detailed segment-by-segment breakdown later in the call.

Speaker Change: Turning to slide five here as a high level look at our second quarter results.

Speaker Change: Net sales for Q2, 2024 $136 billion, a four 5% decrease.

Speaker Change: The prior year period, and adjusted EBITDA was $198 million, a 17% decrease versus the prior year.

Speaker Change: Adjusted EBITDA margin compressed by 220 basis points.

Speaker Change: Jeff will provide a detailed segment by segment breakdown later in the call.

Rose Lee: Turning to side 6. In the aperture solution segment, we successfully completed the acquisition of Harvey Building Products in Q2, enhancing our presence in the repair and remodel market, and bolstering our distribution and dealer channel offerings. Our discipline pricing strategies and productivity efforts have enabled us to effectively reduce the impact of lower market volume on profitability. In the surface solution segment, we are witnessing faithful demand trends as we navigate peak season. Although net sales in Q2 remain consistent with their previous year, adjusted EBITDA's a significant 21% increase, expanding margins by 382 basis points. This increase demonstrates our capacity to achieve operational efficiencies and drive profitable growth in this segment.

Speaker Change: Turning to slide six and the aperture solutions segment, we successfully completed the acquisition of Heartburn Harvey building products in Q2.

Rose Lee: In the Aperture Solutions segment, we successfully completed the acquisition of Harvey Building Products in Q2, enhancing our presence in the repair and remodel market and bolstering our distribution and dealer channel offerings. Our disciplined pricing strategies and productivity efforts have enabled us to effectively reduce the impact of lower market volume on profitability. In the Surface Solutions segment, we are witnessing capable demand trends as we navigate peak season. Although net sales in Q2 remain consistent with the previous year, adjusted EBITDA saw a significant 21% increase, expanding margins by 382 basis points.

Ensing, our presence in the repair and remodel market and bolstering our distribution and dealer channel offerings.

Speaker Change: Our disciplined pricing strategies and productivity efforts have enabled us to effectively reduce the impact of lower market volume and profitability.

Speaker Change: In the surface solutions segment, we are witnessing favorable demand trends as we navigate peak season.

Speaker Change: Although net sales in Q2 remained consistent with their previous year adjusted EBITA, such significant 21% increase expanding margins by 382 basis points.

Rose Lee: This increase demonstrates our capacity to achieve operational efficiencies and drive profitable growth in this segment. It is a direct result of our ongoing strategy to become a comprehensive solutions provider for our customers. In the shelter solution segment, the decline in the commercial markets fueled by higher-for-longer interest rates, coupled with a sharp decline in the steel CRU index, is impacting both volume and price. While demand has softened due to customers monitoring interest rates and CRU declines, quoting activity remains strong, and we are starting to see positive signs of stabilization in the market, as evidenced by consecutive months of order growth. Operationally, our One Shelter strategy continues to make substantial progress, enabling us to streamline operations and enhance customer service. Now, I would like to turn the call over to Jeff.

Speaker Change: This increase demonstrates our capacity to achieve operational efficiencies and drive profitable growth in this segment.

Rose Lee: This is a direct result of our ongoing strategy to become a comprehensive solutions provider for our customers.

Speaker Change: Okay.

Okay.

Speaker Change: A comprehensive solutions provider.

Speaker Change: All right.

Rose Lee: In the shelter solution segment, the decline in the commercial market, fueled by higher-for-longer interest rates, coupled with a sharp decline in the CLCRU index, is impacting both volume and price. While demand has softened into customers monitoring interest rates and CRU declines, quoting activity remains strong, and we are starting to see positive signs of stabilization in the market as evidenced by consecutive months of order growth. Operationally, our one shelter strategy continues to make substantial progress, enabling us to streamline operations and enhance customer service.

Speaker Change: Okay.

Speaker Change: The decline in the consumer market.

Speaker Change: Hi.

Interest rates.

Speaker Change: When they shop.

Speaker Change: With that.

Speaker Change: And that volume.

Speaker Change: While demand has softened as the customers monitoring interest rates and CRD declines quoting activity remains strong and we are starting to see positive signs of stabilization in the market as evidenced by consecutive months of order growth.

Speaker Change: Operationally, our one shelter strategy continues to make substantial progress, enabling us to streamline operations and enhance customer service.

Jeffrey Lee: Now I would like to turn the call over to Jeff. Thank you, Rose. Starting on slide 7, let's take a deeper dive into what led to our results. Starting with the just of EBITDA, our decline was primarily due to $43 million impact from lower volumes and a $49 million negative impact from price and inflation driven by falling spill costs and weaker market conditions primarily in our shelter solution segment. I'll explore these factors in more detail in the upcoming slides. Despite these challenges, we are pleased with the performance of our cornerstone production system. We achieved $23 million in net manufacturing productivity, which helped partially offset the negative impacts from volume and market pressures.

Now I would like to turn the call over to Jeff.

Jeff: Thank you rose.

Jeffrey S. Lee: Thank you, Rose. Starting on slide seven, let's take a deeper dive into what led to our results. Starting with adjusted EBITDA, our decline was primarily due to a $43 million impact from lower volumes and a $49 million negative impact from price and inflation driven by falling raw materials costs and weaker market conditions, primarily in our shelter solution segments. I'll explore these factors in more detail in the upcoming slides. Despite these challenges, we are pleased with the performance of our Cornerstone production system. We achieved $23 million in net manufacturing productivity, which helped partially offset the negative impacts from volume and market pressures. Turning to slide 8.

Jeff: Starting on slide seven.

Jeff: Let's take a deeper dive into what led to our results starting with adjusted EBITDA decline was.

Jeff: It's primarily due to $43 million impact from lower volumes, and a 40 $49 million negative impact from price and inflation.

Jeff: Driven by falling steel costs and weaker market conditions, primarily in our shelter solutions segment.

Jeff: I will explore these factors in more detail in the upcoming slides.

Jeff: Despite these challenges we are pleased with the performance of our cornerstone production system, we achieved $23 million and net manufacturing productivity, which helped partially offset the negative impacts from volume and market pressures.

Jeffrey Lee: Turning to slide 8, let's take a closer look at the performance of our business segments. Beginning with shelters, in the second quarter, net cells for this segment decreased by 20.2 percent to $355 million compared to $445 million in the same period last year. This decline was primarily due to a 17.6 percent reduction in volume and a 2.6 percent drop in pricing influenced by lower steel cost. We attribute the lower volume across all four divisions within shelters, but experience greater pressure to our long cycle pre-engineered metal buildings business and components products. As anticipated and in line with our previous statements, demand for shelters typically trails our residential markets by 12 to 18 months.

Jeff: Sure.

Jeff: Turning to slide eight.

Jeff: Let's take a closer look at the performance of our business segments, beginning with shelters in the second quarter net sales for this segment decreased by 2022% to $355 million compared to $445 million in the same period last year.

Jeffrey S. Lee: Let's take a closer look at the performance of our business segments. Beginning with shelters, in the second quarter, net sales for this segment decreased by 20.2% to $355 million, compared to $445 million in the same period last year. This decline was primarily due to a 17.6% reduction in volume and a 2.6% drop in pricing influenced by lower steel costs.

Jeff: This decline was primarily due to a 17, 6% reduction in volume and a two 6% drop in pricing influenced by lower steel cost.

Jeffrey S. Lee: We attribute the lower volume across all four divisions within shelters but experience greater pressure on our long-cycle, pre-engineered metal buildings business and components products. As anticipated, and in line with our previous statements, demand for shelters typically trails our residential markets by 12 to 18 months. In addition to the lag effect from the residential market, we monitor two leading indicators, the Fed Funds Rate and the Architectural Billing Index. The Architectural Billing Index has been in decline since March of 2022 and appears to have hit bottom in March of 2024. Adjusted EBITDA of $55 million was unfavorable by $51 million versus the prior year.

Jeff: We attribute the lower volumes across all four divisions within shelters, but experienced greater pressure to our long cycle pre engineered metal buildings business and components products.

Jeff: As anticipated and in line with our previous statements demand for shelters typically trails are residential markets by 12 to 18 months.

Jeffrey Lee: In addition to the lag effect from the residential market, we monitor two leading indicators: the Fed Funds Rate and the Architectural Billing Index. The Architectural Billing Index has been in decline since March of 2022 and appears to have hit bottom in March of 2024. Adjusted EBITDA, a 55 million, was unfavorable by 51 million versus prior year. 50 increase was driven by lower volume impact to 25 million and the lower price versus inflation impact of 33 million, partially offset by favorability in SG&A, which resulted in a 15.4 percent EBITDA margin for the quarter. The key factors affecting our price versus inflation was the downturn trend in steel costs, coupled with challenging market conditions mentioned earlier.

Jeff: In addition to the lag effects in the residential market, we monitor to leading indicators the fed funds rate and the architectural billing index. The architectural billing index has been has been in decline since March 2022, and appears to have hit bottom in March of 2024.

Jeff: Adjusted EBITDA of $55 million was unfavorable by $51 million versus prior year.

Jeffrey S. Lee: This decrease was driven by a lower volume impact of $25 million and a lower price versus inflation impact of $33 million, partially offset by favorability in SG&A, which resulted in a 15.4% EBITDA margin for the quarter. The key factors affecting our price versus inflation were the downturn trend in steel costs coupled with challenging market conditions mentioned earlier. Quoting activity has been strong, and we are seeing early indications of commercial decline stabilization, as evidenced by an increase in our bookings.

Speaker Change: This decrease was driven by lower volume impact to $25 million and a lower price versus inflation impact of $33 million, partially offset by favorability in SG&A, which resulted in a 15, 4% EBITDA margin for the quarter.

Speaker Change: The key factors affecting our price versus inflation was the downturn trend in steel costs, coupled with challenging market conditions mentioned earlier.

Jeffrey Lee: Quoting activity has been strong, and we are seeing early indications of commercial decline stabilization, evidenced by increased in our bookings. It is important to note that it still prices decreased; typically, customers delay orders until they perceive a turnaround in the steel trend. In the short term, this impacts our results, but in the mid to long term, this dynamic enables us to refine our approach to market engagement and inventory management, positioning us well for the rebound.

Speaker Change: Quoting activity has been strong and we are seeing early indications of commercial decline stabilization evidenced by increased in our bookings.

Jeffrey S. Lee: It is important to note that if steel prices decrease, typically, customers delay orders until they perceive a turnaround in the steel trend. In the short term, this impacts our results, but in the mid to long term, this dynamic enables us to refine our approach to market engagement and inventory management, positioning us well for the rebalance. The Adjusted EBITDA margin of 15.4% versus 23.8% in 2023 was a combination of record prior year performance, typical seasonality, and the impact of an unfavorable mix and pre-engineered metal buildings, which had lower overall volumes versus other products within the shelter solutions. Turning to slide 9.

Speaker Change: It is important to note that as steel prices decrease typically customers delay orders until they perceive a turnaround in the steel trend.

In the short term this impacts our results, but in the mid to long term. This dynamic enables us to refine our approach to market engagement and inventory management positioning is positioning us well for the rebound.

Jeffrey Lee: Adjusted EBITDA margin of 15.4 percent versus 23.8 percent in 2023 was a combination of record prior year performance, typical seasonality, and the impact of unfavorable mix and pre-engineered metal buildings, which had lower overall volumes versus other products within the shelter. Turning to slide 9. In the Aperture's solution segment, second-quarter net sales reached 673 million, marking a 3.9% increase compared to the prior year. This growth was primarily driven by a 12.8% increase in volume, attributed to the acquisition of Harvey Building Products and Eastern Architectural Systems, EAS. This was partially offset by a 7.1% decline in volume from our legacy businesses.

Adjusted EBITDA margin of 15, 4% versus 23, 8% in 2023 was a combination of record prior year performance typical seasonality and the impact of unfavorable mix and pre engineered metal buildings, which had lower lower overall volumes versus other products within.

Speaker Change: The shelter solutions.

Speaker Change: Turning to slide nine.

Jeffrey S. Lee: In the Aperture Solution segment, second quarter net sales reached $673 million, marking a 3.9% increase compared to the prior year. This growth was primarily driven by a 12.8% increase in volume attributed to the acquisition of Harvey Building Products and Eastern Architectural Systems, EAS. This was partially offset by a 7.1% decline in volume from our legacy business. Adjusted EBITDA for the Aperture segment was $100 million, down $3 million or 3.6% from the prior year.

Speaker Change: In the apertures solutions segment second quarter net sales reached 673 million, marking a three 9% increase compared to prior year.

Speaker Change: This growth was primarily driven by a 12, 8% increase in volume.

Speaker Change: <unk> to the acquisition of Harvey building products and eastern architectural systems Eas.

Speaker Change: This was partially offset by a seven 1% decline in volume from our legacy businesses.

Jeffrey Lee: Adjusted EBITDA for the Aperture's segment was 100 million, down 3 million or 3.6% from the prior year. This decline was driven by a $16 million impact from lower volume and an $11 million unfavorable price versus inflation impact primarily due to mix as volume shifted from higher margin R&R to market to R&R and markets to new construction and markets. This was partially offset by $16 million in additional adjusted EBITDA from the acquisition of Harvey and EAS. The segment continues to benefit from our commitment to operational excellence, realizing $6 million in net manufacturing productivity. Operationally, we continue to focus on automation in our manufacturing facilities and operational efficiency gains through the Cornerstone Production System.

Speaker Change: Adjusted EBITDA for the aperture segment was $100 million down $3 million or three 6% from the prior year.

Jeffrey S. Lee: This decline was driven by a $16 million impact from lower volume and an $11 million unfavorable price versus inflation impact primarily due to mix as volume shifted from higher-margin R&R to lower-margin R&R end markets to new construction end markets. This was partially offset by $16 million in additional adjusted EBITDA from the acquisition of Harvey and EAS. This segment continues to benefit from our commitment to operational excellence, realizing $6 million in net manufacturing productivity.

Speaker Change: This decline was driven by a $16 million impact from lower volume and an $11 million unfavorable price versus inflation impact primarily due to mix as volume shifted from higher margin R&R to market.

Speaker Change: R&R and markets to new construction end markets.

Speaker Change: This was partially offset by $16 million and additional.

Speaker Change: Adjusted EBITDA from the acquisition of Harvey and Eas.

Speaker Change: This segment continues to benefit from our commitment to operational excellence, realizing 6 million in net manufacturing productivity.

Jeffrey S. Lee: Operationally, we continue to focus on automation in our manufacturing facilities and operational efficiency gains through the Cornerstone production system. On the automation front, we are strategically upgrading our manufacturing capabilities by integrating automation equipment and key facilities. On the efficiency front, our team is increasing margins by implementing continuous improvement best practices to drive gains in both material and manufacturing processes. Turning to slide 10.

Speaker Change: Operationally, we continue to focus on automation in our manufacturing facilities and operational efficiency gains through the cornerstone production system on.

Jeffrey Lee: On the automation front, we are strategically upgrading our manufacturing capabilities by integrating automation equipment and key facilities. On the efficiency front, our team is increasing margins by implementing continuous improvement with best practices to gain, to drive gains in both material and manufacturing processes.

Speaker Change: On the automation front, we are strategically upgrading our manufacturing capabilities by integrating automation equipment in key facilities.

Speaker Change: On the efficiency front, our team is increasing margins by implementing continuous improvement best practices to gain.

Speaker Change: To drive gains in both material and manufacturing processes.

Jeffrey Lee: Turning to slide 10, our surface solution segment continues to exhibit exceptional resiliency amidst the dynamic market environment, underscoring its growth potential and emerging opportunities. In the second quarter, net sales remains steady at $336 million, consistent with the prior year. Our MAC acquisition contributed $11 million in net sales and effectively offset the impact of lower volume and price and mix in our legacy businesses. Adjusted EBITDA for the surface solution segment reached $74 million, an increase of $13 million compared to the prior year, with EBITDA margins expanding by 382 basis points year over year. This growth was primarily driven by favorable net manufacturing productivity of 16 million, reflecting our focus on operational excellence and strategic capital investments.

Speaker Change: Turning to slide 10.

Jeffrey S. Lee: Our Surface Solutions segment continues to exhibit exceptional resiliency amidst the dynamic market environment, underscoring its growth potential and emerging opportunities. In the second quarter, net sales remained steady at $336 million, consistent with the prior year. Our MAC acquisition contributed $11 million in net sales and effectively offset the impact of lower volume, price, and mix in our legacy businesses. Adjusted EBITDA for the Surface Solutions segment reached $74 million, an increase of $13 million compared to the prior year, with EBITDA margins expanding by 382 basis points year-over-year.

