Q2 2025 TopBuild Corp Earnings Call
Greetings and welcome to the TopBuild second quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce P.I. Aquino, Vice President of Investor Relations. Please go ahead.
Good morning, and thanks for joining us with me today. Are Robert Buck our president and CEO and Rob Coons are CFO.
Our earnings release senior Management's formal remarks, and a deck summarizing our comments can be found on our website at topbuild.com.
many of our remarks today will include forward-looking statements which are subject to known and unknown risks and uncertainties, including those set forth in this morning's press release and in the company's SEC filings
The company assumes, no obligation to update, any forward-looking statements, because of new information, future events or otherwise.
Please note that some of the financial measures to be discussed. During this call will be on a non-gaap basis.
These non-gaap measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with gaap.
We've provided a Reconciliation of these Financial measures to the most comparable, gaap measures in today's press release. And in our presentation, both of which are available on our website,
To our president and CEO Robert buck.
Good morning, thank you for joining us today. For our second quarter 2025 earnings call.
With half of 2025 behind us. I want to start by saying how proud I am of everything. Our teams have accomplished so far this year,
In July, we completed the acquisition of Progressive Roofing establishing a new platform for growth. In the large highly fragmented, 75 billion, Commercial Roofing Services Market. The transaction aligns very well with our core. Strengths expands our installation, service offerings for commercial customers and increases our exposure to non-cyclical, non-discretionary revenue drivers.
Commercial Roofing is a natural adjacency to our core insulation business with exciting potential and we're delighted to welcome the talented Progressive Roofing team to top build.
Our teams are starting to work together, including sharing best practices and thoughts on an integration roadmap.
We also took steps in the first quarter, to better, align our cost structure with the demand environment and optimize our footprint, including the consolidation of 33 branches across our Network.
On a daily basis. Our teams put a great deal of effort in a driving our performance. And I want to thank everyone on our team for continuing to strive for improvement, across our business and delivering solid results.
Our continued solid profitability. In the second quarter is a testament to our ability to successfully navigate changes in an uncertain macro environment.
We are pleased with our sequential improvement from the first quarter with our second quarter, adjusted IBA margin of 20.1% which is a direct reflection of the command we have over our business and is supported by our ongoing work to drive improvements across the business and our supply chain.
softness and residential new construction was partially offset by growth in heavy commercial and Industrial where verticals like technology
education and Healthcare continue to flourish.
Total top build sales in the second quarter declined, 5% to 1.3 billion as the new residential construction Market remained weak and single family demands. Slid further on a year-over-year basis.
While the housing market in the US is still underbuilt mixed economic signals interest rates and affordability concerns continue to weigh on consumer confidence. Keeping some home buyers on the sidelines.
We'll continue to closely monitor the macro environment.
Turning to Capital, allocation, we have a robust pipeline of acquisition candidates and m&a is still our highest priority for deploying capital.
In addition, the progressive team has several acquisition opportunities in their pipeline.
As always, we'll stay disciplined around evaluation and focused on driving strong shareholder. Returns
In the second quarter, we also repurchase just under 4555 shares of our stock returning, a total of 136 million in capital to our shareholders.
Before I turn it over to Rob, I want to give you a brief look back at our business but also share with you some thoughts on how we're positioning top, build for the future.
This past July 1st marked the 10 year anniversary for top billed as a public company.
When I look back over that time, it's remarkable how much we've grown.
When we spun in 2015, we had 1.6 billion dollars in sales and mid single-digit profit margins.
Last year, we were roughly 5.3 billion dollars in sales or about a 14% compounded annual growth rate.
With Progressive will be more than 5.5 billion on a pro for basis, this year.
Since 2015.
We've also more than tripled our IBA margin.
Our safety metrics have also improved as we stay focused on keeping our people safe.
10 years ago about 85% of our sales were tied to residential and 15% of our sales were tied to the commercial industrial and markets.
now, having completed 44 Acquisitions, we've grown our commercial Industrial Sales to approximately 40% of our total sales this year,
We've successfully Diversified our business and in doing. So, we've also improved our sales, resiliency about 20% of our total sales, are considered recurring, non-discretionary or non-cyclical.
As we look out our runway for opportunity for growth is exciting.
We have a total addressable Market of nearly 95 billion dollars for insulation, and Commercial Roofing and are encouraged by our growth prospects.
with the verification positions as well, for our next level, of growth and more exposure to commercial, industrial, and non-discretionary spin, and reduced dependence on residential housing,
Just last week, our leadership team was on site at a multi-phase data center campus in Arizona.
At the same data center campus, TopBuild's family of companies is now providing multiple services and products for the same contractor.
