Q3 2025 Builders FirstSource Inc Earnings Call
One hour, including remarks by management and the question and answer session.
In order to ask a question. Please press the star key followed by the number one on your phone at any time during the call.
We do ask that you limit yourself to one question and one follow up.
I'd now like to turn the call over to Heather Kos Senior Vice President Investor Relations for builders versus source. Please go ahead.
Good morning, and welcome to our third quarter 2025 earnings call with me on the call are Jackson, our CEO Keith Bachman our CFO.
Operator: Please stand by. Your program is about to begin. If you require assistance throughout the event today, please press star zero. Good day and welcome to the Builders FirstSource third quarter 2025 earnings conference call. Today's call is scheduled to last about one hour, including remarks by management and the question and answer session. In order to ask a question, please press the star key followed by the number one on your phone. At any time during the call, we do ask that you limit yourself to one question and one follow up. I'd now like to turn the call over to Heather Kos, Senior Vice President Investor Relations for Builders FirstSource. Please go ahead.
Our earnings press release and presentation are available on our website at investors Dot B L. D. R. Dot com, we will refer to the presentation during our call.
Speaker #4: Good day and welcome to the Builders FirstSource, Inc. Third Quarter 2020 Earnings Conference Call . Today's call is scheduled to last about one hour , including remarks by management and the question and answer session .
The results discussed today include GAAP and non-GAAP results adjusted for certain items.
We provide these non-GAAP results for informational purposes, and they should not be considered in isolation from the most directly comparable GAAP measures.
Speaker #4: In order to ask a question , please press the star key , followed by the number one on your phone at any time during the call .
Can find a reconciliation of these non-GAAP measures to the corresponding GAAP measures where applicable.
A question of why we believe they can be useful to investors in our earnings press release, SEC filings and presentations.
Speaker #4: We do ask that you limit yourself to one question and one follow up . I'd now like to turn the call over to Heather Kos Senior Vice President , Investor Relations for Builders FirstSource, Inc. .
Our remarks in the press release presentation and on this call contain forward looking and cautionary statements within it.
The meaning of the private Securities Litigation Reform Act and projections of future results. Please review the forward looking statements section in today's press release and in our SEC filings for various factors that could cause our actual results to differ from forward looking statements and projections.
Speaker #4: Please go ahead .
Speaker #5: Good morning and welcome to our third quarter 20 , 20 earnings call . With me on the call are Peter Jackson , our CEO and Pete Beckmann , our CFO .
Heather Kos: Good morning and welcome to our third quarter 2025 earnings call. With me on the call are Peter Jackson, our CEO, and Pete Beckmann, our CFO. The earnings press release and presentation are available on our website at investors.bldr.com. We will refer to the presentation during our call. The results discussed today include GAAP and non-GAAP results adjusted for certain items. We provide these non-GAAP results for informational purposes and they should not be considered in isolation from the most directly comparable GAAP measures. You can find the reconciliation of these non-GAAP measures to the corresponding GAAP measures, where applicable, and a discussion of why we believe they can be useful to investors in our earnings press release, SEC filings, and presentation.
Speaker #5: The earnings press release and presentation are available on our website and investors . We will refer to the presentation during our call . The results discussed today include GAAP and non-GAAP results adjusted for certain items .
I'll turn the call over to Peter.
Thank you Heather and good morning, everyone.
Over the past several years, we have transformed into a stronger organization.
By our leading network of value added solutions, a relentless focus on operational excellence and superior capital deployment.
Speaker #5: We provide these non-GAAP results for informational purposes , and they should not be considered an isolation from the most directly comparable GAAP measures .
These strengths combined with our scale and a team of dedicated exceptional customer service have driven margin expansion.
Speaker #5: You can find the reconciliation of these non-GAAP measures to the corresponding GAAP measures were applicable in a discussion of why we believe they can be useful to investors in our earnings press release , SEC filings , and presentation .
Before starting industry leadership and extended our track record of success.
When focusing on the factors within our control and leveraging our competitive advantage.
Speaker #5: Our remarks in the press release presentation and on this call contain forward looking and cautionary statements within the meaning of the private Securities Litigation Reform Act and projections of future results .
Heather Kos: Our remarks in the press release, presentation, and on this call contain forward-looking and cautionary statements within the meaning of the Private Securities Litigation Reform Act and projections of future results. Please review the forward-looking statements section in today's press release and in our SEC filings for various factors that could cause our actual results to differ from forward-looking statements and projections. With that, I'll turn the call over to Peter.
We are competing effectively today and are well positioned to outperform our competitors as the market recovers.
Speaker #5: Please review the forward looking Statements section in today's press release and in our SEC filings . For various factors that could cause our actual results to differ from forward looking statements and projections .
Let's turn now to slide four.
Our third quarter results reflect the strength of our strategy and disciplined execution weak housing market.
Speaker #5: With that , I'll turn the call over to Peter .
We continue to execute effectively and sustained healthy profitability. Despite a low starts environment underscoring our operational disciplines and improvement since 2019.
Speaker #6: Thank you , Heather , and good morning , everyone . Over the past several years , we have transformed into a stronger organization powered by our leading network of value added solutions , a relentless focus on operational excellence and superior capital deployment .
Peter Jackson: Thank you, Heather, and good morning, everyone. Over the past several years, we have transformed into a stronger organization powered by our leading network of value-added solutions, a relentless focus on operational excellence, and superior capital deployment. These strengths, combined with our scale and a team dedicated to exceptional customer service, have driven margin expansion, reinforced our industry leadership, and extended our track record of success. By focusing on the factors within our control and leveraging our competitive advantages, we are competing effectively today and are well positioned to outperform our competitors as the market recovers. Let's turn now to Slide 4. Our third quarter results reflect the strength of our strategy and disciplined execution in a weak housing market. We continue to execute effectively and sustain healthy profitability despite a low starts environment, underscoring our operational disciplines and improvement since 2019.
Let's take a minute to step back and talk about the market.
Single family construction remained soft builders manage the pace of starts given affordability concerns consumer uncertainty and elevated new home inventories.
Speaker #6: These strengths , combined with our scale and a team dedicated to exceptional customer service , have driven margin expansion , reinforced our industry leadership and extended our track record of success .
<unk> remains tempered despite fed rate cuts in 2025.
As a reminder, Q4 is one of our slower quarters due to seasonality.
Speaker #6: By focusing on the factors within our control and leveraging our competitive advantages , we are competing effectively today and are well positioned to outperform our competitors as the market recovers .
Our builder customers have addressed these challenges by offering smaller and simpler homes as well as incentives such as interest rate buy downs.
It creates an environment, where there are less sales dollars per start and every store is more competitive on the affordability front.
Speaker #6: Let's turn now to slide four . Our third quarter results reflect the strength of our strategy and disciplined execution in a weak housing market .
We are working closely with them leveraging our broad product portfolio and bundled solutions to drive cost efficiencies, while upholding the highest quality standards.
Speaker #6: We continue to execute effectively and sustain healthy profitability despite a low starts environment underscoring our operational disciplines and improvement since 2019 . Let's take a minute to step back and talk about the market .
In the multifamily market activity is expected to remain muted through year end in line with our previous thinking.
Peter Jackson: Let's take a minute to step back and talk about the market. Single-family construction remains soft as builders manage the pace of starts, given affordability concerns, consumer uncertainty, and elevated new home inventories. Demand remains tempered despite Fed rate cuts in 2025. As a reminder, Q4 is one of our slower quarters due to seasonality. Our builder customers have addressed these challenges by offering smaller and simpler homes as well as incentives such as interest rate buy downs. That creates an environment where there are less sales dollars per start and every start is more competitive. On the affordability front, we are working closely with them, leveraging our broad product portfolio and bundled solutions to drive cost efficiencies while upholding the highest quality standards. In the multifamily market, activity is expected to remain muted through year end, in line with our previous thinking.
However, we have seen green shoots in quoting activity as our customers see improving financing costs.
Speaker #6: Single family construction remains soft as builders manage the pace of starts . Given affordability concerns , consumer uncertainty and elevated new home inventories , demand tempered despite fed rate cuts in 2025 .
As a reminder, our first sale tends to lag a multifamily start by roughly nine to 12 months.
We continue to view multifamily as an appealing and profitable business for us supported by a substantial mix of value added products and attractive fundamentals.
Speaker #6: As a reminder , Q4 is one of our slower quarters due to seasonality . Our builder customers have addressed these challenges by offering smaller and simpler homes , as well as incentives such as interest rate buy downs .
On slide five we highlight some of the key initiatives under our strategic pillars, and the third quarter, we invested more than $20 million in value added solutions to expand our product offerings in key market.
Speaker #6: That remains environment where there are less sales dollars per start , and every star is more competitive on the affordability front . We are working closely with them , leveraging our broad product portfolio and bundled solutions to drive cost efficiencies while upholding the highest quality standards in the multifamily market .
This included the opening of new millwork location in South Carolina, and expanding or upgrading plants in seven states.
We remain disciplined in how we deploy capital.
Consistent strong free cash flow through the cycle gives us the flexibility to invest in organic growth pursue strategic M&A.
Speaker #6: Activity is expected to remain muted through year end , in line with our previous thinking . However , we have seen green shoots and quoting activity as our customers see improving financing costs .
Peter Jackson: However, we have seen green shoots in quoting activity as our customers see improving financing costs. As a reminder, our first sale tends to lag a multifamily start by roughly 9 to 12 months. We continue to view multifamily as an appealing and profitable business for us, supported by a substantial mix of value-added products and attractive fundamentals. On Slide 5, we highlight some of the key initiatives under our strategic pillars. In the third quarter, we invested more than $20 million in value-added solutions to expand our product offerings in key markets. This included opening a new millwork location in South Carolina and expanding or upgrading plants in seven states. We remain disciplined in how we deploy capital. Our consistent, strong free cash flow through the cycle gives us the flexibility to invest in organic growth, pursue strategic M&A, and return capital to shareholders.
And return capital to shareholders. This.
This capital deployment is strengthening our competitive position and driving long term value creation.
Speaker #6: As a reminder , our first sale tends to lag a multifamily start by roughly 9 to 12 months . We continue to view multifamily as an appealing and creates an profitable business for us , supported by a substantial mix of value added products and attractive fundamentals .
Operational excellence is crucial to how we run the business as we develop talent improve agility and embed technology into our operations, we generated $11 million in productivity savings in Q3, primarily through targeted supply chain initiatives.
Speaker #6: On slide five , we highlight some of the key initiatives under our strategic pillars . In the third quarter , we invested more than $20 million in value added solutions to expand our product offerings in key markets .
Turning to slide six we are prudently managing discretionary spending and maximizing operational flexibility.
In response to lower volumes over the last year, we have taken steps to align capacity across our facilities manage head count and control expenses.
Speaker #6: This included opening a new millwork location in South Carolina and expanding our upgrading plants in seven states . We remain disciplined in how we deploy capital , our consistent , strong free cash flow through the cycle gives us the flexibility to invest in organic growth , pursue strategic M&A and return capital to shareholders .
We are reducing variable cost today, while also investing in needed capacity to ensure we are positioned to scale quickly with the expected recovery in demand.
Year to date through September we have consolidated 16 facilities, including eight in the third.
Speaker #6: This capital deployment is strengthening our competitive position and driving long-term value creation. Operational excellence is crucial to how we run the business as we develop talent, improve agility, and embed technology into our operations.
Peter Jackson: This capital deployment is strengthening our competitive position and driving long-term value creation. Operational excellence is crucial to how we run the business as we develop talent, improve agility, and embed technology into our operations. We generated $11 million in productivity savings in Q3, primarily through targeted supply chain initiatives. Turning to Slide 6, we are prudently managing discretionary spending and maximizing operational flexibility in response to lower volumes over the last year. We have taken steps to align capacity across our facilities, manage headcount, and control expenses. We are reducing variable costs today while also investing in needed capacity to ensure we are positioned to scale quickly with the expected recovery in demand. Year to date through September, we have consolidated 16 facilities, including eight in the third quarter, while maintaining an on time and in full delivery rate of 92%.
While maintaining an on time and full delivery rate of 92%.
With our industry, leading scale experienced leadership team and a track record of operating proactively through the cycle. We are confident that we can continue to deliver exceptional customer service.
Speaker #6: We generated $11 million in productivity savings in Q3 , primarily through targeted supply chain initiatives . Turning to slide six . We are prudently managing discretionary spending and maximizing operational flexibility in response to lower volumes over the last year , we have taken steps to align capacity across our facilities , manage headcount and control expenses .
Moving to slide seven our disciplined capital allocation strategy focuses on maximizing shareholder returns through organic growth M&A and share repurchases.
In the third quarter, we deployed over $100 million.
Toward return enhancing opportunities aligned with those priorities.