Speaker Change: Our surface solutions segment continues to exhibit exceptional resiliency.

Speaker Change: Amidst the dynamic market environment, underscoring its growth potential and emerging opportunities in the second quarter net sales remained steady at $336 million consistent with the prior year.

Speaker Change: Our Mac acquisition contributed 11 million in net sales and effectively offset the impact of lower volume and price and mix in our legacy businesses.

Speaker Change: Adjusted EBITDA for the surface solutions segment reached $74 million, an increase of $13 million compared to the prior year with EBITDA margins expanding by 382 basis points year over year.

Jeffrey S. Lee: This growth was primarily driven by favorable net manufacturing productivity of $16 million, reflecting our focus on operational excellence and strategic capital investments. This was partially offset by a $6 million impact from unfavorable price versus inflation. Turning to slide 11.

Speaker Change: This growth was primarily driven by favorable net manufacturing productivity of $16 million, reflecting our focus on operational excellence and strategic capital investments. This was partially offset by a $6 million impact from unfavorable price versus inflation.

Jeffrey Lee: This was partially offset by $6 million impact from unfavorable price versus inflation.

Jeffrey Lee: Turning to slide 11, as Rose mentioned earlier, our acquisition of Mueller Supply Company serves our strategic goal of expansion in the retail channel by leveraging their vast existing infrastructure. This acquisition doubles our metal buildings' material footprint and enables us to better serve the widest set of residential metal roofing and simple metal building customers. Through this transaction, we also add premier manufacturing capabilities and capacity in strategic locations in the Southwest region. Additionally, it gives us the opportunity to leverage Mueller's proven branch expansion strategy to further accelerate our organic growth.

Speaker Change: Turning to slide 11.

Jeffrey S. Lee: As Rose mentioned earlier, our acquisition of Mueller Supply Company serves our strategic goal of expansion in the retail channel by leveraging their vast existing infrastructure. This acquisition doubles our metal building material footprint and enables us to better serve the widest set of residential metal roofing and simple metal building customers. Through this transaction, we also add premier manufacturing capabilities and capacity in strategic locations in the Southwest region. Additionally, it gives us the opportunity to leverage Mueller's proven branch expansion strategy to further accelerate our organic growth. Turning to slide 12.

Speaker Change: As Rose mentioned earlier, our acquisition of Mueller supply company serves our strategic goal of expansion in the retail channel by leveraging their vast existing infrastructure. This acquisition doubles, our metal buildings material footprint and enables us to better serve the.

Speaker Change: The widest set of residential metal roofing and simple metal buildings come.

Speaker Change: Customers.

Speaker Change: Through this transaction, we also add premier manufacturing capabilities and capacity in a strategic locations in the southwest region.

Speaker Change: Additionally, it gives us the opportunity to leverage <unk> proven branch expansion strategy to further accelerate our organic growth.

Jeffrey Lee: Turning to slide 12. As we look to the remainder of 2024, we anticipate our end markets remain dynamic due to persistent high interest rates. Specifically, our guidance reflects an expected year-over-year decline in the residential market, with stabilization projected towards the end of the year. We force the new construction demand stabilizing in the second half from the recent run-up of the first half influenced by continued elevated interest rates and declining builder sentiment as indicated by the Housing Market Index. In the commercial sector, we anticipate a flat to continued market decline through the second half, with some stabilization expected in the final quarter.

Speaker Change: Turning to slide 12.

Jeffrey S. Lee: As we look to the remainder of 2024, we anticipate our end markets will remain dynamic due to persistent high interest rates. Specifically, our guidance reflects an expected year-over-year decline in the residential market with stabilization projected towards the end of the year. We foresee new construction demand stabilizing in the second half from the recent run-up in the first half influenced by continued elevated interest rates and declining builder sentiment as indicated by the Housing Market Index.

Speaker Change: As we look to the remainder of 2024, we anticipate our end markets remain dynamic due to persistent high interest rates specifically our guidance reflects an expected year over year decline in the residential market with stabilization projected towards the end of the year we.

Speaker Change: We foresee new construction demand stabilizing in the second half from the recent run up for the first half influenced by continued elevated interest rates and declining builder sentiment as indicated by the housing market index.

Jeffrey S. Lee: In the commercial sector, we anticipate a flat to continued market decline through the second half, with some stabilization expected in the final. Regarding our financial guidance, we are presenting information in two formats. The reported figures on the left side of the slide reflect our expectation for this year's performance inclusive of our recent acquisitions based on their acquisition dates. The pro forma figures on the right account for the full year impacts of Mueller, Harvey, EAS, and MAC acquisitions on a year over year basis.

Speaker Change: In the commercial sector, we anticipate a flat to continued market decline through the second half with some stabilization expected in the final quarter.

Jeffrey Lee: Regarding our financial guidance, we are presenting information in two formats. The reported figures on the left side of the slide reflect our expectation for this year's performance, inclusive of our recent acquisitions based on their acquisition dates. The pro forma figures on the right account for the full-year impacts of Mueller, Harvey, EAS, and MAC acquisitions on a year-over-year basis. On the reported side, we project net sales to be between $5.4 billion and $5.8 billion, with adjusted EBITDA ranging from $750 million to $810 million. Implying a 13.9% EBITDA margin, which is a slight increase compared to the prior year.

Speaker Change: Regarding our financial guidance, we are presenting information in two formats.

Speaker Change: The reported figures on the left side of the less side of the slide reflect our expectation for this year's performance inclusive of our recent acquisitions based on their acquisition dates.

Speaker Change: The pro forma figures on the right account for the full year impacts of Mueller, Harvey Eas, and Mac acquisitions on a year over year basis.

Jeffrey S. Lee: On the reported side, we project net sales to be between $5.4 billion and $5.8 billion, with adjusted EBITDA ranging from $750 million to $810 million, implying a 13.9% EBITDA margin, which is a slight increase compared to the prior year. On a pro forma basis, we expect net sales to range from $5.6 billion to $6.1 billion, down 4.5% year-over-year. Adjusted EBITDA is projected to be between $790 million and $860 million, down 2.5% from the prior year. Despite the volume decline, accretive acquisitions and cost savings from the Cornerstone production system are expected to deliver EBITDA margins of 14%, a slight improvement compared to the prior year. Moving to slide 13.

Speaker Change: On the reported side, we project net sales to be between $5 4 billion and $5 8 billion with adjusted EBITDA, ranging from $750 million to $810 million, implying a 13, 9% EBITDA margin, which is a slight increase compared to the prior year.

Jeffrey Lee: On a pro forma basis, we expect net sales to range from $5.6 billion to $6.1 billion, down 4.5% year-over-year. Adjusted EBITDA is projected to be between $790 million and $860 million, down 2.5% from the prior year. Despite the volume decline, our accretive acquisitions and cost savings from the cornerstone production system are expected to deliver EBITDA margins of 14%, a slight improvement compared to the prior year.

Speaker Change: On a pro forma basis, we expect net sales to range from $5 6 billion to $6 1 billion down four 5% year over year adjusted EBITDA EBITDA is projected to be between $790 million and $860 million down two 5% from the <unk>.

Speaker Change: Prior year, despite the volume decline, our accretive acquisitions and cost savings from the cornerstone production system are expected to deliver EBITDA margins of 14% a slight improvement compared to the prior year.

Jeffrey Lee: Moving to slide 13. This slide underscores the significant untapped potential we have yet to leverage from our commitment to achieving results. As a reminder, our cornerstone production system delivered $86 million in cost savings in 2023. As illustrated on the left-hand side of this slide, we identified synergies and cost savings opportunities totaling $113.8 million by the end of Q2. In addition to those savings, we have also identified an additional $14 million in potential synergy savings from our unwavering dedication to operational excellence has equipped us to seize numerous opportunities to streamline labor hours, reduce scrap, lower freight costs, and optimize procurement savings.

Moving to slide 13.

Jeffrey S. Lee: This slide underscores the significant untapped potential we have yet to leverage from our commitment to achieving results. As a reminder, our Cornerstone production system delivered $86 million in cost savings in 2023. As illustrated on the left-hand side of this slide, we identified synergies and cost savings opportunities totaling $113.8 million by the end of Q2. In addition to those savings, we have also identified an additional $14 million in potential synergy savings from our Mueller acquisition.

Speaker Change: This slide underscores the significant untapped potential we have yet to leverage from our commitment to achieving results. As a reminder, our cornerstone production system delivered $86 million in cost savings in 2023.

Speaker Change: As illustrated on the left hand side of this slide we identified synergies and cost savings opportunities totaling $113 8 million by the end of Q2.

Speaker Change: In addition to those savings we have also identified an additional $14 million in potential potential synergy savings from our Mueller acquisition.

Jeffrey S. Lee: Our unwavering dedication to operational excellence has equipped us to seize numerous opportunities to streamline labor hours, reduce scrap, lower freight costs, and optimize procurement savings. Building on this momentum, we are pursuing additional cost savings measures within our manufacturing operations to sustain our record of fiscal improvement. Turning to slides 14 and 15.

Speaker Change: Our unwavering dedication to operational excellence has equipped us to cease numerous opportunities to streamline labor hours reduced scrap lower freight costs and optimize procurement savings.

Jeffrey Lee: Building on this momentum, we are pursuing additional cost savings measures within our manufacturing operations to sustain our record of fiscal improvement.

Speaker Change: Building on this momentum we are pursuing additional cost savings measures within our manufacturing operations to sustain our record of physical improvements.

Jeffrey Lee: Turning the slide 14 and 15. In the second quarter, our unlevered free cash flow was favorable for a million, which is lower than the 151 million in the prior year. This is primarily driven by reduction in the Justin Ibadah and networking capital impacts from EAS and Harvey acquisitions of approximately 70 million. As noted previously, we have been strategically investing in working capital, particularly in buildings and inventory within our surface solutions and aperture solution segments to reduce lead times and expand market share as the season demand increases. These strategic moves are designed to strengthen our competitive stance and accelerate growth as market conditions improve.

Turning to slide 14 and 15.

Jeffrey S. Lee: In the second quarter, our unlevered free cash flow was favorable $4 million, which is lower than the $151 million in the prior year. This is primarily driven by a reduction in adjusted EBITDA and networking capital impacts from EAS and Harvey acquisitions of approximately $70 million. As noted previously, we have been strategically investing in working capital, particularly in buildings and inventory within our Surface Solutions and Aperture Solutions segments to reduce lead times and expand market share as seasonal demand increases.

Speaker Change: In the second quarter, our Unlevered free cash flow was favorable $4 million, which is lower than the $151 million in prior year. This was primarily driven by a reduction in adjusted EBITDA and net working capital impacts from Eas and Harvey acquisitions of approximately $70 million.

As noted previously we have been strategically investing in working capital, particularly in buildings and inventory within our surface solutions and aperture solutions segments to reduce lead times and expand market share as the season demand increases.

Jeffrey S. Lee: These strategic moves are designed to strengthen our competitive stance and accelerate growth as market conditions improve. Additionally, the greater than anticipated decline in demand within our shelter segment has resulted in more inventory than our desired levels.

Speaker Change: These strategic moves are designed to strengthen our competitive stance and accelerate growth as market conditions improve. Additionally.

Jeffrey Lee: Additionally, the greater the anticipated decline in demand within our shelters, additionally, the greater than anticipated decline demand within our shelter segment has resulted in more inventory than our desired levels. We anticipate this overage of inventory to be consumed in the second half. We remain committed to investing in initiatives focused on growth excellence and cost reductions, and are confident this will yield the highest returns for our stakeholders, while ensuring adequate liquidity with 953 million of availability as of June 29, 2024. In July, the company borrowed 550 million under its revolving credit facilities, principally to finance the acquisition of Mueller Supply Company, which closed on July 16.

Speaker Change: Additionally, the greater the anticipated decline in demand within within our shelters.

Additionally, the greater than anticipated decline in demand within our shelter segment has resulted in more inventory than our desired levels. We anticipate this overage of inventory to be consumed in the second half.

Jeffrey S. Lee: We anticipate this overage of inventory to be consumed in the second half. We remain committed to investing in initiatives focused on growth excellence and cost reductions and are confident this will yield the highest returns for our stakeholders, all while ensuring adequate liquidity with $953 million of availability as of June 29, 2024. In July, the company borrowed $550 million under its revolving credit facilities, principally to finance the acquisition of Mueller Supply Company, which closed on July 16.

Speaker Change: We remain committed to investing in initiatives focused on growth excellence and cost reductions and are confident this will yield the highest returns for our stakeholders, all while ensuring adequate liquidity with $953 million of availability as of June 29 2024.

Speaker Change: Sure.

Speaker Change: In July the company borrowed $550 million under its revolving credit facilities, principally to finance the acquisition of Mueller supply company, which closed on July 16.

Jeffrey Lee: We remain committed to a balanced capital allocation strategy, investing in operational sales and growth excellence. Our focus is on executing cost reduction, automation initiatives, and driving revenue growth opportunities. We maintain a disciplined approach to assessing strategic acquisition prospects and prioritize debt repayment to ensure financial stability. This comprehensive strategy aims to sustain and enhance value to our stakeholders, reinforcing our dedication to their long-term interest.

Jeffrey S. Lee: We remain committed to a balanced capital allocation strategy, investing in operational, sales, and growth excellence. Our focus is on executing cost reduction, automation initiatives, and driving revenue growth opportunities. We maintain a disciplined approach to assessing strategic acquisition prospects and prioritize debt repayment to ensure financial stability. This comprehensive strategy aims to sustain and enhance value for our stakeholders, reinforcing our dedication to their long-term interests. And now, I'd like to turn the call back to Rose for her concluding comments. Thanks Jeff, turning to slide 16.

We remain committed to a balanced capital allocation strategy investing in operational sales and growth excellence. Our focus is on executing cost reduction automation initiatives and driving revenue growth opportunities, we maintain a disciplined approach to assessing strategic acquisition prospects and <unk>.

Speaker Change: Prioritize debt repayment to ensure financial stability. This comprehensive strategy aims to sustain and enhance value to our stakeholders reinforcing our dedication to their long term interest.

Rose Lee: And now, I'd like to turn the call back to Rose for concluding comments. Thanks, Seth, turning to slide 16. If I mentioned earlier, we are an attorney to become a premier provider of exterior building solutions. Our large-scale manufacturing network deepened broad channel partnerships and leading brands and products have enabled us to secure leadership positions across our course segment, shelter, aperture, and surface solutions. The cornerstone building brand's business system is the core of our value creation slide wheel. We continue to make investments to advance our capabilities in delivering high-quality products on time and in full to our customers.

Speaker Change: And now I'd like to turn the call back to rose for concluding comments.

Rose: Thanks, Pat turning to slide 16, as I am.

Rose Lee: As I mentioned earlier, we are on a journey to become a premier provider of exterior building solutions. Our large-scale manufacturing network, deep and broad channel partnerships, and leading brands and products have enabled us to secure leadership positions across our core segments – shelter, aperture, and surface solutions. The Cornerstone Building Brands business system is the core of our value creation flywheel.

Rose: Mentioned earlier, we're on a journey to become a premier provider of exterior building solutions.

Rose: Our large scale manufacturing network deep and broad channel partnerships, and leading brands and products have enabled us to secure our leadership position across our core segments shelter avatar in surface solutions.

Rose: The cornerstone building brands business system is the core of our value creation flywheel.

Rose Lee: We continue to make investments to advance our capabilities in delivering high-quality products on time and in full to our customers. We are also investing in new products and services to create stronger connections and greater value for our customers, all while providing a safe and inclusive work environment for our employees. New technology adoption is also an integral dimension of advancing our production and sales execution capability; factory automation via robots, business process digitization, and customer-facing technologies, which have increasing AI-enabled capabilities, are part of our innovation priorities.

Rose: Continue to make investments to advance our capabilities and delivering high quality products on time in April to our customers.

Rose Lee: We are also investing in new products and services to create stronger connections and greater value to our customers, all while providing a safe and inclusive work environment for our employees. New technology adoption is also an integral dimension of advancing our production and sales execution capabilities. Faster re-automation via robots, business process digitization, and customer-facing technologies which have increasing AI-enabled capabilities are part of our innovation priorities. We continue to make visible progress in advancing our business to become a partner of choice for our customers.