The Progressive Roofing team was providing new construction, Roofing services for the first. 200,000 square foot facility at the site while our distribution international team was delivering fabricated mechanical, insulation parts, and prior to that our local T. True. True team business had provided building envelope insulation Solutions in the form of fiberglass, and spray foam installation.
Currently there are 324 data center projects under construction and 110 data centers that are doing the engine engineering stage.
We're also tracking nearly 2,000 more projects that are in the planning stage.
This growing vertical of data centers is just 1. Example of the commercial and Industrial projects which top build can now provide a full Suite of Service Solutions.
Let me conclude my remarks today by recognizing and thinking each 1 of our employees. Our success, over the last 10 years would not be possible without the hard work and support of our talented and highly motivated teams.
Rob, thanks, Robert first. I'd like to thank our teams for delivering another quarter of strong results in an uncertain macro environment.
While weak demand in the residential markets continued, our teams have done an outstanding job adjusting our cost structure and driving profitability.
In addition, our teams are continuing to drive profitable growth in heavy commercial, and Industrial and markets.
turning to the second quarter results, total sales declined 5% to 1.3 billion
Volume was down 7.8%, partially offset by m&a of 1.9% and pricing of 0.9%.
Our installation segment sales totaled, 780.7 million.
Down 8.3% driven by a 10.5% volume decline, which was partially offset by Acquisitions of 1.4% and pricing of 0.9%.
The volume decline was driven by weakness in new residential construction and Light, commercial and markets.
Heavy commercial projects, continued to be a bright spot and posted solid growth in the quarter.
Specially distribution sales, improved 1.1% to 599.2 million in the quarter.
Acquisitions grew our sales by 2.3% and price added 0.8%.
This was partially offset by lower volume of 2.1%.
Lower volumes were driven by slower sales of residential projects, which were partially offset by continued, strong growth in mechanical, insulation, for the commercial and Industrial and markets.
Adjusted gross profit in the second quarter was 30.3%, which is 70 basis points lower than last year.
Adjusted sgna as a percentage of sales. In the second quarter was 13.3% versus 13.6% last year.
Second quarter adjusted ebita for top build was 261.3 million or 20.1% of sales.
Our ibida margin improved 110, basis points from the first quarter and was down only 20 basis points to Prior year.
This strong profitability was driven by the cost actions. We took in the first quarter and supply chain improvements.
These savings almost entirely offset the ibida margin pressures from lower sales, volume and price pressure on residential products in our specialty distribution segment.
Installation. Adjusted ibida margin was 22.3% up 120 basis points sequentially and flat versus the second quarter of last year.
Especially distribution adjusted. Ebit on margin of 17.2% was up, 90 basis points, sequentially and down. 50 basis points versus a second quarter of 2024.
Other expense.
Order was 16.2 Million compared to 7.2 million last year.
The increase is due to the combination of lower interest income from lower cash balances and higher interest expense from our expanded credit facility.
Second quarter adjusted earnings per diluted share was $5.31 and compares to $5.42 last year.
Of 1.8 billion of which 842.5 million was cash and 938.8 million was available under our revolver.
Our total debt at the end of the quarter was 1.9 billion.
500 million higher than prior year due to the refinancing and expansion of our bank credit facility.
This new 2.25 billion, credit facility includes a 1 billion Term Loan, a 1 billion revolver and a 250 million delayed draw Term Loan, all of which mature in May of 2030.
Net debt. At the end of the quarter totaled, 1.1 billion and our net debt. Leverage ratio was 1.01 times trailing 12 months, pro forma adjusted ibida,
Year to date our free cash flow is 321.4 million up approximately 38% from the prior year. Primarily due to the Improvement in timing of working capital.
Working capital as a percentage of sales totaled 13.7% which compares the 14.8% last year.
We continue to prioritize our strong free cash flows towards m&a. And in July, we closed the acquisition of Progressive Roofing.
This acquisition establishes a new platform for growth and expands the building envelope installation services. We can provide for commercial contractors.
We funded the transaction with cash on hand and proceeds from our expanded credit facility.
Assuming Progressive Roofing was in our results. For the second quarter, our net debt, leverage would have been approximately 1.65 times trailing 12 months performer, adjusted evida
In the second quarter, we also repurchased shares totaling $136 million.
On a year-to-date basis. We've returned total of 351.6 million, in capital to shareholders, representing about 1.1 million shares.
We have approximately 836.4 million remaining under the current authorization.
Returning to guidance. As you saw in the release, we are issuing guidance today that includes the impact of progressive, roof of the Progressive, Roofing, acquisition for the balance of the year.
