Q4 2025 GMS Inc Earnings Call

Operator: Greetings and welcome to GMS Inc.'s 4th Quarter Fiscal Year 2025 Earnings Conference Call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation.

Greetings and welcome to G. M S Inc. 's fourth quarter fiscal year 2025 earnings conference call.

At this time all participants are in a listen only mode.

<unk> and answer session will follow the formal presentation. If anyone requires operator assistance during the conference. Please press star zero on your telephone keypad as a reminder, this conference is being recorded.

Operator: If anyone requires operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.

Carey Phelps: It is now my pleasure to introduce your host, Carey Phelps, Vice President, Investor Relations. Thank you. Please go ahead. Thank you, Donna.

It is now my pleasure to introduce your host Carey Phelps Vice President Investor Relations. Thank you. Please go ahead.

Speaker Change: Thank you Donna.

Carey Phelps: Good morning, and thank you for joining us for the GMS Earnings Conference Call for the fourth quarter and full year fiscal 2025. I am joined today by John Turner, President and Chief Executive Officer, and Scott Deakin, Senior Vice President and Chief Financial Officer. In addition to the press release issued this morning, we have posted PowerPoint slides to accompany this call in the investor section of our website at www.gms.com. Now beginning with slide two.

Good morning, and thank you for joining us for the Gms earnings conference call for the fourth quarter and full year fiscal 2025.

John Turner: I'm joined today by John Turner, President and Chief Executive Officer, and Scott Deakin, Senior Vice President and Chief Financial Officer.

In addition to the press release issued this morning, we have posted Powerpoint slides to accompany this call in the investors section of our website at Www Dot G. M S Dot com.

Speaker Change: Now beginning with slide two on todays call managements prepared remarks and answers to your questions may contain forward looking statements as defined in the private Securities Litigation Reform Act of $19 95.

Carey Phelps: On today's call, management's prepared remarks and answers to your questions may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address matters that are subject to risk and uncertainty, many of which are beyond our control and may cause actual results to differ from those discussed today. As a reminder, forward-looking statements represent management's current estimates and expectations. The company assumes no obligation to update any forward-looking statement in the future. Listeners are encouraged to review the more detailed discussions related to these forward-looking statements contained in the company's filings with the SEC, including the risk factors section in the company's 10-K and other periodic reports.

Speaker Change: Forward looking statements address matters that are subject to risks and uncertainties many of which are beyond our control and may cause actual results to differ from those discussed today.

As a reminder, forward looking statements represent management's current estimates and expectations. The company assumes no obligation to update any forward looking statements in the future.

Listeners are encouraged to review the more detailed discussions related to these forward looking statements contained in the company's filings with the SEC, including the risk factors section in the company's 10-K and other periodic reports.

Carey Phelps: Today's presentation also includes a discussion of certain non-GAP measures. The definitions and reconciliations of these non-GAP measures are provided in the press release and presentation slides.

Today's presentation also includes a discussion of certain non-GAAP measures the definitions and reconciliations of these non-GAAP measures are provided in the press release and presentation slides.

Carey Phelps: Please note that references on this call to the fourth quarter of fiscal 2025 relate to the quarter ended April 30, 2025.

Please note that references on this call to the fourth quarter of fiscal 2025 related to the quarter ended April 30th 2025.

Carey Phelps: Finally, once we begin the question and answer session of the call, in the interest of time, we kindly request that you limit yourself to one question and one follow-up.

Finally, once we begin the question and answer session of the call in the interest of time, we kindly request that you limit yourself to one question and one follow up.

John Turner: With that, I'll turn the call over to John Turner, whose discussion will start on slide 3. J.T.? Thank you, Carey. Good morning, and thank you all for joining us today. I'll begin by reviewing our full year and fourth quarter performance, which overall, despite a continued challenging macro backdrop, came in at the higher end of the expectations we provided in March.

Speaker Change: With that I'll turn the call over to John Turner Who's discussion will start on slide three J T.

Speaker Change: Thank you Gary.

John Turner: Good morning, and thank you all for joining us today.

Speaker Change: I'll begin by reviewing our full year and fourth quarter performance.

John Turner: Overall, despite a continued challenging macro backdrop came in at the higher end of the expectations. We provided in March.

John Turner: I will then turn the call over to Scott to further review the financial results. before concluding with an overview of our guidance and opening the line up for Q&A. For the full year, net sales were $5.5 billion, up marginally compared to the prior year, driven by positive contributions from our recent acquisitions, including CAMCO, Yvonne Building Supply, R.S. Elliott, and Howard & Sons Building Materials. Organic sales for the year were $5.2 billion, down 5.4% on a same-day basis compared to the prior year. Net income for the full year was $115.5 million, inclusive of the $42.5 million non-cash goodwill impairment charge we recorded in the third quarter.

John Turner: We'll then turn the call over to Scott to further review the financial results.

John Turner: For concluding with an overview of our guidance and opening the line up for Q&A.

John Turner: For the full year net sales were $5 $5 billion.

John Turner: Marginally compared to the prior year driven by positive contributions from our recent acquisitions, including Camco, you Bond building supply R. S Eliot and Howard and some building materials.

John Turner: Organic sales for the year were $5 2 billion down five 4% on a same day basis compared to the prior year.

John Turner: Net income for the full year was $115 $5 million inclusive of the $42 $5 million noncash goodwill impairment charge, we recorded in the third quarter adjusted.

John Turner: Adjusted EBITDA was $500.9 million and free cash flow for the year was $336.1 million or 67% of adjusted EBITDA.

John Turner: Adjusted EBITDA was $509 million and free cash flow for the year was $336 1 million or 67% of adjusted EBITDA.

John Turner: Looking at the fourth quarter, which is highlighted on slide four, we delivered solid results, even as we continue to face pressure across the business amid the ongoing macroeconomic challenges impacting our industry. We reported $1.3 billion in net sales. Organic sales declined 8.3% per day. which was slightly better than our expectations. Net income was $26.1 million and adjusted EBITDA was $109.8 million. Coming in at the high end of our outlook. Our cash flow generation continues to demonstrate our operational discipline through this down cycle with $196.8 million of cash from operating activities and $183.4 million or 167% of adjusted EBITDA of free cash flow generated during the quarter.

John Turner: Looking at the fourth quarter, which is highlighted on slide four we delivered solid results, even as we continue to face pressure across the business amid the ongoing macroeconomic challenges impacting our industry.

John Turner: We reported $1 $3 billion in net sales organic sales declined eight 3% per day.

John Turner: Which was slightly better than our expectations.

John Turner: Net income was $26 $1 million and adjusted EBITDA was $109 $8 million coming in at the high end of our outlook.

John Turner: Our cash flow generation continues to demonstrate our operational discipline through this down cycle with $196 $8 million of cash from operating activities and $183 $4 million or 167% of adjusted EBITDA or free cash flow generated during the quarter.

John Turner: This was the highest level of quarterly free cash flow conversion in our company's history, with the exception of our fiscal fourth quarter of 2020, when COVID first hit, and we moved swiftly and extraordinarily to protect the business. Even against a challenging backdrop, ceilings and complementary products saw volume improvement. Ceilings perform particularly well given the continued benefits of the addition of CAMCO combined with our intentional strategic focus on architectural specialties projects, which have higher average unit prices. In wallboard, the implementation of calendar 2025 manufacturer price increases came later than originally announced, with only modest pricing actions realized in May.

John Turner: This was the highest level of quarterly free cash flow conversion in our company's history with the exception of our fiscal fourth quarter of 2020, when Covid first hit and we moved swiftly and extraordinarily to protect the business.

John Turner: Even against the challenging backdrop ceilings and complimentary products saw volume improvement during the quarter ceiling.

John Turner: Ceilings perform particularly well given the continued benefits of the addition of camco combined with our intentional and strategic focus on architectural specialties projects, which have higher average unit pricing.

John Turner: Wallboard the implementation of calendar 2025 manufacturer price increases came later than originally announced with only modest pricing actions realized in may.

John Turner: We continue to work diligently with our customers to affect these increases as we continue to focus on protecting our margins. In Steel Framing, as our suppliers navigate the latest tariff actions, we have received notices of upcoming manufacturer price increases. Through the end of the fourth quarter, however, steel prices remain pressured. Beyond steel, we anticipate minimal direct impact from tariffs, as most of our products distributed in the U.S. and Canada are sourced domestically. We believe that the primary risk to our business from trade policy is the potential negative effect on broader demand.

John Turner: We continue to work diligently with our customers to affect these increases as we continue to focus on protecting our margins.

John Turner: In steel framing as our suppliers navigate the latest tariff actions, we have received notices of upcoming manufacturer price increases.

John Turner: Through the end of the fourth quarter, However, steel prices remain pressured.

John Turner: Beyond steel, we anticipate minimal direct impact from tariffs as most of our products distributed in the U S and Canada are sourced domestically.

John Turner: We believe that the primary risks to our business from trade policy is the potential negative effect on broader demand.

John Turner: Looking at our end markets on slide 5, we are cautiously optimistic that we are nearing the bottom of the cycle. Although the intensity and duration of the downturn will vary by each market. Fourth quarter demand was down across both residential and commercial as economic uncertainty dominated the headlines. As a result, wall board industry volumes, as reported by the Gypsum Association, were down 10% in the first calendar quarter. Stubbornly high interest rates and policy uncertainty remain the primary impediments to growth, both residentially and commercially. These factors are causing homebuyers to retreat to the sidelines, multifamily and commercial developers to pause or delay starts, and regional banks to both increase their commercial lending requirements for new projects and lend less overall.

John Turner: Looking at our end markets on slide five we are cautiously optimistic that we are nearing the bottom of the cycle, although the intensity and duration of the downturn will vary by each market.