Drilling into M&A on slide eight we remain focused on pursuing acquisitions that expand our value added product offerings and advance our leadership position and desirable geographies. We have developed substantial improve in muscle memory to grow through M&A and have a track record of successful integration.
Speaker #6: We are reducing variable costs today while also investing in needed to capacity to ensure we are positioned to scale quickly with the expected recovery in demand .
Speaker #6: Year to date through September , we have consolidated 16 facilities , including eight in the third quarter , while maintaining an on time and in full delivery rate of 92% .
In the third quarter, we acquired St. George Trust company address manufacturer, serving builders in southern Utah and Southern Nevada.
Speaker #6: With our industry leading scale , experienced leadership team and a track record of operating proactively through the cycle , we are confident that we can continue to deliver exceptional customer service .
Peter Jackson: With our industry-leading scale, experienced leadership team, and a track record of operating proactively through the cycle, we are confident that we can continue to deliver exceptional customer service. Moving to Slide 7, our disciplined capital allocation strategy focuses on maximizing shareholder returns through organic growth, M&A, and share repurchases. In the third quarter, we deployed over $100 million toward return-enhancing opportunities aligned with those priorities. Drilling into M&A on Slide 8, we remain focused on pursuing acquisitions that expand our value-added product offerings and advance our leadership position in desirable geographies. We have developed substantial and proven muscle memory to grow through M&A and have a track record of successful integration. In the third quarter, we acquired St. George Truss Co., a truss manufacturer serving builders in southern Utah and southern Nevada. In October, we acquired Builders Door and Trim and Riston Construction.
In October we acquired builders door and trim and rice and construction.
Together, the two companies formed a leading provider of door and millwork capabilities in the Las Vegas area.
And the key product gap in the region and strengthening our ability to deliver comprehensive solutions to our customers.
Speaker #6: Moving to slide seven . Our disciplined capital allocation strategy focuses on maximizing shareholder returns through organic growth . M&A and share repurchases . In the third quarter , we deployed over $100 million toward return , enhancing opportunities aligned with those priorities .
We've made 38 acquisitions, representing over $2 billion in annual sales since the BMC merger in 2021, the equivalent of a top 10, OEM player demonstrating our ability to execute and integrate seamlessly.
Speaker #6: Drilling into M&A . On slide eight , we remain focused on pursuing acquisitions that expand our value added product offerings and advance our leadership position in desirable geographies .
And with the industry still fragmented we see significant opportunity ahead.
We remain confident that inorganic investments will remain an important driver of long term growth.
Speaker #6: We have developed substantial and proven muscle memory to grow through M&A and have a track record of successful integration . In the third quarter , we acquired Saint George Trust Company , a trust manufacturer serving builders in southern Utah and southern Nevada .
Let's now turn to slide nine and discuss the latest updates on our digital and technology strategy.
We are accelerating the adoption of our digital capabilities and deploying scalable customer centric solutions that will strengthen our operational agility and support long term growth.
Speaker #6: In October . We acquired builders Door and trim in Royston construction . Together , the two companies formed the leading provider of door and millwork capabilities in the Las Vegas area , closing a key product gap in the region and strengthening our ability to deliver comprehensive solutions to our customers .
Peter Jackson: Together the two companies formed the leading provider of door and millwork capabilities in the Las Vegas area, closing a key product gap in the region and strengthening our ability to deliver comprehensive solutions to our customers. We have made 38 acquisitions representing over $2 billion in annual sales since the BMC merger in 2021, the equivalent of a top 10 LVM player, demonstrating our ability to execute and integrate seamlessly. With the industry still fragmented, we see significant opportunity ahead. We remain confident that inorganic investments will remain an important driver of long term growth. Let's now turn to Slide 9 and discuss the latest updates on our digital and technology strategy. We are accelerating the adoption of our digital capabilities and deploying scalable customer-centric solutions that will strengthen our operational agility and support long term growth.
Our BFS digital tools deliver meaningful benefits to our homebuilder customers and align BFS, it's a key technology partner in the industry.
Despite the weak market, we have seen continued adoption with our target audience of smaller builders since launching in early 2020 for our digital tools have processed over $2 $5 billion of orders and over $5 billion.
Speaker #6: We have made 38 acquisitions , representing over $2 billion in annual sales since the BMC merger in 2021 . The equivalent of a top ten LBM player , demonstrating our ability to execute and integrate seamlessly and with the industry still fragmented , we see significant opportunity ahead .
Those representing increases in access of 200% year to date.
Importantly, we're seeing that digital is not just about incremental sales is a catalyst for a broader company growth.
Speaker #6: We remain confident that inorganic investments will remain an important driver of long-term growth. Let's now turn to slide nine and discuss the latest updates on our digital and technology strategy.
The efficiencies and capabilities enabled by our digital tools, including artificial intelligence accelerate the pace and elevate the precision of our quoting and sales operations.
Speaker #6: We are accelerating the adoption of our digital capabilities and deploying scalable , customer centric solutions that will strengthen our operational agility and support long term growth .
While it is evident that our initial business case around digital did not predict the timing of our outcomes very well we remain convinced of the tremendous shareholder value that the digital tools will unlock for us.
Speaker #6: Our BFFs , digital tools deliver meaningful benefits to our home builder customers and align BFFs as a key technology partner in the industry .
Peter Jackson: Our BFS digital tools deliver meaningful benefits to our homebuilder customers and align BFS as a key technology partner in the industry. Despite the weak market, we have seen continued adoption with our target audience of smaller builders. Since launching in early 2024, our digital tools have processed over $2.5 billion of orders and over $5 billion of quotes, representing increases in excess of 200% year to date. Importantly, we're seeing that digital is not just about incremental sales, it's a catalyst for broader company growth. The efficiencies and capabilities enabled by our digital tools, including artificial intelligence, accelerate the pace and elevate the precision of our quoting and sales operations. While it's evident that our initial business case around digital did not predict the timing of our outcomes very well, we remain convinced of the tremendous shareholder value that the digital tools will unlock for us.
Continuing on the technology front I'm pleased that we've continued to make steady progress on our comprehensive implementation of S&P. After the launch of two pilot markets in July.
Speaker #6: Despite the weak market , we have seen continued adoption with our target audience of smaller builders since launching in early 2024 , our digital tools have processed over $2.5 billion of orders and over $5 billion of quotes representing increases in excess of 200% year to date .
We gained valuable insights from these initial pilots and we'll be applying those learnings as we prepare for the next phase.
During Q3, we also successfully converted to SAP for our centralized accounting functions as well as for all of our internal and external financial reporting.
Speaker #6: Importantly , we're seeing the digital is not just about incremental sales . It's a catalyst for a broader company growth . The efficiencies and capabilities enabled by our digital tools , including artificial intelligence , accelerate the pace and elevate the precision of our quoting and sales operations .
Although these conversions are never easy we are working through the details and are excited about the growth and efficiency opportunities to come with this new software.
Recognizing one of our incredible team members each quarter, it's one of the best parts of my role today.
Speaker #6: While it's evident that our initial business case around digital did not predict the timing of our outcomes very well , we remain convinced of the tremendous shareholder value that the digital tools will unlock for us .
Today, I want to spotlight, Harold Fuqua driver and our Lebanon, Tennessee yard recently celebrated 40 years with BFS.
Harold is known for its dependability strong work ethic and love of the Tennessee volunteers is.
Speaker #6: Continuing on the technology front , I'm pleased that we continue to make steady progress on our comprehensive implementation of SAP after the launch of two pilot markets in July , we've gained valuable insights from these initial pilots and will be applying those learnings as we prepare for the next phase .
Peter Jackson: Continuing on the technology front, I'm pleased that we continue to make steady progress on our comprehensive implementation of SAP after the launch of two pilot markets in July. We've gained valuable insights from these initial pilots and we'll be applying those learnings as we prepare for the next phase. During Q3, we also successfully converted to SAP for our centralized accounting functions as well as for all of our internal and external financial reporting. Although these conversions are never easy, we are working through the details and are excited about the growth and efficiency opportunities to come with this new software. Recognizing one of our incredible team members each quarter is one of the best parts of my role today. I want to spotlight Harold Fuqua, a driver at our Lebanon, Tennessee yard who recently celebrated 40 years with BFS.
His dedication shows and this commitment is often at the yard before four a M and the way he shares his experience having trained more than 100 drivers over the years.
He has also earned a reputation for driving over the regions toughest hills with skill and care.
Speaker #6: During Q3 , we also successfully converted to SAP for our centralized accounting functions , as well as for all of our internal and external financial reporting .
I'm honored to recognize here and so many others across beauty, whose hard work and commitment continued to move us forward.
Speaker #6: Although these conversions are never easy , we are working through the details and are excited about the growth and efficiency opportunities to come with this new software .
I'll now turn the call over to Pete to discuss our financial results in greater detail.
Thank you Peter and good morning, everyone.
Yes.
We continue to execute our strategy in a down market responding to near term challenges and carefully managing costs, while preserving our ability to invest for the future.
Speaker #6: Recognizing one of our incredible team members , each quarter is one of the best parts of my role . Today . I want to spotlight Harold Fuqua , the driver at our Lebanon , Tennessee yard , recently celebrated 40 years with BFS .
Our financial agility supported by a healthy balance sheet and strong free cash flow through the cycle.
<unk> us to deploy capital prudently to fuel organic growth pursue strategic M&A and return capital to shareholders.
Speaker #6: Harold is known for his dependability , strong work ethic , and love of the Tennessee Volunteers . His dedication shows , and his commitment .
Peter Jackson: Harold is known for his dependability, strong work ethic, and love of the Tennessee Volunteers. His dedication shows in his commitment. He's often at the yard before 4:00 A.M. and in the way he shares his experience. Having trained more than 100 drivers over the years, he's also earned a reputation for driving over the region's toughest hills with skill and care. I'm honored to recognize Harold and so many others across BFS whose hard work and commitment continue to move us forward. I'll now turn the call over to Pete to discuss our financial results in greater detail.
These investments are bolstering our competitive position as we invest for the future.
Speaker #6: He's often at the yard before 4 a.m. and in the way he shares his experience . Having trained more than 100 drivers over the years , he's also earned a reputation for driving over the region's toughest hills with skill and care .
Let's begin by reviewing our third quarter performance on slides 10 through 12.
Net sales decreased six 9% to $3 9 billion.
Speaker #6: I'm honored to recognize Harold and so many others across BFS whose hard work and commitment continue to move us forward . I'll now turn the call over to Pete to discuss our financial results in greater detail .
Driven by lower organic sales and commodity deflation.
Partially offset by growth from acquisitions.
The organic sales decrease was driven by a 12% decline in single family.
The lower starts activity and value per start.
Speaker #6: Thank you Peter , and .
Pete Beckmann: Thank you, Peter, and good morning, everyone. We continue to execute our strategy in a down market, responding to near-term challenges and carefully managing costs while preserving our ability to invest for the future. Our financial agility, supported by a healthy balance sheet and strong free cash flow through the cycle, enables us to deploy capital prudently to fuel organic growth, pursue strategic M&A, and return capital to shareholders. These investments are bolstering our competitive position as we invest for the future. Let's begin by reviewing our third quarter performance on slides 10 through 12. Net sales decreased 6.9% to $3.9 billion, driven by lower core organic sales and commodity deflation, partially offset by growth from acquisitions.
Speaker #7: Good morning , everyone . We continue to execute our strategy in a down market , responding to near-term challenges and carefully managing costs while preserving our ability to invest for the future .
As well as a 20% decline in multifamily.
In line with our expectations amid muted activity levels against stronger prior year comps.
Additionally, repair and remodel decreased 1% given consumer uncertainty.
Speaker #7: Our financial agility , supported by a healthy balance sheet and strong free cash flow through the cycle , enables us to deploy capital prudently to fuel organic growth , pursue strategic M&A and return capital to shareholders .
As we've noted on recent calls there are a few key factors reconciled in single family starts for our core organic sales.
First as a reminder, there is a roughly three months lag from a start or a per sale.
Speaker #7: These investments are bolstering our competitive position as we invest for the future . Let's begin by reviewing our third quarter performance on slides ten through 12 .
Second the value of the average AUM has fallen the size and complexity have decreased over time.
Raising an additional head sales headwind.
Speaker #7: Net sales decreased 6.9% to $3.9 billion, driven by lower core organic sales and commodity deflation, partially offset by growth from acquisitions.
Third margins remain pressured throughout the supply chain is affordability concerns continue to be Paramount.
Based on this we believe our third quarter share was flat to up slightly as we continue to be the industry leader and a trusted partner to our customers.
Speaker #7: The core organic sales decrease was driven by a 12% decline in single family due to lower starts , activity and value per start , as well as a 20% decline in multifamily .