We expect full year sales to be between 5.15 billion to 5.35 billion.
Our assumptions are as follows.
On a same Branch basis, including price, we are now assuming that residential sales will decline low double digits for the year.
Driven by continued weakness in both single family and multifamily activity.
Commercial and Industrial. Same Branch sales are expected to be flattish to upload single digits.
We expect heavy commercial to remain strong. While Light commercial will continue to be challenged.
The full year impact of m&a is expected to add approximately 300 million to sales.
Inclusive of m&a total. Net sales will be flattish in the third quarter and upload single digits in the fourth quarter. As the fourth quarter will benefit from a full quarter of progressive sales and the comparison to Prior year is slightly softer.
We expect adjusted ibida for the year to be between 900 and 70 million to 1.07 billion.
At the midpoint of our guidance, our adjusted ibida margin will be 19.4%, a very strong profit performance.
In closing, I want to thank our teams once again for their efforts. And I would also like to welcome our new teammates from Progressive Roofing.
As top build enters, its second decade. As a public company, I couldn't be more excited about the growth opportunities that lie ahead for our teams and for our shareholders,
With that, I'll turn it back to Robert.
Hey Rob, I want to express my confidence in the underlying fundamentals for our business. Our flexible and diversified business model enables us to deliver solid results. We have incredibly focused teams that have great control over our business.
We've proven that we can adjust our operations as demand changes and expect to outperform in a changing environment.
As always, we'll stay focused on driving profitable growth and increasing shareholder value.
We are planning to host an investor day. In New York on December on Tuesday, December 9th.
We'll be sharing more details in the coming months and look forward to having you join us in person.
With that operator. Let's open up the line for questions.
1 moment, please while we pull for questions.
Our first question is from Michael overhaul with JP Morgan.
Yes. Uh, thanks. Good morning, everyone. Thanks for taking my questions.
um,
First, I I wanted to dive in a little bit to uh, Progressive and, you know, just the impact on uh, the second half more. So from the um, the margin side. If you expect that to be diluted or accretive to margins, um, and how you're thinking about the contribution in 2026, um, and and I guess more broadly, um, how you're seeing early opportunities, perhaps even from the um, uh, sales Synergy side as well.
Sure, Michael. This is Rob I'll start and and and Robert will jump in with the second half. I mean, in terms of our our guidance, what we have baked in for Progressive, um, you know, from a, from a sales perspective, you know, it's roughly about 215 million. Um, incremental for Progressive. Uh, our our guide last time, was around 85 million for m&a. We're up to about 300 million and then the ibida that goes with that is going to be right around, you know, in the neighborhood of a 20 percent evida so you know, really not decremental.
Or or or heavily incremental to where we're running right now. Um, pretty much in line with our our Core Business
Yeah, Michael relative to the question on on cross-selling and the Synergy piece. Yeah, really excited about that. I mean, just that data center project, I gave you the example of in the prepared remarks. I mean that's 1 example, as we've started working with the progressive team and looking at, you know, crossover and projects. Customer base, verticals, that type of thing. We definitely see an opportunity. And, you know, I've already been on a few m&a visits with the progressive team as well and talking to some, you know, I'm going to say future companies that will be coming on board. Uh, we see that as well. And some cross server where they have relationships with our insulation contractors and stuff as well. So, um, yeah. We, we think it was a part of our model but we definitely see upside to that, uh, as we're starting to work together,
Oh, that's great to hear. And and obviously very exciting in terms of the the multi-year uh, uh, prospects that that that whole vertical uh um, can lend itself to. So, congrats on that. Um, you know, secondly, you know, appreciate. Also the um, I guess more challenging Core Business. Um you know specifically residential and markets down low double uh digits versus down high single digits before. Maybe you can just talk about um
Uh, you know, which parts of the business that's hitting more, is it, you know, kind of equally, um, on installation or distribution. Um, and also just, you know, if there's particular areas of the country or, you know, any more color in terms of what's driving that softness, and if we should expect, perhaps a Down Low double digit rate, you know, into let's say the first half of 26,
Yeah, Michael. I'll I'll this is Rob, I'll start with, you know, kind of what we've got baked into our guidance. And what we saw, Robert can get into some of the details of what we're seeing, kind of across the country. Um, you know, yeah, we we've adjusted our our midpoint, uh, you know, guidance around residential to be down, you know, low double digits from from high single digits before. And that's really
primarily driven by deterioration in single family that we've seen really the, you know, the, the guidance we had previously assumed, you know, things weren't going to get worse from what we saw in the first quarter and we definitely saw, you know, the starts environments, slow down, uh, here in the second quarter. Um, so we're baking that into the guys that say the other piece. That's that's been a little bit softer is is like commercial, um, you know, heavy commercial as we talked about has been been strong Industrials been strong. So I've seen a lot of good growth there, but but like commercials remain challenged. So we've, you know, eased up a little bit on the commercial guidance as well to to
In the Carolinas, and even I'd say even optimistic up in the Northeast and the Midwest. Texas is a mixed bag again, right? Like what we're seeing in Dallas and San Antonio, but Austin and Houston, you know, slow from that perspective. Um, just a couple of other points: Colorado, single family is slow, building some multifamily backlog in Colorado, so a little bit's back there. Um, some better trends in multifamily, probably Vegas and the Southwest. Um, we see some positive things building in the Northwest right now, so it's kind of mixed as you go around, a little mixed multiverses versus single.