Rose: We're also investing in new product products and services to create stronger connections and greater value to our customers.

Rose: All while providing a safe and inclusive work environment for our employees.

Rose: New technology adoption is also an integral dimension of advancing our production and sales execution capabilities.

Rose: Factory automation via robot business process, Digitization and customer facing technologies.

Which have increasing AI enabled capabilities are part of our innovation priority.

Rose Lee: We continue to make visible progress in advancing our business to become a partner of choice for our customers. Operator, we would now like to open the call for questions. At this time, if you'd like to ask a question, simply press star followed by the number one on your telephone keypad.

We continue to make visible progress in advancing our business to become a partner of choice for our customers.

Regina: Operator, we would now like to open a call for questions. At this time, if you'd like to ask a question, simply press star followed by the number one on your telephone keypad.

Operator, we would now like to open the call for questions.

Speaker Change: At this time, if you'd like to ask a question simply press star followed by the number one on your telephone keypad. Our first question will come from the line of Andrew Casella with Deutsche Bank. Please go ahead.

Andrew P. Casella: Our first question will come from the line of Andrew Casella with Deutsche Bank. Please go ahead. Hey, Rose and Jeff, thanks for taking the questions. So, I guess I wanted to ask a little bit about the guidance, if we could just kind of dive into that a little bit. So, if I understand it correctly, the new guidance implies roughly about $5.6 billion to $6.1 billion, assuming the contribution of Mueller. If we take out the LTM contributions for revenue in EBITDA, which are about $380 and $58, I get to a number closer to $5.47 billion, which, if I understand it correctly, is comparable to the original guidance that you had previously discussed in the first quarter of $5.76 billion.

Andrew Casella: Our first question will come from the line of Andrew Casella with Deutsche Bank. Please go ahead.

Andrew Casella: Hey, Rose and Jeff, thanks for taking the questions. So, I guess I wanted to ask a little bit about the guidance if we can just kind of dive into that a little bit. So, if I understood it correctly, the new guidance implies roughly about 5.6 billion to 6.1 billion, assuming the contribution of Mueller. If we take out the LTM contributions to revenue in EBITDA, which is about 380 and 58, I get to a number closer to 5.47 billion, which, if I understand correctly, that's comparable to the original guidance that you had previously discussed in the first quarter of 5.76 billion.

Andrew P. Casella: Hey, guys.

Andrew P. Casella: Thanks for thanks for taking the questions. So I guess I wanted to ask a little bit about the the guidance. If we can just kind of dive into that a little bit. So if I understood. It correctly the new guidance.

Andrew P. Casella: So, I guess putting that all into one headline, it looks like you're organically taking down guidance by about $290 million in sales and about $63 million in EBITDA. Can you walk us through, I guess, what made you get more bearish on the market, if you could talk about end markets, if you were specifically focused on a particular one, if that's the repair and remodel market, and then also if any of that included a movement in what you assumed as far as cost takeouts as a contribution into 2024? Sandra, maybe I'll just put some qualitative color and then maybe ask Jeff to elaborate on some of the quantifications in our modeling.

Speaker Change: Implies roughly about.

Speaker Change: $5 6 billion to $6 1 billion, assuming the contribution of Mueller, if we take out the LTM contribution for revenue and EBITDA, which is about $3 80, and 58 I get to a number closer to 547 billion, which if I understand it correctly, that's comparable to the original <unk>.

Speaker Change: <unk> that you had previously discussed discussed in the first quarter of $5 76 billion. So so I guess, putting that all under one headline it looks like you're organically taking down guidance by about $2 90 in sales and about 63 million EBITDA could you walk us through I guess, what what made you I.

Andrew Casella: So, I guess putting that all in the one headline, it looks like you're organically taking down guidance by about 2.90 in sales and about 63 million EBITDA.

Rose Lee: Could you walk us through, I guess, what made you, I guess, get more bearish on the market, if you could talk about end markets, if you were specifically focused on a particular one, if that's the repair and remodel market. And then also, if any of that included a movement in what you assume as far as cost takeouts as a contribution into 2024.

Speaker Change: I guess.

Speaker Change: More bearish on the market. If you could talk about end markets. If you were specifically focused on a.

Speaker Change: Particular, one if that's the repair and remodel market and then also if any of that included.

Speaker Change: Our movement in what you assumed as far as cost take outs as a contribution into 2024.

Rose Lee: Sandra, maybe I'll just put some qualitative color, and then maybe ask Jeff to elaborate with some of the quantifications in our modeling. I think by all accounts, 2024 is unfolding to be a year with the greater levels of challenges than anyone had anticipated. As we started out the year, I think the consensus view was that clearly new construction was going to be stronger and consistently stronger. Even R&R was supposed to have some level of growth. I think what we're experiencing is that new construction continues to be more toned down. There is some activity; for example, in our Build a Direct Channel, we are indeed seeing some growth and some positive momentum.

Speaker Change: It's Andrew maybe I'll just put some qualitative color and then maybe ask Jeff to elaborate with some of the that the quantification.

Speaker Change: Modeling.

Rose Lee: I think, by all accounts, 2024 is unfolding to be a year with greater levels of challenges than anyone had anticipated. As we started out the year, I think the consensus view was that clearly new construction was going to be stronger and consistently stronger, and even R&R was supposed to have some level of growth. I think what we're experiencing is that new construction continues to be more toned down. There is some activity, for example, in our Build a Direct channel.

Speaker Change: I think.

Speaker Change: By all accounts 2024 is an unfolding is unfolding to be a year with <unk>.

Speaker Change: Later levels of talented than anyone had anticipated as we started out the year I think the consensus view is that clearly new construction was going to be stronger and consistently stronger and are even R&R was supposed to have some level of growth I think what we're experiencing is that.

Speaker Change: New construction continues to be more toned down there is some activity for example in our builder direct channel. We are indeed, seeing some growth and some positive momentum, but in many of the other channels that have a significant amount of new construction in their portfolio, we don't see a consistent level of growth.

Rose Lee: We are indeed seeing some growth and some positive momentum, but in many of the other channels that have a significant amount of new construction in their portfolio, we don't see a consistent level of growth. And certainly, the R&R market is smaller, and it's decreasing on a year-on-year basis. So, with that context in mind, I think we're becoming more clear and measured in our view of how much growth is likely to be had in the current year.

Rose Lee: But in many other channels that have a significant amount of new construction in their portfolio, we don't see as a consistent level of growth. And certainly, the R&R market is lower, and it's decreasing on a year-on-year basis. So, with that context in mind, I think we're becoming more clear and measured in our view of how much growth is resident to be had in the current year. What we're assuming, for example, first half to second half, and second half, we're assuming that the market condition is going to be in the whole, not that much better. We're hopeful that we might see a little bit more activities on the new construction side if the interest rates help out.

Speaker Change: And certainly the R&R market is.

Speaker Change: It's lower and its decreasing on a year on year basis, So with that context in mind 19 were becoming more clear and measured in our view of how much growth is resident to be had endocrine tier what we're assuming for example, first half to second half and second half, we're assuming that the market condition is going to be in the hall.

Rose Lee: What we're assuming, for example, first half to second half, in the second half, we're assuming that the market condition is going to be, on the whole, not that much better. We are hopeful that we might see a little bit more activity on the new construction side if the interest rates help out. But what we're banking on, really, is our ability to identify areas where we can organically grow with our customers and capture more share than we currently have in very select areas, which implies that it's going to be competitive, and we're going to have to figure out ways to get more of that share that exists.

Speaker Change: Not that much better.

Speaker Change: We are hopeful that we might see a little bit more activity on the new construction side, if the interest rates help out but what we are banking on really is our ability to go identify areas, where we can organically grow with our customers and share capture more share than we currently have in very select areas, which implies that we're going to.

Rose Lee: But what we're banking on really is our ability to go identify areas where we can organically grow with our customers and share a capture more share than we currently have in very select areas. Which implies that it's going to be competitive, and we're going to have to figure out ways to get more of that share that exists. So that's what we're dealing with, and I think that's why some of the numbers that you summarize is indicating a view quantified that is less aggressive than what we had in the year.

Speaker Change: It's going to be competitive and we're going to have to figure out ways to get more of that here that exist. So that's what we're dealing with and I think thats why some of the numbers that you summarized as indicating Apu quantified that is less aggressive than what we had here.

Rose Lee: So, that's what we're dealing with, and I think that's why some of the numbers that you summarized are indicating a view, quantified, that is less aggressive than what we had at the beginning of the year. Yeah, and Andrew, I'll add a few more comments to that as well.

Jeffrey Lee: Andrew, I'll add a few more comments onto that as well. Going back to the numbers, we gave guidance in the first quarter that said that our EBITDA would be close to 830 million. When you look at the pro forma guidance that we're providing right now, which includes Mueller, we're pretty close to the same numbers, so coming in at the midpoint around 825. The Mueller impact on a pro forma basis, right? This isn't a reported basis. This is on the pro forma, including all 12 months. Has an impact that has a combination of their existing trailing 12 month EBITDA, which is close to $60 million, plus a little bit of synergy savings that we'd expect to get in 2024.

Speaker Change: Yes, Andrew I'll add a few more comments on to that as well.

Jeffrey S. Lee: So going back to the numbers, we gave guidance in the first quarter that said that our EBITDA would be close to $830 million. And when you look at the pro forma guidance that we're providing right now, which includes Mueller, we're pretty close to the same number, so coming in at the midpoint around $825. So the Mueller impact on a pro forma basis, right, this isn't a reported basis, this is on the pro forma, including all 12 months, has an impact that is a combination of their existing trailing 12-month EBITDA, which is close to So all in all, about $65 million worth of benefits are coming in from Mueller on a pro forma basis.

So going back to the numbers.

Andrew P. Casella: We gave guidance in the first quarter that said that our EBITDA would be close to $830 million.

Andrew P. Casella: And when you look at the.

Speaker Change: Pro forma guidance that we're providing right now which includes Mueller where.

Speaker Change: Pretty close to the same numbers so coming in at the midpoint around 825.

Speaker Change: Mueller the Mueller impact on a pro forma basis right. This isn't a reported basis. This is on the pro forma including all 12 months.

And impact it has a combination of there.

Speaker Change: Existing trailing 12 month, EBITDA, which is close to $60 million plus a little bit of synergy savings that we'd expect to get in 2024. So all in all about $65 million worth of benefit coming in from Mueller on a pro forma basis.

Jeffrey Lee: So all in all, about $65 million worth of benefit coming in from Mueller on a pro forma basis. So that indicates that obviously we're seeing a decline inside the legacy business, as you indicated. As we back up to the first quarter, as Rose mentioned, expected growth in the R&R markets. We're now seeing the decline in the R&R markets, not significant declines, but down in the low single digits for 2024 and, in particular, inside the back half. We don't see significant improvement on that, with hopes that we'll see some things spur to get that R&R market back and going inside maybe the fourth quarter, first quarter of next year.

Jeffrey S. Lee: So that indicates that, obviously, we're seeing a decline inside the legacy business, as you indicated. But as we back up to the first quarter, as Rose mentioned, expected growth in the R&R markets. We're now seeing declines in the R&R markets, not significant declines, but down in the low single digits for 2024, and in particular inside the back half, we don't see significant improvement on that, with hopes that we'll see some things spurred to get that R&R market back and going inside maybe the fourth quarter or first quarter of next year.

Speaker Change: So that indicates that obviously, we're seeing.

Speaker Change: Decline inside the legacy business as you indicated.

Speaker Change: As we back up to the first quarter as Rose mentioned expected growth in the R&R markets. We're now seeing the decline in the R&R market is not significant declines but down in the in the low single digits.

Speaker Change: For 2024 and in particular inside the back half, we don't see significant improvement on that with hopes that we'll see some some things spur to get that R&R market back and going inside maybe the fourth quarter first quarter of next year.

Jeffrey S. Lee: New construction, as Rose mentioned, has been plugging around kind of a 5%, 6%, 7%, and we've been seeing that benefit come in through our first half of the year inside of our residential businesses, in particular. In the back half, we expect that to be a little bit slower, just due to the higher interest rates, in particular, the higher for longer expectation on interest rates. Now, there is hope, as everybody knows, that the Feds will decrease interest rates in September.

Jeffrey Lee: New construction, as Rose mentioned, has been plugging around kind of a 5, 6, 7 percent. We've been seeing that benefit come in through our first half of the year inside of our residential businesses, in particular. In the back half, we expect that to be a little bit slower just due to the higher interest rates, in particular, the higher-for-longer expectation on interest rates. Now there is hope, as everybody knows that the feds will decrease the interest rates in September. I think right now most people are expecting to see a rate decline, at least some sort of movement inside the September numbers.

Rose: Construction as rose mentioned has been.

Speaker Change: Plugging around kind of a 567% and we've been seeing that benefit come in through our <unk>.

Our first half of the year inside of our residential businesses in particular in the back half, we expect that to be a little bit slower just due to the higher interest rates in particular.

Speaker Change: Higher for longer.

Expectation on interest rates now there is hope as everybody knows that the feds will decrease the interest rates in September I think right now most people are expecting to see a rate decline or at least some sort of movement inside the September numbers.

Jeffrey S. Lee: I think right now most people are expecting to see a rate decline or at least some sort of movement in the September numbers. I've seen other banks out there that are indicating maybe 2 to 3 in 2024. All of that's good news, as we think that will help spur more activity inside the residential markets, but we really need the interest rates themselves, the 30-year arm, to come down to maybe a 5-handle to really see some real improvement in those markets.

Jeffrey Lee: I've seen other banks out there that are indicating maybe two to three inside of 2024. All of that's good news as we think that will help spur more activity inside the residential markets, but really need the interest rates themselves, the 30-year ARM to come down to maybe a five-handle to really see some real improvement inside those markets.

Speaker Change: Seen other other banks out there that are indicating maybe two to three inside of 2024 all of that's good news.

Speaker Change: We think that will help spur more activity inside the residential markets, but really need the interest rates themselves to 30 year arm to come down too.

Speaker Change: Maybe a five handle to really see some real improvement inside those markets. So a lot's changed since the first time that we that we announced.

Jeffrey S. Lee: So a lot has changed since the first time that we announced, specifically as we think about our businesses by segment. We do expect that Aperture's business dropped about $200 million from our last forecast in revenue, and it's really around those two things, the slower R&R combined with the interest rates being so high and a little bit of new construction softening in the back half.

Jeffrey Lee: So a lot's changed since the first time that we announced specifically as we think about our businesses by segment. We do expect that the apertures business dropped about $200 million from our last forecast in revenue, and it's really around those two things. The slower R&R combined with the interest rates being so high and a little bit of new construction softening in the back half, and then inside of our shelter's business, expect that one to be down between our long cycle engineer building systems combined with components that combined drop in revenue of about $150 million from our last forecast.

Speaker Change: Specifically as we think about our businesses by segment we do.

Speaker Change: Do expect that the apertures business dropped about $200 million.

Speaker Change: From our last forecast in revenue and it's really around those two things the slower R&R combined with the interest rates being so high and a little bit of new construction softening in the back half and then inside of our shelters business expect.

Andrew P. Casella: And then inside of our Shelters business, expect that one to be down between our long-cycle engineered building systems combined with components, a combined drop in revenue of about $150 million from our last forecast. So that's the breakdown on revenue. Now, when you think about first half to second half, we are thinking about the improvements from a sequential basis, first half to second half in revenue, but also inside a cost-out initiative. So because of the slower markets because of the expected demand that's in the second half, each one of our segments is working hard to make sure that they're taking out cost at the appropriate levels, and that's going to improve some of the EBITDA as we go Okay, I got it.

Speaker Change: We expect that one to be down between our our long cycle engineered building systems combined with components that combined drop in revenue of about 150 million.

Speaker Change: From our last forecast so that's the breakdown on revenue now when you think about first half to second half.

Jeffrey Lee: So that's the breakdown on revenue. Now, when you think about first half to second half, we are thinking about the improvements from a sequential basis, first half to second in revenue, but also inside a cost-out initiatives. So because of the slower markets, because of the expected demand that's on the second half, each one of our segments are working hard to make sure that they're taking out costs at the appropriate levels. And that's going to improve some of the EBIT. Guys, we're going to the second half. But it's really volume expectations from the last ruling forecast that's driving that decline from our last guide.

Speaker Change: We are thinking about the improvements.