John Turner: Fourth quarter demand was down across both residential and commercial as economic uncertainty dominated the headlines.

John Turner: As a result wallboard industry volumes as reported by the Gypsum Association were down 10% in the first calendar quarter stuff.

John Turner: Stubbornly high interest rates and policy uncertainty remain the primary impediments to growth both residential <unk> and commercially.

John Turner: These factors are causing homebuyers to retreat to the sidelines multifamily and commercial developers to pause or delay starts and regional banks to both increase their commercial lending requirements for new projects and lend less overall.

John Turner: For residential, while single family is experiencing softness, there remains a clear and fundamental need for housing in both the United States and Canada that continues to give us optimism for the eventual recovery of that sector. In the near term, given recent share gains and some regional strength, we expect a slightly outpaced normal seasonal trend. Specifically, with wallboard volumes expected to be flat to up slightly for our fiscal first quarter, we expect similar year-over-year growth in single-family volumes throughout the balance of our fiscal year. in multifamily rents have been stable or have continued to rise in most markets since COVID Also, developers appear to be modestly optimistic about demand levels, as the number of new starts has possibly bottomed and recently begun to increase.

John Turner: For residential while single family is experiencing softness there remains a clearance fundamental need for housing in both the United States and Canada. The continues to give us optimism for the eventual recovery of that sector in the near term given recent share gains and some regional strength, we expect to slightly outpace normal seasonal trends.

John Turner: Specifically with wallboard volumes expected to be flat to up slightly for our fiscal first quarter. We expect similar year over year growth in single family volumes throughout the balance of our fiscal year.

John Turner: In multifamily rents have been stable or have continued to rise in most markets since COVID-19.

John Turner: Also developers appear to be modestly optimistic about demand levels as the number of new starts has possibly bottomed and recently began to increase.

John Turner: Once there is less uncertainty in the broader macro environment, we expect demand to return for this end market. hopefully with year-over-year declines in our sales volumes ending by early calendar 2026. Commercial activity continues to also be negatively impacted by high interest rates, the lack of available financing, and again, general economic uncertainty, contributing to soft starts and mixed results among commercial applications early this calendar year. We expect this dynamic to continue but moderate with some recovery in our business towards the first half of calendar 2026. This assumes we see rates decrease as expected and generally improve confidence in the direction of the economy.

John Turner: Once there is less uncertainty in the broader macro environment, we expect demand to return for this end market hopefully with year over year declines in our sales volumes ending by early calendar 2026.

John Turner: Commercial activity continues to also be negatively impacted by high interest rates the lack of available financing and again general economic uncertainty contributing to Sop starts and mixed results among commercial applications early this calendar year.

John Turner: We expect this dynamic to continue but moderate with some recovery in our business towards the first half of calendar 2026.

John Turner: This assumes we see rates decrease as expected and generally improved confidence in the direction of the economy.

John Turner: Within commercial, current category strength continues to come from larger projects and those that are not as dependent on private financing, particularly those in public education, healthcare, and technology. Notably, we have a data center backlog that extends well into 2026. and there is no indication of these projects slowing down in the near term. Data centers continue to be an excellent offering for us as they utilize both our core and complementary products, often with higher end specifications, helping to fill the gap left by the ongoing malaise in office hours.

John Turner: Within commercial current category strength continues to come from larger projects and those that are not as dependent on private financing, particularly those in public education health care and technology.

John Turner: Notably we have a data center backlog that extends well into 2026.

John Turner: And there is no indication of these projects slowing down in the near term.

John Turner: Datacenters continue to be an excellent offering for us as they utilize both our core and complementary products often with higher end specifications, helping to fill the gap left by the ongoing malaise and office activity.

John Turner: As we look ahead, we expect that the near-term will remain challenging for our business and the industry as a whole, given the rate environment and macroeconomic dynamics at play. That said, given our focus on our customers and exceptional service, as well as the execution of our four strategic pillars to expand share in our core products, grow our complementary products, expand our platform, and drive improved productivity and profitability, we expect to capitalize on long-term growth opportunities for the company and value creation opportunities for our stakeholders. As we've discussed in previous quarters, we have taken decisive action to further align and rationalize our operations with our volume and the market realities of today, setting us up for more efficient realization of growth through the next cycle.

John Turner: As we look ahead, we expect that the near term will remain challenging for our business and the industry as a whole given the rate environment and macroeconomic dynamics at play that said given our focus on our customers and exceptional service as well as the execution of our four strategic pillars to expand share in our core products.

John Turner: Crowe, our complementary products expand our platform and drive improved productivity and profitability.

John Turner: We expect to capitalize on long term growth opportunities for the company and value creation opportunities for our stakeholders.

John Turner: As we've discussed in previous quarters, we have taken decisive action to further align and rationalize our operations with our volume and the market realities of today satish setting us up for more efficient realization of growth through the next cycle.

John Turner: Notably, we've continued to execute on a significant cost savings program. through which we took actions to achieve another $25 million in annualized cost savings in our fiscal fourth quarter, higher than the $20 million we projected earlier. With these actions, we have implemented a total of $55 million of annualized cost savings during fiscal 2020. We also continue to pay down debt and return cash to our shareholders through repurchase equity. We reduced net debt by more than 10% during the quarter, leaving us within our target debt leverage range of one and a half to two and a half times with high confidence in our ability to continue generating excellent cashflow.

John Turner: Notably we've continued to execute on a significant cost savings program through.

John Turner: Through which we took actions to achieve another $25 million in annualized cost savings in our fiscal fourth quarter higher than the $20 million, we projected earlier.

John Turner: With these actions we have implemented a total of $55 million of annualized cost savings during fiscal 2025.

John Turner: We also continue to pay down debt and return cash to our shareholders through repurchase activity.

John Turner: We reduced net debt by more than 10% during the quarter, leaving us within our target debt leverage range of one five to two five times with high confidence in our ability to continue generating excellent cash flow.

Scott Deakin: With that, I'll turn the call over to Scott. Thanks, JT. Good morning, everyone. Starting with slide six, net sales for our fiscal fourth quarter were ahead of our forecast as market conditions recovered slightly after a particularly challenging winter. As compared with a year ago, net sales of $1.3 billion decreased 5.6 percent or 4.1 percent on a per-day basis. Ceilings, which continue to benefit from project mix and complementary products, both saw volume growth during the quarter, while our other product categories experienced weaker sales than a year ago. organically sales decreased 9.7% or 8.3% on a per day basis.

Scott: With that I'll turn the call over to Scott.

Scott: Thanks, J T. Good morning, everyone.

Speaker Change: Starting with slide six net sales for our fiscal fourth quarter were ahead of our forecast as market conditions recover slightly after a particularly challenging winter as.

Scott: As compared with a year ago net sales of $1 $3 billion decreased five 6% or four 1% on a per day basis.

Scott: Ceilings, which continued to benefit from project mix and complementary products, both saw volume growth during the quarter.

Scott: Our other product categories experienced weaker sales than a year ago.

Scott: Organically sales decreased nine 7% or eight 3% on a per day basis as compared with the fourth quarter of fiscal 2024 coming in slightly ahead of our guidance.

Scott Deakin: as compared with the fourth quarter of fiscal 2024, coming in slightly ahead of our guidance. As GT mentioned, given the ongoing uncertainty in the market and across the industry, we continue to implement additional cost reduction actions during the quarter, working to take out another $25 million in annualized operating costs. bringing our total to $55 million of cost reductions implemented during fiscal 2025. These savings reduced general SG&A expenses, which together with four yard closures, were principally realized through workforce reduction. Leveraging efficiencies gained from our previous technology and process investments designed to better optimize our operational activities.

Scott: As J P mentioned, given the ongoing uncertainty in the market and across the industry. We continue to implement additional cost reduction actions during the quarter working to take out another $25 million in annualized operating cost.

Scott: Bringing our total to $55 million of cost reductions implemented during fiscal 2025.

Scott: These savings reduced general SG&A expenses, which together with four yard closures were principally realized through workforce reductions leveraging efficiencies gained from our previous technology and process investments designed to better optimize our operational activities.

Scott Deakin: We estimate that we captured roughly a third of the quarterly run rate of our latest round of savings during the fiscal fourth quarter, as much of the actions were implemented during the last half of the quarter. We expect to realize the full quarterly run rate of our fiscal 2025 cost actions during the fiscal first quarter of 2026. Further supporting our cost reduction activity, we are continuing to consolidate our legacy subsidiary structure to drive greater efficiencies by leveraging ERP data standardization, removing redundancies, and streamlining process. As an example of the potential benefits, looking at the first division to implement this transformation.

Scott: We estimate that we captured roughly a third of the quarterly run rate of our latest round of savings during the fiscal fourth quarter as much of the actions were implemented during the last half of the quarter.

Scott: We expect to realize the full quarterly run rate of our fiscal 2025 cost actions during the fiscal first quarter of 2026.

Scott: Further supporting our cost reduction activity, we are continuing to consolidate our legacy subsidiary structure to drive greater efficiencies by leveraging ERP data standardization, removing redundancies and streamlining processes.

Scott: As an example of the potential benefits looking at the first division to implement this transformation with.

Scott Deakin: With the combination of four subsidiaries into one centralized division, redundant back office operations were eliminated, disparate regional data was standardized, and operational best practice deployment increased, resulting in reduced administrative costs, higher inventory turnover, lower DSO, and decreased operating expenses.

Scott: With a combination of four subsidiaries into one centralized division.

Scott: Redundant back office operations were eliminated.

Scott: <unk> regional data with standardized and operational best practice deployment increased resulting in reduced administrative costs higher inventory turnover lower DSO and decreased operating expenses.