Great. And any thoughts about how that might, you know, carry over into the first half of next year?
I think, um, you know, you're seeing some of the the builders where they're coming out with the public uh, Builders as they're talking, as you seen their guidance and stuff. And so, you know, I think we're, you know, aligned across, you know, the variety of size of Builders there. So, you know, we're definitely starting to bid work for the fourth quarter into the first part of next year. I think some of that multi family that we're talking about and even seeing some of the starts, that's probably heading into the first quarter of next year. So that's kind of how we think about it and see it.
Great. Thanks so much.
Certainly.
Our next question is from Susan McLaren with Golden S.
Thank you. Good morning everyone.
Morning. My first question is focused. Good morning. My first question is focused on the commercial industrial side of the business. Can you give us a bit more detail? On how you're thinking about the volume versus price breakdown in there? And maybe with that? Are you still seeing some of that momentum on the price side within that segment of the business that you talked to in the first quarter?
Yes, Susan, this is Rob. So, yeah, from a from a price perspective, you know what we talked about in the first quarter was we saw some some incremental pricing on on some of the, you know, mechanical insulation products and and mineral wool products uh that we use on that side. Those those definitely stuck through the second quarter. So we're continuing to see that, um, you know, the weakness is really, you know, from a volume perspective on on the Light commercial side of things where we're down, you know, double digits. I'd say for on a year to date basis, um, we're up, you know, on the heavy commercial side of things more in the in the in the high single digits, almost double digits on a year-to-date basis. So um, seeing good growth there but the, you know, the Light commercial, uh, weigh in a little bit heavier on us right now.
Okay, that's that's helpful. And then 1 of the things that you mentioned in your prepared, remarks was imp improvements to the supply chain. Can you talk a bit more about what? Some of those efforts are how we should think about them continuing to flow through the business and the back half of this year and any potential for additional opportunities there and what those could mean for the business?
Yeah, good morning, Susan Roberts. So you know, a couple of things to talk about when in first quarter, we talked about some of the work we did in optimizing the footprint. Um, that's obviously coming through in supply chain savings for us relative to Logistics relative to even some productivity measures that we track. As we've worked through that. As we've made sure we positioned, you know, our resources appropriately based on where work and jobs are happening. So, um, that definitely be part of it. We're obviously working with our supplier Partners. I mean, I think, you know, we've talked about openly around spray foam as an example. Um, so we're obviously working with those supplier Partners. As there's been some Dynamic exchange there. So we'll expect that to continue the back half, um, of the Year here. Um, as we're in constant, you know, discussions and constantly working with, uh, you know, working to drive improvements in our business and working with our partners as well.
Okay, thank you for the color. Good luck with the quarter.
Our next question is.
With Jeff.
Hey guys, uh, congrats on a really strong cord and, uh, Dynamic environment. Um, so I guess question, for me is around pricing pricing was actually pretty solid in the first half it's holding, uh, despite a pretty tough resi, backdrop, Rob. I guess, implicit in your guide and and your conversations with uh, your big Builder customers. Um, how how are you seeing that price back after kind of unfolding, obviously, they're dealing with a lot of affordability, headwinds as well. Um, and on the flip side, the cost side, what are you seeing on that side of things, especially material costs, whether it's fiberglass or spray foam in the back half. So when you kind of think about price costs, what's embedded in your guide and how you're thinking about it? Thank you.