Pete Beckmann: The core organic sales decrease was driven by a 12% decline in single-family due to lower starts, activity, and value per start, as well as a 20% decline in multifamily in line with our expectations amid muted activity levels against stronger prior year comps. Additionally, repair and remodel decreased 1% given consumer uncertainty. As we've noted on recent calls, there are a few key factors reconciling single-family starts to our core organic sales. First, as a reminder, there is a roughly three-month lag from a start to our first sale. Second, the value of the average home has fallen as size and complexity have decreased over time, creating an additional sales headwind. Third, margins remain pressured throughout the supply chain as affordability concerns continue to be paramount.
For the third quarter gross profit was $1 2 billion, a decrease of 13, 5% compared to the prior year period.
Speaker #7: In line with our expectations amid muted activity levels against stronger prior year comps . Additionally , repair and remodel decreased 1% given consumer uncertainty .
Gross margin was 34% down 240 basis points, primarily driven by below normal starts environment.
Compared to an approximately 27% gross margin in 2019, our Q3 gross margin reflects the substantial investments, we have made and value added solutions and our continuous improvement.
Speaker #7: As we've noted on recent calls , there are a few key factors reconciling single family starts to our core organic sales . First , as a reminder , there is a roughly three month lag from a start to our first sale .
Adjusted SG&A of $790 million increased $7 million, primarily due to acquired operations, partially offset by lower variable compensation due to lower sales.
Speaker #7: Second , the value of the average home has fallen as size and complexity have decreased over time , creating an additional sales headwind .
Speaker #7: Third , margins remain pressured throughout the supply chain as affordability concerns continue to be paramount . Based on this , we believe our third quarter share was flat to up slightly as we continue to be the industry leader and a trusted partner to our customers .
As Peter touched on previously we are focused on carefully managing our SG&A and are well positioned to leverage our costs as the market grows.
Pete Beckmann: Based on this, we believe our third quarter share was flat to up slightly as we continue to be the industry leader and a trusted partner to our customers. For the third quarter, gross profit was $1.2 billion, a decrease of 13.5% compared to the prior year period. Gross margin was 30.4%, down 240 basis points, primarily driven by below-normal starts environment compared to an approximately 27% gross margin in 2019. Our Q3 gross margin reflects the substantial investments we have made in value-added solutions and our continuous improvement. Adjusted SGA of $790 million increased $7 million primarily due to acquired operations, partially offset by lower variable compensation due to lower sales. As Peter touched on previously, we are focused on carefully managing our SGA and are well positioned to leverage our costs as the market grows.
Adjusted EBITDA was $434 million down approximately.
31%, primarily driven by lower gross profit.
Speaker #7: For the third quarter , gross profit was $1.2 billion , a decrease of 13.5% compared to the prior year period . Gross margin was 30.4% , down 240 basis points , primarily driven by below normal starts .
Adjusted EBITDA margin was 11%.
<unk> 380 basis points from the prior year, primarily due to lower gross profit margins and reduced operating leverage.
Our ability to maintain a double digit EBITDA margin and a weak market is a testament to the strength of our transformed the business.
Speaker #7: Environment . Compared to an approximately 27% gross margin in 2019 . Our Q3 gross margin reflects the substantial investments we have made in value added solutions and our continuous improvement .
Adjusted EPS was $1 88.
A decrease of 39% compared to the prior year.
Speaker #7: Adjusted SG&A of $790 million increased $7 million , primarily due to acquired operations , partially offset by lower variable compensation due to lower sales .
On a year over year basis share repurchases enabled by our strong free cash flow generation at a roughly <unk> 10 per share for the third quarter.
Now, let's turn to our cash flow balance sheet liquidity on slide 13.
Speaker #7: As Peter touched on previously, we are focused on carefully managing our SG&A and are well positioned to leverage our costs as the market grows.
Our third quarter operating cash flow was $548 million.
Decrease of $182 million, mainly driven by lower net income.
Speaker #7: Adjusted EBITDA was $434 million , the approximately 31% primarily driven by lower gross profit . Adjusted EBITDA margin was 11% , down 380 basis points from the prior year , primarily due to lower gross profit margins and reduced operating leverage .
Pete Beckmann: Adjusted EBITDA was $434 million, down approximately 31%, primarily driven by lower gross profit. Adjusted EBITDA margin was 11%, down 380 basis points from the prior year, primarily due to lower gross profit margins and reduced operating leverage. Our ability to maintain a double digit EBITDA margin in a weak market is a testament to the strength of our transformed business. Adjusted EPS was $1.88, a decrease of 39% compared to the prior year. On a year over year basis, share repurchases enabled by our strong free cash flow generation added roughly $0.10 per share for the third quarter. Now let's turn to our cash flow, balance sheet, and liquidity on slide 13. Our third quarter operating cash flow was $548 million, a decrease of $182 million, mainly driven by lower net income. We generated free cash flow of $465 million.
We generated free cash flow of $465 million.
Trailing 12 months free cash flow yield was approximately 8% of our operating cash flow return on invested capital was 15%.
Our net debt to adjusted EBITDA ratio was approximately two three times.
Speaker #7: Our ability to maintain a double digit EBITDA margin in a weak market as a testament to the strength of our transformed business , adjusted EPs was $1.88 , a decrease of 39% compared to the prior year .
While our fixed charge coverage ratio was roughly six times.
We have no long term debt maturities until 2030, our maturity profile enables us to remain operationally and financially disciplined while preserving a flexible balance sheet for accretive capital deployment.
Speaker #7: On a year over year basis , share repurchases enabled by our strong free cash flow generation , added roughly $0.10 per share for the third quarter .
Moving to the third quarter capital deployment.
Capital expenditures were $83 million, and we deployed $19 million on acquisitions.
Speaker #7: Now , let's turn to our cash flow balance sheet and liquidity on slide 13 . Our third quarter operating cash flow was $548 million , a decrease of $182 million , mainly driven by lower net income .
We currently have $500 million remaining on our share repurchase authorization.
We remain comfortable with our net debt levels and will continue to execute our capital allocation priorities in a disciplined manner and are on the path to maximizing value creation.
Speaker #7: We generated free cash flow of $465 million , our trailing 12 month free cash flow yield was approximately 8% , and our operating cash flow return on invested capital was 15% .
On slides 14, and 15, we show our 2025 outlook and assumptions.
Pete Beckmann: Our trailing twelve months free cash flow yield was approximately 8% and our operating cash flow return on invested capital was 15%. Our net debt to adjusted EBITDA ratio was approximately 2.3 times while our fixed charge coverage ratio was roughly 6 times. We have no long term debt maturities until 2030. Our maturity profile enables us to remain operationally and financially disciplined while preserving a flexible balance sheet for accretive capital deployment. Moving to third quarter capital deployment, capital expenditures were $83 million and we deployed $19 million on acquisitions. We currently have $500 million remaining on our share repurchase authorization. We remain comfortable with our net debt levels and will continue to execute our capital allocation priorities in a disciplined manner on the path to maximizing value creation. On slides 14 and 15, we show our 2025 outlook and assumptions on a year over year basis.
On a year over year basis, our latest forecast assumes single family starts down 9% for the year multifamily starts down mid teens and R&R end market to be flat.
Speaker #7: Our net debt to adjusted EBITDA ratio was approximately 2.3 times , while our fixed charge coverage ratio was roughly six times . We have no long term debt maturities until 2030 .
The 2025 multifamily headwind to sales of $400 million to $500 million.
Speaker #7: Our maturity profile enables us to remain operationally and financially disciplined while preserving a flexible balance sheet for accretive capital deployment . Moving to third quarter capital deployment , capital expenditures were $83 million , and we deployed $19 million on acquisitions .
EBITDA of less than $200 million.
It has largely been digested and remains on track.
As a result, we are guiding net sales in the range of $15 $115 4 billion.
We expect adjusted EBITDA to be 1625 to $1 67 5 billion.
Speaker #7: We currently have $500 million remaining on our share repurchase authorization . We remain comfortable with our net debt levels and will continue to execute our capital allocation priorities in a disciplined manner on the path to maximizing value creation .
Adjusted EBITDA margin is forecast to be in the range of 10 six to 11, 1%.
We expect our 2025 full year gross margin to be in the range of 31% to 35%.
Speaker #7: Slides 14 and 15 , we show our 2025 outlook and assumptions on a year over year basis . Our latest forecast assumes single family starts down 9% for the year , multifamily starts down mid-teens and R&R end market to be flat .
Reflecting our strong execution and a below normal starts environment.
We expect free cash flow of $800 to $1 billion.
Pete Beckmann: Our latest forecast assumes single-family starts down 9% for the year, multifamily starts down mid-teens, and R&R end market to be flat. The 2025 multifamily headwind to sales of $400 to $500 million and EBITDA of less than $200 million has largely been digested and remains on track. As a result, we are guiding net sales in the range of $15.1 to $15.4 billion. We expect adjusted EBITDA to be $1.625 to $1.675 billion. Adjusted EBITDA margin is forecast to be in the range of 10.6% to 11.1%. We expect our 2025 full year gross margin to be in the range of 30.1% to 30.5%, reflecting our strong execution in a below normal starts environment. We expect free cash flow of $800 million to $1 billion.
Our revised guidance assumes average commodity prices in the range of 370 to $390 per thousand board foot versus the long term average of $400.
Speaker #7: The 2025 multifamily headwind to sales of 400 to $500 million and EBITDA of less than $200 million , as largely been digested and remains on track as a result .
Moving to slide 16, we recognize that 2026 is coming into focus as we approach year end.
Like we did last year.
Speaker #7: We are guiding net sales in the range of 15.1 to $15.4 billion . We expect adjusted EBITDA to be 1.625 to $1.675 billion .
Laid out a scenario analysis to demonstrate how we are positioned to generate resilient financial performance across a range of potential housing market and commodity conditions.
As you can see we have included a new scenario that provides a perspective on our performance in a normal housing environment.
Speaker #7: Adjusted EBITDA margin is forecast to be in the range of 10.6 to 11.1% . We expect our 2025 full year gross margin to be in the range of 30.1 to 30.5% , reflecting our strong execution in a below normal starts environment .
I want to emphasize that this is not guidance, but these scenarios should help clarify our range of performance expectations for 2026.
To demonstrate the strength of our best in class operating platform.
Speaker #7: We expect free cash flow of 800 million to $1 billion . Our revised guidance assumes average commodity prices in the range of 370 to $390 per 1000 board foot , versus the long term average of $400 .
In closing we are closely monitoring the current environment and remain agile to mitigate downside risk in the near term, while also investing strategically for the future.
Pete Beckmann: Our revised guidance assumes average commodity prices in the range of $370 to $390 per thousand board foot versus the long term average of $400. Moving to slide 16, we recognize that 2026 is coming into focus as we approach year end. Like we did last year, we have laid out a scenario analysis to demonstrate how we are positioned to generate resilient financial performance across a range of potential housing market and commodity conditions. As you can see, we have included a new scenario that provides a perspective on our performance in a normal housing environment. I want to emphasize that this is not guidance, but these scenarios should help clarify our range of performance expectations for 2026 and demonstrate the strength of our best-in-class operating platform.
I am confident in our ability to drive long term growth by executing our strategy, leveraging our exceptional platform and maintaining financial flexibility.
Speaker #7: Moving to slide 16 , we recognize that 2026 is coming into focus as we approach year end like we did last year . We have laid out a scenario analysis to demonstrate how we are positioned to generate resilient financial performance across a range of potential housing market and commodity conditions .
With that I will turn the call back over to Peter for some final thoughts.
Thanks, Pete I want to close by emphasizing the transformation of BFS as illustrated on slide 17.
Today, we are an exceptionally improved organization.
Speaker #7: As you can see , we have included a new scenario that provides a perspective on our performance in a normal housing environment . I want to emphasize that this is not guidance for these scenarios should help clarify our range of performance expectations for 2026 and demonstrate the strength of our best in class operating platform .
Powered by our value added solutions and digital tools.
Let's focus on operational excellence and a disciplined capital deployment strategy.
These improvements combined with our scale have positioned us to accelerate growth as we return to a normalized starts environment.
By controlling what we can control and leveraging our competitive advantages, we will continue to deliver exceptional long term shareholder value.
Speaker #7: In closing , we are closely monitoring the current environment and remain agile to mitigate downside risk in the near term . While also investing strategically for the future .
Pete Beckmann: In closing, we are closely monitoring the current environment and remain agile to mitigate downside risk in the near term while also investing strategically for the future. I am confident in our ability to drive long term growth by executing our strategy, leveraging our exceptional platform, and maintaining financial flexibility. With that, I'll turn the call back over to Peter for some final thoughts.
Thank you again for joining us today operator, let's please open the call now for questions.
Speaker #7: I am confident in our ability to drive long term growth by executing our strategy , leveraging our exceptional platform , and maintaining financial flexibility .