Scott Deakin: We look forward to our other U.S. divisions concluding similar efforts by the end of this calendar year. As a result of our cost reduction efforts, we are well positioned to exit this cycle as a better, more efficient operator.

Scott: We look forward to our other U S divisions, concluding similar efforts by the end of this calendar year.

Scott: As a result of our cost reduction efforts, we are well positioned to exit this cycle is a better more efficient operator.

Scott Deakin: Now, before we proceed into the rest of the results for our fourth quarter, please note that we had one less selling day during this year's fourth quarter as compared to the prior year. First on Revit. Looking at our US markets revenues for our single family and market increased 4.5% on a per day basis as compared with the fourth quarter of fiscal 2024 Multifamily and commercial revenues, on the other hand, fell 32.4% and 10.1%, respectively, on a per day basis. Given the significant decline in multifamily, total U.S. residential revenues declined 6% per day as compared with the prior year period.

Scott: Mel.

Mel: Before we proceed into the rest of the results for our fourth quarter. Please note that we had one less selling day during this year's fourth quarter as compared to the prior year.

Speaker Change: First on revenues.

Speaker Change: Looking at our U S markets revenues for our single family end market increased four 5% on a per day basis as compared with the fourth quarter of fiscal 2024.

Speaker Change: Multifamily and commercial revenues on the other hand, full 32, 4% and 10, 1% respectively on a per day basis.

Speaker Change: Given the significant decline in multifamily total U S residential revenues declined 6% per day as compared with the prior year period.

Scott Deakin: By product category, wallboard sales for the quarter of $526.6 million were down 10.1% over the same period last year, or 8.7% on a per day basis. Single family volumes in the U.S. were down 1.9% per day, outperforming our expectations as we successfully picked up share during the quarter. U.S. Multifamily Wall Board volumes were down 37.6% per day and commercial volumes were down 18.3% per day. Organically, fourth quarter wallboard sales were down 12.5% compared with the prior year period, or 11.1% on a per day basis, comprised of a 12.1% decrease in volume, partially offset by a 1% increase in price and mix.

Speaker Change: By product category wallboard sales for the quarter of $526 $6 million were down 10, 1% over the same period last year.

Speaker Change: Were eight 7% on a per day basis.

Speaker Change: Single family volumes in the U S were down one 9% per day outperforming our expectations as we successfully picked up share during the quarter.

Speaker Change: U S multifamily wallboard volumes were down 37, 6% per day in commercial volumes were down 18, 3% per day.

Scott: Organically fourth quarter wallboard sales were down 12, 5% compared with the prior year period or 11, 1% on a per day basis comprised of a 12, 1% decrease in volume, partially offset by a 1% increase in price and mix.

Scott Deakin: Reflective of myriad capacity utilization and commodity, excuse me, commodity dynamics influencing wallboard manufacturing. Pricing has remained resilient throughout this cycle. The average realized price for wallboard for the fourth quarter was $478 per 1,000 square feet down only marginally from a third quarter price of $479, all the result of the mixed shift toward lower dollar single family wallboard products. on a like-for-like product basis, Wahlberg Pricing Excluding Max. was up 1% sequentially for the quarter. Year over year, pricing was up from $475 in the prior year period. As JT mentioned, manufacturers launched small regional price increases in May, and we expect our team's work to implement these increases to continue, at least through the summer.

Scott: Reflective of myriad capacity utilization and commodity DP excuse me commodity dynamics influencing wallboard manufacturing.

Scott: Pricing has remained resilient throughout the cycle.

Scott: The average realized price for wallboard for the fourth quarter was $478 per thousand square feet down only marginally from the third quarter price of $479. All the result of the mix shift toward lower dollar single family Wallboard products.

Scott: On a like for like product basis, wallboard pricing, excluding mix was up 1% sequentially for the quarter.

Scott: Year over year pricing was up from $475 in the prior year period.

Speaker Change: As J P mentioned manufacturers launched small regional price increases in May and we expect our teams worked to implement these increases to continue at least through the summer.

Scott Deakin: Due to the soft demand conditions and uncertainty in the macro environment, it is too soon to know how successful the adoption of these increases will be in the near term. For ceilings, sales of $201 million were up 6.4% compared to the prior year period, or 8.1% on a per day basis. representing a 1.4% increase in volume and a 6.8% improvement in price and mix. Organic sales for ceilings grew 2.9% in total, or 4.5% on a per day basis for the quarter. Despite a 1.5% decrease in volume, given constrained commercial activity due to the macroeconomic and lending environment.

Scott: The soft demand conditions and uncertainty in the macro environment. It is too soon to know how successful the adoption of these increases will be in the near term.

Scott: For ceiling sales of $201 million were up six 4% compared to the prior year period or eight 1% on a per day basis Rep.

Scott: Representing a one 4% increase in volume and a six 8% improvement in price and mix.

Scott: Organic sales for ceilings grew two 9% and total or four 5% on a per day basis for the quarter.

Scott: Despite a one 5% decrease in volume.

Scott: Constrained commercial activity due to the macroeconomic and lending environment.

Scott Deakin: Price and mix increased 6%, benefiting from both the normal cadence of regular price increases on ceilings, as well as a favorable shift towards architectural specialties products. Steel framing sales of $189.2 million were down 14.2% for the quarter or 12.8% on a same-day basis versus the prior year quarter. As volumes were down 2.6% and price and mix were down 10.2%. On an organic basis, steel framing sales were down 17.9% in total, or 16.6% on a same-day basis. with a 10.1% decline in volume and a 6.5% decline in price and mix. Recent tariff announcements on steel have indeed resulted in price increase announcements from our suppliers, and we do expect eventual higher pricing as a result.

Scott: Price and mix increased 6% benefiting from both the normal cadence of regular price increases on ceilings as well as a favorable shift towards architectural specialties products.

Scott: Steel framing sales of $189 $2 million were down 14, 2% for the quarter or 12, 8% on a same day basis versus the prior year quarter as.

Scott: As volumes were down two 6% and price and mix were down 10, 2%.

Scott: On an organic basis steel framing sales were down 17, 9% in total.

Scott: Were 16, 6% on a same day basis.

Scott: With a 10, 1% decline in volume and a six 5% decline in price and mix.

Scott: Recent tariff announcements on steel have indeed resulted in price increase announcements from our suppliers and we do expect the eventual higher pricing as a result.

Scott Deakin: However, due to the continuing soft consumption levels in steel's primary end markets, including automotive, structural construction, and appliances, the broader tariff activity has, for now, only set a likely bottom for pricing in our application. As such, although still difficult to predict, while there could be upside, we are assuming relatively flat steel prices for our business in the near term. Complementary product sales of $416.9 million for the quarter were nearly flat a year ago in total, or up 1.4% on a per day basis, representing the 20th consecutive quarter of per day growth in this margin accretive category.

Scott: However, due to the continuing soft consumption levels in steel primary end markets, including automotive structural construction and appliances. The broader tariff activity has for now only sort of likely bottom for pricing in our applications.

Scott: As such although still difficult to predict while there could be upside we are assuming relatively flat steel prices for our business in the near term.

Scott: Complementary product sales were $416 9 million for the quarter were nearly flat with a year ago. In total were up one 4% on a per day basis, representing the 20th consecutive quarter a per day growth in this margin accretive category.

Scott Deakin: On an organic basis, sales were down 7.3% or 5.8% on a same-day basis. We continue to see complementary products as an attractive expansion opportunity and are targeting its growth at twice the rate of our core products. Similarly, as the broader sector has faced the pressure of recent macro challenges, this category has organically contracted more slowly than our core product. Within Complementary Products, we are particularly focused on expanding our reach in tools and fasteners, given the fragmentation of its niche, pro-focused market. Insulation as there is a real opportunity for pull through organic growth within our current commercially focused footprint.

Scott: On an organic basis sales were down seven 3% or five 8% on a same day basis.

Scott: We continue to see complementary products as an attractive expansion opportunity and are targeting its growth at twice the rate of our core products.

Scott: Similarly, as the broader sector has faced pressure of recent macro challenges. This category has organically contracted more slowly than our core products.

Scott: Within complementary products, we are particularly focused on expanding our reach and tools and fasteners given the fragmentation of its niche pro focused market in.

Scott: Installation is there is a real opportunity for pull through organic growth within our current commercially focused footprint.

Scott Deakin: and exterior finishes such as eaves, stucco, and siding, particularly through leveraging the capabilities from our recent RS Elliott acquisition. In total, these three product types grew 2% for the fourth quarter, or 3.6% on a per day basis.

Scott: And exterior finishes such as east stucco inciting, particularly through leveraging the capabilities from our recent <unk> acquisition.

Scott: In total these three product types grew 2% for the fourth quarter or three 6% on a per day basis.

Scott Deakin: With Eves & Stucco firmly in our wheelhouse, we've also recently begun to include siding in our exterior finish offerings and have already captured work from some of the country's largest home builders.

Scott: With eastern stucco firmly in our wheelhouse. We've also recently begun to includes fighting and our exterior finish offerings and have already captured work from some of the country's largest homebuilders.

Scott Deakin: Now, turn to slide seven, which highlights our profitability for the quarter. Gross profit of $416.2 million decreased 7.7% compared to the prior year quarter. Our gross margin of 31.2% was flat sequentially and in line with our expectations on stable price-cost dynamics, but down 70 basis points from the prior year, reflecting decreased sales volumes and as a result, lower vendor incentive income as compared to the prior year period. Selling general and administrative expenses were $315.1 million for the quarter, down slightly from $315.5 million in the prior year quarter, despite a $14 million year-over-year inorganic increase related to our recent acquisitions.

Scott: Now turning to slide seven which highlights our profitability for the quarter.