In from a, from a guidance perspective, similar to, to what we talked about last quarter, we do have some some price cost headwinds baked in, you know, roughly roughly, 30 million dollars of of headwind in the back half of the Year knowing that, you know, really the, the price, the first half of this year was driven by carryover benefit of of fiberglass. Pricing, that that hit kind of middle of last year. So we're going to be rolling over that no longer benefiting from that as well as you know, the, the commercial products that I talked about a little bit earlier, uh, we're seeing the benefits of those, we do expect those to carry forward through the remainder of the year. Uh, but obviously with that that Dynamic, um, you know, we're the comparisons are going to get a little tougher on price and, and to your point, you know, the the builders are pushing out there and, you know, you know, where necessary we do make adjustments, we're definitely seeing the the, the price impacts, you know, a little heavier impacting, the margins on the, on the distribution side of the business, the residential
Side of the distribution business, but like I said, we've got some some, you know, headwinds baked into the the second half forecast. That's why the, the ibida margins are a little bit worse than the than the first half.
Uh, hopefully that proves to be conservative, but we got to see how that that plays out.
Yeah, I think Phil so to add on to what Rob said. I mean, you can see the performance in second quarter, you can do the calculation in the back half and he's still very solid profitability. So what that, what that, uh, equates to is, you know, great work by the teams in the field from a few different things. 1, driving productivity. Um, you know, working all elements including, you know, labor productivity sales productivity, you know, where do we get, uh, you know, where do where do we pick up more volume, and how do we, you know, leverage that relative to, you know, driving our efficiencies, in the field. So I think that, you know, speaks loudly to that. And then also, you know, definitely work with our supply Partners. You talked about, uh, you talked about the the foam side. Um, you know, fiberglass as well. So you know, continue to work with our supply Partners here because we can provide some uncertainty in an uncertain environment. So
Yeah, no doubt, Robert and Rob. I mean, that margin performance got in for the years, pretty incredible given uh, the current backdrop. So true Testament to the business. Um, on your cni side of things. Um, any more color on, how booking or orders are progressing, uh, as well as um the progressive deal, any cancellation project delays um and and and how does the order book looking into 2026?
Yeah, so, Phil Robert, I'd say, solid, um, as we look at, so just give a a few few data points there. As we look at bidding as we look at bidding activity backlogs here, heavy commercial industrial. Um, looks positive continues. I would say, cancellations not nothing, uh, on the radar that we're seeing on cancellations and I'd say just, you know, obviously we've been working. The relationship with Progressive for a while, and I'll be a part of our team here for nearly a month. Uh, you know, love what we're seeing there and that, that team just does a fabulous job of continuing to work their relationships across multiple service areas uh and you know, continue to build backlogs there as well.
Yeah, so I I would just add to that. I mean, we were, we were in Arizona with the progressive folks about a week ago and they're they're really happy with where, where their backlogs are sitting right now and and definitely stronger than a year ago. So feeling really good about that.
That that's a really great color. Anyway, the size of me, the stronger and markets and cni that you're seeing whether its data centers or perhaps some of these um,
LG projects and whatnot. Just trying to get this little perspective and how impactful it is for your cni function.
Yeah, so a couple of points there. So, you know, data centers key1. Um, if you think about, uh, you know, power power generation, which you got to have, you got to have that infrastructure relative to the data centers. I'd say that's another 1 to point to and by the way, as we think about, you know, power, you think about LNG that's US and Canada. I mean our our Canadian team is is doing fabulous if we look at their results and when we look at backlogs there for the rest of the year, so we're seeing that strength cross verticals in Canada, then I'd also point out uh, you know, definitely Health Care. Um, and then, you know, manufacturing food beverage and then we're seeing it and and again because the relationships we have we're we're seeing an education as well and uh and some key markets.
Okay, preview, all the great color guys, continue to Good Works.
Thank you. Thank you.
Our next question is from Keith Hughes with true and security.
Thank you. Um you had said earlier in the call I think you're about 40% commercial, Industrial Sales did that include the roofing transaction or was that before the transaction?
That's that's inclusive of the roofing transaction.
Give us a feel for how much of their business would be in the heavy commercial versus the light commercials. But something, you know,
On the, uh, on the Progressive side of the business by far, the majority heavy commercial key. Yeah, the important the important part to remember there is that it's only 30% new construction. So, you know, 70% is re-roof and and services. But to Robert's Point more more towards heavy commercial projects.
And does Progressive slant towards any 1 of the different applications and CPM TPO, anything like that.
No, they're agnostic. They really have a great skill set there to provide any of the solutions, including, to Rob's point, they can handle it on you, uh, construction but definitely any of the applications from our re-roof and service maintenance perspective as well. So, great skill set across the team there.
Okay, and final question. Um, as you progress in the second half of the year, is commercial numbers are, um, I think there are a week; I think you said that in the call. Is there any, you know, signs of life in terms of order activity coming in that could, you know, paint to something brighter than 2026?