Certainly at this time, if you would like to ask a question. Please press the star and one on your telephone keypad you.
Speaker #7: With that , I'll turn the call back over to Peter for some final thoughts .
You may withdraw yourself from the queue at any time by pressing star two.
Speaker #6: Thanks , Pete . I want to close by emphasizing the transformation of BFS as illustrated on slide 17 . Today we are an exceptionally improved organization , one powered by our value added solutions and digital tools .
Peter Jackson: Thanks, Pete. I want to close by emphasizing the transformation of BFS as illustrated on slide 17. Today, we are an exceptionally improved organization, one powered by our value-added solutions and digital tools, a relentless focus on operational excellence, and a disciplined capital deployment strategy. These improvements, combined with our scale, have positioned us to accelerate growth as we return to a normalized starts environment. By controlling what we can control and leveraging our competitive advantages, we will continue to deliver exceptional long-term shareholder value. Thank you again for joining us today. Operator, let's please open the call now for questions.
Again, we do ask that you limit yourself to one question and one follow up.
We'll take our first question from Matthew Bouley with Barclays. Your line is open.
Good morning, guys. Thank you for taking the questions.
Speaker #6: Our relentless focus on operational excellence and a disciplined capital deployment strategy . These improvements , combined with our scale , have positioned us to accelerate growth as we return to a normalized environment by controlling what we can control and leveraging our competitive advantages , we will continue to deliver exceptional long term shareholder value .
So wanted to start on on the framework the scenarios for FY 'twenty six.
But I'm looking at it right. It seems like you're implying kind of maybe a mid to high 9% EBITDA margin at the midpoint versus the fear, obviously 10, 6% to 11, one is that because you're you're I guess, implying exiting this year.
Speaker #6: Thank you again for joining us today . Operator . Let's please open the call now for questions .
29% to 30 on gross margin and the expectation is that that should continue.
Speaker #4: Certainly , at this time , if you would like to ask a question , please press the star and one on your telephone keypad .
Operator: Certainly at this time, if you would like to ask a question, please press the star and one on your telephone keypad. You may withdraw yourself from the queue at any time by pressing star two. Again, we do ask that you limit yourself to one question and one follow up. We'll take our first question from Matthew Bouley with Barclays. Your line is open.
Kind of given you know builders negotiating back with suppliers or is the S&P inflammation implementation part of that just I guess what are some of the moving pieces behind that margin outlook in 2026.
Speaker #4: You may withdraw yourself from the queue at any time by pressing star two . Again , we do ask that you limit yourself to one question and one follow up .
Hey, Matt.
It's Peter I think Youre right for the most part it's not SAP thing at his sense of both where we have gotten to at the exit of 25, but also our read on the competitive environment and the dynamics are.
Speaker #4: We'll take our first question from Matthew Boulet with Barclays. Your line is open.
Speaker #8: Good morning guys . Thank you for taking the questions . So want to start on on the framework . The scenarios for FY 26 .
[Analyst]: Morning guys. Thank you for taking the questions. I want to start on the framework, the scenarios for FY26. If I'm looking at it right, it seems like you're implying kind of maybe a mid to high 9% EBITDA margin at the midpoint versus this year obviously 10.6% to 11.1%. Is that because you're, I guess, implying exiting this year, you know, between 29% to 30% on gross margin and the expectation is that that should continue kind of given, you know, builders negotiating back with suppliers or is the SAP implementation part of that? I guess what are some of the moving pieces behind that margin outlook in 2026? Thank you.
It's basically a leveling out we're about to the bottom we're thinking based on everything we're seeing on the margin side.
Speaker #8: If I'm looking at it right , it seems like you're implying kind of maybe a mid to high 9% EBITDA margin at the midpoint versus this year .
But that question is out there in terms of which way the market will go as we signaled with the sort of up and down version of the scenarios.
Speaker #8: Obviously ten 6 to 11 one . Is that because you're you're , I guess , implying exiting this year . You know , between 29 to 30 on gross margin and the expectation is that that should continue kind of given , you know , builders negotiating back with suppliers .
So trying to give a middle of the road view on where we think it's going to end up.
Overall, I think we would be successful we're seeing the stabilization I think we're getting close to the bottom.
The real question comes when does when does it turn happen sooner the sooner the better we are ready to go.
Speaker #8: Or is the SAP implementation implementation part of that just I guess , what are some of the moving pieces behind that margin outlook in 2026 ?
But we need a little cooperation.
Speaker #8: Thank you .
Yeah, no absolutely makes sense and so thank you for that.
Speaker #6: Hey , Matt , it's Peter , I think you're you're right for the most part . It's not an SAP thing . It is a sense of both where we have gotten to at the exit of 25 , but also our read on the competitive environment and the dynamics are it's it's basically a leveling out .
Peter Jackson: Hey Matt, it's Peter. I think you're right for the most part, it's not an SAP thing. It is a sense of both where we have gotten to at the exit of 2025, but also our read on the competitive environment and the dynamics are. It's basically a leveling out. We're about to the bottom. We're thinking based on everything we're seeing on the margin side. That question is out there in terms of which way the market will go as we signaled with the sort of up and down version of the scenarios. Tried to give a middle of the road view on where we think it's going to end up overall. I think we're being successful, we're seeing the stabilization. I think we're getting close to the bottom. The real question comes when does the turn happen? The sooner the better.
So then the other one I guess just sticking with that slide I wanted to ask on the normalized EBITDA guide.
So obviously it jumps out a little of that it's a different number than what you gave at the Investor day, a couple of years ago I guess.
Speaker #6: We're about to the bottom . We're thinking based on everything we're seeing on the margin side . But that question is out there in terms of which way the market will go .
The revenue number would be.
The main difference there. So I'm wondering if that's a comment on sort of the market share growth that you were assuming at that time, you know maybe the starting point on market share is a little bit different because of the decline in the market. We've just had in the past year.
Speaker #6: As we signaled with the sort of up and down version of the scenarios . So tried to give a middle of the road view on on where we think it's going to end up overall .
Or just anything else you can kind of give us.
Speaker #6: You know , I think we're we're being successful . We're seeing the stabilization . I think we're getting close to the bottom . The real question comes when does when does the turn happen ?
What you think may be a little structurally different.
Leading to that level of profitability at one to $1 1 million. Thank you.
Speaker #6: Sooner , you know , the sooner the better . We're ready to go . But we need a little cooperation .
Yeah. It's a good question, although I guess I'll start by pointing out it's a bit of apples and oranges. So investor day, obviously, we're laying out our plans for the future based on where we were in the day.
Peter Jackson: We're ready to go, but we need a little cooperation.
Speaker #8: Yeah . Nope . Absolutely . Makes sense . And so thank you for that . So then the other one I guess just sticking with that slide , I wanted to ask on the normalized EBITDA guide .
[Analyst]: Absolutely makes sense. Thank you for that. Just sticking with that slide, wanted to ask on the normalized EBITDA guide. Obviously it jumps out a little that it's a different number than what you gave at the investor day a couple years ago. I guess the revenue number would look to be the main difference there. I'm wondering if that's a comment on sort of the market share growth that you were assuming at that time, maybe the starting point on market share is a little bit different because of the decline in the market we've just had in the past year or just anything else you can kind of give us on what you think may be a little structurally different, leading to that level of profitability at $1 million to $1.1 million. Thank you.
But initiatives productivity M&A, all the things that we outlined in that in that meeting. This is simply an attempt to say based on where we are in 2025 and some basic level of assumptions about what we think is going to play out over the next year in terms of back if we saw if we magically made this thing can go back to norm.
Speaker #8: So obviously it jumps out a little that it's a different number than what you gave at the Investor Day . A couple of years ago .
Speaker #8: I guess , you know , the revenue number would look to be the main difference there . So I'm wondering if that's a comment on sort of the market share growth that you were assuming at that time .
We will over the next year.
What would the numbers look like so in light of that Big difference is the market as you pointed out dramatically different the average size of the home the average content of the home is markedly different.
Speaker #8: Maybe the starting point on market share is a little bit different because of the decline in the market . We've just had in the past year or , you know , just anything else you can kind of give us on what you think may be a little structurally different , you know , leading to that level of profitability at 1 to 1.1 million .
Your point about share that's a fair comment and I think the impact on deleveraging the business.
Given some of those dynamics in terms of the overall size of the market. That's in play in here too, but don't forget I mean, this is not apples to apples in terms of the and Europe Investor day, either so there's a there's a timeline just our metrics snap the line difference here.
Speaker #8: Thank you .
Speaker #6: Yeah , it's a good question . Although I guess I'll start by pointing out it's a bit of apples and oranges . So Investor Day obviously we're laying out our plans for the future based on where we were in the day .
Peter Jackson: Yeah, it's a good question. I guess I'll start by pointing out it's a bit of apples and oranges. Investor Day, obviously we're laying out our plans for the future based on where we were in the day, but initiatives, productivity, all the things that we outlined in that meeting.
Speaker #6: But initiatives , productivity , M&A , all the things that we outlined in that , in that meeting , this is simply an attempt to say based on where we are in 2025 and some basic level assumptions about what we think is going to play out over the next year in terms of back , if we saw if we magically made this thing go back to normal over the next year , what would the numbers look like ?
Hopefully this this is a good reference point for you to see look this market is weak it's not normal for us to be at the level. We are today and it doesn't take much in terms of recovery to get us to the numbers that are meaningfully better based on the outputs of what this business is capable.
[Analyst]: The.
Peter Jackson: This is simply an attempt to say based on where we are in 2025 and some basic level assumptions about what we think is going to play out over the next year. In terms of back, if we saw, if we magically made this thing go back to normal over the next year, what would the numbers look like? In light of that, big differences, the market, as you pointed out, dramatically different. The average size of the home, the average content of the home is markedly different. Your point about share, that's a fair comment. I think the impact on deleveraging a business given some of those dynamics in terms of the overall size of the market, that's in play in here too. Don't forget, this is not apples to apples in terms of the end here of investor day either.
Sure.
We're ready for that turn we're excited about it to come but that's that's maybe the best summary of the differences.
Speaker #6: So in light of that , big differences , the market , as you pointed out , dramatically different . The average size of the home , the average content of the home is markedly different .
Yes, no I appreciate all of that so thanks for the color there Peter and good luck guys.
Yes.
Speaker #6: Your point about share ? That's a fair comment . And I think the impact on deleveraging of business , given some of those dynamics in terms of the overall size of the market , that's in play in here , too .
We'll take our next question from John Lovallo with UBS. Your line is open.
Good morning, guys. Thanks for taking my call my questions as well. The first one is the midpoint of the outlook implies <unk> sales of about 342 billion adjusted EBITDA of about $341 million, which would imply a sequential or quarter over quarter decremental I've only about 18.
Speaker #6: But don't forget , I mean , this is not apples to apples in terms of the end year of investor day either . So there's a there's a timeline , just a metric snap the line difference here .
Peter Jackson: There's a timeline, just a metric snap the line difference here. Hopefully this is a good reference point for you to see. Look, this market is weak. It's not normal for us to be at the level we are today. It doesn't take much in terms of recovery to get us to numbers that are meaningfully better based on the outputs of what this business is capable of. We're ready for that turn. We're excited about it to come. That's maybe the best summary of the differences.
Speaker #6: Hopefully this this is a good reference point for you to see . Look , this market is weak . It's not normal for us to be at the level we are today .
Percent of year over year would be about 38%, but both of these are better than what we've experienced over the past few quarters. So can you help us just understand what's driving the improvement there.
Speaker #6: And it doesn't take much in terms of recovery to get us to numbers that are meaningfully better based on the outputs of what this business is capable of.
John Thanks for the question.
Speaker #6: We're ready for that turn . We're excited about it to come . But that's that's maybe the best summary of the differences . There .
It's I would say the general.
The essence of your comment is is reasonable we don't disagree with it I think that there is a couple of factors at play you've got a little bit of it.
Speaker #8: Yep . No . Appreciate all that . So thanks for the color there Peter . And good luck guys .
[Analyst]: Yeah, appreciate all that. Thanks for the color there, Peter, and good luck guys.
A lapping effect, where the comps year over year or are less dramatically down.
Speaker #4: We'll take our next question from John Lovallo with UBS . Your line is open .
Operator: We'll take our next question from John Lovallo with UBS. Your line is open.
But we're still in a market that's challenged feet onto the things out of that yes. It is.
Speaker #9: Good morning guys . Thanks for taking my call . My questions as well . The first one is the midpoint of the outlook implies for Q sales of about 3.42 billion adjusted EBITDA of about 341 million , which would imply a sequential or quarter over quarter decremental of only about 18% .
[Analyst]: Good morning, guys. Thanks for taking my questions as well. The first one is the midpoint of the outlook implies Q4 sales of about $3.42 billion, adjusted EBITDA of about $341 million, which would imply a sequential or quarter over quarter decremental of only about 18%. I think year over year would be about 38%. Both of these are better than what we've experienced over the past few quarters. Can you help us just understand what's driving the improvement there?