Scott: Gross profit of $416 $2 million decreased seven 7% compared to the prior year quarter.

Scott: Gross margin of 31, 2% was flat sequentially and in line with our expectations on stable price cost dynamics, but down 70 basis points from the prior year, reflecting decreased sales volumes and as a result, lower vendor incentive income as compared to the prior year period.

Scott: Selling general and administrative expenses were $315 1 million for the quarter down slightly from $315 5 million in the prior year quarter, Despite a $14 million year over year inorganic increase related to our recent acquisitions.

Scott Deakin: Separately, we saw a $4 million increase in rent expense, a $4 million increase related to higher insurance claim costs, and $1.5 million in severance These expenses were fully offset by lower overall operating costs resulting from the structural cost reductions we took earlier this fiscal year together with lower variable costs as a result of lower sales volume. As a reminder, we expect to realize additional savings in our first quarter fiscal 2026 results from those actions implemented during the fourth quarter. SG&A expense as a percentage of net sales increased 130 basis points to 23.6% for the quarter, up from 22.3% a year ago, but reflected a sequential improvement compared with the prior quarter's level of 24.7%.

Scott: Separately, we saw a $4 million increase in rent expense of $4 million increase related to higher insurance claim costs and $1 $5 million in severance expenses.

Scott: These expenses were fully offset by lower overall operating costs, resulting from the structural cost reductions. We took earlier this fiscal year together with lower variable costs as a result of lower sales volumes.

Scott: As a reminder, we expect to realize additional savings in our first quarter of fiscal 2026 results from those actions implemented during the fourth quarter.

Scott: SG&A expense as a percentage of net sales increased 130 basis points to 23, 6% for the quarter up from 22, 3% a year ago, but reflected a sequential improvement compared with the prior quarter's level of 24, 7%.

Scott Deakin: General operating cost inflation, including higher rent expense, drove 110 basis points of deleverage, the majority of which was offset by the previously announced cost outage. Accident and Claim Activity contributed 30 basis points of view. And net product price deflation, led by steel, was unfavorable to SG&A leverage by 30 basis. The remainder of the year-over-year difference was related to reduced absorption on lower sales, offset partially by the benefit of acquisition. On an adjusted SG&A basis, expenses as a percentage of net sales of 23.1% increased 130 basis points from 21.8%. All in, inclusive of a 5.7 percent increase in interest expense, net income decreased to $26.1 million compared to $56.4 million a year earlier.

Scott: General operating cost inflation, including higher rent expense drove a 110 basis points of deleverage the majority of which was offset by the previously announced cost out actions.

Scott: And claim activity contributed 30 basis points of deleverage and net product price deflation led by steel was unfavorable to SG&A leverage by 30 basis points.

Scott: The remainder of the year over year difference was related to reduced absorption on lower sales offset partially by the benefit of acquisitions.

Scott: On an adjusted SG&A basis expenses as a percentage of net sales of 23, 1% increased 130 basis points from 21, 8%.

Scott: All in inclusive of a five 7% increase in interest expense net income decreased to $26 1 million compared to $56 $4 million a year earlier.

Scott Deakin: Net income per diluted chair of 67 cents decreased from $1.39 per diluted chair. And finally, relating to the P&L, adjusted EBITDA of $109.8 million came in at the high end of our expected range for the quarter and compared to $146.6 million a year ago. Adjusted EBITDA margin of 8.2% was down from 10.4% in the prior year period. With improvement in demand and less uncertainty in the market, particularly given the recent operating cost reductions, we continue to expect the annual EBITDA margin will return over time to a range of 10-12% in a more normalized environment.

Scott: Net income per diluted share of <unk> 67.

Scott: Decreased from $1 39.

Scott: Excuse me $1 39 per diluted share.

Scott: And finally relating to the P&L adjusted EBITDA of $109 $8 million came in at the high end of our expected range for the quarter and compared to $146 $6 million a year ago.

Scott: Adjusted EBITDA margin of eight 2% was down from 10, 4% in the prior year period.

Scott: With improvement in demand and less uncertainty in the market, particularly given the recent operating cost reductions. We continue to expect that annual EBITDA margin will return over time to a range of 10% to 12% and a more normalized environment.

Scott Deakin: Now, turning to the balance sheet on slide eight. As of April 30th, we had cash on hand of $55.6 million and $631.3 million of available liquidity under our revolving credit facility. Although we achieved a sequential reduction in net debt, our leverage ratio increased to 2.4 times adjusted EBITDA compared to 1.7 times a year ago. primarily due to the year-over-year decline in adjusted EBITDA. Cast generation was a definite highlight in the quarter. Cash provided by operating activities for the quarter was $196.8 million compared to $204.2 million in the prior year quarter. Free cash flow was $183.4 million compared to $186.7 million for the same period last year, totaling 167% of adjusted EBITDA.

Scott: Now turning to the balance sheet on slide eight.

Scott: As of April 30, we had cash on hand of $55 $6 million and $631 $3 million of available liquidity under our revolving credit facility.

Scott: Although we achieved a sequential reduction in net debt our leverage ratio ratio increased to two four times adjusted EBITDA.

Scott: Impaired to a one seven times a year ago.

Scott: Primarily due to the year over year decline in adjusted EBITDA.

Scott: Cash generation was a definite highlight in the quarter.

Scott: Cash provided by operating activities for the quarter was $196 $8 million.

Scott: Impaired to $204 $2 million in the prior year quarter.

Scott: Free cash flow was $183 4 million compared to $186 7 million for the same period last year.

Scott: Totaling 167% of adjusted EBITDA.

Scott Deakin: For the full year, we generated cash provided by operating activities of $383.6 million and free cash flow of $336.1 million, representing 67.1% of adjusted EBITDA, slightly exceeding our full year expectations. Capital expenditures for the quarter were $13.4 million compared to $17.5 million a year ago. Looking forward for full year fiscal 2026, we now expect capital expenditures to total between $40 and $45 million. During the quarter, we repurchased 348.6 thousand shares of common stock for $26.4 million at an average price of $75.60 per share. At April 30th, there was $192 million of shareholder purchase authorization remaining.

Scott: For the full year, we generated cash provided by operating activities of 308, excuse me $383 6 million and.

Scott: And free cash flow of $336 $1 million.

Scott: Representing 67, 1% of adjusted EBITDA slightly exceed our full year expectation.

Scott: Capital expenditures for the quarter were $13 4 million compared to $17 $5 million a year ago.

Scott: Looking forward for full year fiscal 2026, we now expect capital expenditures to total between 40% and $45 million.

Scott: During the quarter, we repurchased $348 6000 shares of common stock for $26 4 million at an average price of $75 60 per share.

Scott: At April 30, there was $192 million of share repurchase authorization remaining.

Scott Deakin: For the full year, we were purchased 1.9 million shares of common stock for $164.1 million at an average cost of $85.27 per share. Looking ahead, we expect to maintain a disciplined approach to capital allocation as we balance stock buybacks with debt reduction. while maintaining enough cash to pursue attractive M&A opportunities that expand our offerings and build on strategic priorities. During this suppressed demand environment, we will continue to be tightly focused on managing operating efficiencies and cash, maintaining optimal financial flexibility to best position the company for a still widely expected eventual return to improved economics.

Scott: For the full year, we repurchased one 9 million shares of common stock for $164 1 million at an average cost of $85 27 per share.

Scott: Looking ahead, we expect to maintain a disciplined approach to capital allocation as we balanced stock buybacks with debt reduction, while maintaining enough cash to pursue attractive M&A opportunities that expand our offerings and build on our strategic priorities.

Scott: During the suppressed demand environment, we will continue to be tightly focused on managing operating efficiencies and cash maintaining optimal financial flexibility to best position the company pretty still widely expected eventual return to improved economics.

John Turner: With that, I'll turn the call back over to J.T. who will start on slide nine. Thank you, Scott. We finished fiscal 2025 having undergone a period of macroeconomic difficulties that impacted our industry as a whole, and will likely continue to do so for the remainder of calendar 2025. While we continue to expect recovery to be tightly closed more closely tied closely to mortgage rates and the broader macroeconomic environment. Our team has been working diligently to service our customers and execute against our strategic priorities. Despite headwinds, we believe that there is a great deal of pent-up demand that will materialize when conditions improve.

Jay: With that I will turn the call back over to Jay who will start on slide nine.

Jay: Thank you Scott.

Jay: We finished fiscal 2025, having undergone a period of macroeconomic difficulties that impacted our industry as a whole and will likely continue to do so for the remainder of calendar 2025.

Jay: While we continue to expect the recovery to be tightly closed more quickly.

Jay: <unk> closely to mortgage rates and the broader macroeconomic environment.

Jay: Our team has been working diligently to service, our customers and execute against our strategic priorities. Despite.

Jay: Despite headwinds, we believe that Theres, a great deal of pent up demand that will materialize when conditions improve.

John Turner: Looking ahead, as Scott discussed, continuing business simplification efforts are on track to be finished by the end of this calendar year, leveraging standardized data sets, streamlining processes, and reducing redundancies across our business. combined with the strong fundamentals of the business and our already implemented cost reduction. We believe our strategic approach should position the company to capture demand when it returns as a leaner, more efficient operator.

Jay: Looking ahead as Scott discussed continuing business simplification efforts are on track to be finished by the end of this calendar year, leveraging standardized datasets streamlining processes and reducing redundancies across our business units.

Jay: Combined with the strong fundamentals of the business and are already implemented cost reductions. We believe our strategic approach should position the company to capture demand when it returns as a leaner more efficient operator.