Yeah, Keith. This is Rob, I'd say, you know, on the, on the heavy commercial side and and some of the larger projects, we still feel pretty good given the backlogs. We have their, um, you know, definitely feel good about the back half of the Year. Well, you know, we'll have to see on on 2026 but we're definitely bidding work out that far. And like I said, progressives, backlogs strong there as well. Um, but but the headwinds on the Light commercial side are, are you know, what's, what's been been the drag on that side of things?
Okay, so no no light at the end of the tunnel on that yet.
I don't not, I don't like commercial, but the Ops point, I think we feel solid about heavy commercial in the industrial Side, based on the based on the backlogs.
Okay. Well, thank you.
Thank you.
All right. Next question is from Stephen Kim with evercore.
Yeah, thanks very much, guys. Appreciate it all the color. Um, let me start on the m&a side. Um, I think if you had talked previously about the fact that Progressive has Superior margins to uh, its competitors, uh, in the space and I'm curious as to how you think. Uh Progressive might go about uh raising uh any acquired entities, you know, kind of up to their level. If you could sort of just walk us through what you think, the opportunity there is and how you would go about, um, capturing that that that would be helpful. And and then also, um, you also have this other, you know, vertical. Um,
Where it seems like it's been a little quiet in the mechanical and Industrial side on the m&a. Uh, side and notwithstanding the effort to at SPI or with SPI curious. If you can give us an update specifically on the mechanical and Industrial uh, pipeline, how that's looking
Yeah, Stephen, this is Robert. Good morning. So, let me start on the Progressive side. So something that we spent a lot of time with understanding and, and, and learning and seeing the track record. So, if you think back to our announcement about the, uh, the transaction, it's really about the business system that Progressive has and so their ability to, you know, how they how they target jobs, how they bid jobs, you know, even, you know, selecting selecting the jobs, they're based on the scope of the, of the bid, if you will, or the, um, you know, the spec of the job if you will. And then obviously, as they get involved, how they engineer and how they track and manage the job. You know, man hours, man days. And they've got certain checkpoints if you will throughout the process there of making sure that that jobs are staying on track. So that's really, you know, the business system and how they manage those jobs everywhere from what they go after to how they bid. It how they manage the job to make sure it's Landing appropriately, um, or exceeding and then that's the other things around. You know, they're definitely.
You know, Synergy perspective of of things, they bring to the table whenever they do a transaction.
We continue to have pipeline opportunities there, but you know, we we ran we've had a couple that we've, you know, walked away from because we continue to remain disciplined here and going to bring on ones that are going to drive great returns here. So they're definitely activity in that space. Um, but we'll stay targeted there. And, and, and we see opportunity to continue to be on the mechanical side, that's a great. Great question. And as we said on the m&a standpoint, the core still has a lot of opportunity and uh, progressives bringing a ton of opportunity as well.
Uh, thanks for that Robert. Um, you on, on the Progressive, uh, the system that they have are their proprietary, um, computer systems or software that, that, that they utilize or is it merely, uh, the way in which they, uh, utilize or employ, uh, just the standard type of, um, you know, computer systems or management systems that that everybody else has. It's just that they utilize them in a, in a, uh, in a better way.
I'll hit that from 2 or 3, different directions, Rob may have some additional comments here. So I think what they've done for my job, costing perspective and that I'd say there's some uh, there's some things others don't have. Uh, so you could call that proprietary. But I would just say they're training. I mean how they bring folks on board, how they train the talent development, the focus on Talent Development, whether it be leadership in the field or whether it be from a sales Talent perspective, um, they've got something, you know, they've developed their that works.
And that's how they've continued to scale the business. I think, whenever we made the announcement, we talked about the organic growth rate, some things that have led to that organic growth rate, uh, in that business. So, um, so I'd say some proprietary, but I'd also say, beyond what I call business system, I'd say some great training and talent development as well. Yeah. And and this is Rob. I just add, I mean, I think, you know, similar to our business. It's it's a relationship business, right? And, and Nick and team do a great job of of building relationships with, with key contractors and getting bids on on jobs where they know, you know, they're going to have a, have a right to win and, and, and Robert touched on it in terms of their, their job tracking and and cost tracking that they do. They've, they've developed, uh, you know, and and and worked uh to put together a tool that that's really helpful for them with that. And it's really integrated not just into their their accounting but into their operations. Um and and that's certainly, you know, not something we see with with every company we've looked at in that space and so while
As Robert mentioned, you know, the margin profiles of other companies in the space are not as strong as Progressive. Uh, that just makes a bigger opportunity for us in terms of what we can bring them to. So that's, you know, another reason we're so excited about the space.