Speaker Change: From a sequential basis first half to second and revenue.

Speaker Change: But also inside of the cost out initiatives, so because of the slower markets because of the.

Speaker Change: The expected demand it's on the second half each one of our segments are working hard to make sure that they are taking out cost at the appropriate levels.

Speaker Change: And thats going to improve some of the EBITDA as we go into the second half, but its really volume.

Speaker Change: Expectations from the last rolling forecast is driving that decline from our last our last guidance.

Jeffrey Lee: Okay, God, and if you'd appreciate all that, if you could just clarify on the cost side, just remind us again in the original 830 million, what was the realized amount of synergies and cost takeout relative to the new 825 if you have that? Yeah, they're about the same. When I think about the cost takeout, we think about $100 million inside the year, and it's not that different by quarter; a little bit more inside the second and third quarters than the first and fourth quarters. And as we think about the first quarter, EBIT dog bridges that we provide, the second quarter EBIT dog bridges that we provide, you can see that we're picking out kind of 25 to $30 million worth of cost takeout.

Jeffrey S. Lee: And I appreciate all that. If you could just clarify on the cost side, just remind us again, in the original $830 million, what was the realized amount of synergies and cost takeout relative to the new $825, if you have that? Yeah, they're about the same.

Speaker Change: Okay got it.

Speaker Change: I appreciate all that if you could just clarify on the cost side, just remind us again in the original $830 million what was the realized amount of synergies and cost take out relative to the new 825, if you have that.

Jeffrey S. Lee: When I think about the cost takeout, we think about $100 million a year, and it's not that different by quarter. A little bit more in the second and third quarters than the first and fourth quarters, and as we think about the first quarter EBITDA bridges that we provide, and the second quarter EBITDA bridges that we provide, you can see that we're picking out kind of $25 to $30 million worth of cost takeout. We expect that run rate to move through into the third and fourth quarters, so roughly $50 to $60 million worth of cost takeout in the back half. Now Mueller, you know; it's brand new.

Speaker Change: Yes, there are about the same when I think about the cost takeout.

Speaker Change: We think about $100 million inside the year, and it's not that different by quarter, a little bit more inside the second and third quarters than the first and fourth quarters.

Speaker Change: And as we think about the first quarter.

Speaker Change: The EBITDA bridges that we provide the second quarter EBITDA bridges that we provide you can see that we're picking up kind of $25 million to $30 million worth of cost take out we expect that run rate to move through into the third and fourth quarter, So roughly $50 million to $60 million worth of cost takeout.

Jeffrey Lee: We expect that run rate to move through into the third and fourth quarters. So roughly 50 to $60 million worth of cost takeout inside of the back half. Now Mueller, you know, it's brand new; we're just getting to know that business, but we do anticipate that $14, $15 million worth of synergy savings to come through. Not all of that will hit 2024. We'll pick up some of that probably inside the third and fourth quarter, probably around a three to $5 million number inside synergy savings for this fiscal year. Okay, perfect.

Jeffrey S. Lee: We're just getting to know that business, but we do anticipate that $14, $15 million worth of synergy savings to come through. Not all of that will hit 2024. Okay, perfect. And then I wanted to ask about Mueller.

Speaker Change: Inside of the back half now Mueller.

Speaker Change: It's brand new were just getting to know that business, but we do anticipate that $2014 $15 million worth of synergy savings to come through not all of that will hit 2024, we'll pick up some of that probably inside the third and fourth quarter, probably around a $3 million to $5 million number inside synergy savings for this.

Speaker Change: Fiscal year.

Andrew P. Casella: You know, certainly you guys just got done completing the acquisition of Harvey and then Mueller, you know, a couple months later. Just can you talk a little bit about the opportunity, what your thoughts are on M&A as it relates to the rest of the year, and I guess the sizing around, you know, what that pipeline might look like? You know, these were two, you know, back-to-back $500 million acquisitions.

Speaker Change: Okay, Perfect and then I wanted to ask about Mueller.

Rose Lee: And then I want to ask about Mueller. You know, certainly you guys just got done completing the acquisition of Harvey, and then Mueller, you know, a couple months after. Just can you talk a little bit about the opportunity, what your thoughts are on MNA as it relates to the rest of the year and I guess the sizing around, you know, what that pipeline might look like. You know, these were two, you know, back-to-back $500 million acquisitions.

Speaker Change: Certainly you guys just got done completing the acquisition of Harvey and then you're a couple months after.

Speaker Change: Can you talk a little bit about the opportunity what your thoughts are on M&A as it relates to the rest of the year and I guess, the sizing around what that pipeline might look like.

Speaker Change: These were two back to back $500 million acquisitions. So just curious.

Rose Lee: So just curious, you know, what the outlook is for the rest of this year and/or next year. I know you talked about in your prepare remarks, just trying to balance capital allocation and MNA, but if you could kind of walk us through, you know, how it came about. Was it just such a compelling opportunity that you decided to pull the trigger? If you just walk us through that? Thanks so much.

Rose Lee: So just curious, you know, what the outlook is for the rest of this year and or next year. I know you talked about in your prepared remarks, just trying to balance capital allocation and M&A. But if you could kind of walk us through, you know, how that came about?

Speaker Change: What the outlook is for the rest of this year and next year I know I know you talked about in your prepared remarks, just trying to balance capital allocation and M&A, but if you could kind of walk us through how it came about was it just such a compelling opportunity that you decided to pull the trigger if you could just walk us through that thanks, so much.

Andrew P. Casella: Was it just such a compelling opportunity that you decided to pull the trigger? If you just walk us through that, thanks so much.

Rose Lee: Yeah, both for Harvey and the Mueller acquisition because M&A is an integral part of how we plan for our growth. Those are both businesses that we have watched and cultivated relationships with over a significant period of time. Actually, in Mueller's case, I think it goes back to NCI time as well.

Rose Lee: Yeah, both for Harvey and Mueller acquisition, because MNA is an integral part of how we plan for our growth. Those are both businesses that we have watched and cultivated relationships over a significant period of time. Actually, in Mueller's case, I think it goes actually back to the NCI time as well. And so these are businesses that have established strong business models and success in their own right. And because of their strategies, when we looked at in combination with cornerstone building friends, we felt very strongly that it's creative and additive to accelerating our growth. So just as a reminder in Harvey's case, very strong in the Northeast, very strong in distribution and dealer, and those are our focus channels in which we want to accelerate our growth.

Speaker Change: Yeah.

Speaker Change: For Harvey and Mueller acquisition, because M&A is a integral part of how we plan for growth.

Speaker Change: <unk>.

Speaker Change: Businesses that we have watched and cultivating relationships over a significant period of time actually in <unk> case, I think it goes actually back up.

Speaker Change: The NCI time as well.

Speaker Change: These are businesses that have established a strong.

Speaker Change: At risk models and success in their own right and because of their strategy and when we looked at in combination with cornerstone building brands, we felt very strongly that its accretive and additive to accelerating our growth.

Rose Lee: And so these are businesses that have established strong business models and success in their own right. And because of their strategies, when we looked at them in combination with Cornerstone Building Brands, we felt very strongly that it was a creative and additive way of accelerating our growth. So just as a reminder, in Harvey's case, very strong in the Northeast, very strong in distribution and dealer. And those are our focus channels in which we want to accelerate our growth. In Mueller's case, they have a strong presence in the Southwest, where we want to bolster our capabilities.

Speaker Change: Just as a reminder, in harvest case very.

Speaker Change: Very strong annuity very strong and distribution and dealer and due to our focused channels in which we look to accelerate our growth and Miller's case, they had a strong presence in the south.

Rose Lee: In Mueller's case, they have a strong presence in the South West where we want to bolster our capabilities. And it creates a capability of addresses the full portfolio of steel products that we manufacture, both in the building side, component and residential metal roofing. And it also gives us closer proximity to our end customers that we're always interested in understanding more deeply what solutions are most meaningful for them. And so, as we've always said, being clear around the strategic fits and the compelling value proposition that the acquisition targets provide to us is our really kind of the anchoring criteria by which we cultivate relationships.

Speaker Change: The last where we want to bolster our capability.

Rose Lee: And it creates a capability to address the full portfolio of steel products that we manufacture, both in the building side component and residential metal roofing. And it also gives us closer proximity to our end customers, so we're always interested in understanding more deeply what solutions are most meaningful for them. And so it's, as we've always said, being clear about the strategic fits and the compelling value proposition that the acquisition targets provide to us.

It creates a capability of addressed.

Speaker Change: Addresses the full portfolio of steel products that we manufacture.

Speaker Change: Building side components and residential metal roofing and it also gives us closer proximity to our end customers that were always interested in understanding more deeply.

Speaker Change: Our solutions are most meaningful for them and so as we've always said.

Speaker Change: Being clear around the strategic fit and a compelling value proposition that the acquisition.

Rose Lee: These are really kind of the anchoring criteria by which we cultivate the relationship and, for the right conditions, enable them to become part of Cornerstone Building Brands. If there is a compelling fit and we have the affordability, then we will act on those particular opportunities. Andrew, I'll just add a couple of comments to that as well.

Speaker Change: To provide to us is that really kind of the anchoring.

Speaker Change: Anchoring criteria by which we cultivate.

Speaker Change: Sure.

Rose Lee: And if the rights and conditions enable them becoming part of cornerstone building brands.

Speaker Change: Yes.

Speaker Change: And it was the right conditions.

Speaker Change: <unk> and becoming part of cornerstone building back and I think for the last part of your.

Jeffrey Lee: And I think for the last part of your question, Andrew, I think we will continue to do our work in terms of having a robust M&A pipeline. Of course, we will always be disciplined in terms of the value that we get for those targets. But we don't have a previous position, as they were going to do so many or X number. It is really a combination of continuing to refine our strategic roadmap, understanding the availability and the value of the different targets. And if there is a compelling fit and we have this full affordability, then we will have those particular opportunities.

Speaker Change: Andrew I think we will continue to do our work in terms of having a robust M&A pipeline of course, we will always be disciplined in terms of the value that we get for those targets.

Speaker Change: But we we don't have a predisposition to say, we're going to do with so many or.

Speaker Change: X number it is really a combination of continuing to refine our strategic road map understanding availability in the value of the different targets and if there is a compelling fit and we have the affordability that we will act on those particular opportunities.

Jeffrey Lee: Andrew, I'll just add a couple of comments to that as well. Thinking about our balance sheet, thinking about our leverage ratio and the Mueller acquisition, would you take into consideration the post-Center G EBITDA of Mueller and the base purchase price, right? So the base purchase price we announced in AKF 475 when we closed the deal, it was closer to 491. We did pick up some cash; we also picked up some higher working capital for the Mueller transaction, but those are opportunities for us to reduce that working capital with Mueller as well. But when you look at the overall leverage ratio on a post-Center G basis, the leverage ratio for the company is it barely goes up.

Speaker Change: And Andrew I'll, just add a couple of comments to that as well.

Jeffrey S. Lee: Thinking about our balance sheet, thinking about our leverage ratio and the Mueller acquisition, when you take into consideration the post-Synergy EBITDA of Mueller and the base purchase price, right? So the base purchase price we announced in AKF 475, but when we closed the deal, it was closer to 491. We did pick up some cash. We also picked up some higher working capital for the Mueller transaction, but those are opportunities for us to reduce that working capital with Mueller as well. But when you look at the overall leverage ratio on a post-Synergy basis, the leverage ratio for the company barely goes up, so it's pretty flat from where we were before.

Andrew P. Casella: Thinking about our balance sheet thinking about our leverage ratio on the Mueller acquisition.

Speaker Change: Would you take into consideration the post synergy EBITDA of Mueller and the base purchase price rates to the base purchase price, we announced in 8-K or $4 75, when we closed the deal. It was closer to 491, we did pick up some cash we also picked up some higher working capital for the Mueller transaction.

Speaker Change: Those are opportunities for us to reduce that working capital with Mueller as well, but when you look at the overall leverage ratio on a post synergy basis, the leverage ratio for the company is barely goes up.

Jeffrey Lee: So it's pretty flat from where we were before. And so we'd like that transaction for lots of reasons strategically, but from a balance sheet perspective, it also made sense for us to say our leverage isn't significantly higher. In fact, it barely moves with this transaction because of the EBITDA that we're acquiring with it as well.

Speaker Change: So it's pretty flat from where we were before and so we like that transaction for lots of reasons strategically, but from a balance sheet perspective. It also makes sense for us too.

Jeffrey S. Lee: And so we like that transaction for lots of strategic reasons, but from a balance sheet perspective, it also made sense for us to say, hey, our leverage isn't significantly higher. In fact, it barely moves with this transaction because of the EBITDA that we're acquiring with it as well. Okay, got it. And just to confirm, where will Mueller be consolidated in segment, I'm assuming shelters?

Speaker Change: To say, hey, our Leverages and significantly higher in fact, it's barely barely moves with this transaction because of the EBITDA that we are acquiring with it as well.

Jeffrey Lee: Okay, God, and just to confirm, where will Mueller be consulted in segment on assuming shelters? Yeah, it'll go into shelters as we provide on slide 11. It looks a lot like our shelter's business. It's got a components portion of about 30% of their revenue goes into components. It's got prefabricated and complex projects that are out there about 20% and 10% inside of that revenue, and then roofing, metal residential roofings about another 13%. So it looks a lot like our shelter segment from many regards, but they have a much better footprint on the retail space where they're selling directly to consumers.

Speaker Change: Okay got it and then just to confirm where we'll newer be consolidated and segment I'm assuming shelters.

Speaker Change: Okay.

Jeffrey S. Lee: Yeah, it'll go into shelters, as we provide on slide 11. It looks a lot like our shelter business. It's got a components portion of about 30% of their revenue goes into components. It's got prefabricated and complex projects that are out there, about 20% and 10% inside of that revenue, and then roofing, metal residential roofing's about another 13%. So it looks a lot like our shelter segment in many respects, but they have a much better footprint in the retail space where they're selling directly to consumers, and that's a high growth area for us that we feel like we have a right to win in, and we're excited about bringing them on and learning from their organic opportunities that they have combined with the things we'd like to do throughout the United States. Okay, great. Thanks for taking all the time. I'll get back in the queue. Our next question comes from the line of James Kayler with Bank of America. Please go ahead. Hey guys, how are you?

Speaker Change: Yes, it'll go into shelters.

Speaker Change: We provide on the on slide 11, it looks a lot like our shelters business, it's got a components.

Speaker Change: Portion of about 30% of their revenue goes into components.

Speaker Change: Got pre fabricated.

Speaker Change: And complex projects that are out there about 20% and 10% inside of that revenue and then roofing.

Speaker Change: Metal residential roofing is about another 13% so it looks a lot like our shelter segment for many regards but they have a much better footprint on the retail space, where they're selling directly to consumers and that's a high growth area for US do we feel like we have a right to win and we're excited about bringing them on <unk>.

Jeffrey Lee: And that's a high growth area for us, but we feel like we have a right to win in, and we're excited about bringing them on and learning from their organic opportunities that they have combined with the things we'd like to do throughout the United States.

Speaker Change: Learning from the organic opportunities that they have combined with the things we'd like to do throughout the United States.

Unknown Executive: Okay, great.

Speaker Change: Okay, great. Thanks for thanks for taking all the time I'll get back in the queue.

Unknown Executive: Thanks for taking all the time. I'll get back in the queue.

James Kailer: Our next question comes from the line of James Kailer with Bank of America. Please go ahead.

Speaker Change: Our next question comes from the line of James Taylor with Bank of America. Please go ahead.

James Kailer: Hey guys, how are you? Doing well. Good, good.

James Forristall Kayler: Hey, guys how are you.

James Forristall Kayler: They're doing well. Good, good. Just one quick follow-up on Mueller. You said that you had borrowed the..., the revolver to finance that.

Speaker Change: They are doing well.

James Kailer: Just one quick follow-up on Mueller. You said that you had borrowed on the revolver to finance that. Is there any thought to term that out with like longer dated bank debt or bonds?

James Forristall Kayler: Good good just one quick follow up on on Mueller, you said that you had borrowed on the.

Jeffrey S. Lee: Is there any thought to term that out with longer-dated bank debt or bonds? Yeah, I mean, we're constantly looking at it. So, let me back up a little bit. So we borrowed $550 million on the ABL, about $500 million of that went to the Mueller acquisition, and there's some timing, right? So as we think about the July timeframe in particular, we have higher interest expenses that are paid, there's just some working capital, and other things that kind of pull on the cash.