Peter said in his prepared remarks, Q4 is a seasonally lower quarter for us so sequentially, we will see a step down from Q3.
That's expected as Peter mentioned, the lapping in the year over year. We are closing the gap. So we saw Q4 last year, starting to compress and we're now lapping getting closer to that lapping period.
Speaker #9: I think year over year would be about 38% . But both of these are better than what we've experienced over the past few quarters .
Speaker #9: So can you help us just understand what's driving the the improvement there ?
Okay understood and then the $3 four 2 billion.
Implied fourth quarter revenue would be down about 11% year over year can you help us just kind of bridge that 11% in terms of organic sales M&A.
Speaker #6: John , thanks for the question . It's I would say the general the essence of your comment is , is reasonable . We don't disagree with it .
Peter Jackson: John, thanks for the question. I would say the general, the essence of your comment is reasonable. We don't disagree with it. I think that there's a couple of factors at play. You've got a little bit of a lapping effect where the comps year over year are less dramatically down. We're still in a market that's challenged. Pete, I don't know if you have anything to add on that.
Speaker #6: I think that the there's a couple of factors at play . You've got a little bit of a of a lapping effect where the comps year over year are , are less dramatically down , but we're still in a , in a market that's , that's challenged .
<unk> and within the organic piece, what are the expectations for single family versus multifamily versus R&R.
So the M&A will continue to be a good boost for us as we have shared in our sales growth are really every quarter and in our assumptions, it's roughly 5%. So that'll continue.
Speaker #6: Pete , I don't know if you have anything to add on that .
Speaker #7: Yeah . And as Peter said in his prepared remarks , Q4 is a seasonally lower quarter for us . So sequentially , we will see a step down from Q3 that that's expected .
Pete Beckmann: Yeah. As Peter said in his prepared remarks, Q4 is a seasonally lower quarter for us. Sequentially, we will see a step down from Q3. That's expected. As Peter mentioned on the lapping in the year over year, we are closing the gap. We saw Q4 last year starting to compress and we're now lapping, getting closer to that lapping period.
The margin pressure and headwinds that all.
Show up in the form of pricing will continue to be a headwind in Q4, but as we outlined maybe.
Speaker #7: As Peter mentioned , on the lapping in the year over year , we are closing the gap . So we saw Q4 last year starting to compress , and we're now lapping , getting closer to that lapping period .
Maybe a little less significant and we were getting closer to what we feel is a bottom.
And then on the organic side.
Speaker #9: Okay . Understood . And then the 3.42 billion in implied fourth quarter revenue would be down about 11% year over year . Can you can you help us just kind of bridge that 11% in terms of organic sales , M&A , commodities and within the organic piece , what are the expectations for single family versus multifamily versus R&R ?
[Analyst]: Okay, understood. The $3.42 billion in implied fourth quarter revenue would be down about 11% year over year. Can you help us just kind of bridge that 11% in terms of organic sales, M&A, commodities? Within the organic piece, what are the expectations for single-family versus multifamily versus R&R?
We still have a starts assumption out there that's 929.
928000 single family starts, which as step downs on a quarterly basis.
It's still up mid teens double digit decline in the fourth quarter. So that that's really the big makeup and the headwind that we're seeing in the numbers.
Thank you guys.
Speaker #7: So the M&A will continue to be a good boost for us as we've shared in our sales growth . Really every quarter and in our assumptions .
Pete Beckmann: M&A will continue to be a good boost for us as we've shared in our sales growth really every quarter, and in our assumptions it's roughly 5%. That'll continue. The margin pressure and headwinds that'll show up in the form of pricing will continue to be a headwind in Q4, but as we outlined, maybe a little less significant. We are getting closer to what we feel is a bottom. On the organic side, we still have a starts assumption out there that's 920,000 single-family starts, which has step downs on a quarterly basis. Still a mid-teens double-digit decline in the fourth quarter. That's really the big makeup and the headwind that we're seeing in the numbers.
Thanks, John.
We will take our next question from Charles <unk> with Goldman Sachs. Your line is open.
Speaker #7: It's roughly 5% . So that'll continue the the margin pressure and headwinds that'll show up in the form of pricing will continue to be a headwind in Q4 .
Good morning, everyone and thank you for taking my question.
Good morning, first I just want to go back to the scenarios I just wanted to understand how the multifamily plays that I think multifamily starts are up 17% year over year to date through August So I think the mix it skewed towards larger building, which are I think are outside of your scope, but then more broadly how do you think about the multifamily recovery.
Speaker #7: But as we outlined , maybe a little less significant , and we're getting closer to what we feel is a bottom . And then on the organic side , we still have a starts assumption out there .
We've been embedding in your scenarios for next year, given the Green shoot noted in your prepared remarks, and what could that mean for the margin considering a larger amount of value added.
Speaker #7: That's 920 , 920,000 single family starts , which has step downs on a quarterly basis . So still a mid-teens double digit decline in the fourth quarter .
In that segment.
Yeah.
Yeah multifamily right now is 8% to 9% of ourselves we don't have a call. It a swim lane or a row called out for multifamily.
Speaker #7: So that that's really the big makeup and the headwind that we're seeing in the numbers .
But in 2025, we were calling down mid teens for multifamily in 2026, we're looking at a flat environment for us even though the overall starts number is showing a recovery.
Speaker #9: Thank you guys .
[Analyst]: Thank you, guys.
Speaker #6: Thanks , John .
Peter Jackson: Thanks John.
Speaker #4: We'll take our next question from Charles . Perrone Pica with Goldman Sachs . Your line is open .
Operator: We'll take our next question from Charles Perron-Piche with Goldman Sachs. Your line is open.
Just that lag in expectation of the.
Speaker #8: Good morning everyone . Thank you for taking my question .
[Analyst]: Good morning, everyone. Thank you for taking my question.
Market that we participate in.
Speaker #10: First , I just want to go back to the scenarios . I just want to understand how multifamily plays in it . I think multifamily starts are up 17% year over year today through August .
Heather Kos: First.
Our stories with structures and below.
[Analyst]: I just want to go back to the scenarios. I just want to understand how multifamily plays in it. I think multifamily starts are up 17% year over year today through August. I think the mix is skewed towards larger buildings which I think are outside of your scope. More broadly, how do you think about this multifamily recovery? How is it embedding in your scenarios for next year given the green shoot noted in your prepared remarks? What could that mean for the margin considering the larger amount of value-added content in that segment?
<unk>.
It's going to be more of a flattish because of the time it takes to transition that start into our first sale for us.
Speaker #10: Do I think the mix is skewed towards larger building ? Which are I think are outside of your scope , but so more broadly , how do you think about this multifamily recovery ?
So that's that's the expectation of multifamily for 2027.
Okay Thats good color and then understanding the market dynamics that are outside your control, but you've done a great job the last few years.
Speaker #10: How is it embedded in your scenarios for next year , given the green shoot ? Noted in your prepared remarks ? And what could that mean for the margin , considering the larger amount of value added content in that segment ?
With your cost structure to protect profitability I guess against the scenario that you presented today are you considering incremental productivity actions as an asset and maybe taking a step back can you talk about your ability to service demand should we see a faster than expected pick up and start activity going forward.
Speaker #7: Yeah, multifamily right now is 8% to 9% of our sales. We don't have a, call it a swim lane or a ROWE, called out for multifamily.
Pete Beckmann: Yeah, multifamily right now is 8% to 9% of our sales. We don't have a, call it a swim lane or a row called out for multifamily. In 2025 we were going down mid teens for multifamily. In 2026 we're looking at a flat environment for us. Even though the overall starts number is showing a recovery, it's just that lag and expectation of the market that we participate in in that four stories wood structures and below, it's going to be more of a flat ash because of the time it takes to transition that start into a first sale for us. That's the expectation of multifamily for 2026.
Speaker #7: But in 2025 , we were calling down mid-teens for multifamily . In 2026 , we're looking at a flat environment for us , even though the overall starts number is showing a recovery .
Yeah no good questions.
The storyline around our businesses one of them day to day management.
Speaker #7: It's just lag and expectation of the market that we participate in . In that four stories would structures and below us , it's going to be more of a flattish because of the time it takes to transition that start into a first sale for us .
Speaker #7: It's just lag and expectation of the market that we participate in . In that four that So that's that's the expectation of multifamily for 2026 .
Week to week quarter by quarter at the location level right. Yes, we are a national player we coordinated as a team, but we run this business in a very entrepreneurial way based on the local market demand. So what you've seen us do over.
Well over the long term, but particularly in the last year, where we've seen headwinds on the sales line. We've looked at it at the local market how do we make sure we're able to meet our customers needs and leveraging our existing footprint and the best way possible that means really managing the variable portion of the spend.
Speaker #10: Okay . That's good color . And then understanding the market dynamics are outside your control . But you know you've done a great job in the last few years to adjust cost structure to protect profitability .
[Analyst]: Okay, that's good color. Understanding the market dynamics are outside your control, you've done a great job in the last few years here at the cost structure to protect profitability, I guess against the scenarios that you presented today. Are you considering incremental productivity actions as an asset, and maybe taking a step back, can you talk about your ability to service demand? Should we see a factor and expect a pickup in start activity going forward?
Speaker #10: I guess against the scenarios that you presented today , are you considering incremental productivity actions as an asset and maybe taking a step back ?
Making sure we are aligning the hours.
The location footprint and the trucks and all of it to what our customers really need that that wont change that will continue to be executed, meaning we will continue to react at that local market and youll continue to see that.
Speaker #10: Can you talk about your ability to service demand ? Should we see a faster than expected pickup in start activity going forward ?
Speaker #6: Yeah . No good questions . The the storyline around our business is one of day to day management week to week , quarter by quarter at the location level , right ?
Peter Jackson: Yeah, no, good questions. The storyline around our business is one of the day-to-day management, week to week, quarter by quarter at the location level.
We have our foot on the gas when it comes to productivity.
Teams are engaged in a lot of different actions to try and make this business incrementally better this year than it was last year.
Speaker #6: Yes . We're a national player . We coordinate as as a team . But we run this business in a very entrepreneurial way based on the local market demand .
Pete Beckmann: Right?
Peter Jackson: Yes. We're a national player, we coordinate as a team, but we run this business in a very entrepreneurial way based on the local market demand. What you've seen us do over the long term, but particularly in the last year where we've seen headwinds on the sales line, we've looked at it at the local market. How do we make sure we're able to meet our customers' needs and leverage our existing footprint in the best way possible? That means really managing the variable portion of the spend, making sure we're aligning the hours and the location footprint and the trucks and all of it to what our customers really need. That won't change. That will continue to be executed, meaning we will continue to react at that local market and you'll continue to see that we have kept our foot on the gas.
Some of that candidly has been overwhelmed by the deleveraging, even though we're more efficient on a per unit basis. The lack of units in the overhead that we.
Speaker #6: So what you've seen us do over well over the long term , but particularly in the last year where we've seen headwinds on the sales line , we've looked at it at the local market .
Sustain is a business of our scale means that some of our productivity numbers have gone Brad even though the teams are doing good things and that goes I think to your last part of your question, which is we are going to be exceptionally well positioned to take advantage of growth because what we've been able to do in terms of the work that we do at local level.
Speaker #6: How do we make sure we're able to meet our customers needs and leveraging our existing footprint in the best way possible ? That means really managing the variable portion of the spend , making sure we're aligning the hours and the the location footprint and the trucks and all of it to what our customers really need .
Is protect the capacity availability, yes.
Speaker #6: That, that won't change. That will continue to be executed. Meaning we will continue to react at that local market, and you'll continue to see that we have kept our foot on the gas when it comes to productivity.
Yes of course, we will have some re hiring to do but making sure that we have kept our ability to serve at a higher level. While at the same time scaling operations in the near term.
It's something that we're very good at and I think is going.
Peter Jackson: When it comes to productivity, the teams are engaged in a lot of different actions to try and make this business incrementally better this year than it was last year. Some of that, candidly, has been overwhelmed by the deleveraging. Even though we're more efficient on a per unit basis, the lack of units and the overhead that we sustain as a business of our scale means that some of our productivity numbers have gone red even though the teams are doing good things. I think that goes to your last part of your question, which is we are going to be exceptionally well positioned to take advantage of growth because what we've been able to do in terms of the work that we do at the local level is protect the capacity availability.
Speaker #6: The teams are engaged in a lot of different actions to try and make this business incrementally better this year than it was last year .
Going to be evident was evident during sort of the COVID-19, Despite where we were better positioned and better able to respond and everybody else I think that's even going to be more true as we make this next turn because of the thoughtful investments we've made around those markets, where we knew we ran out of capacity lifestyle right. We've learned from.