Appreciate that, that's really clear. Uh, last 1 for me Staffing, I think in the in previous calls you had indicated that you were um, uh, reluctant to to move too quickly on reducing Staffing levels. You know, on the idea that, uh, you know, you might see a recovery in volume and you want to be ready for it. Uh, simply put are, do you feel that, uh, given the modest deterioration in the market? In the last several months that maybe, uh, you're taking a harder. Look at Staffing levels.
Yeah, I'll start with that Stephen. So you saw what we did in the first quarter? I think we appropriately calibrated with those actions, um, but our, our team continues at a local market. And obviously, you know, the standard Erp gives us that, uh, that insights to look at that on a market by market base. But we did a lot of calibration there at that first quarter action. And I think what you heard us say is we didn't cut muscle. Um so we feel like we're prepared for you know, if there are uptakes and things that happen here but but yeah we definitely the teams taking the appropriate actions for this point. Yeah. And I'll just add Stephen. We did, you know, we talked about last quarter of those you know those cost actions. We took its you know, between the the lease costs and the people cost.
You know, north of 30 million dollars a year in savings and, you know, you can see the benefit of that in this quarter's results, right? Our our decremental was was 23%, uh, uh, for the quarter, same Branch decremental when you when you pull out the impact of m&a, you know. So so below what we've we've talked about, as a target from, from 27% our, our full year guidance is, is closer to 29, but that's because of the, the price cost headwind. We've got baked in that I talked about but I definitely feel like we've. We've calibrated from a headcount standpoint to to the volumes we're seeing right now, uh and as Robert points out, you know, we're going to continue to monitor that and uh you know, we'll take further actions if necessary.
Perfect. Thanks so much, guys.
Our next question is from Colin Veyron with Deutsche Bank.
Only owning for less than a month, but any early reads on how quickly you can start executing M&A in commercial roofing and what the deals and the progressive pipeline look like from a size perspective when you acquired it?
Yeah, so morning, Calvin, Mr. Robear, uh, I'll start off. So, you know, we said a few things whenever we made the announcement about a month ago. Number 1 is, there's some nice chunkier deals in the, in the pipeline. There we've seen that. Like, I mentioned, maybe on 1 of the previous, uh, questions visited a few of those and, and Rob and I started getting involved with the process, but, uh, Progressive got a team there. That's, uh, that's focused on it. So that's why it is exciting. Um, you know, I think we said earlier, we think the multiple stay pretty close to what you've seen in some of our traditional, uh multiples uh, for some of those side deals, um, on the roofing side. So, you know, good activity there. We're, you know, I, I don't mind saying this, we're making an investment to make sure that the momentum of of them and keeps up, uh, on that side at the same time, staying disciplined. So, uh, we think there's, uh, good opportunity there and we'll be excited to, uh, you know, be talking to you about that in the future as well.
Great. I appreciate the call and then just 1 follow-up question on the price Cost question. I think rob you mentioned that it was a 30 million dollar headwind in the back half of the year. It was that just a price comment or was that a total price cost um headwind?
It's it's both really right? It's more driven by the top line, but it's, it's the net impact, uh, between it
Great. Thank you. I'll leave it there and pass along quick. Pass it on.
Thank you.
Our next question is from Ken Zenner with Seaport Research Partners.
Good morning, everybody.
Morning.
10 years, Robert long time. Um,
You know that makes me think like this quarter. You know you guys had a big footprint, you all said you're going to grow into your branches. That would provide you operating leverage with your it system etc. Etc.
We have, by and large, seen that. Then the concern was.
During a contraction, which, you know, volume down, 10% reduction. That's, you know, it's a modest 1. You guys cut costs; your SG&A is still, you know, percentage-wise the same. Um, Rob, you're talking about the second half price cost headwinds that are baked into your guidance. Um, it's just you guys have been able to handle the incremental better, right? So specific to the second half.
Positive and negative factors: what kind of gets you? If you're guiding conservatively to that $29, what are the kinds of things that you think about in the positive bucket that could get you more to what you saw in the first half?
And what are the things that could go against you to get to that midpoint?
Is it volume predominantly?
Yeah, Ken, this is Robert. Yeah, I mean volume is definitely, you know, a player in that right. I mean, if if you know the, the residential single family in particular, environment continues to, to, to get worse from here. Um, you know, that, that, that could be a potential headwind. We're not, you know, we're not hearing that at this point or or, or projecting it to get a whole lot worse. I'd say it's going to be a, our, our guidance has it a little worse, the back half than the first half. But, um, you know, not not a dramatic fall off there, I think commercial Industrials potential upside, right. I mean, as as we talked about in the past, you know, there's a large projects can fluctuate quarter to quarter in terms of timing, but our backlogs are good. Uh, so we feel feel like that could be an opportunity to back half of the year. I think, you know, the big, the big ones, you know. That's that's different than the first half is price cost. We've had, you know, kind of a price cost headwind, you know, baked in throughout the year, uh, being cautious. It hasn't, it hasn't.