James Forristall Kayler: On the revolver to finance that is there any thought to term that out.

Speaker Change: With both.

Speaker Change: Longer dated bank debt or <unk>.

Speaker Change: Our bonds.

Jeffrey Lee: Yeah, I mean, we're constantly looking at. So let me back up a little bit. So we've got our $550 million on the ABL; about 500 million of that went to for the Mueller acquisition. And there's some timing, right? So, as we think about the July time frame in particular, we have higher interest expenses that are paid. There's just some working capital and other things that kind of pulls on the cash. As we think about cash going into the second half, we can talk more in detail about this, but there's an expectation that we're going to have a working capital benefit.

Jeffrey S. Lee: As we think about cash going into the second half, we can talk more in detail about this, but there's an expectation that we're going to have a working capital benefit. We typically have that as a company, and it allows us to recover a lot of the investment that we made in the first half comes back in the second half as we get higher revenues from that inventory. But specifically to your question, we're always looking at our capital, our capital allocations as a company, and considering what's best for us to make sure that we have ample liquidity and that we're able to run the business appropriately.

Speaker Change: Yes.

Speaker Change: We're constantly looking at so let me back up a little bit <unk> $550 million on the ABL.

Speaker Change: About $500 million of that went to for the Mueller acquisition and there is some timing right. So as we think about the July timeframe. In particular, we have higher interest expenses that are paid there is just some working capital and other things that kind of pulls on the cash as we think about cash going into the second half.

Speaker Change: We can talk more in detail about this but there is an expectation that we're going to have a working capital benefit we typically have that as a company.

Jeffrey Lee: We typically have that as a company and allows us to recover a lot of the investment that we made in the first half comes back in the second half as we get higher revenues from that from that inventory.

Speaker Change: <unk> allows us to to.

Speaker Change: To recover a lot of the investment that we made in the first half comes back in the second half because we get higher revenues from that from that inventory, but specifically to your question. We're always looking at our capital.

Jeffrey Lee: But specifically to your question, we're always looking at our capital allocations as a company and considering what's best for us to make sure that we have ample liquidity and that we're able to run the business appropriately. So, as we stated, we have just under a billion dollars' worth of liquidity at the end of June. We pulled about half of that when we think about the Mueller transaction. We do need about a hundred million dollars of cash to run the business on a daily basis through the season, right? That's not necessarily in any given quarter, but about a hundred million dollars to just kind of keep things moving back and forth between working capital and operating requirements.

Speaker Change: Our capital.

Speaker Change: Allocations as a company and considering what's best for us to make sure that we have ample liquidity and that we're able to run the business appropriately. So as we as we stated we have just under $1 billion worth of liquidity at the end of June we pulled about half of that when we think about the Mueller transaction, we do need.

Jeffrey S. Lee: So, as we stated, we had just under a billion dollars worth of liquidity at the end of June; we pulled about half of that when we think about the Mueller transaction. We do need about $100 million of cash to run the business on a daily basis through the season, right? That's not necessarily in any given quarter, but about $100 million to just kind of keep things moving back and forth between working capital and operating requirements.

Speaker Change: About $100 million of cash to run the business on a daily basis through the season right, that's not necessarily in any given quarter, but about $100 million should just kind of keep things moving back and forth between working capital and operating requirements. So we feel like there's plenty of liquidity for us to operate and again we.

Jeffrey S. Lee: So we feel like there's plenty of liquidity for us to operate. And again, we'll continue to look at our capital structure and make the right decisions as we think about forward liquidity. All right, very good. Just one question.

Jeffrey Lee: So we feel like there's plenty of liquidity for us to operate. And again, we'll continue to look at our capital structure and make the right decisions as we think about forward liquidity.

Speaker Change: We'll continue to look at our capital structure and make the right decisions as we think about forward liquidity.

James Kailer: All right, very good.

Speaker Change: Alright very good.

James Kailer: Just one question. There were some; I think in the corner, there were some reports on some like PVC disruption in Mexico. It doesn't seem like it had any impact on the surface solutions business. Is that anything that we should be on a radar, or was it not really not really an impact? We've had no major disruption to our supply chain. I mean, there are occasions in which a particular supplier might have some capacity issues. Sometimes suppliers have the RP implementations and things like that. But we've been able to have much more robust supply chain design, multiple sources in some of the cases.

James Forristall Kayler: There were some, I think, in the corner. There were some reports on some like the PVC disruption in Mexico. It doesn't seem like it had any impact on the Surface Solutions business. Is that something that we should be on our radar? Or was it really unaffected?

Speaker Change: Just one question there were some I think in the quarter. There were some reports on some like PVC disruption.

Speaker Change: In Mexico, It doesn't seem like it had any impact on the surface solutions business.

Is that anything that.

Speaker Change: That we should be on our radar at what was it not really not really.

Speaker Change: On impact.

Rose Lee: We've had no major disruptions to our supply chain. I mean, there are occasions in which a particular supplier might have some capacity issues. You know, sometimes suppliers have ARP implementations and things like that.

Speaker Change: We've had no major disruptions to our supply chain I mean on.

Speaker Change: There are occasions and uhm.

Speaker Change: Particular to.

Speaker Change: Supplier might have some capacity issues.

Rose Lee: But we've been able to have much more robust supply chain design, multiple sources in some cases, and then those that we do have significant business and transaction relationships with, we have a much more robust process now in terms of proactive communication, managing the supply chain, order intake, and delivery rates and things like that. So a long way to say that we're always managing those things on a case-by-case basis, but there were no significant disruptions that we experienced in the second quarter. And James, you probably know there was some information around one of our competitors to put out. Disruption at their locations based on an ASA colorant that came out of Mexico.

Speaker Change: Fantastic players have ERP implementations and things like that but.

Speaker Change: Therefore, we've been able to.

Speaker Change: How much more robust supply chain design multiple sources in some cases and then those that we do have significant business in transaction relationships, we have a much more robust.

Jeffrey Lee: And then those that we do have significant business and transaction relationships, we have a much more robust process now in terms of proactive communication, managing the supply chain, order intake, and delivery rates and things like that. So a long way to say that we're always managing those things on a case-by-case basis, but there are no significant disruptions that we experienced in the second quarter.

Speaker Change: Robust process now in terms of proactive communication managing the supply chain.

Speaker Change: Order intake in delivery rates and things like that so a long way to say that we're always managing those things on a case by case basis, but there are no.

James Forristall Kayler: Significant disruptions that we experienced in the second quarter and James Youre, probably there is a.

Jeffrey Lee: And James, you're probably there was some information around one of our competitors that put out some disruption on their locations based on an ASA colorant that came out of Mexico. We also have that same vendor, but as Rose said, we were able to secure supply, and that vendor is back up and running. So if you're specifically talking about that one disruption inside, deciding for dark colors in particular, that has been resolved for us. I can't speak for anybody else in the marketplace, but for us that's been resolved.

James Forristall Kayler: Some information around one of our competitors to put out some.

James Forristall Kayler: Disruption on their locations based on an assay colorant that came out of Mexico.

Jeffrey S. Lee: We also have that same vendor, but as Rose said, we were able to secure supply, and that vendor is back up and running. So if you're specifically talking about that one disruption inside a siding for dark colors in particular, that has been resolved for us. I can't speak for anybody else in the marketplace, but for us, that's been resolved. Very good. That's helpful.

ROE: We also have that same vendor, but as ROE said, we were able to secure supply and that vendors back up and running so if youre specifically talking about that one disruption inside deciding for dark colors in particular that has been resolved for us.

ROE: Can't speak for anybody else in the marketplace, but for US that's been resolved.

James Forristall Kayler: One, just last big picture one, the guidance, helpful to give goalposts, but you know, when we think about the business and sort of the margin potential, like where you're aiming for, like when we get back to a more normalized demand environment, assuming that the rate outlook sort of... unfolds as people generally expect. What is the right sort of blended margin for this business, Rose? Do you think sort of?

James Kailer: Very good. That's helpful.

ROE: Very good.

James Kailer: There's one just last big picture one. The guidance is helpful to give goal posts.

ROE: Just one last big picture one.

Speaker Change: <unk> helpful.

Speaker Change: Helpful to give goalposts.

Rose Lee: But when we think about the business and sort of the margin potential, like where you're aiming for, like when we get back to a more normalized demand environment, assuming that the rate outlook sort of unfold as people generally expect, like what is the right sort of blended margin for this business, Rose, do you think sort of longer term? Yeah, I think what we have been saying pretty consistently with the portfolio that we have and where our prioritizing growth. I think we are aiming towards and working towards a business that is for the totality of the portfolio, a high teams margin, EBITDA margin profile.

Speaker Change: When we think about the business and sort of the margin potential like where you're at.

Speaker Change: Aiming for like when we get back to a more <unk>.

Speaker Change: Normalized demand environment, assuming that the rate outlook.

Speaker Change: Unfolds as people generally expect like what is what is the right.

Rose: Sort of blended margin for this business Rose do you think sort of.

Rose Lee: Longer term. Yeah, I think what we have been saying pretty consistently with the portfolio that we have and where we are prioritizing growth, I think we are aiming for and working towards a business that is, for the totality of the portfolio, a high-teams, even the margin profile. And the way we'll get there, again, because we're in a cyclical space overall, so we fully recognize that.

Rose: Longer term.

Rose: Yes, I think what we've been saying pretty consistently with the portfolio that we have annual and we are prioritizing growth I think we.

Speaker Change: Our aiming towards and working towards a business that is for the totality.

Speaker Change: The portfolio a high teens margin EBITDA margin profile and the way we will get there again, because we're in a cyclical.

Rose Lee: And the way we'll get there again because we're in a cyclical space in totality. So we fully recognize that, but you can see second and by segment in our surface of segment clearly now with their refined strategy of portfolio offerings. They're continuing to advance their margin profile. So we expect that high margin that we're starting to realize, we're going to continue to incrementally improve that, but that is, you know, kind of maximizing the potential that it has.

Speaker Change: In totality, so we fully recognize that but you can see segment by segment in our surfaces segment, clearly now with their refined strategy a portfolio offering there continue to advance their margin profile. So we expect that that high margin that we're starting to realize we're going to continue to incrementally improve that but that is.

Rose Lee: But you can see, segment by segment, in our services segment, clearly now with their refined strategy of portfolio offerings, they are continuing to advance their margin profile. So we expect that high margin that we're starting to realize. We're going to continue to incrementally improve that, but that is kind of maximizing the potential that it has. Where we see the greatest amount of potential for upside that we're working towards is in our Aperture business. It is a labor-intensive business.

Rose: Kind of <unk>.

Rose: Maximizing the potential that that has where we see the greatest amount of potential for upside that we're working towards is in our aperture business. It is a labor intensive business. It is the largest part of our business and as we automate and putting our production system and become more systematic in our execution, we fully expect that that business.

Rose Lee: Where we see the greatest amount of potential for upside that we're working towards is in our aperture's business. It is a labor-intensive business. It is the largest part of our business. And as we automate and put in our production system and become more systematic in our execution, we fully expect that that business should be a high teams margin business. And so there is a several hundred basis point improvement that we're working towards that will happen over time. And we're investing in things like for the longer term ERP systems and things like that. So that's what we're going to see a lot of the upside.

Rose Lee: It is the largest part of our business, and as we automate and put in place our production system and become more systematic in our execution, we fully expect that that business should be a high-margin business. And so there is a several hundred basis points improvement that we're working towards that will happen over time. And we're investing in things like, for the longer term, ERP systems and things like that. So that's where we're going to see a lot of the upside.

Speaker Change: It should be a high teens.

Speaker Change: Mike in business and so there is a several hundred basis points improvement that we are working towards that will happen over time, and we're investing in things like.

Speaker Change: For the longer term ERP systems and things like that so that's what we're going to see a lot of the upside and then when the shelter.

Rose Lee: And then in the shelter business, as we pointed out last year, what we experienced last year, we loved it, significantly higher margins in the 20s, but we always knew that that was not sustainable. It is not reflective of the fundamentals of the business model.

Rose Lee: And then the shelter business, as we pointed out last year, what we experienced, we loved it, significantly margins in the 20s, but we always needed that was not sustainable. It is not reflective of the fundamentals of the business model. And so that's what we're seeing. Although right now we're dealing with a down market where it's compressed, and now we're in the mid teens, but we think that's where really it belongs. Maybe a little bit higher than what we displayed in the quarter of the little 15%. But it is certainly in the mid teens range that I think the shelter business out the long.

Speaker Change: Our business as we pointed out.

Speaker Change: Last year, while the experience we love today.

Speaker Change: Significantly.

Speaker Change: Margins into 'twenty, but we always knew that that was not sustainable it is not reflective of the fundamentals of the business model and so that's what we're seeing.

Rose Lee: And so that's what we're seeing, although right now we're dealing with a down market where it's compressed, and now we're in the, let's say, the mid-teens. But we think that's where it really belongs, maybe a little bit higher than what we displayed in the quarter, a little over 15%, but it is certainly in the mid-teens range that I think the shelter business belongs. All right, very good. Thank you. Good luck in the back half. Our next question will come from the line of Kirk Luedtke with Imperial Capital, LLC. Please go ahead. Hello Rose, Jeffrey, and Mohsin.

Speaker Change: Right now, we're dealing with a down market Larry.

Speaker Change: Compressed and now were in the let's say the mid teens, but we think thats, where really it's along with maybe a little bit higher than what we displayed in the quarter, that's a little over 15%, but it is certainly in that mid teens range that I think the shelter business App alone.

James Kailer: All right, very good. Thank you.

Speaker Change: Alright very good. Thank you good luck in the back half.

James Kailer: Good luck in the back half.

Kirk Lutkey: Our next question will come from the line of Kirk Lutkey with Imperial Capitol LLC. Please go ahead. Hello, Rose, Jeffrey, Mohsin. Appreciate the call. Good morning. Morning.

Speaker Change: Thank you. Our next question will come from the line of Kirk Ludtke with Imperial capital LLC. Please go ahead.

Kirk Luedtke: Appreciate the call. Good morning. With respect to the guidance, what would you, where would you ballpark the company's cash requirements on a pro forma basis for the acquisitions? I'm particularly interested in CapEx.

Speaker Change: Hello, Ross Geoffrey Molson.

Geoffrey Molson: Right at the call.

Kirk Ludtke: Good morning, good morning.

Kirk Lutkey: With respect to the guidance, where would you ballpark the company's cash requirements on a pro forma basis for the acquisitions, particularly interest in CapEx? Yeah, let me address it a little bit broader than the question, but as we think about the components of cash, right? So EBITDA, as we look on a reported basis, let me get to the midpoints here for a second, give me a moment. So we look on a reported basis, EBITDA, about, again, at the midpoint around 790, 785, 790. That gives us the opportunity then to think through the other components of cash.

Speaker Change: Good morning.

Speaker Change: With respect to the guidance.

Speaker Change: What would you.

Speaker Change: Where would you ballpark the company's cash requirements on them on a pro forma basis for.

Speaker Change: For the acquisitions.

Speaker Change: Particularly interest and Capex.

Jeffrey S. Lee: Yeah, let me address it a little bit broader than the question. But as we think about the components of cash, right, so EBITDA as we look on a reported basis. Let me get to the midpoints here for a second. Give me a moment.

Speaker Change: Yes, let me, let me address a little bit broader than the question but.

Speaker Change: As we think about the components of cash right. So.

Speaker Change: EBITDA as we as we look on a reported basis.

Speaker Change: Let me get to the mid points here for a second continuing enrollment.

Jeffrey S. Lee: We look on a reported basis EBITDA about, again, at the midpoint of $790, $785, $790. That gives us the opportunity then to think through the other components of cash. Interest expense, including Mueller's, we expect to be around $340 million. We expect our cash taxes to be about $116-ish.

Speaker Change: So we look on a reported basis EBITDA about.

Speaker Change: Again at the midpoint around 790, $785 790 <unk>.

Speaker Change: That gives us the opportunity then to think through the other components of cash.

Jeffrey Lee: Interest expense, including Mueller, we expect to be around 340 million. We expect our cash taxes to be about 116-ish. I think last time we talked about a number that was a little bit broader, kind of a 100 to 140. We think we can tighten that up now that we're in the back half. It'll be close to maybe a 110 to 120 number. And then we think about the working capitals, a real benefit for us in the back half. So, as I discussed earlier, we have a really use of cash in particular in the first and second quarters, not just from seasonality, but from strategic investments.