Speaker #6: Some of that , candidly , has been overwhelmed by the deleveraging , even though we're more efficient on a per unit basis . The lack of units in the overhead that we sustain as a business of our scale means that some of our productivity numbers have gone red , even though the teams are doing good things and that goes , I think , to your last part of your question , which is we are going to be exceptionally well positioned to take advantage of growth because what we've been able to do in terms of the work that we do with that local level , is protect the capacity , availability .
Those situations and made sure that we're going to be ready in the next turn around key markets and key opportunity area. So excited about it I think it's going to be really good for this business.
Like I said before we just need a little momentum coming our way.
Okay. That's good color Peter Thank you for everything and good luck with the next quarter.
Speaker #6: Yes , of course we'll have some rehiring to do , but making sure that we have kept our ability to serve at a higher level while at the same time scaling operations in the near term , it's something that we're very good at .
Thank you Charles I appreciate it.
Peter Jackson: Yes, of course we'll have some rehiring to do, but making sure that we have kept our ability to serve at a higher level while at the same time scaling operations in the near term is something that we're very good at and I think is going to be evident. It was evident during the COVID spike where we were better positioned and better able to respond than everybody else. I think that's even going to be more true as we make this next turn because of the thoughtful investments we've made around those markets where we knew we ran out of capacity last time. We've learned from those situations and made sure that we're going to be ready in the next turnaround. Key markets and key opportunity areas. I'm excited about it. I think it's going to be really good for this business.
We'll move next to Mike Dahl with RBC capital markets. Your line is open.
Good morning, Thanks for taking my questions.
Speaker #6: And I think is going to be evident . Was evident during sort of the Covid spike where we were better positioned and better able to respond than everybody else .
Peter it's early.
Absolutely impressive how stable the gross margins have been year to date, obviously step down versus last year about 35 to $37 84.
Speaker #6: I think that's even going to be more true as we make this next turn , because of the thoughtful investments we've made around those markets where we knew we ran out of capacity last time .
Pretty remarkable stability above 30.
Two part question here on the margin I guess it seemed like the margin came in better than your expectations in <unk>. So can you comment on.
Speaker #6: Right . We learned from those situations and made sure that we're going to be ready in the next turn around . Key markets and key opportunity areas .
What drove that and then with your fourth quarter guidance at the midpoint, implying kind of a 100 basis point.
Speaker #6: So excited about it . I think it's going to be really good for this business . Like I said before , we just need a little momentum coming our way .
Peter Jackson: Like I said before, we just need a little momentum coming our way.
<unk> stepped down is that something you're already seeing in your exit rate into the fourth quarter or or is there kind of a buffer against the <unk>.
Speaker #10: Okay . That's good color Peter . Thank you for everything and good luck with the next quarter .
[Analyst]: Okay, that's good color. Peter, thank you for everything and good luck with the next quarter.
Speaker #6: Thank you Charles . Appreciate it .
Peter Jackson: Thank you, Charles. Appreciate it.
Speaker #4: We'll move next to Mike Dahl with RBC Capital Markets . Your line is open .
Operator: We'll move next to Michael Dahl with RBC Capital Markets. Your line is open.
Softening its competitive maybe things continue to weaken through the quarter.
And you can address both of us that'd be great.
Speaker #11: Good morning . Thanks for taking my questions Peter . It's really actually impressive how stable the gross margins have been . Year to date .
[Analyst]: Good morning. Thanks for taking my questions, Peter. It's really actually impressive how stable the gross margins have been year to date. Obviously stepped down versus last year, but 30.5%, 30.7%, 30.4%, pretty remarkable stability above 30%, I guess. I've got a two part question here on the margin. It seemed like the margin came in better than your expectations in Q3. Can you comment on what drove that? With your fourth quarter guidance still at the midpoint, implying kind of 100 basis point sequential step down, is that something you're already seeing in your exit rate into the fourth quarter or is there kind of a buffer against, you know, the market softening? It's competitive. Maybe things continue to weaken through the quarter. If you could address both of those, that would be great.
Yeah.
Thanks, Mike good questions. So with respect to the margin performance in Q3.
Speaker #11: Obviously step down versus last year . About 30.5 30.7 30.4 . Pretty pretty remarkable stability above 30 . I guess I've got a two part question here on the margin .
We did outperform what we had outlined we did see a sequential step down it just wasn't as significant as what we had originally thought.
Shared on the last call.
Some of the outperformance is due to us buying better and us managing through our supply chain initiatives.
Speaker #11: I guess it seemed like the margin came in better than your expectations in Q3. So, can you comment on what drove that?
It has really helped and bolsters. So we have a professional team that continues to look for.
Speaker #11: And then with your fourth quarter guidance still at the midpoint , implying kind of 100 basis point sequential step down , is that something you're already seeing in your exit rate into the fourth quarter or or is there kind of a buffer against the market softening its competitive ?
Way to to maximize and improve our bias so that was.
We're contributing the outperformance in Q3.
With respect to Q4, we're still outlining that a court.
Stepped down for that call it exit quarter rate.
Speaker #11: Maybe things continue to weaken through the quarter that if you could address both of those , that would be great .
We are seeing continued pressure.
Across a weak market that we're operating in with the team across the business is doing exceptionally well managing pricing and being extremely disciplined and.
Speaker #7: Thanks , Mike . Good questions . So with respect to the margin performance in Q3 , we did outperform what we had outlined .
Pete Beckmann: Thanks, Mike. Good questions. With respect to the margin performance in Q3, we did outperform what we had outlined. We did see a sequential step down. It just wasn't as significant as what we had originally thought and shared on the last call. Some of the outperformance is due to us buying better and us managing through our supply chain initiatives. That has really helped and bolstered. We have a professional team that continues to look for the way to maximize and improve our bias. That was what we're contributing, the outperformance in Q3. With respect to Q4, we're still outlining that. I'll call it step down for the exit quarter rate. We are seeing continued pressure across a weak market that we're operating in.
Getting.
Getting the sale at our level that we feel is appropriate for what we're providing from a service standpoint.
Speaker #7: We did see a sequential step down . It just wasn't as significant as what we had originally thought and shared on the last call .
It is a weak market that we're operating in so that competitive dynamic is real and we're operating in navigating extremely well.
Speaker #7: Some of the outperformance is due to us buying better and us managing through our supply chain initiatives . That has really helped in bolster .
Okay. That's helpful. Thank you my second question just understanding.
Speaker #7: So we have a professional team that continues to look for the way to to maximize and improve our bias . So that was what we're contributing .
And that what you're.
Putting out there today.
Normalized it's not necessarily apples to apples versus Investor day, I wanted to drill down on theirs.
Speaker #7: The outperformance in Q3 with respect to Q4 . We're still outlining that . I'll call it a step down for the call . It exit quarter rate .
It seems to be an implication that there is kind of that lower revenue per start dynamic happening in and.
Speaker #7: We are seeing continued pressure across a weak market that we're operating in with a team across the business is doing exceptionally well managing pricing and being extremely disciplined and getting getting the sale at a level that we feel is appropriate for what we're providing from a service standpoint .
I think there's kind of a debate on.
Over some period of time is the content and size of home at least is that a cyclical dynamic as the structural dynamic if you're calling this kind of normalized are you taking a different view on you think that some of those pressures you've seen in the last couple of years that that is kind of.
Pete Beckmann: The team across the business is doing exceptionally well, managing pricing and being extremely disciplined and getting the sale at our level that we feel is appropriate for what we're providing. From a service standpoint, it is a weak market that we're operating in. That competitive dynamic is real and we're operating and navigating extremely well.
Speaker #7: It is a weak market that we're operating in so that competitive dynamic is real and we're operating in navigating extremely well .
That is the new normal even in kind of a recovery you would still expect those headwinds to persist.
Yeah.
Yes so.
Speaker #11: Okay, thank you. My second question is just to understand your position that what you're putting out there today is normalized. It's not necessarily apples to apples versus Investor Day.
[Analyst]: Okay, that's helpful. Thank you. My second question, just understanding your position that what you're putting out there today is normalized. It's not necessarily apples to apples versus investor day. I want to drill down on, there still seems to be an implication that there's kind of that lower revenue per start dynamic happening. I think there's kind of a debate on over some period of time, is the content and size of home at least, is that a cyclical dynamic, is it a structural dynamic? If you're calling this kind of normalized, are you taking a different view on, you know, you think that some of those pressures you've seen the last couple of years, that that is kind of, that is the new normal, even in kind of a recovery, you'd still expect those headwinds to persist?
I guess, maybe the if I understand the correct the question correctly.
We're not trying to advertise or predict.
<unk> back to the old size and complexity at all we're just sort of acknowledging it where it is and drawing the line out from here could there be some recoveries sure yeah. Yeah. No. No question I think the challenge today, though to be honest, Mike is affordability is a real there's a real thing right. It's not a made up.
Speaker #11: I want to drill down on there's there's still seems to be an implication that there's kind of that lower revenue per start dynamic happening .
Speaker #11: And , you know , I think there's kind of a debate on over some period of time is the content and size of home at least .
Headline its what people are feeling and that's going to take some time to recover back to maybe where it was five years ago. So with that in mind I think the step off point on the normalized within that scenario chart is a real good sense of where we are today.
Speaker #11: Is that a cyclical dynamic ? Is it a structural dynamic ? If you're calling this kind of normalized , are you taking a different view on you think that some of those pressures you've seen in the last couple of years that that is kind of that is the new normal , even in kind of a recovery , you'd still expect those headwinds to persist .
I think there is potential upside on the starts number I think there is realistic expectation that we should see upside on the commodity number when you look at the results of some of these mills or their software and right now at these prices. So I think there's a lot that would indicate we can do better than normal.
Speaker #6: Yeah . So I guess maybe the if I understand the the question correctly , we're not trying to . Advertise or predict or bounce back to the old size and complexity of the home .
Peter Jackson: Yeah, so I guess maybe if I understand the question correctly, we're not trying to advertise or predict or bounce back to the old size and complexity of the home. We're just sort of acknowledging it where it is and drawing the line out from here. Could there be some recovery? Sure, yeah. No question. I think the challenge today though, to be honest, Mike, is affordability is a real thing. Right. It's not a made up media headline. It's what people are feeling and that's going to take some time to recover back to maybe where it was five years ago. With that in mind, I think the step off point on the normalized within that scenario chart is a real good sense of where we are today. I think there's potential upside on the starts number.
But I also don't want to.
I don't want to signal the wrong message to the broader investor community about what that what that says that is just historical averages and kind of based on where we are today and to your point, where we are today is really size and complexity of the home that's what's in there.
Speaker #6: We're just sort of acknowledging it where it is and drawing the line out from here . Could there be some recovery ? Sure .
Speaker #6: Yeah , yeah . No , no question . I think the challenge today , though , to be honest , Mike , is affordability is a real is a real thing , right ?
Speaker #6: It's not a made up . Media headline , it's what people are feeling . And that's going to take some time to recover back to to maybe where it was five years ago .
Okay, Yeah that makes sense. Thanks.
We'll move next to race Jetro, such with Bank of America Your.
Your line is open.
Hi, good morning, Thanks for taking my questions.
Hello, Greg.
<unk>.
You commented earlier that the market share was.
It was flat to up slightly in the quarter.
Peter Jackson: I think there's realistic expectation that we should see upside on the commodity number. I mean you look at the results of some of these mills, boy, they're suffering right now at these prices. I think there's a lot that would indicate we can do better than normal. I also don't want to signal the wrong message to the broader investor community about what that says. That is just historical averages and kind of based on where we are today. To your point, where we are today is really size and complexity of the home. That's what's in there.
I'm wondering if you could just remind us on what you saw in terms of market share through the year than the broader competitive environment and then what do you like what's embedded in the 2026.
Sort of outlook.
Or scenarios in terms of the market share assumption.
Yes.
Thanks for the question so.
With respect to the market share and we've provided in the past a bridge of our sales versus starts on a lag basis and in the prepared remarks, we remind everyone that it's roughly a three months lag.
[Analyst]: Okay, yeah, that makes sense. Thanks.
Operator: Rafe Jadrosich with Bank of America. Your line is open.
So when you look at the quarter as we talked about.
Flat to up a little bit from a share standpoint, if you look back to.
[Analyst]: Hi, good morning. Thanks for taking my questions. You commented earlier that the market share was flat up slightly in the quarter. I'm wondering if you could just remind us on what you saw in terms of market share through the year and the broader competitive environment, and then what are you, like, what's embedded in the 2026 outlook or scenarios in terms of the market share assumption.
Q2 starts they were down year over year about 8%.
We're still seeing a little bit of headwinds from smaller home and complexity, it's pretty modest.
A little more on the cost basis side of things and when you factor those structural adjustments in.
We're at a flat to up slightly.