John Turner: Given this backdrop, let me turn to what our expectations for our product categories look like this next quarter. Starting with wallboard on an organic basis and using our U.S. business as the proxy, we anticipate single-family volumes to be flat to up slightly year-over-year for our fiscal first quarter. Multifamily organic wallboard volumes are expected to be down 25 to 30 percent for the first quarter, and commercial organic wallboard volumes are expected to be down low teens as compared with the prior year period. In total, including Canada, we expect first quarter organic wallboard volumes to be down high single digits and total wallboard volumes, including recent acquisitions, to be down mid to high single digits.

Jay: Given this backdrop, let me turn to what our expectations for our product categories look like this next quarter.

Jay: Starting with wallboard on an organic basis and using our U S business as the proxy we anticipate single family volumes to be flat to up slightly year over year for our fiscal first quarter multifamily organic wallboard volumes are expected to be down 25% to 30% for the first quarter and commercial organic wallboard volumes are.

Jay: <unk> to be down low teens as compared with the prior year period.

Jay: In total, including Canada, we expect first quarter organic wallboard volumes to be down high single digits, and total wallboard volumes, including recent acquisitions to be down mid to high single digits.

John Turner: Although prices on a like-for-like product basis should be slightly higher year-over-year for WallBoard, including the impact of mix shifts, we anticipate our first fiscal quarter overall price and mix for WallBoard to be roughly flat with the prior year period. In ceilings, a low single-digit decline in volumes is expected for our first fiscal quarter, reflective of the soft commercial and market conditions. In addition, the results of our CAMCO business, whose acquisition was completed in March 2024, are now fully reflected in both the current quarter and the prior year period. With a typical pattern of price increases anticipated, price and mix for ceilings is expected to be up mid to high single digits for our first.

Jay: Although prices on a like for like product basis should be slightly higher year over year for wallboard, including the impact of mix shifts we anticipate our first fiscal quarter overall price and mix for wallboard to be roughly flat with the prior year period.

Jay: In ceilings, a low single digit decline in volumes as expected for our first fiscal quarter reflective of the soft commercial and market conditions. In addition, the results of our Kimco business, whose acquisition was completed in March 2024 are now fully reflected in both the current quarter and the prior year period.

Jay: <unk>.

Jay: With a typical pattern of price increases anticipated price and mix for ceilings is expected to be up mid to high single digits for our first fiscal quarter.

John Turner: Steel Framing, which is also heavily impacted by commercial market conditions, is expected to be down high single digits in volume and low single digits in price and mix. While pricing does still have the potential to increase in subsequent quarters, given the lag dynamics from rolled steel through our manufacturing partners to us, we don't expect to see any significant improvement in the first quarter. Including with complimentary products, while we remain focused on growing this product category due to its exposure to the commercial end market, we expect for year-over-year sales to be down low single digits in the product category.

Jay: Steel framing, which is also heavily impacted by commercial market conditions is expected to be down high single digits in volume and low single digits and price and mix, while pricing does still have the potential to increase in subsequent quarters, given the lag dynamics from rolled steel through our manufacturing partners to us we don't expect to see any.

Jay: Significant improvement in the first quarter.

Jay: Including with complementary products, while we remain focused on growing this product category due to exposed its exposure to the commercial end market, we expect for year over year sales to be down low single digits in the first quarter.

John Turner: All in, and as shown on slide 10, we anticipate net sales for our fiscal first quarter to be down low to mid-single digits in total, and down mid to high single digits organically, as compared to the prior year period. While gross margins are expected to be consistent with both our fourth quarter and the prior year period, around 31.2%, we expect to see lower operating expenses year-over-year as a result of our cost reduction actions and lower sales volume. All considered, we anticipate that Adjusted EBITDA will be in the range of $132 million to $137 million for the first fiscal quarter, with margins in the 9.5% to 9.8% range.

Jay: All in and as shown on Slide 10, we anticipate net sales for our fiscal first quarter to be down low to mid single digits in total and down mid to high single digits organically as compared to the prior year period.

Jay: While gross margins are expected to be consistent with both our fourth quarter and the prior year period around 31, 2%, we expect to see lower operating expenses year over year as a result of our cost reduction actions and lower sales volumes.

Jay: All considered we anticipate that adjusted EBITDA will be in the range of $132 million to $137 million for the first fiscal quarter with margins in the nine five to nine 8% range.

John Turner: Cash flow generation should remain strong for fiscal 2020. likely 60-65% of adjusted EBITDA for the full year. Before I conclude, I'd like to take a moment to thank the entire GMS team for their continued commitment to delivering outstanding service and adding value for our customers. during soft market condition. I'd also like to thank our customers and suppliers for their continued partnership, working hard every day while navigating the same headwinds we're facing.

Jay: Cash flow generation should remain strong for fiscal 2026 likely 60% to 65% of adjusted EBITDA for the full year.

Jay: Before I conclude I'd like to take a moment to thank the entire gms team for their continued commitment to delivering outstanding service and adding value for our customers during soft market conditions.

Jay: Also like to thank our customers and suppliers for their continued partnership working hard everyday while navigating the same headwinds we're facing.

John Turner: As conditions improve, interest rates lower, and uncertainty lessens, pent-up demand within the market should materialize, and we believe our strong foundation will set us up for continued shared success. Thank you for joining us this morning.

Jay: As conditions improve interest rates, lower and uncertainty lessens pent up demand within the market should materialize and we believe our strong foundation will set us up for continued shared success.

Jay: Thank you for joining us this morning.

Operator: Donna, we can now open the line for questions. Thank you. The floor is now open for questions. If you would like to ask a question, please press star 1 on your telephone keypad at this time. A confirmation tone will indicate that your line is in the question zone. You may press star 2 if you would like to remove your question from the... For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star key.

Donna: Donna we can now open the line for questions.

Jay: Thank you the floor is now open for questions.

Speaker Change: I'd like to ask a question. Please press star one on your telephone keypad at this time, a confirmation tone will indicate that your line is in the question queue. You May press star two if he would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up the handset before pressing the star keys, we do ask that you please limit yourself to.

Operator: We do ask that you please limit yourself to one question and one follow-up. Again, that's star 1 to register.

Jay: One question and one follow up again Thats Star one to register a question.

David Manthey: Today's first question is coming from David Manthey of Baird. Please go ahead. Thank you. Good morning. JT, you mentioned that sequential organic trends would be seasonally better next quarter and I think quarter to quarter trends have been running below expectations for about a year now. Maybe I didn't catch it.

Speaker Change: Today's first question is coming from David Manthey of Baird. Please go ahead.

David Manthey: Yes, Thank you and good morning.

Speaker Change: J P. You mentioned that the sequential organic trends.

Speaker Change: Would be seasonally better next quarter, and I think quarter to quarter trends have been running below expectations for about a year now.

John Turner: Did you outline why you feel that way? I think we referred specifically to the single-family market as that improvement, and so we're just experiencing that. We also have some share gain that we've achieved with some of our bigger customers that we will enjoy for the balance of this year, Dave. So we're really speaking primarily from an improvement in the single-family for our business, maybe not so much the whole market, although recent commentary from Lenar and also Horton, you guys have read it, the sky is not falling in that respect. So we feel pretty good about where we are and how we've bottomed, and we're experiencing that normal seasonality and a little bit better, like I said, today in single-family primarily.

Speaker Change: Maybe I didn't catch it did you outline why you feel that way.

Speaker Change: I think we referred specifically to the single family market is that improvement and so we're just experiencing that we also have some share gain that we've achieved with some of our bigger customers.

Speaker Change: We will enjoy for the balance of this year.

Speaker Change: Dave So we're really speaking primarily from an improvement in the single family for our business, maybe not so much the whole market. Although recent commentary from Lamar and also Horton you guys have read it.

Speaker Change: The sky is not falling.

Speaker Change: In that respect so we feel pretty good about where we are and how we bottomed and we're experiencing that normal seasonality and a little bit better like I said today.

Speaker Change: And single family primarily.

David Manthey: Okay, yeah, it looks like based on your overall guidance, you're pretty much in line with normal quarter-to-quarter trends into the first quarter, so hopefully that holds up.

Speaker Change: Okay, yes, it looks like based on your overall guidance here.

Speaker Change: Much in line with normal quarter to quarter trends into the first quarter. So hopefully that holds up.

John Turner: And then, second, as you're thinking about the technology and efficiency optimization efforts and this $25 million in annualized savings, I think you said it was mostly RIFs, but could you talk about the technology that you're implementing and if there's any additional digital benefits beyond what you've already outlined in savings? Yeah, I mean, we haven't done anything, you know, we never slowed down our investment in digital at all throughout this entire cycle. You know, depending on when you want to say the cycle started declining. We've continued to focus really heavily on our digital efforts and our customer portal and our e-commerce efforts and our automation efforts.

Speaker Change: Then.

Speaker Change: Second as you're thinking about the technology and efficiency optimization efforts in this $25 million in annualized savings I think you said it was mostly rips.

Speaker Change: Could you talk about the technology that you are implementing and if theres any additional digital benefits beyond what you've already outlined and savings.

Speaker Change: Yes, I mean, we haven't done anything we never slowed down our investment in digital at all throughout this entire cycle.

Speaker Change: Depending on when you want to say the cycle started.

Speaker Change: Declining.

Speaker Change: We've continued to focus really heavily on our digital efforts and our customer portal and our E. Commerce efforts in our automation efforts part of that success is why we were able to take out the additional amount of cost we have been able to take out during this period.

John Turner: Part of that success is why we were able to take out the amount of cost we have been able to take out during this period, you know, which is in excess of what we otherwise would have been able to do simply from a volume. So our efficiencies have continued to get better on a year-over-year basis over the course of the last several years. You know, we have no slowdown in investment in our e-commerce. So we have some AI applications we're looking at that are going to automate order entry for us this next year. We are continuing to advance the actual B2B and B2C capability of our e-commerce.