Speaker Change: Interest expense.

Speaker Change: Including Mueller, we expect to be around $340 million, we expect our cash taxes to be.

Speaker Change: About 116 ish I think last time, we talked about a number that was a little bit broader kind of a 100 to $140. We think we can tighten that up now that we're in the back half it will be closer to maybe.

Jeffrey S. Lee: I think last time we talked about a number that was a little bit broader, kind of between $100 and $140. We think we can tighten that up now that we're in the back half. It'll be closer to maybe a $110 to $120 number. And then we think about working capital being a real benefit for us in the back half. So, as I discussed earlier, we have a real use of cash, in particular in the first and second quarters, not just from seasonality but from strategic investments.

Speaker Change: 110 to $1 20 number and then we think about <unk>.

Speaker Change: Working capital as a real benefit for us in the back half.

Speaker Change: No.

Speaker Change: As I discussed earlier, we have a really use of cash in particular in the first and second quarters, not just from seasonality, but from strategic investments. So in particular inside of our surfaces business and a little bit inside of our shelters business, we increased our inventories to make sure that we had sufficient amount of finished.

Jeffrey Lee: So, in particular, inside of our surfaces business and a little bit inside of our shelters business, we increased our inventories to make sure that we had a sufficient amount of finished product for our customers as that demand comes back. And it's paid off as we think about our surfaces business in particular. And even earlier, someone talked about some of the ASA issues on Colorance. We felt confident that we could continue our supply to our customers because of the inventories that we had in place. In addition to that, we know we have more inventory than we'd like right now within our shelters business, and that's an opportunity for us to get a source of cash as we come into the back half.

Jeffrey S. Lee: So, in particular, inside of our surfaces business and a little bit inside of our shelters business, we increased our inventories to make sure that we had a sufficient amount of finished products for our customers as that demand came back. And it's paid off, as we think about our surfaces business in particular. And even earlier, someone talked about some of the ASA issues with colorants. We felt confident that we could continue our supply to our customers because of the inventories that we had in place.

Speaker Change: Product for our customers as that demand comes back and it's paid off of as we think about our surfaces business in particular and even earlier someone talked about the some of the assay issues on Colorants, we feel confident that we could continue our supply to our customers because of the inventories that we had in place in.

Jeffrey S. Lee: In addition to that, we know we have more inventory than we'd like right now within our shelter business, and that's an opportunity for us to get cash, a source of cash as we come into the back half. So in the back half, in particular when we think about working capital, we think there's probably somewhere between $100 to $150 million worth of benefit, a source of cash coming back inside those two quarters, which then puts our overall working capital for the year fairly flat.

Speaker Change: And to that we know we have more inventory than we'd like right now within our shelters business.

Speaker Change: And that's an opportunity for us to get cash a source of cash as we come into the back half. So in the back half in particular, when we think about working capital, we think theres, probably somewhere between $100 million to $150 million worth of benefit source of cash coming back inside those two quarters, which then puts our overall working capital in the year.

Jeffrey Lee: So in the back half, in particular, when we think about working capital, we think there's probably somewhere between 100 to 150 million dollars' worth of benefit, source of cash coming back inside those two quarters, which then puts our overall working capital on the year fairly flat.

Speaker Change: Fairly flat.

Jeffrey S. Lee: And then we have CapEx that you alluded to, Kirk, which is our investments going into the business. We think we're going to probably be somewhere around $150 million or $180 million worth of CapEx. And that's a combination of a couple of things. About $75 million with some of the acquisitions on maintenance capital. That's just required on an annual basis.

Jeffrey Lee: And then we have CapEx that you alluded to, Kirk, which is our investments going into the business. We think we're going to probably be somewhere around 150, 180 million dollars worth of CapEx, and that's a combination of a couple of things: about 75 million dollars with some of the acquisitions on maintenance capital. That's just required on an annual basis, and then you look at that other 100 million dollars investing back into the business. A lot of the things that we're getting in our corner stump production system are because of the investments that we've made in automation around processes to make sure that we can get the cost takeout.

Speaker Change: And then we have capex that you alluded to occur which is.

Speaker Change: Our investments going into the business, we think we're going to probably be somewhere around $150 million to $180 million worth of Capex.

Speaker Change: And Thats a combination of a couple of things.

Speaker Change: About $75 million with some of the acquisitions.

Speaker Change: On maintenance capital, that's just required on an annual basis, and then you look at that other $100 million investing back into the business a lot of the things that we're getting in our on our cornerstone production system because of the investments that we've made in automation around processes to make sure that we can get the cost take out and so that investment is showing.

Jeffrey S. Lee: And then you look at that other $100 million investing back into the business. A lot of the things that we're getting in our Cornerstone production system are because of the investments that we've made in automation around processes to make sure that we can get the cost takeout. And so that investment is showing up. It has shown up now for 23 consecutive quarters and for the first half of 2024.

Jeffrey Lee: And so that investment is showing up. It has showed up now for 23 and for the first half of 2024. And so expect those investments to continue, as we're finding really good return on those investments. And that's about like I said, 140 to 170 million dollars' worth of CapEx. And then the other components of cash is really going to be on the borrowings, making sure that we pay back the ABL as we start to generate more EBITDAQ. Those are the basic components of our cash.

Speaker Change: <unk> has showed up now for.

Speaker Change: 23, and for the first half of 2024, and so we expect those investments to continue as refining really good return on those investments and that's about like I said.

Jeffrey S. Lee: And so expect those investments to continue as we're finding really good returns on those investments. And that's about, like I said, $140 to $170 million worth of CapEx. And then as the other components of cash are really going to be on the borrowings, making sure that we pay back the ABL as we start to generate more EBITDA. Those are the basic components of our cash. That's really helpful.

Speaker Change: $140 million to $170 million worth of Capex.

Speaker Change: And then as is the other components of cash.

Speaker Change: Is really going to be on the borrowings, making sure that we pay back the ABL as we start to generate more EBITDA, but those are the basic components of our cash.

Kirk Lutkey: That's super helpful. I appreciate that.

Kirk Luedtke: I appreciate that. Do you have cash restructuring costs? Not a lot.

Speaker Change: Yes.

Speaker Change: That's super helpful. I appreciate that.

Jeffrey Lee: Do you have cash restructuring costs? Not a lot. We don't anticipate major restructuring with the acquisitions that we've made. In fact, we're planning on running them in normal course. We have small type of activities that are going in within the business units around cost takeout, but nothing that meets the criteria for restructuring. Got it.

Speaker Change: Cash restructuring costs.

Jeffrey S. Lee: We don't anticipate major restructuring with the acquisitions that we've made. In fact, we're planning on running them in the normal course. We have a small type of activity that is going on within the business units around cost takeout, but nothing that meets the criteria of restructuring. Got it. Thank you. I appreciate it. And then on slide.

Speaker Change: Not a lot.

Speaker Change: We don't anticipate major restructuring with the acquisitions that we've made.

Speaker Change: In fact, we're planning on running them in normal course, we have small type of activities that are going in within the business units around cost take out, but nothing that meets that criteria of restructuring.

Kirk Lutkey: Thank you. I appreciate it.

Speaker Change: Got it. Thank you I appreciate it and then on slide.

Jeffrey Lee: And then on slide 15, with respect to liquidity, is it, is it just, is it that simple? If you wanted to think about pro formal liquidity to just deduct the 550 from Mueller from the 953. Yeah, there's no, there's no borrowing base limitations, no covenant issues.

Kirk Luedtke: 15 with respect to liquidity, is it just is it that simple if you wanted to think about pro forma liquidity, to just deduct the 550 for Mueller from the 953 yeah, there's no there's no borrowing base limitations, no covenant issues we should think about. That's correct. Got it. I appreciate it. Thank you. Our next question comes from the line of Brian DiRubbio with Baird. Please go ahead. Good morning, Rose and Jeff.

Speaker Change: 15 with respect to liquidity as it is.

Speaker Change: It just is it that simple if you wanted to think about pro forma liquidity to just deduct the.

Speaker Change: 550 for Mueller from the 953, yes, there is.

Speaker Change: No.

Speaker Change: There is no borrowing base limitations no covenant issues, we should think about.

Kirk Lutkey: We should think about. That's correct. Got it. I appreciate it.

Speaker Change: That's correct.

Kirk Lutkey: Thank you.

Got it I appreciate it thank you.

Speaker Change: Yes.

Brian DiRubbio: Our next question comes from a line of Brian DiRubbio with Beard. Please go ahead.

Speaker Change: Our next question comes from the line of Brian <unk> with Baird. Please go ahead.

Brian DiRubbio: Good morning, Grozen Jeff. Just a couple of questions here. Any changes that you're seeing in the competitive environment, given that the, the smalays impacting US housing industries, just going on for a little bit longer than anybody expected. Yeah, I mean, I think when in any market, when the demand is less than desired and the supply is ample, there's always going to be a greater competitive nature. And we're seeing that in pockets, so many if we take the new construction market as an example, sometimes it's certain geographies because of the competitive nature of maybe a smaller regional players that are producers.

Brian DiRubbio: Just a couple of questions here. Any changes that you're seeing in the competitive environment, given that this malaise impacting the U.S. housing industry is just going on for a little bit longer than anybody expected? Yeah, I mean, I think in any market when the demand is less than desired, and the supply is ample, there's always going to be a greater competitive nature. And we're seeing that in pockets. I mean, if we take the new construction market as an example, sometimes it's certain geographies because of the competitive nature of maybe smaller regional players that are producers, or there are customer concentrations with lots of power.

Brian: Good morning, gross and Jeff just a couple of questions here.

Brian: Any changes that you're seeing in the competitive environment given that.

Speaker Change: This malaise impacting the U S housing industries.

Speaker Change: Just going on for a little bit longer than anybody expected.

Speaker Change: Okay.

Speaker Change: Yeah, I mean, I think one in any market.

Speaker Change: The demand is less than desired.

Speaker Change: And the supply is ample talent really is going to be greater in nature.

Speaker Change: We're seeing that in pockets of meaningfully.

Speaker Change: The new construction market as an example, sometimes it's certain geography because of the competitive nature of maybe a smaller regional players that are producers.

Brian DiRubbio: So, for example, we're finding that in the Texas region, which has always been a competitive region, when we compete for project-based new construction projects, we have to be surgical and mindful in terms of the pricing positions that we take on. But they're still more one-offs.

Brian DiRubbio: And, or there are customer concentrations with lots of power. So, for example, we're finding that in the Texas region, which has always been a competitive region when we compete for project-based new construction projects, that we have to be surgical and mindful in terms of the pricing positions that we take on. But they're more still one off by and large. We have been able to hold on to most of the pricing and our residential businesses with the products and with the value added services that we have. Got it.

Speaker Change: There are customer concentration with lots of power. So for example, we're finding that in the Texas region, which has always been a competitive region. When we compete for project base.

Speaker Change: New construction projects that we have to be surgical in mindful in terms of the pricing decisions that we take on.

Speaker Change: Theyre more still.

Rose Lee: By and large, we have been able to hold on to most of the pricing in our residential businesses with the products and with the value-added services that we have. Got it, and I guess, you know, are you seeing any, just... Following up on that, you know, is competitive behavior so much more intense in Aperture's business than it is in the Surface Solutions business? Yes, and the reason for that is if I take Service Solutions as a portfolio of offerings and platforms, but really, the largest part of it is our planning and siting business.

Speaker Change: All one off.

Speaker Change: By and large we have been able to hold on to most of the pricing in our residential businesses.

Speaker Change: With the products and with the value added services that we have.

Rose Lee: And I guess, you know, you see any, it just following up on that, you know, is the part, is the competitive behavior sort of more intense in the apertures business than it is in the surface solutions business? Yes. And the reason for that is, if I take service solutions as a portfolio of offerings and platforms, but really the largest parts that are cladding and fighting business. If you look at our fighting business, it is a pretty consolidated market. And so, the discipline that exists in the marketplace as the demand, as it flows, it is more consistent in the pricing logic that exists in the marketplace.

Speaker Change #100: Got it and I guess, what are you seeing any just.

Speaker Change #100: Just following up on that is.

Speaker Change #101: Is the competitive behavior, so more intense and the <unk> business than it is in.

Speaker Change #101: The surface solutions business.

Speaker Change #102: Yes, and the reason for that is.

Speaker Change #103: If I take service solutions as a portfolio of offerings and pipelines, but really the largest part of that is our cladding and siding business. When you look at our siding business. It is a pretty consolidated.

Rose Lee: If you look at our siting business, it is a pretty consolidated market, and so the discipline that exists in the marketplace as the demand ebbs and flows is more consistent with the pricing logic that exists in the marketplace. And so there, even though they're also experiencing the same down pressures in the construction R&R as Aperture, they're seeing less of a volatility. Some of the pricing gives that you saw in the quarterly results for our service business have to do more with the PVC resin that it's linked to.

Speaker Change #103: Market.

Speaker Change #103: So the discipline that exists in the marketplace.

Speaker Change #103: As the demand.

Ebbs and flows.

Speaker Change #103: It is more consistent in the pricing logic that exist in the market and so they are even though they are also experiencing the same down pressures any construction R&R as apertures, they're seeing less of a volatility that some of the pricing gap that you saw in the quarterly results.

Rose Lee: And so, even though they're also experiencing the same down pressures in the construction R&R as apertures, they're seeing less of volatility. There's some of the pricing give that you saw in the quarterly results for our service business has to do more with the PVC resin, which it's linked to. Although our pricing is decouples from the pure commodity pricing of PVC, there are more pressures and adjustments that we have to notice when PVC prices are in a deflation period, which is the case while it is the previous years. But in aperture's case, although it is also space that it's consolidating, there is a lot more fragmentation in the competitive dynamics.

Speaker Change #104: Our service business has to do more words.

Speaker Change #105: The PVC resin, which is linked to although our pricing has decoupled from the pure commodity pricing. Our PVC. There are more pressures and adjustments that we have to involve our PVC prices are in a deflationary period, which is the case relative to the previous years, but in <unk> case, although it is also states that is consolidating there.

Rose Lee: Although our pricing is decoupled from the pure commodity pricing of PVC, there are more pressures and adjustments that we have to make when PVC prices are in a deflationary period, which is the case relative to previous years. But in Aperture's case, although it is also a space that is consolidating, there is a lot more fragmentation in the competitive dynamics, and again, as a function of region and the products that are available for a given locale.

Speaker Change #106: There is a lot more fragmentation in the competitive dynamics and again as a function of region into products that are available for Kevin.

Rose Lee: And again, as a function of region and the products that are available for given look out. And so, given that dynamic, we're finding that as a function of the project or a function of the particular customer, that we are finding a more frequent, higher frequency of competitive dynamics, that we at times have to respond.

Speaker Change #106: Given locale and so given that dynamic we are finding that.

Rose Lee: And so given that dynamic, we're finding that, as a function of the project or a function of a particular customer, we are finding a higher frequency of competitive dynamics that we at times have to respond to.

Speaker Change #105: As a function of the project are function of the particular customer that we are finding more frequent higher frequency of competitive dynamics that we at times have to respond to.

Brian DiRubbio: Switching gears to Shelter Solutions, just with the commentary that you made about just the general environment for that business and then, obviously, combined with the excess inventory you have, should we think about, you know, margins there getting weaker through the end of the year and then possibly looking better next year as you're sort of working through that inventory and cutting operating rates? So certainly, what we're experiencing in the current quarter are some of the decisions that we made for especially longer cycle businesses that we won in the first quarter that came into existence in the second quarter, and the pricing that is associated with that.

Rose Lee: Understood. Switching gears to Shelter Solutions, just with the commentary that you made about just the general environment for that business and then I'll be just come on with the access inventory you have. Should we think about, you know, margins there getting weaker through the end of the year and then possibly looking better next year, she's sort of working through that inventory and cutting operating rates. So certainly what we're experiencing in the current quarter is some of the decisions that we made for especially longer cycle businesses that we won in the first quarter that came into existence in the second quarter and the pricing that our associate with that. And then of course how the steel prices, ebbing and slowing as we make different purchases at points in time. As we said before, we have a pretty sophisticated pricing capability that we've built at the last couple of years.