When we zoom out for the year to date, where we are year to date, it's pretty flat its pretty neutral.
Starts are down about I would say, 5% on a lag basis versus our 8% on sales and then taken into account some of those same structural adjustments.
Pete Beckmann: Yeah, thanks for the question, Ray. With respect to the market share, we've provided in the past a bridge of our sales versus starts on a lag basis. In the prepared remarks, we remind everyone that it's roughly a three-month lag. When you look at the quarter, as we talked about, flat to up a little bit from a share standpoint. If you look back to Q2 starts, they were down year over year about 8%. We're still seeing a little bit of headwinds from the smaller home and complexity, it's pretty modest, but a little more on the cost basis side of things. When you factor those structural adjustments in, we're at a flat to up slightly. Now, when we zoom out for the year to date, where we are year to date, it's pretty flat, it's pretty neutral.
Comes out pretty flat.
Again, a testament to the team and how well we're managing our price in this weak weak market and maintaining the share level that we feel is appropriate.
That's really the basis for why.
Some of our comments are around we think we're getting bouncing around the bottom here.
Because of that comment combine sort of output, we see stabilization of margin stabilization and share which sort of in my in my mind indicates this is kind of where it wants to be right. Now now that has tremendous opportunity for us obviously as the market starts to pick up a little bit, especially given our.
Our available capacity and scale, but that's that's sort of the logic around that.
Pete Beckmann: Starts are down about, I would say, 5% on a lag basis versus our 8% on sales. Taking into account some of those same structural adjustments, it comes out pretty flat. Again, a testament to the team and how well we're managing our price in this weak market and maintaining a share level that we feel is appropriate.
That's really really helpful and then.
Just on the value add on a year over year basis has been down by more than number over the last few quarters that spreads is that just the different end market exposure thats driving that or is that competitive dynamics and where I think the longer term goal is to grow value assets sort of outpaced co.
Peter Jackson: I think that's really the basis for why some of our comments are around. We think we're getting to bouncing around the bottom here because of that combined sort of output. We see stabilization in margins, stabilization in share, which in my mind indicates this is kind of where it wants to be right now. That has tremendous opportunity for us obviously as the market starts to pick up a little bit, especially given our available capacity and scale. That's sort of the logic around that.
Oddity.
When could that start to get back to a point where value is outpacing.
<unk> bouncing around the bottom here because of that comp combined sort of output, we see stabilization in margins stabilization and share which sort of in my in my mind indicates this is kind of where it wants to be right. Now now that has tremendous opportunity for us obviously is the <unk>.
Yeah, I think what youre seeing mostly in the value add is from the multifamily side of the business and that year over year lapping that we've outlined.
Remember that multifamily is much higher index towards the value added products.
We saw the trust stepping down.
And that's been known and we've been communicating but the millwork is also now filling it later in the build cycle from a multi family standpoint, and so that's also in our value added products. So you'll see both of those from a year over year basis.
It starts to pick up a little bit, especially given our available capacity and scale, but that's that's sort of the logic around that.
[Analyst]: It's really, really helpful. Just on the value add, on a year over year basis, it has been down by more than lumber over the last few quarters. That spread, is that just the different end market exposure that's driving that? Is that competitive dynamics? I think the longer term goal is for value adds to sort of outpace commodity. When could that start to get back to a point where value add is outpacing?
That's really really helpful.
And then.
Just on the value add on a year over year basis has been down by more than number over the last few quarters that spread is that just the differ.
The largest contributor to that debt down percentage.
So theres no Theres no question Theres pressure across the board I want to be real clear about that.
A different end market exposure, that's driving that is that competitive dynamics and I think the longer term goal is to fair value assets sort of outpace commodity.
<unk>.
Sales volume out of any of our value add facilities by virtue of what it is that we do in.
Install we invested and overhead in order to create efficiency when you put product through the factory that's.
When could that start to get back to a point where value is outpacing.
Pete Beckmann: Yeah, I think what you're seeing mostly in the value add is from the multifamily side of the business and that year over year lapping that we have outlined. Remember that multifamily is much higher index toward the value-added products. We saw the truss stepping down, and that's been known and we've been communicating. The millwork is also now feeling it later in the build cycle from a multifamily standpoint, and that's also in that value-added product. You'll see both of those from a year over year basis as the largest contributor to that down %.
Yeah, I think what youre seeing mostly in the value add is from the multifamily side of the business and that year over year lapping that we've outlined for.
It's a tough environment when it comes to the competitive world and making sure. Those facilities are full I think we are doing an exceptional job I'm very proud of the team, but there is definitely a headwind there and by the way there is some pass through product right. There are some engineered wood in there that they are also faced a very similar situation in terms of headwinds on the top.
Remember that multifamily is much higher index towards the value added products.
We saw that trust stepping down.
And that's been known and we've been communicating but the millwork is also now filling that later in the build cycle from a multifamily standpoint, and so that's also in our value added products. So youll see both of those from a year over year basis.
Thank you that's very helpful.
Okay.
We will take our next question from David Manthey with Baird. Your line is open.
The largest contributor to that debt down percentage.
Peter Jackson: There's no question there's pressure across the board like that. I want to be just real clear about that. Taking sales volume out of any of our value-added facilities, by virtue of what it is that we do, right, we've invested in overhead in order to create efficiency. When you put product through the factory, that's a tough environment when it comes to the competitive world and making sure those facilities are full. I think we're doing an exceptional job. I'm very proud of the team. There is definitely headwind there. By the way, there is some pass-through product. There's a mentioned engineered wood in there that they've also faced a very similar situation in terms of headwinds on the team problem.
So theres no Theres no question Theres pressure across the board that I.
Yeah. Thank you good morning, guys. It really opens the floodgates here with this 26 scenario data I would just say.
I wanted to be real clear about that.
<unk>.
But as we look at that data if we go from the 2025 mid point to the normalized mid point it looks like a contribution margin of a little over 20%.
Sales volume out of any of our value add facilities by virtue of what it is that we do.
Install we've invested and overhead in order to create efficiency when you put product through the factory. That's that's a tough environment. When it comes to the competitive world and making sure. Those facilities are full I think we're doing an exceptional job I'm very proud of the team, but there is definitely headwind there and by the way.
And I just wanted to check with you again, if we think about long term kind of secular or are you still thinking contribution margins.
On volume would be something in the high teens long term.
There is some pass through product right. There are some engineered wood in there that they are also faced a very similar situation in terms of headwinds on the top.
Well I think the contribution margin also depends on what margins are doing and where we're seeing margins go when you jump right to the normalized we moved that up to the midpoint of our long term normalized margins.
[Analyst]: Thank you. It's very helpful.
Thank you that's very helpful.
Okay.
So it looks like a bigger up in contribution from where we are today.
Operator: We'll take our next question from David Rush with Baird. Your line is open.
We will take our next question from David Manthey with Baird. Your line is open.
As you look at the midpoint in 2026.
[Analyst]: Yeah, thank you. Good morning, guys. You really opened the floodgates here with this 26 scenario data, I would just say, but as we look at that data, if we go from the 2025 midpoint to the normalized midpoint, it looks like a contribution margin of a little over 20%. I just wanted to check with you. If we think about long term kind of secular, are you still thinking contribution margins on volume would be something in the high teens long term?
Yes. Thank you good morning, guys. It really opened the floodgates here with this 26 scenario data I would just say.
And the opposite scenario, where we see a lot of that margin headwinds and pressure continuing.
A lot of it's the lapping effect of what we're seeing on the slope through 2025 so.
But as we look at that data if we go from the 2025 mid point to the normalized mid point it looks like a contribution margin of a little over 20%.
That flow through in contribution margin is largely dependent on.
Which way are margins moving.
And I just wanted to check with you. If we think about long term kind of secular are you still thinking contribution margins.
Right.
Said another way there is there is probably to normalization there is some tailwind.
On volume would be something in the high teens long term.
That number off but what I'm asking is just secular if you think about the model growing volume I think in the past you said high teens is that still in play or is that changed.
Pete Beckmann: I think the contribution margin also depends on what margins are doing and where we're seeing margins go. When you jump right to the normalize, we move that up to the midpoint of our long term normalized margins. It looks like a bigger step up in contribution from where we are today. As you look at the midpoint in 2026, that's an opposite scenario where we see a lot of that margin headwinds and pressure continuing, but a lot of it's the lapping effect of what we're seeing on the slope through 2025. That flow through and contribution margin is largely dependent on which way are margins moving.
Well I think the contribution margin. It also depends on what margins are doing and where we're seeing margins go when you jump right to the normalized we moved that up to the midpoint of our long term normalized margins.
I'm actually drawing a blank on when we said that I trusted. What you said is right I would say mid to high teens is what we've what the way I think about it.
So it looks like a bigger bump in contribution from where we are today.
Let me, let me say it a different way, we're not intending to change any of our prior messaging or change our tune on this I think this is just an attempt to give a reference.
As you look at the midpoint in 2026.
And the opposite scenario, where we see a lot of that margin headwinds and pressure continuing.
<unk> point as we think about what 2026 looks like.
A lot of it's the lapping effect of what we're seeing on the slope through 2025 so.
Yes, okay.
And.
So staying on the theme I guess as we're looking forward.
That flow through in contribution margin is largely dependent on.
Which way are margins moving.
When we look from the 25 mid point to the flat scenario of 26.
[Analyst]: Right. Said another way, there's probably to normalization. There are some tailwinds that push that number up. What I'm asking is just secular. If you think about the model growing volume, I think in the past you said high teens, is that still in play or has that changed?
Right.
Said another way there is theres probably.
To normalization there is some tailwind that pushed that number up but what I'm asking is just secular if you think about the model growing volume I think in the past you said high teens is that still in play or has that changed.
The contribution margin is actually slightly negative.
I think Peter as you said Youre talking 2025, as a whole as opposed to 2026 as a starting point of sort of where we are today or year end 2025, but just as we think about.
Peter Jackson: I'm actually drawing a blank on when we said that. I trust that what you said is right. I would say mid to high teens is what we've. The way I think about it, I don't. Let me say it a different way. We're not intending to change any of our prior messaging or change our tune on this. I think this is just an attempt to give a reference point as we think about what 2026 looks like.
I'm actually drawing a blank on what we said that I trusted. What you said is right I would say mid to high teens is what we've what the way I think about it.
Moving from here to there can you talk about the major buckets of puts and takes in the model, meaning you get productivity savings you get some glide path from acquisitions and then the offsets there would be what labor inflation occupancy freight can you just talk about the moving parts.
Let me, let me say it a different way, we're not intending to change any of our prior messaging or change our tune on this I think this is just an attempt to give a.
Reference point as we think about what 2026 looks like.
That will that will flex that up and down into 'twenty 2026, even on a flat start scenario.
[Analyst]: Yeah. Okay. Staying on this theme, I guess as we're looking forward, when we look from the 2025 midpoint to the flat scenario, 2026, you know, the contribution margin is actually, I think, slightly negative. I think, Peter, as you said, you're taking 2025 as a whole as opposed to 2026 as a starting point of sort of where we are today or year end 2025. Just so as we think about moving from here to there, could you talk about the major buckets of puts and takes in the model, meaning you get productivity savings, you get some glide paths from acquisitions. The offsets there would be what, labor, inflation, occupancy, freight. Could you just talk about the moving parts that'll flex that up and down into 2026 even on a flat start scenario?
Yes, okay.
And.
So staying on this theme I guess as we're looking forward.
Yeah, I mean, you started railroad rattling off most of them so.
When we look from the 25 mid point to the flat scenario 2006.
With the flat environment, we're jumping off of a lower point.
For 2025 than what the whole of the year is that.
The contribution margin is actually I think slightly negative.
And that that.
That was part of my other comments that I made on the margin and where the margin movement.
Peter as you said Youre talking 2025, as a whole as opposed to 2026 as a starting point of sort of where we are today or year end 2025.
We are going to expect lapping of acquisitions. So acquisitions completed to date would be reflected in that number. So there is a stub year period that would contribute.
Just as we think about.
Moving from here to there can you talk about the major buckets of puts and takes in the model, meaning you get productivity savings you get some glide path from acquisitions and then the offsets there would be what labor inflation occupancy freight could you just talk about the moving parts.
There are assumptions around inflation on costs as you can imagine of every year that would have that and some productivity to offset it but it's still in an environment, where it's flat and we're focusing a lot of our resources on the ERP deployment, so it's not going to be.
That'll that'll flex that up and down into <unk> 2026, even at a flat start scenario.
Strong as what we had.
Shared a few years ago.
So that all contributed into what we're seeing for 2020.