Speaker Change: Which is in excess of what we otherwise.

Speaker Change: <unk> would have been able to do simply from a volume perspective. So our efficiencies have continued to get better on a year over year basis over the course of the last several years.

Speaker Change: We have no slowdown in investment in our E. Commerce. So we have some AI applications, we're looking at that our audit going to automate order entry for us.

Speaker Change: This next year.

Speaker Change: We are continuing to advance the actual <unk> capability of our E Commerce, our portal gets better all the time, although it's fully functioning now.

John Turner: Our portal gets better all the time, although it's fully functioning now. We're up to almost 20% of our accounts receivable being collected online through our portal. I mean, that's a really significant number, considering we have a lot of large customers that naturally pay another way. So we're just constantly seeing the metrics associated with what we've invested in getting better, which allows us to be confident that even though we've taken the cost out that we have, that we continue to deliver exceptional service, and we'll have that ability going forward. David, also, I think you know, we've got a common ERP platform across our entire US footprint.

Speaker Change: We're up to almost 20% of our accounts receivable being collected.

Speaker Change: Online through our portal and hasn't really significant number considering we have a lot of large customers that naturally pay another way. So we're just constantly seeing the metrics associated with what we've invested in getting better which allows us to be confident that even though we've taken the cost out that we have that we continued to deliver exceptional service.

Speaker Change: And we'll have that ability going forward.

Speaker Change: Steve I'd also add I think you know we've got a comedy our fleet, our ERP platform across our entire U S footprint and what's really nice about what we're doing as we clean up this data standardization is the ability to get better utilization out of those other technologies goes up so not only do we get efficiencies in terms of <unk>.

John Turner: And what's really nice about what we're doing is we clean up this data standardization is the ability to get better utilization out of those other technologies goes up. So not only do we get efficiencies in terms of working with that data back office efficiencies, etc. But some of those underlying tools that JT just mentioned actually become more effective with that cleaner Perfect.

Speaker Change: And with that data back office efficiencies et cetera, but some of those underlying tools that Jay just mentioned actually become more effective with a cleaner data.

David Manthey: Thanks and good luck. Thanks, Dave. Thank you.

Speaker Change: Perfect. Thanks, and good luck.

Dave: Thanks, Dave.

Speaker Change: Thank you. The next question is coming from Mike Dahl of RBC capital markets. Please go ahead.

Mike Dahl: The next question is coming from Mike Dahl of RBC Capital Markets. Please go ahead. Thanks for taking my questions.

Mike Dahl: Hi, Thanks for taking my questions.

Mike Dahl: JC, maybe just to follow up on the single-family dynamic, you know, I respect that some of the commentary has suggested things aren't necessarily crashing, but that's also coming in context of the companies that you quoted reporting order trends that are still well below normal seasonality and some other commentary suggesting, you know, the bottom's a little bit elusive and that they're more vocally applying pressure to their partners. So I want to tie that back to your share gain, because if I look at your single-family guide compared to single-family starts or under construction, it would imply a very healthy share gain.

Speaker Change: Maybe just to follow up on the single family dynamics.

Speaker Change: I respect that some of the commentary.

Speaker Change: Suggested things arent necessarily crashing, but thats also coming in the context of the companies that you've quoted reporting order trends that are still well below normal seasonality and some other commentary, suggesting the bottoms.

Speaker Change: A little bit elusive and apply and that theyre more vocally applying pressure to their partners. So I wanted to tie that back to your share gain because if I look at your single family guide compared to single family starts are under construction it would imply.

Speaker Change: <unk> healthy share gain I think those numbers are still running down high single digits year on year help us understand the nature of the share gains the categories and then when the builders are asking for the.

Mike Dahl: I think those numbers are still running down high single digits year on year.

John Turner: Help us understand the nature of the share gains, the categories, and then when the builders are asking for, you know, the concessions, how you're balancing that kind of share versus margin and price dynamic. Yeah, I mean, we're leveraging our scale to help our builder partners where necessary. You know, obviously, we're somewhat limited as the distributor, but we have wonderful relationships, you know, back throughout the supply chain right on the supply side. So we're working really diligently to help builders through this period of time and partner with builders through this period of time. We feel pretty good about it, quite frankly, and I think it's part of this this next quarter's guide we just talked about.

Speaker Change: The concession, how you're how you're balancing that kind of share versus margin and price dynamic.

Speaker Change: Yes, I mean, we're leveraging our scale to help our builder partners.

Speaker Change: Our necessary.

Speaker Change: Obviously were somewhat limited as the distributor, but we have wonderful relationships.

Speaker Change: Throughout the supply chain right on the supply side. So were working really diligently to help builders through this period of time and partner with builders through this period of time, we feel pretty good about it quite frankly and I think it's part of this next quarter's guide we just talked about we know that we picked up some share gain.

John Turner: We know that we've picked up some share gain recently, you know, so I think maybe we're just overperforming a little bit. I wouldn't say dramatically. I'm guessing it's not quite as dramatic as, you know, you just you just rattled off there. I do think that we've done some things on a geographic basis to be better where builders are building. So we have some regional strength. Some of our greenfield activity over the course of the last several years has been focused in and around where builders are focused on building. As well, and so I think that's helping us and, you know, our acquisition track record here has been pretty good, too.

Speaker Change: <unk>.

Speaker Change: So I think maybe we're just over performing a little bit I wouldn't say dramatically.

Speaker Change: Guessing, it's not quite as dramatic as what you just you just rattled off there I do think that we've done some things on a geographic basis to be better where builders are building. So we have some regional strength.

Speaker Change: Some of our Greenfield activity over the course of the last several years has been focused in and around where builders are focused on building.

Speaker Change: As well and so I think thats, helping us and.

Speaker Change: Our acquisition track record here has been pretty good too. So I think we're picking up on the complementary product side, we are picking up some things that we otherwise in the state of Florida as an example, with our as Elliot we wouldn't have had any of that eastern stucco business to speak of use is really primarily multifamily, but if you think about stucco. The first first level and still the second level and a lot of homes in Florida stucco.

John Turner: So I think we're picking up on the complimentary product side. We're picking up some things that we otherwise, you know, in the state of Florida is an example with RS Elliott. We wouldn't have had any of that East and stucco business to speak of uses really primarily multifamily, but think about stucco the 1st, 1st level and still the 2nd level in a lot of homes in Florida stucco. And so, you know, we're much better as a result of that acquisition down in Florida.

Speaker Change: And so we're much better as a result of.

Speaker Change: That our SLA acquisition down in Florida. So I think those are kind of the primary drivers.

Mike Dahl: So I think those are kind of the primary drivers. Okay, great. That's really helpful.

Speaker Change: Okay, Great that's really helpful.

Mike Dahl: Um, and then just Shifting gears to the margin dynamics, it's nice to see the OPEX coming back down and some of the cost outs starting to bear fruit at least. looking at the guide in particular, the comments about margins 10 to 12% longer term, you know, historically, you had seen that in the COVID years, which benefited a lot from price. And before that, you were slightly below.

Speaker Change: And then just.

Speaker Change: Shifting gears to the margin dynamics.

Speaker Change: Nice to see the.

Speaker Change: The opex coming coming back down and some of the cost out starting to bear fruit at least.

Speaker Change: Looking at the guide in particular, the comments about margins kind of 10% to 12% longer term. Historically, you had seen that in the COVID-19 years, which benefited a lot from price and before that you were slightly below.

John Turner: So when you think about that margin target, how much would you attribute to being kind of dependent on a market outcome, versus obviously, you guys are doing a lot under the hood to improve the internal operations, cost efficiencies, data, transparency, etc. Help us kind of understand what's the self-help in there versus market dynamics. I mean, clearly, we still need the market to come back, right? I mean, we need to put some volume to the machine to get to those kinds of numbers, right? I mean, we have the ability today to do a lot more volume, even after taking out the cost that we've taken out, and all of that incremental volume across this cost structure means we're leveraging the fixed side, right, straight to the bottom line.

Speaker Change: When you think about that margin target how much would you attribute to being kind of dependent on market outcome.

Speaker Change: Obviously, you guys are doing a law under the Hood.

Speaker Change: Improve.

Speaker Change: The internal operations cost efficiencies data transparency et cetera.

Speaker Change: Just kind of understand what's the self help in there versus versus market dynamic.

Speaker Change: I mean, clearly we still need the market to come back right. I mean, we need to put some volume should the machine to get to those kinds of numbers right. I mean, we have the ability today to do a lot more volume even after taking out the costs that we've taken out and.

Speaker Change: All of that incremental volume across this cost structure means we're leveraging that fixed side right straight to the bottom line. So let me let me tell you maybe half of what we think we can do is volume related and the other half is just being leaner now going forward.

John Turner: So let me tell you, maybe half of what we think we can do is volume-related, and the work that we've done, both in our product mix, right, we've talked about complementary products being accretive, and we continue to grow that side of the business, but then also our cost structure, we're just leaner going into this. And again, I would expect not to have the same degree of inflation that we all experienced post-COVID either, right, so on the cost side. So a little bit of normalization in gross profit. a little bit of volume. and leveraging our cost and product mix gets us right.

Speaker Change: And the work that we've done.

Speaker Change: In our product mix.

Speaker Change: We've talked about complementary products being accretive.

Speaker Change: And we continue to grow that side of the business.

Speaker Change: But then also our cost structure, we're just leaner going into this and again I would expect not to have the same degree of inflation that we all experienced post COVID-19 either.

Speaker Change: So on the cost side of the business I'm talking about so a little bit of normalization in gross profit.

Speaker Change: Little bit of volume.

Speaker Change: And leveraging our cost and product mix gets us right there.