Speaker Change #107: Understood switching gears to shelter solutions, just with the commentary that you made about just the general environment for that business and then obviously combined with the excess inventory you have should we think about margins, they're getting weaker through the end of the year and then possibly.

Speaker Change #109: Better next year, as you're sort of working through that inventory and cutting operating rates.

Speaker Change #108: So certainly what were experiencing in the current quarter is some of the decisions that we made for especially in longer cycle businesses. Every one of the first quarter that came into existence, the second quarter and the pricing that are associated with that and then of course, how the steel.

Brian DiRubbio: And then, of course, how the steel price is ebbing and flowing as we make different purchases at points in time. As we said before, we have a pretty sophisticated pricing capability that we've built in the last couple of years, and so anytime there's volatility in the market, our ability to price a little bit ahead of increasing steel prices and then also then parachute down in a slow walk back to lower steel prices is something that we manage very dynamically.

Speaker Change #108: Rice is ebbing and flowing as we make different purchase at points in time as we said before we have a pretty sophisticated pricing.

Speaker Change #108: Capability that we built at the last couple of years and so anytime there is volatility in the market our ability to price a little bit ahead of the increasing price pricing steel price and then also then parachute down in a slow walk back too.

Rose Lee: And so anytime there's volatility in the market, our ability to price a little bit ahead of increasing price pricing, steel price and then also then cherish it down in a slow walk back to lower steel price. It's something that we manage dynamically. And so that's what we will continue to do for every opportunity to price above and maximize the spread between steel price and our market's go-to-market price. We anticipate that with all that and the inventory management that we will do, that we are kind of in the ballpark of the margin realization that we have at the moment.

Speaker Change #108: Lower steel price is something that we manage that dynamically and so thats. All we will continue to do is look for every opportunity to price above.

Brian DiRubbio: And so that's what we'll continue to do for every opportunity to price above and maximize the spread between the steel price and our markets' go-to-market price. We anticipate that with all that and the inventory management that we will do, that we are kind of in the ballpark of the margin realization that we have at the moment, and, as we've said, more stable margin levels that we seek in the shelter businesses in the mid-teens with a little bit of pressure going north of that.

Speaker Change #108: And maximize the spread between steel prices and our markets are.

Speaker Change #108: Our go to market price, we anticipate that with all of that and the inventory management that we will do that we are kind of in the ballpark of the margin realization that we.

Speaker Change #108: We have at the moment and as we said more still.

Jeffrey Lee: And as we said, more stable margin levels that we seek in the shelter businesses in the mid teens, with a little bit of pressure going north of that. So we don't anticipate that there would be a significant change in the margin profile that we will realize in the third quarter. Now, all that to say, I have no crystal ball for steel price fluctuations, and we look at that all the time. And if you look at the graph of how much volatility there has been in the last year and a half to two years versus the previous history, it paints a completely different picture.

Speaker Change #108: Margin levels that we seek in the shelter business is in the mid teens with little bit of pressure.

Speaker Change #108: Going north of that so we don't anticipate that there would be a significant change in the margin profile.

Speaker Change #108: We will realize in the third quarter now all of that to say I have no crystal ball with steel price fluctuations and if we look at that all the time and if you look at the graph of how much volatility there has been in the last year and half to two years versus the previous history, it's a completely different picture.

Brian DiRubbio: So we don't anticipate that there would be a significant change in the margin profile that we will realize in the third quarter. Now, all that to say, I have no crystal ball for the steel price fluctuations, and we look at that all the time, and if you look at the graph of how much volatility there has been in the last year-and-a-half to two years versus the previous history, it's a completely different picture, and so that unpredictable volatility is something that we can't fully predict, buildings, in particular, the pre-engineered metal buildings, high complexity, which has the highest margins for us as well, and so having lower high complex buildings is driving our margin rates down.

Jeffrey Lee: And so that unpredictable volatility is something that we can't fully predict.

Speaker Change #108: And so that unpredictable volatility is something that we cant fully predict and Brian I'll add just a couple of comments on the roses. So theres two things right as we think about the first half for shelters combined.

Jeffrey Lee: And Brian, I'll pull just a couple of comments on the roses. So there's two things, right? As we think about the first half for shelters combined, combined quarters were about 16% adjusted EBITDA margins for that segment. It's really influenced by two things. The first one is the mix of products. So we're seeing less buildings in particular, the pre-engineered metal buildings, high complexity, which has the highest margins for us as well. And so having lower high complex buildings is driving our margin rates down. And then, as Rosa mentioned, the steel cost, in particular, to put a little bit of context to that.

Brian: Combined quarters, we're about 16% adjusted EBITDA margins for that segment.

Brian: It's really influenced by two things the first one is.

Brian: The mix of products, So we're seeing less building.

Brian: Buildings in particular, the pre engineered metal buildings high complexity, which has the highest margins for us as well and so having lower.

Rose: Lower high complex buildings is driving our margin rates down and then as rose mentioned.

Brian DiRubbio: And then, as Rose mentioned, the steel cost in particular, to put a little bit of context on that, as you back up to January of 2024, which is when we were buying steel, basically, for this time frame, it was about $1,000, let's call it $1,200 per ton on an index, right? Not our cost, but the index that's out there, and then we have other negotiations, et cetera, to get But the index was around $1,200 a ton, and if you look at where we are at today, it's probably closer to $800 a ton. Now, that's the combination of hot roll cold and cold roll steel.

Rose: Steel cost in particular.

A little bit of context to that as you back up to January of 2024, which is when we were buying steel basically for this timeframe.

Rose Lee: So it's decreased significantly, right? And so what we're feeling inside the second half, first half, was higher steel costs combined with an unfavorable mix coming out of buildings. And so as we come into the second half, most of that inventory that we purchased inside of January is off the balance sheet, and we start to pick up an average cost that's much less. And so that should have a better impact on margins for the second half, and we also expect, based on our booking rates as of recent, the last couple of months, that our buildings themselves, the building mix should come up a little bit as well.

Jeffrey Lee: As you back up to January of 2024, which is when we were buying steel basically for this time frame, it was about a thousand, let's call it a thousand two hundred dollars per ton on an index, right? Not our cost, but the index that's out there, and we have other negotiations, et cetera, to give to our cost. But the index was around a thousand two hundred dollars a ton. And if you look at the, if you look at where we're at today, it's probably closer to $800 a ton. Now that's the combination of hot roll, cold, and cold roll steel.

Rose: It was about a 1000, let's call it a $1200 per tonne on an index right not our cost with the index that's out there that we have.

Rose: Other negotiations et cetera to give to our costs, but the index was around $1200 a ton and if you look at the.

Rose: If you look at where we're at today, it's probably closer to $800 a ton now that's the combination of hot rolled cold in cold rolled steel. So it's decreased significantly right and so what we're feeling inside the second half.

Jeffrey Lee: So it's decreased significantly, right? And so what we're feeling inside the second half: first half was higher steel cost combined with unfavorable mix coming out of buildings. And so, as we come into the second half, most of that inventory that we purchased inside of January is off the balance sheet. And we start to pick up an average cost that's much less. And so that should have a better implication on margins for the second half. And we also expect with our booking rates as of recent the last couple of months that our buildings themselves, the building mix should come up a little bit as well.

Rose: First half was higher steel cost combined with.

Rose: Unfavorable mix coming out of buildings and so as we come into the second half most of that inventory that we purchased inside of January is off the balance sheet and we start to pick up in average cost it's much less and so that should have a better implication on margins for the second half and we.

Rose: Also expect with our booking rates as of recent the last couple of months that our buildings themselves.

Rose: Building mix should come up a little bit as well so all in all as we think about first half second half 16% in the first half second half we would expect an improvement from that I won't guide specifically to the segment itself, but we do expect an improvement on the second half over the first.

Jeffrey Lee: So all in all, as we think about first half, second half, 16% in the first half; second half we would expect an improvement from that. I won't guide specifically to the segment itself, but we do expect an improvement on the second half over the first.

Rose Lee: So all in all, as we think about first half, second half, 16% in the first half, and second half, we would expect an improvement from that. I won't go specifically to the segment itself, but we do expect an improvement in the second half over the first. Got it. That's extremely helpful.

Brian DiRubbio: Got it. That's extremely helpful. Thank you.

Brian DiRubbio: Thank you. And just a final question, Rose, on just M&A's picked up over the last year. You know, you're sort of full at this point in time and going to digest a little bit. I'd just love to get your thoughts about what you're seeing, what's in your pipeline, and what your appetite is for taking on more at this point. Certainly, we're going to prioritize to make sure that our recent acquisitions are successful and that they're integrating into Cornerstone Building Brands as intended, and also capturing the synergies that we have identified. So that is the first execution priority.

Speaker Change #110: Got it that's extremely helpful. Thank you.

Rose Lee: And just a final question, Rose, you know, just M&A's picked up over the last year, you know, sort of full at this point in time and gonna digest a little bit. Just love to get your thoughts about what you're seeing, what's in your pipeline, and what your appetite to take on more at this point. Certainly, we're going to prioritize to make sure that our recent acquisitions are successful and that they're integrating into Cornerstone Building Brands as intended and also capturing the synergies that we have identified, so that is the first execution priority. But I do believe it's really an end for us in terms of continuing to cultivate a pipeline because you can never fully predict when it's an opportune time for an acquisition has the appropriate set of conditions for us to act upon, and so we will continue to build on our pipeline and we find that on an ongoing basis.

Rose: Final question Rose.

Speaker Change #111: M&A has picked up over the last year.

Speaker Change #112: Just sort of full at this point in time in going to Digest, a little bit just love to get your thoughts about what youre seeing what's in your pipeline and what's your appetite to take on more at this point.

Speaker Change #113: Certainly we're going to prioritize to make sure that our recent acquisitions are successful and that they're integrating into cornerstone building brands as intended and also capturing the synergies that we have identified so that is the first execution priority, but I do believe that it really <unk> and for us in terms of continuing to cultivate.

Rose Lee: But I do believe it's really an and for us in terms of continuing to cultivate a pipeline because you can never fully predict when is an opportune time for an acquisition and has the appropriate set of conditions for us to act upon. And so we will continue to build on our pipeline and refine that on an ongoing basis. But for sure, as we look at the remainder of the year, the execution of successful integration will be our priority. I appreciate all the color.

Speaker Change #113: Pipeline, because you can never fully predict when is an opportune time for an acquisition has the appropriate set of conditions for <unk>.

Speaker Change #113: For Us to act upon and so we will continue to build on our pipeline and we find that on an ongoing basis, but for sure as we look at the remainder of the year and execution of successful integration will be our priority.

Rose Lee: But for sure, as we look at the remainder of the year, the execution of successful integration will be our priority.

Unknown Executive: I just so appreciate all the color. Thank you.

Understood I appreciate all the color. Thank you.

Brian DiRubbio: Thank you. Our final question will come from the line of Joshua Gonzalez with Apollo. Please go ahead.

Speaker Change #113: Yes.

Joshua Gonzalez: Our final question will come from the line of Joshua Gonzalez with Apollo. Please go ahead. Hi, I have a series of questions because I just want to make sure we're clear on this. So 830 was provided in May, and then the yesterday you guys provided 825. 830 had unrealized savings, and 825 does not. So are these figures aren't apples to apples, right? Or is there, or would you view them as apples to apples?

Josh Anderson: Our final question will come from the line of Joshua <unk> with Apollo. Please go ahead.

Joshua Gonzalez: Hi, I have a series of questions because I just want to be sure we're clear on this. So 830 was provided in May and then yesterday you guys provided 825. 830 had unrealized savings, and 825 does not. So are these these figures aren't apples to apples, right? Or is there, or would you view them as apples to apples?

Speaker Change #113: Okay.

Speaker Change #113: Hi.

Josh Anderson: A series of questions because I just want to make sure we're clear on this.

Speaker Change #115: So $8 30 was provided in May and then.

Speaker Change #117: Yesterday, you guys provided $8 25.

Speaker Change #116: <unk> had.

Speaker Change #118: We realized savings in 2025 does not so are these these figures aren't apples to apples right or is there or would you view them as apples to apples.

Joshua Gonzalez: Josh, they're apples to apples. So as I comment earlier, inside of, yeah, inside of our 825 number and inside of our 830 number was roughly about $50 million of synergy savings inside, not synergies, cost takeout savings inside the back half of 2024. The only difference is we probably expect a little bit more now because of Mueller. And Mueller, like I mentioned, is probably somewhere between four and, I think I said, $7 million worth of savings inside of 2024. Now we do expect to get more savings out of Mueller over time. We mentioned a $14 million dollar number.

Jeffrey S. Lee: Josh, they're apples to apples, so as I commented earlier, inside of our 825 number and inside of our 830 number was roughly about $50 million of cost takeout savings in the back half of 2024. The only difference is we probably expect a little bit more now because of Mueller, as I mentioned, is probably somewhere between four and, I think I said $7 million worth of savings in 2024. Now, we do expect to get more savings out of Mueller over time.

Speaker Change #118: Josh there are apples to apples so as I commented earlier inside of inside of our 825 number and inside of our 830 number was roughly about $50 million of synergy savings inside not synergies cost takeout savings inside the back half of 2020.

For the only differences, we probably expect a little bit more now because of Mueller.

Speaker Change #118: Mueller like I mentioned is probably somewhere between four and I think I said $7 million worth of savings inside of 2024 now we do expect.

Speaker Change #118: To get more savings out of Mueller overtime, we mentioned the $14 $15 million number and so but Dr. Apples to apples. When you think about that 830 and the <unk> hundred 25 again, the difference being $64 million roughly increase coming in from Mueller offset by legacy business being inside of that.

Joshua Gonzalez: We mentioned a $14, $15 million number, but they are apples to apples when you think about that 830 and the 825. Again, the difference being $64 million roughly increase coming in from Mueller offset by legacy business being inside of Apertures and Shelters. I talked about roughly a $200 million drop in volume with corresponding EBITDA declines inside of Apertures and roughly $150 million drop inside of our original estimate inside of Shelters with, again, a corresponding drop in EBITDA. So that's what drives the difference, and again, we talked about the macroeconomic indicators in particular and just the cyclicality of this industry that's really driving those two differences. Okay, that's helpful.

Jeffrey Lee: And so, but the are apples to apples when you think about that 830 and the 825. Again, the difference being $64 million roughly increased coming in from Mueller, offset by legacy business being inside of apertures and shelters. I talked about roughly a $200 million drop in volume with corresponding EBITDA declines inside of apertures and roughly $150 million drop inside of our original estimate inside of shelters, with again the corresponding drop in EBITDA. So that's what drives the difference. And again we talked about the macroeconomic indicators in particular, and just the sick locality of this industry that's really driving those two differences.

Speaker Change #118: <unk> and.

Shelters I talked about roughly a $200 million drop in volume with corresponding.

Speaker Change #118: EBITDA declines inside of apertures, and roughly $150 million drop inside of our original estimate inside of.

Speaker Change #118: Shelters.

Speaker Change #118: With again, the corresponding drop in EBITDA. So that's what drives the difference and again, we talked about the Mac.

Speaker Change #118: Macroeconomic indicators in particular and just the cyclicality of this industry, that's really driving those two differences.

Jeffrey Lee: Okay, that's helpful. And so then in the apertures section, the decline in price I think was maybe like 1.3%. Is that all mix or is there some level of promotion there? It's primarily mixed. I mean, there's always a little bit of pressure on different projects and stuff like that. But when we think about a mix, it's the new construction, national home builders and product that's going through the new construction that continues to grow. And when we think about the R&R markets, which are more profitable, we've seen bigger declines inside those markets. So yes, there's some overall price; I would say it's very minimal.

Jeffrey S. Lee: And so, in the apertures section, the decline in price, I think was maybe like 1.3%. Is that all mixed, or is there some level of promotion there? It's primarily mixed.

Speaker Change #118: Okay. That's helpful and so then.

And the apertures section.

Speaker Change #119: The decline in price I think it was maybe like one 3% is that all mix or is there some level of promotion there.

Jeffrey S. Lee: I mean, there's always a little bit of pressure on different projects and stuff like that. But when we think about the mix, it's the new construction, national home builders, and product that's going through new construction that continues to grow. And when we think about the R&R markets, which are more profitable, we've seen bigger declines inside those markets. So, yes, there's some overall price decline, but I would say it's

Its primarily mix I mean, theres always a little bit of pressure on different projects and stuff like that but when we think about mix. It's the new construction.