And, you know, cost us a a ton so far this year, I'd say on the distribution side, you see a little bit of impact their, uh, on the install side. Not not as strong at this point. So, you know, hopefully potentially that's a conservative assumption that gets us, you know, maybe in a little better spot. But, yeah, there's there's a lot of, you know, potential puts and takes their. But I think all in all we feel feel really good about the midpoint of our guidance. I think, you know, Roofing is, you know, it's new. We got to, we got to see how they do. But, like, I was saying before, we feel good about the backlog of work, they do or the backlog of work, they have, um, and the results we've seen so far. So so feel pretty good about that as well as a potential, you know, upside potentially the back half of the year.
and then, um,
Give or take percent to the larger Builders top 10.
better with the Publix would you say or with the private Builders and um,
Giving your guidance do you think that the public Builders which you know, kind of more the smile States? You know, we all kind of know where they are but like is inventory more of an issue in those markets, where the Publix are or is it in more in the private side?
Thank you very much.
Yeah, I can. I'll start on that and and Robert will add on here. But I, I'd say, overall, what we're seeing here today, you know, the, the private and, and Regional Builders have held up pretty well custom Builders especially, I think have have done pretty well so far this year. So, um, you know, in a, in a tough environment, pretty well as relative, right? But you know, they're hanging in there. They're not, I wouldn't say they're doing significantly worse than than the big Builders this year.
And I think, you know custom Builders doing well. I mean I've seen think about that that client base for the majority of them. But then I'd say Regional Builders look Regional Builders have to have to sell what's coming out of the ground. So, um, they've done well, but they got to sell their inventory. And, and you know, we see that in in our discussions with them and our, our bidding with them, as well. So I think that's where you see the, you know, the pressure point there with the Regionals.
Thank you very much.
Headwind. It sounds like that's predominantly price. On the installation side, are you getting any relief? Are you able to push back on the manufacturers yet? And if we go into 2026 and say the market stays like stable with where it is remain soft will there be more opportunity on the cost side of that price cost equation? Like could that narrow going going forward. Um if the backdrop stays consistent,
Yeah, morning. Right, it's Robert. So, look, there's an abundance of supply out there now, no doubt about it. So, obviously, it's got the conversations with, um, you know, the supply partners to make sure we're calibrating. Obviously, they're important to us; we're important to them. So, we're definitely having constant dialogue and conversations there. I mentioned spray foam earlier as a good example of that. So, um, there's definitely a consistent dialogue happening with this, uh, with the supply partners right now across the business, quite honestly.
Lie.
It is. Have you seen anything on the fiberglass side yet, though? It sounds like, in terms of relief for manufacturers,
I'd I'd say there's been equal discussions there, as well.
Okay, okay and then um in terms of the, the outlook for for m&a on the commercial roofing side, with with Progressive, can you talk about your willingness of the level of Leverage you would be be um, willing to take for for larger deals. Um, just giving some of the weakness on the the, the core business.
Yeah, race. This is Rob. So, you know, as we've, we've talked, historically, you know, we're, we're very comfortable between, you know, 1 and 2 times, net, debt leverage. Uh, that's where we we've spent most of our time, but we we have gone above that and we'll go above that for, for the right deals. Um, you know, with with Di and and USI we we went up kind of north of 2 and a half times. So I think between 2 and 3 times
Certainly very, very comfortable there. If we see, you know, a good opportunity from an M&A perspective, and you know, as we have in the past, we've always deliberated pretty quickly after that. Um, and so we would anticipate doing that if we saw the right opportunity there to do that.
Great. Thank you.
Our next question is from Ruben Gardner with the benchmark.
Come on for you guys.
Yeah, morning uh room this Robert. So I'd say, you know, our service partners team gets after that on the R&R side so relative to the smaller contractor that's doing that work. That's definitely a a focus of of our distribution business on the service partner side. So that continues to be good part of the business continues to be uh, a healthy part of the business there, because they're definitely, you know, smaller projects going on um, you know, in the residential side. And so uh, definitely our service partners team gets after that and that continues to be a focus for our distribution side of the business.
Thanks guys. Good luck.
Thank you. Thank you.
Thank you. There are no further questions at this time. I'd like to hand the floor back over to Robert for any closing comments.
Okay, thank you for joining us today. We look forward to talking with you in early November, where we'll be discussing our Q3 results. Thank you.
This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.