Mike Dahl: All right. Thank you. Appreciate it. Thank you.

Speaker Change: Alright, thank you.

Mike: Thank you I appreciate it Mike.

Speaker Change: Thank you. The next question is coming from Matthew Bouley of Barclays. Please go ahead.

Matthew Bouley: The next question is coming from Matthew Bouley of Barclays. Please go ahead. Good morning, everyone. Thank you for taking the questions. I'm going to stick to the single family guide. You know, as Mike alluded to, I think we just saw single family starts probably down about 7% year-over-year in the month of May. And so, you know, I hear you all on the share gain and, you know, partnering with your builder customers and all that. So, Mike, my question is really the visibility that you have into that end market, you know, to the extent you can, you know, look a little bit forward on orders.

Matthew Bouley: Hi, Good morning, everyone. Thank you for taking the questions.

Speaker Change: Let's stick to the single family.

Speaker Change: Died.

Speaker Change: As Mike alluded to I think we just saw single family starts probably down about 7% year over year in the month of May and so I hear you on the share gain in partnering with your builder customers and all of that.

Speaker Change: Question is really the visibility that you have into that end market.

Speaker Change: To the extent you can look a little bit forward on orders.

John Turner: Just, you know, how do you think about or to what degree do you have visibility? And kind of secondly, you know, thinking about kind of lag times and all that, I mean, just historically speaking, when would you see start activity end up flowing into your own shipments? Thank you. You know, usually about three to six months, you know, because it's, you know, we're really very production large builder. focus. We have less of a customer. It's not really a focus as much as it's just the nature of the business. We don't have as big a custom home builder mix.

Speaker Change: Just how do you think about or to what degree do you have visibility and kind of secondly.

Speaker Change: Thinking about kind of lag times and all of that is I mean, just historically speaking.

Speaker Change: When would you see start activity end up flowing into your own shipments.

Speaker Change: Usually about three to six months.

Speaker Change: Because we are really very production large builder.

Speaker Change: Focus we have less of a customer was not really a focus as much as it's just the nature of the business. We don't have as big a custom homebuilder mix. So.

John Turner: So although a couple of the big production, you know, luxury builders, we do pretty well with. So three to six months, Matt is kind of the lead time there. You know, our visibility that we're very comfortable with is kind of the quarter. That's kind of why we give you a guide for a quarter. You know, obviously, if starts just collapse going forward, then, you know, the outlook changes. But I don't think that's probably what we're going to see. I think it's going to be challenging here for a little period of time from starts. But I believe that you'll get through the summer months and we'll start to see a little bit of uptick again and get prepared for next year's spring selling season.

Speaker Change: A couple of the big production.

Speaker Change: Luxury builders, we do pretty well with.

Speaker Change: So three to six months.

Speaker Change: That is kind of the lead time there.

Speaker Change: Our visibility that we're very comfortable with is kind of the quarter. That's kind of why we should give you a guide for a quarter.

Speaker Change: Obviously, if starts just collapse going forward than the outlet changes.

Speaker Change: But I don't think Thats, probably what were going to see I think it is going to be challenging here for a little period of time from starts but.

Speaker Change: I believe that you will get through the summer months, and we will start to see a little bit of uptick again and get prepared for next year spring selling season. I mean, just again if you go back this is going to be the fourth year, most likely now of declining single family home starts.

John Turner: I mean, just again, if you go back, this is going to be the fourth year most likely now of declining single family home starts. and home starts really in total. And so, that's almost always, it's not a longer cycle than four years. Four years is usually about three to four years, right? And so, it would be an exceptional situation to move into a fifth year with. you know, Home Starts Down Again. I don't see anything out there that says things are going to be exceptionally bad, so our expectation is things will kind of bottom here and then move up going into next year's spring selling season.

Speaker Change: And home starts really.

Speaker Change: In total and so.

Speaker Change: So that's almost always it's not a longer cycle than four years four years, usually about three years to four years right and so it would be an exceptional situation to move into a fifth year with.

Speaker Change: Home starts down again so.

Speaker Change: I don't see anything out there that.

Speaker Change: Says things theyre going to be exceptionally bad so our expectation is things will kind of bottom here and then and then move up going into next year's spring selling season, I mean, we're already halfway through the calendar year.

Matthew Bouley: I mean, we're already halfway through the calendar year. Yep. Okay. Got it. Thank you for that, JT.

Speaker Change: Okay got it. Thank you for that J T and then yeah I guess.

Matthew Bouley: And then, yeah, I guess, you know, great color around, you know, kind of, I guess, streamlining the cost structure in terms of, you know, where you want to be if and when we do have that end market recovery. So, I guess just double clicking on the SG&A savings, maybe that incremental $25 million. You obviously gave a lot of great color on kind of what's behind that. But we always like to just kind of check on, I guess, the permanence of a lot of these cuts and just trying to understand, you know, if and when you do have volume recovery, you know, to what degree does some of those costs actually kind of come back into the system versus, you know, to what degree do you think, you know, you sort of permanently reduce the cost structure.

Speaker Change: Great color around kind.

Speaker Change: I guess streamlining the cost structure in terms of where do you want to be if and when we do have that end market recovery. So I guess just double clicking on the SG&A savings maybe that incremental $25 million. You. Obviously gave a lot of great color on kind of what's behind that but.

Speaker Change: We always like to just kind of check on I guess, the permanence of of a lot of these cuts and I'm just trying to understand if and when you do have volume recovery to what degree does some of those costs actually kind of come back into the system versus.

Speaker Change: To what degree do you think you've sort of permanently reduced the cost structure. Thank you.

Scott Deakin: Thank you. Yeah, I mean, we've historically always talked about our fixed variable being 5050. I think between the investments we've made in our productivity capability, the current structure of the business actually has some upside in volume in volume, before we would begin adding back, even the very some of the variable costs, but, you know, I would tell you probably, you know, over the over a long run of growth, 50% of the cost stays out and 50% is variable, and like Okay, got it. Thank you for that, JT. Good luck, guys. Thanks Matt. Appreciate it.

Speaker Change: Yes, I mean, we've historically always talked about our fixed variable being 50 50, I think between the investments we've made in our productivity capability. The current structure of the business actually has some upside in volume and volume before we would begin adding back.

Speaker Change: Even though some of the variable cost but.

Speaker Change: I would tell you probably over the over a long run of growth, 50% of the cost stays out 50% variable and might come back.

Jay: Okay got it thanks for that Jay take good luck guys.

Speaker Change: Thanks, Matt I appreciate it.

Brian Biros: Thank you. The next question is coming from Brian Brios of Thompson Research Group. Please go ahead. Hey, good morning. Thank you for taking my questions.

Speaker Change: Thank you. The next question is coming from Brian <unk> of Thompson Research Group. Please go ahead.

Brian: Hey, good morning, and thank you for taking my questions I guess sticking on kind of still the homebuilders and the single family environment.

Brian Biros: I guess sticking on kind of still the home builders and the single family environment, just, I guess, as the big home builders continue to be a larger share of the home starts, how does that impact, I guess, the distribution channel and your business? On the one hand, I can kind of see big builders being able to take advantage of your offerings better than the smaller builders, but also maybe you lose some leverage when you have fewer customers there. So just curious to hear your thoughts on how the distribution channel and your company specifically is adapting its kind of go-to-market strategy here in the current environment.

Speaker Change: That's the big Homebuilders continue to be a larger share of the home starts how does that impact I guess, the distribution channel and your business on the one hand, I can kind of see big builders being able to take advantage of your offerings better than the smaller builders, but also maybe you lose some leverage when you have your customers. There. So just curious to hear your thoughts on.

Speaker Change: The distribution channel and your company, specifically and adapting it to kind of go to market strategy here in the current environment.

Brian: Yes, I mean in the near term I think thats another.

Brian: Tailwind to kind of what we're guiding to here is the fact that those big builders are significantly more positive than the small builders.

Brian: And.

Brian: We've gained quite a bit of share with big builders over the last couple of years because of our service proposition our national ability to service their business.

Brian: And really the quality of that delivery that ensures that in particularly in these times no added cost going into their process. As a result of them doing business with US right. If anything we should help them be more lean and more efficient.

Brian: By having the most professional delivery capability in the industry and so I think thats kind of why we appeal to them and.

John Turner: And so I think that's kind of why we appeal to them. And we're great partners with them, right, they are important customers, and we're going to work with them. And we're going to we're going to help them through this period of time. And we're going to do everything we can on every side of our business to reduce costs, reduce, reduce product costs, reduce operating to help our builder partners through this period of time and, you know, keeps us going in the near term and then in the long term. I don't know. I really think there's going to be some significant growth in that channel.

Brian: And we're great partners with them right. They are important customers and we're going to work with them.

Brian: And we're going to we're going to help them through this period of time and we're going to do everything we can on every side of our business to reduce cost reduce product cost reduced operating costs.

Brian: To help our builder partners.

Brian: Through this period of time and it keeps us going in the in the in the near term and then in the long term.

Brian: I really think theres going to be some significant growth in that channel.

John Turner: When all this pent-up demand gets released, I think... I saw some article yesterday. There's a million millennials that are either living together as roommates or back in their homes again through this down cycle, right? That's millennials. That's not young people. I mean, that's people that are ready to form households and start buying houses. Got a million people sitting in that environment. So that alone says there's a lot of pent-up demand out there. And yes, we're better with national builders because our service proposition and partnering proposition really fits that business model. Got it.

Brian: When all this pent up demand gets released I think we will.

Brian: Saw some article yesterday, there's a million millennials that are either living together as roommates or back in their homes again through this down cycle.

Speaker Change: That's millennials, that's not young people.

Brian: It's people that are already.

Brian: Form households, and start buying houses got 1 million people sitting in that environment right now so.