Speaker Change #119: National Homebuilders and product Thats going through the new construction that continues to grow.

Speaker Change #119: And we think about the R&R markets, which are more profitable we've seen bigger declines inside of those markets. So yes. There is some some overall price I would say, it's very minimal, but when you look at the drop inside of the price over inflation, it's primarily mix.

Joshua Gonzalez: When you look at the drop inside of the price over inflation, it's primarily mixed. Okay, and the 1% number is the right number. That's correct.

Jeffrey Lee: When you look at the drop inside of the price over inflation, it's primarily mixed. Okay, and the 1% number is the right number. That's correct. Okay, citing the price change within that division, what was it? So, citing, citing is a little bit different. We did get some price increases coming out of citing that business has been performing over last year. The majority of the increase in EBIT comes from our manufacturing efficiencies and our ability to go shape better pricing with some of our vendors. So, it's a little bit more of a consistent story. Typically, our citing business doesn't have the high peaks and low valleys through the cyclists or the businesses doing.

Speaker Change #120: Okay, and then 1% number is the right number.

Speaker Change #120: That's correct.

Jeffrey S. Lee: Okay, siding, the price change within that division, what was it? So, siding is a little bit different. We did get some price increases coming out of the siding business this past year. The majority of the increase in EBITDA comes from our manufacturing efficiencies and our ability to negotiate better pricing with some of our vendors. So it's a little bit more of a consistent story.

Speaker Change #120: Okay.

Speaker Change #120: Lighting.

Speaker Change #121: The price change within that division what was it.

Speaker Change #122: So exciting sightings a little bit different.

We did get some price increases coming out of siding that business has been performing over last year. The majority of the increase in EBITDA comes from our manufacturing efficiencies and our ability to negotiate better pricing with some of our vendors.

Speaker Change #122: So it's a little bit more of a consistent story typically our siding business doesn't have the high peaks and low valleys.

Jeffrey S. Lee: Typically, our siding business doesn't have the high peaks and low valleys through the cycle as our other businesses do, and we're seeing that through this one as well. They continue to have more flat type of numbers versus the shelters or apertures. Okay, um, just what I think, within the comments.

Speaker Change #122: Through the cycle as our other businesses do and we're seeing that through this one as well they continue to have more flat type of numbers versus the shelters are apertures.

Jeffrey Lee: We're seeing that through this one as well. They continue to have more flat type of numbers versus the shelters or our apertures. Okay, so I think within the comments, you guys said that Mac 11 million in that sales offset lower volume and price. So, was citing down a percent, or was it down like 5%? We mentioned inside their difference between them, so you can do the math on that on an organic basis. I think it's in our numbers.

Speaker Change #122: Okay.

Speaker Change #123: I think.

Speaker Change #123: Within the comments.

Joshua Gonzalez: You guys said that MAC 11 million in net sales offset lower volume and price. So was sitting down a percent, or was it down like 5%? We mentioned inside there the difference between them, so you can do the math on that on an organic basis. I think it's in our numbers. Okay. And then, um...

Speaker Change #124: You guys said that Mac $11 million in net sales offset lower volume and price so with fighting down.

Speaker Change #125: A percent or was it down like 5%.

Speaker Change #125: Okay.

Speaker Change #126: We mentioned inside there.

Speaker Change #127: Difference between them. So you can do the math on that on an organic basis I think it's in.

Speaker Change #126: In our numbers.

Rose Lee: Okay, and then in terms of the forward outlook for pricing, should we expect aperture pricing declines to accelerate through the end of the year? I think it's really going to be a function of the market. As I said, we don't anticipate the market to significantly improve. So, I think the amount of pricing pressures that we have and as managing the project by project basis and surgically is what we'll have to continue to do. I don't anticipate a significant shift in pricing realization in the second half, but certainly it's going to continue with the pressures that we are experiencing.

Speaker Change #126: Okay and then.

Joshua Gonzalez: In terms of the forward outlook for pricing, should we expect aperture pricing declines to accelerate through the end of the year? [inaudible] I think it's really going to be a function of the market. As I've said, we don't anticipate the market to significantly improve, so I think the amount of pricing pressures that we have and as we've been managing on a project-by-project basis and surgically is what we'll have to continue to do.

In terms of the forward outlook for pricing should.

Speaker Change #126: Should we expect aperture pricing.

Speaker Change #126: Declines to accelerate through the end of the year.

Speaker Change #126: Yes.

Speaker Change #126: I think it's really going to be a function of the market as I've said, we don't anticipate the market to significantly improve.

Speaker Change #126: So I think demand of pricing pressures that we have an edge.

Speaker Change #126: <unk> on a project by project basis and surgically its what we will have to continue to do I don't anticipate a significant shift in pricing.

Speaker Change #126: Realization in the second half, but certainly it's going to continue with the pressures that we're experiencing.

Joshua Gonzalez: I don't anticipate a significant shift in pricing realization in the second half, but certainly it's going to continue with the pressures that we are experiencing. And Josh, just to add a couple of comments on that, right?

Jeffrey Lee: And Josh, just add a couple comments on that, right? The citing margins for the first half are roughly 12%. And as we think about the second half, we do anticipate more revenue coming in the second half. A lot of this is a combination of just the actions that are in place first to drive additional revenue. And then there's also some cost takeout. And so, as we think about first half to second half, I don't have flat margins going in from 12% to 12%. We do have some cost takeout initiatives plus higher volumes, which come through at a decent rate with the fixed expenses that are inside of each of our businesses, quite honestly.

Speaker Change #126: And Josh just to add a couple of comments on the right. The siding margins for the first half of roughly 12% and as we think about the second half we do anticipate more revenue coming in the second half a lot of this is a combination of just the actions that are in place for us to drive additional revenue.

Rose Lee: The siding margins for the first half were roughly 12%. And as we think about the second half, we do anticipate more revenue coming in the second half. A lot of this is a combination of just the actions that are in place for us to drive additional revenue. And then there's also some cost takeout.

Speaker Change #128: And then there is also some cost take out and so as we think about first half to second half I don't have flat margins going from 12% to 12%. We do have some cost take out initiatives plus higher volumes, which come through at a decent rate with the fixed expenses that are inside of each of our business is quite honestly.

Jeffrey S. Lee: And so as we think about first half to second half, I don't have flat margins going in from 12% to 12%. We do have some cost takeout initiatives, plus higher volumes, which come through at a decent rate with the fixed expenses that are inside of each of our businesses, quite honestly. And so any improvement in volumes has a big impact on EBITDA. And the improvement in volumes, is that just normal seasonality with completions, or is there something else to consider?

Jeffrey Lee: And so any improvement in volume has a big impact on either. And the improvement in volumes is that just normal seasonality with completions or is there something else to consider? It's a combination of a little bit of seasonality, but also the execution on the commercial excellence that we're continuing to push out across our aperture's business in particular and going after some share of wallet and market share capture.

Speaker Change #128: So any improvement in volumes as a big impact on EBITDA.

Speaker Change #129: And the improvement in volumes is that just normal seasonality with completions or is there something else to consider.

Jeffrey S. Lee: It's a combination of a little bit of seasonality, but also the execution on the commercial excellence that we're continuing to push out across our Aperture business, in particular, and going after some share of wallet and market share capture. Okay, and my last question, you guys kind of mentioned maybe that the products that we're seeing, More delays is, I guess, if we were to kind of look at like Dodge Stats, like what are the weak categories within those categories.

Speaker Change #130: It's a combination of.

Speaker Change #131: A little bit of seasonality, but also the execution on that.

Speaker Change #131: The commercial excellence that we're continuing to push out across our <unk> business in particular.

Speaker Change #131: And going after some share of wallet and market market share capture.

Jeffrey Lee: Okay, and then my last question, you guys kind of mentioned maybe the products that in commercial that we're seeing more delays. I guess we were to kind of look at like Dodge stats, like what within those categories are we as a retail like commercial to say any color on that would be helpful. Yeah, we haven't broken those out in great detail over the past. We do know that as we think about some of the breakdowns, so for example, agricultural buildings, manufacturing when you think about production, warehousing, equipment storage, retail stores which we consider to be part of commercial, for example, which has also hangers and garages.

Speaker Change #132: Okay and then my last question you guys kind of mentioned maybe the products that in commercial that we're seeing.

Speaker Change #132: More delays.

Speaker Change #134: I guess, if we were to kind of look at like Dod that's like what within those categories are weak is it retail light commercial just any color on that would be helpful.

Jeffrey S. Lee: Is it retail like a commercial? Just any color on that would be helpful Yeah, we haven't broken those out in great detail. In the past, we do know that, as we think about some of the breakdowns, so for example, agricultural buildings, manufacturing, when you think about production, warehousing, equipment, storage, retail stores, which we consider to be part of commerce, for example, which has hangers and garages, we participate in all of them. We don't have a concentration in any one of them. If we had any, they would probably be inside what we consider to be commercial, which would be retail stores, warehousing and storage, hangars, freight terminals, offices and banks, garages, and service stations.

Speaker Change #133: Yes, we haven't broken those out in great detail.

Speaker Change #137: Over the past, we do know that as we think about some of the.

Speaker Change #135: The breakdown. So for example, agricultural buildings manufacturing when you think about production warehousing equipment storage retail stores, which we consider to be part of commercial for example, which has also hangers and.

Jeffrey Lee: We participate in all of these. We don't have a concentration in any one of them. If we had any, it's probably inside what we consider to be commercial, which would be retail stores, warehousing and storage, hangers, freight terminals, office and banks, garages, service stations. That's probably where we have most of our concentration, but it fluctuates year to year. But what we're seeing, going back to your comment, the delays are coming really from two things. High interest rates and combination of just lower steel cost. And so, as we mentioned in the script, if customers can wait, now sometimes they cannot.

Speaker Change #135: And garages, we participate in all of these.

Speaker Change #136: We don't have a car.

Speaker Change #136: Oncentration in any one of them. If we had any it's probably inside what we considered to be commercial which would be retail stores warehousing and storage hangers.

Speaker Change #136: Freight terminals office and banks garages service stations right, that's probably where we have most of our concentration, but it fluctuates year to year.

Joshua Gonzalez: Right? That's probably where we have most of our concentration, but it fluctuates year to year. But what we're seeing, going back to your comment, the delays are coming really from two things, high interest rates and a combination of just lower steel costs. And so, as we mentioned in the script, if customers can wait, now sometimes they cannot, but if they can wait in a decreasing deflationary environment, they'll wait as long as they can for a lower price. And so, we're seeing some of that as the CRU index, which is the Cold World Index, continues to decline. Some customers, if they can wait again, will.

Speaker Change #138: But what we're seeing going back to your comment.

Speaker Change #138: The delays are coming really from two things high interest rates.

Speaker Change #139: The combination of just lower steel cost and so as we mentioned in the script if customers can wait now sometimes they cannot but.

Jeffrey Lee: But if they can wait in a decreasing deflationary environment, they'll wait as long as they can for a lower price. And so we're seeing some of that as the CRU index, which is the Cold World Index, continues to decline. Some customers, if they can, wait again; will. So it's a combination of high interest rates combined, which is the overall steel cost. Okay.

Speaker Change #139: But if they can wait in a decreasing.

Speaker Change #139: Deflationary environment, they'll wait as long as they can for a lower price and so we're seeing some of that is the <unk> index, which is the cold rolled index continues to decline.

Speaker Change #140: Some customers if they can wait again will so it's a combination of high interest rates combined with just the overall steel costs.

Jeffrey S. Lee: Okay, and sorry, just one more you guys give a range for revenue and EBITDA. Did you guys kind of discuss maybe the swing factors that we should be watching out for if we're going to go towards the high end of that range? Yeah, I'd say a couple things on that one, Josh. Economic environments are constantly changing right now, interest rates are right now projected to have some improvements as we come into the back half of September, and for the most part, it's built in that there's going to be a rate adjustment. If that doesn't happen, then I think that we could see people slow down again and just be sluggish in this environment.

Jeffrey Lee: And sorry, just one more. You get to give a range on revenue, and even though you guys kind of discuss maybe the swing factors that we should be watching out for if we're going to go towards the high end of that range. Yeah, I see a couple things on. Yeah, I see a couple things on that one, Josh. I think that the economic environment constantly moving right now; interest rates are right now projected to have some improvements as we come into the back half. September right now for the most part is built in that there's going to be a rate adjustment.

Speaker Change #141: Okay, and sorry, just one more you guys gave a range on revenue and EBITDA.

Speaker Change #142: You guys kind of discuss maybe the swing factors that we should be watching out for.

Speaker Change #143: So towards the high end of that range.

Speaker Change #142: Yes.

Speaker Change #142: Couple of things, Yes, I would say a couple of things on that one Josh I think that.

Speaker Change #142: The.

Speaker Change #144: Economic environments.

Speaker Change #144: Lastly, moving right now interest rates are right now projected to have some improvements as we come into the back half September right now for the most part is built in that theres going to be a rate adjustment. If that doesn't happen then I think that we could see people slow down again and just be sluggish on this environment.

Rose Lee: If that doesn't happen, then I think that we could see people slow down again and just be sluggish in this environment. If we see two to three rate increases or decreases inside the Fed, that could actually spur some activity and get some excitement back inside of the space. And so for us, as we think about what's in our control and what's out of our control. What's in our control is going after the market share; it's going after service levels to make sure that we have the right service levels. We've significantly seen our business improve since COVID around on time and in full around the quality of products around the ability for us to maintain consistent lead times through the season.

Speaker Change #144: If we see two to three rate increases or decreases inside the fed that could actually spur some activity and get some excitement back inside of the space and so for US as we think about what's in our control and what's out of our control what's in our control is going after the market share it's going after service levels to make sure that we have the right service levels, we significantly.

Jeffrey S. Lee: If we see two to three rate increases or decreases inside the Fed, that could actually spur some activity and get some excitement back inside the space. And so for us, as we think about what's in our control and what's out of our control, what's in our control is going after market share; it's going after service levels to make sure that we have the right service levels. We've significantly seen our business improve since COVID around on time and in full, around the quality of products, around the ability for us to maintain consistent lead times through the season. And so those things are very positive. Those things are in our control. What's out of our control is the Fed rates and market sentiment.

Joshua Gonzalez: And so those are the things that kind of push me to say, Okay, very helpful. Thank you. Thanks Josh. I'll now hand the call back to Mohsin for any closing remarks. Thank you everyone for attending our second quarter call, and thank you for your continued interest. This concludes our meeting, and you may now disconnect.

Speaker Change #144: We've seen our business improve since COVID-19 around on time and in full around the quality of products around the ability for us to maintain consistent lead times through the season and so those things are very positive those things are in our control what's out of our control is the fed rates.

Rose Lee: And so those things are very positive. Those things are in our control. What's out of our control is the Fed rates and market sentiment. And so those are the things that kind of push it from the top end to the bottom.

And market sentiment and so those are the things that kind of push it from the top end to the bottom end.

Unknown Executive: Okay, very helpful. Thank you. Thanks, Josh.

Okay.

Speaker Change #145: Very helpful. Thank you.

Josh Anderson: Thanks, Josh.

Mohsin Syed: I'll now hand the call back to Mohsin for any closing remarks. Thank you, everyone, for attending our second quarter call, and thank you for your continued interest.

Speaker Change #146: I will now hand, the call back to <unk> for any closing remarks.

Speaker Change #147: Thank you everyone for attending our second quarter call and thank you for your continued interest have a great day.

Unknown Executive: Have a great day.

Unknown Executive: This concludes our meeting, and you may now disconnect. Please wait. The conference will begin shortly. Thank you.

Speaker Change #146: Yes.

Speaker Change #148: This concludes our meeting and you may now disconnect.

Speaker Change #148: Please wait the conference will begin shortly.

Speaker Change #148: [music].

Speaker Change #148: Yes.

Speaker Change #148: Sure.

Sure.

Speaker Change #148: Yes.

Speaker Change #148: Okay.

Speaker Change #148: Yes.

Speaker Change #148: Sure.

Speaker Change #148: Yes.

Speaker Change #148: Okay.

Speaker Change #148: Sure.

Speaker Change #148: Okay.

Speaker Change #148: Understood.

Speaker Change #148: Yes.

Speaker Change #148: Okay.

Speaker Change #148: Yes.

Sure.

Speaker Change #148: [music].

Speaker Change #148: Thanks.

[music].

Q2 2024 Cornerstone Building Brands Inc Earnings Call

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