Brian: That alone says there is theres a lot of pent up demand out there and yes were better with national builders, because our service proposition and partnering proposition.

Brian: Really fits that business model.

Speaker Change: Got it and then I guess could you just talk about what you're seeing kind of across the the return to office movement here, we were at Neocon and earlier. This month return to office trend there seems to be kind of slow and steady pace actually happening, but nothing to get too excited about currently I guess, how are you guys thinking about that going forward and kind of what are you seeing in the market today. Thank you.

John Turner: And then I guess, if you can talk about what you're seeing kind of across the return to office movement here, we were at Neocon earlier this month, return to office trend there seems to be kind of slow and steady pace, actually happening, but nothing to get too excited about currently. I guess how you guys think about that going forward? And kind of what are you seeing in the market today? Thank you. Yeah, I mean, you know, longer term, it's a it's a really nice opportunity. In the very near term, right, we're not touting it, because it's not happening to the extent that yet is driving a ton of TI work.

Speaker Change: Yes, I mean.

Speaker Change: Longer term.

Brian: Really nice opportunity in the very near term rate, we're not touting it because its not happening to the extent that yet is driving a ton of Ti work and that tenant improvement work is what's so important for us.

John Turner: And that tenant improvement work is what's so important for us. You know, an equally important trend is the conversion of all of this office space to residential, particularly in some of the major metros would be very good for us. New York City is an example. I think we just saw a forecast in New York, there's like 14 buildings that have now been approved and permitted to be converted. So that's really good business for us as well. So I guess we are cautiously optimistic, but I wouldn't put that in a 12 month view for us. I think that's still, you know, calendar 2027 type time timeframe, when things might be better there.

Brian: Equally important trend is the conversion of all of this office space to residential, particularly in some of the major metros that would be very good for us in New York City. As an example, I think we just saw forecast in New York.

Brian: 2014 buildings that have now been approved and permitted to be converted.

Brian: So thats really good business for us as well. So I guess, we are cautiously optimistic, but I wouldn't put that in a 12 month view for us I think thats still.

Brian: Calendar 2027 type time timeframe when things might be better there when it does come back though.

Kurt Yinger: When it does come back, though, we'll see. really good for us. I mean, that prior to COVID was a huge part of our business and we were the best at it. Thank you.

Brian: That's really good for us that prior to Covid was a huge part of our business and we were the best at it.

Brian: We're still pretty damn good at it and when it happens it will happen for us, but again too far out into the future still to get too excited about it.

Speaker Change: Thank you. Our final question today is coming from Kurt Yinger of D. A Davidson. Please go ahead.

Kurt Yinger: Our final question today is coming from Kurt Yinger of D.A. Davidson. Please go ahead. Yes, great. Thanks. And good morning, everyone.

Kurt Yinger: Yes, great Thanks, and good morning, everyone.

Speaker Change: I just wanted to go back to kind of wallboard pricing and hopefully.

Kurt Yinger: I just wanted to go back to kind of wallboard pricing and hopefully... You guys could give maybe a little bit more color around kind of high level, the timeline in terms of, you know, what you're absorbing in terms of some of those regional price increases, you know, how you're thinking about maybe success and what would be required for that from a demand perspective and maybe ultimately how that ties back into wall board price cost for GMS going forward. Yeah, I would tell you that our guide incorporates basically the ability to pass through limited price increases and or work backwards and take that cost out of our So the magnitude of what we're going through now and experiencing is nothing like we experienced a year ago when everybody thought things were gonna be better and the prices all went in.

Brian: You guys could give maybe a little bit more color around kind of high level. The timeline in terms of what you're absorbing in terms of some of those regional price increases.

Brian: How youre thinking about maybe success and what would be required for that from a demand perspective, and maybe ultimately how that ties back into wallboard price cost for Gms going forward.

Brian: Yes, I would tell you that our guide incorporates basically the ability to pass through limited price increases and or work backwards and take that cost out of our business. So.

Brian: The magnitude of what we're going through now and experiencing is nothing like we experienced.

Brian: A year ago, when everybody thought things were going to be better and the prices. All went in and then two or three months later things start to fall apart from a volume perspective.

John Turner: And then two, three months later, things started to fall apart from a volume perspective. I think everybody understands the environment we're in today. All of our partners understand where we are. We're all working through it together from a cost perspective. And then we're pushing through where we have to push through. It's pretty limited quite frankly. Okay, that's helpful.

Brian: I think everybody understands the environment. We're in today all of our partners understand where we are and where we're all working through it.

Brian: Sure.

Brian: Together from a cost perspective, and then we're pushing through where we have to push through.

Brian: Yes, it's pretty limited quite frankly.

Brian: Okay. Okay. That's helpful and then.

John Turner: And then, you know, if we kind of look at some of the numbers that the Gypsum Association has in terms of expected industry capacity and layer on, you know, a more challenged kind of volume scenario this year, you know, it's not hard to see kind of industry operating rates fall back to, you know, a mid to high 70s level this year. I guess, how do you think about that in terms of, you know, the resiliency of pricing sustaining and and maybe any other kind of high level thoughts around, you know, the industry's ability to kind of hold pricing with that sort of kind of operating rate.

Brian: If we kind of look at some of the numbers that the gypsum Association has in terms of expected industry capacity in <unk>.

Brian: And layer on a more challenged kind of volume scenario. This year, it's not hard to see kind of industry operating rates fall back to a mid to high <unk> level. This year I guess, how do you think about that in terms of.

Brian: The resilience of pricing sustaining and maybe any other kind of high level thoughts around.

Brian: The industry's ability to kind of hold pricing with that sort of kind of operating rate environment.

John Turner: I mean, you know, there's still a lot of inflation on the manufacturer side on the, on the inputs, you know, with the synthetic and natural gypsum situation, all the capital that's been invested to handle that situation. I would guess that through a short period of time, which we're looking at here, six months, you know, maybe nine months. With a recovery and outlook into calendar 2026, it looks like it's more of recovery. I think things can stay pretty resilient. If you were going to go into a significant downturn, recessionary type situation, well, then things could be different.

Brian: There's still a lot of inflation on the manufacturer side on the on the inputs.

Brian: With this synthetic and natural gypsum situation all the capital that's been invested to handle that situation.

Brian: I would guess that through a short period of time, which we're looking at here six months, maybe nine months.

Brian: With a recovery in an outlook into calendar 2026, it looks like it's more of a recovery I think things can stay pretty resilient.

Brian: If you were going to go into a significant downturn.

Brian: Recessionary type situation, well, then things could be different that's not what I'm expecting particularly for an extended period, particularly for an extended period I mean, we're not expecting deep recessionary environment.

John Turner: That's not what I'm expecting. Particularly for an extended period. Yeah, particularly for an extended period. I mean, we're not expecting a deep recessionary environment, but obviously if that happens, it's a different situation and everybody has to act.

Brian: But obviously if that happens it's a different it's a different situation and everybody has to activate.

John Turner: Okay, that makes sense, and I guess... You talked about kind of the more extreme negative demand environment potential for 2026 and the unlikelihood of that. But you know, if we were to think about demand just being pretty stagnant again, and maybe some competitive forces coming back into the market. Is that a scenario that concerns you? Or do you really need to have demand deteriorate further for some of those more negative scenarios around pricing or price costs to really materialize in your You know, I, you know, we say does it concern me, I certainly would prefer not to have another year of muted demand, you know, all the way through 26, you know, not as much fun as a better economy.

Brian: Okay that makes sense and I guess.

Brian: You talked about kind of the more extreme negative demand environment potential for 2026 and the <unk>.

Brian: The likelihood of that but.

Brian: We were to think about demand just.

Brian: Being pretty stagnate again, and maybe some competitive forces coming back into the market.

Speaker Change: Is that a scenario that concerns you or do you really need to have demand deteriorate further.

Brian: For some of those more negative scenarios around pricing or price cost really materialize in your view.

Brian: We see it as a concern me I certainly would prefer not to have another year of muted demand.

Brian: All the way through 'twenty six.

Brian: Not as much fun as a better economy.

John Turner: I don't really know what to tell you from a price perspective if we got into a full year of, let's say, 75% utilization of capacity. Could there be some some erosion in price? Yeah, I mean, there could be, I guess, if you've got a full year of 75%. kind of utilization rates again into into 26. But I also do believe that, you know, there's still a lot of pent up inflation that these manufacturers are have have eaten. And there's still a lot of investment to be done. I mean, there's, there's, the whole industry is not completely ready to go to, you know, away from synthetic yet and synthetic continues to go away.

Brian: I don't really know what to tell you from a price perspective, if we got into a full year of let's say, 75% utilization of capacity could there be some some erosion in price.

Brian: Yeah, I mean, there could be I guess, you got a full year of 75%.

Brian: Kind of utilization rates again into into 'twenty six but I also do believe that there is still a lot of pent up inflation that these manufacturers are have eaten and theres still a lot of investment to be done I mean, there is the whole industry is not completely ready to go to.

Brian: Away from synthetic yet and synthetic continues to go away.

John Turner: So there's still that there's still that challenge.

Brian: So there is still that there is still that challenge.

Speaker Change: Okay, Okay, no that's fair.

John Turner: OK, no, that's that's very helpful perspective. Thank you. Thanks for... Thank you.

Speaker Change: Very helpful perspective, Thank you.

Kurt: Thanks Kurt.

Speaker Change: Thank you ladies and gentlemen. This concludes today's question and answer session and today's event you may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.

Operator: Ladies and gentlemen, this concludes today's question and answer session and today's event. You may disconnect your lines or log off the webcast at this time, and enjoy the rest of your day. Thank you.

Speaker Change: Thank you.

Speaker Change: [music].