Pete Beckmann: Yeah, I mean you started rattling off most of them. With the flat environment, we are jumping off of a lower point for 2025 than what the whole of the year is mentioned. That was part of my other comments that I made on the margin and where the margin movement we are going to expect lapping of acquisitions. Acquisitions completed to date would be reflected in that number. There's a stub year period that would contribute. There are assumptions around inflation on costs, as you can imagine, of every year that would have that and some productivity to offset it. It's still in an environment where it's flat and we're focusing a lot of our resources on the ERP deployment. It's not going to be as strong as what we had shared a few years ago. That all contributed to what we're seeing for 2026.
Yeah, I mean, you started rail rattling off most of them. So.
Yes, I think that.
Dave That's one thing I'll emphasize is that.
With the flat environment, we're jumping off of a lower point.
Yes, the market is weak, but as we think about what we're doing as an organization to transfer. The transformation continues our investments in digital and technology are going to have tremendous pay off for the business.
For 2025 than what the whole of the year is mentioned that.
That was part of my other comments that I made on the margin and where the margin movement.
We are going to expect lapping of acquisitions. So acquisitions completed to date would be reflected in that number so theres a stub year period, they would contribute.
It's obvious that we're going to be able to empower our teams to to grow ROE efficiently to do things there.
First of all others can't do but to give us that gives us an advantage as a partner and as a provider.
There are assumptions around inflation on costs as you can imagine every year that would have that and some productivity to offset it but it's still in an environment, where it's flat and we're focusing a lot of our resources on the ERP deployment, so it's not going to be.
That we're committed to doing Theres, certainly an investment associated with that and we've been very transparent about it I think and really that will continue in 'twenty six it's just the thing.
To keep in mind as you think about those numbers.
I appreciate the color. Thank you.
As strong as what we had at <unk>.
<unk> a few years ago.
Thank you.
So that all contribute into what we're seeing for 2026.
We'll take our next question from Keith Hughes with Truest. Your line is open.
Peter Jackson: Yeah, I think that, Dave, that's one thing I'll emphasize is that yes, the market is weak, but as we think about what we're doing as an organization, the transformation continues. Our investments in digital and technology are going to have tremendous payoff for the business. It's obvious that we're going to be able to empower our teams to grow efficiently, to do things that, first of all, others can't do. That gives us an advantage as a partner and as a provider that we're committed to doing. There's certainly an investment associated with that, and we've been very transparent about it, I think. Really, that will continue in 2026. It's just a thing to keep in mind as you think about those numbers.
Yes.
Dave That's one thing I will emphasize that.
Thank you.
Adjusted for those one of those will be clearer if we look at the scenario analysis.
Yes, the market is weak, but as we think about what we're doing as an organization to transfer. The transformation continues our investments in digital and technology are going to have tremendous pay off for the business. There is it's obvious that we're going to be able to empower our teams to to grow grow efficiently to do things that.
So the middle scenario.
Swaps are single family.
Most of the numbers in that range or below what you were calling for this year.
Is it the flow through from the stores at the end of the year will be affecting that ebitdas or something else going on.
Yes. It is.
First of all others can't do but to give us that gives us an advantage as a partner and as a provider.
Similar to some of the comments are already I would say the biggest difference is around the <unk>.
We're committed to doing Theres, certainly an investment associated with that and we've been very transparent about it I think and really that will continue in 'twenty six it's just something to.
ZIP margin levels.
Where that's going to result for the full year of 26. So it's not that things are necessarily going to get a lot worse from where they are but just recognizing that they got worse through 'twenty five.
Keep in mind as you think about those numbers.
[Analyst]: I appreciate the color. Thank you.
I appreciate the color. Thank you.
Yeah.
And then just along some question.
Okay.
Operator: We'll take our next question from Keith Hughes with Truist Securities. Your line is open.
We will take our next question from Keith Hughes with Truest. Your line is open.
Always consider multifamily lower lower ticket.
Can you just give it a small unit that we were doing so much.
[Analyst]: Thank you. You may have addressed this before, but I just wanted to be clear. If we look at the scenario analysis for 2026, the middle scenario of flat single-family, most of the numbers in that range are below what you're reporting for this year. Is it the flow through from the starts at the end of the year that would be affecting that adjusted EBITDA, or is there something else going on?
Thank you.
Trustworthy complaints in a while.
Justice for those wanted to be clear if we look at the scenario analysis.
Multifamily gets back to a growth vehicle, we won't necessarily fully restored.
<unk> thousand <unk>.
<unk> scenario.
Single family.
Lessen going forward, so when single family versus what it was maybe five six years ago.
Most of the numbers in that range or below which you. According to this year.
Is it the flow through from the starts at the end of the year will be affecting that EBITDA is there something else going on.
That's a great question I don't know if I know off the top of my head dollars per start splitting multifamily versus single family.
Peter Jackson: Yeah, it's similar to some of the comments already. I would say that the biggest difference is around the exit margin levels and where that's going to result for the full year of 2026. It's not that things are necessarily going to get a lot worse from where they are, just recognizing that they got worse through 2025.
Yes. It is.
What I would tell you is it's very it's appealing for us because of the value add exposure, obviously, a lot of trust a lot millwork.
Similar to some of the comments already I'd say the biggest difference is around the.
Exit margin levels, where that's going to result for the full year of 2006.
But it's also a growth factor, we see that there is opportunity for us to do more in that space, particularly as we've been able to.
Not that things are necessarily going to get a lot worse from where they are but just recognizing that they got worse through 'twenty five.
Build our relationships with with contractors with developers.
[Analyst]: Got it. Just a long term question. Always consider multifamily a lower ticket for you, just given a smaller unit. You're doing so much truss work and things. Now multifamily gets back to a growth vehicle. Is that necessarily an inferior start or less of an inferior start in single-family versus what it was maybe five, six years ago?
We think that will continue to be a source of strength for us but.
Okay.
Just wanted some question.
Always consider multifamily lower double low ticket.
But it is it's a tricky one when we talk about communicating it to you guys because everybody wants to look at the multifamily headline number and given our sub.
You just have a small unit that we were doing so much.
Trust work and thanks a lot.
Sort of subsection of that.
Multifamily gets back to a growth vehicle as well.
That's been a little bit of a disconnect, but we like the business, we like the profitability.
Necessarily an inferior start.
Lesson learned for solar.
And I think it has not just a good profile, but also the potential to grow quite well.
Family versus what it was maybe five six years ago.
Thank you.
Peter Jackson: That's a great question. I don't know if I know off the top of my head, dollars per start splitting multifamily versus single-family. What I would tell you is it's very, it's appealing for us because of the value-added exposure. Obviously a lot of trusses, a lot of millwork, but it's also a growth vector. We see that there's opportunity for us to do more in that space, particularly as we've been able to build our relationships with contractors, with developers. We think that will continue to be a source of strength for us. It is a tricky one when we talk about communicating it to you guys because everybody wants to look at the multifamily headline number and given our sort of subsection of that, that's been a little bit of a disconnect.
That's a great question I don't know if I know off the top of my head dollars per start splitting multifamily versus single family.
Thanks Keith.
Well move next to Trey Grooms with Stephens. Your line is open.
What I would tell you is it's very it's appealing for us because of the value add exposure, obviously, a lot of shopping a lot millwork.
Yeah.
Hey, Good morning, guys. This is ethan on for Trey Thanks for taking the questions.
But it's also a growth factor, we see that there is opportunity for us to do more in that space, particularly as we've been able to.
Just going back to some earlier comments about share you know historically you guys were able to take share at maybe a couple of hundred basis points above the market and obviously recognizing the current affordability challenge environment, but how should we think about builders long term ability to continue to take share maybe both in a flat market and on a long.
Build our relationships with with contractors with developers.
We think that will continue to be a source of strength for us.
But it is it's a tricky one when we talk about communicating it to you guys because everybody wants to look at the multifamily headline number and given our sub.
In term time horizon.
Yes. Thanks. Good question, so I'm still a strong believer in our ability to take share I think that the reality. If you go back over the past couple of years.
Our sort of subsection of that.
That's been a little bit of a disconnect, but we like the business, we like the profitability.
Peter Jackson: We like the business, we like the profitability and I think it has not just a good profile but also the potential to grow quite well.
And I think it has not just a good profile, but also the potential to grow quite well.
We talked a lot about it right I think we've lost some share on the pure commodity side of the business I think that we have.
[Analyst]: Okay, thank you.
Thank you.
Peter Jackson: Thanks, Keith.
Thanks Keith.
Operator: We'll move next to Trey Grooms with Stephens. Your line is open.
Well move next to Trey Grooms with Stephens. Your line is open.
<unk> gotten to the point, where we're saying no to any more of that and I think we level that out.
I think on the side, where we gained the most share is primarily in the value add space we have.
[Analyst]: Hey, good morning guys. This is Ethan on for Trey. Thanks for taking the questions. Just going back to some earlier comments about share. You know, historically you guys were able to take share at maybe a couple hundred basis points above the market and obviously recognizing the current affordability challenge environment. How should we think about Builders FirstSource's long term ability to continue to take share maybe both in a flat market and on a longer term time horizon?
Hey, Good morning, guys. This is ethan on for Trey Thanks for taking the questions.
Just going back to some earlier comments about share you know historically you guys were able to take share at maybe a couple of hundred basis points above the market and obviously recognizing the current affordability challenged environment, but how should we think about builders long term ability to continue to take share maybe both in a flat market and on a long.
Pad and have better capacity better capabilities, a better competitive position.
Than anybody else in this space and so when.
When the market is running health.
But also when it's running aggressive.
We are an obvious source of relief for builders, who are trying to solve problems and I think that's the storyline in the long run. We are we are still in an industry where.
Her term time horizon.
Peter Jackson: Yeah, thanks Ethan. Good question. I'm still a strong believer in our ability to take share. I think that the reality, if you go back over the past couple of years, we have, we talk a lot about it. I think we've lost some share on the pure commodity side of the business. I think that we've gotten to the point where we're saying no to any more of that. I think we've leveled that out. On the side where we gain the most share, it's primarily in the value-added space. We have had and have better capacity, better capabilities, a better competitive position than anybody else in the space. When the market is running healthily, but also when it's running aggressively, we are an obvious source of relief for builders who are trying to solve problems. I think that's the storyline in the long run.
Yes. Thanks. Good question, so I'm still a strong believer in our ability to take share I think that the reality. If you go back over the past couple of years.
Youll trades.
Labor is hard to find an increasingly retiring and becoming harder.
We talked a lot about it right I think we've lost some share on the pure commodity side of the business I think that we have.
And that's where our product portfolio, our offering is uniquely suited to meeting the demands of the future.
<unk> gotten to the point, where we're saying no to any more of that and I think we've level that out.
I think that gets accentuated when you think about digital.
The magic of technology in our space is that it helps to take out waste and it helps to enhance efficiency, while protecting the quality and the craft of what homebuilders. Due we can assist we can be a support structure for that and I think it positions us exceptionally well to be part.
I think on the side, where we gained the most share it's primarily in the value add space we have.
Pad and have better capacity better capabilities, a better competitive position.
Than anybody else in this space and so when.
Of what is ultimately the maturing of an industry to meet some of the challenges that we face right now and that to me that's share wins.
When the market is running healthily, but also when it's running aggressive.
We are an obvious source of relief for builders, who are trying to solve problems and I think that's the storyline in the long run. We are we are still in an industry where.
I absolutely believe that we are we are positioned to do that we're certainly better positioned to do it in a growth environment.
Peter Jackson: We are still in an industry where skilled trades, good labor is hard to find and increasingly retiring and becoming harder to find. That's where our product portfolio, our offering, is uniquely suited to meeting the demands of the future. I think that gets accentuated when you think about digital. The magic of technology in our space is that it helps to take out waste and it helps to enhance efficiency while sort of protecting the quality and the craft of what home builders do. We can assist. We can be a support structure for that. I think it positions us exceptionally well to be part of what is ultimately the maturing of an industry to meet some of the challenges that we face right now. To me, that's share wins. I absolutely believe that we are positioned to do that.
Skilled trades.
That is evident in our performance over the last decade, but I think as you see in even in this tough market. We can hold our own we can do well and there are certain categories, where we're doing very well I would say install continues to be a bright spot there are certain aspects of value add or certain markets and value add where we are continuing to.
Good labor.
It's hard to find an increasingly retiring and becoming harder to find.
And that's where our product portfolio, our offering is uniquely suited to meeting the demands of the future.
I think that gets accentuated when you think about digital.
The magic of technology in our space is that it helps to take out waste and it helps to enhance efficiency, while protecting the quality and the craft of what homebuilders. Due we can assist we can be a support structure for that and I think it positions us exceptionally well to be part.
Perform the competition in the market is a little tough to see with all the headwinds right.
No. That's super helpful. Thank you, Peter and maybe diving more into the tech piece that you spoke on at the end of your comments. There can you talk more about the tech investments that youre, making in the business and how specifically how these could provide maybe outsized incremental returns when demand recovers versus prior cycles.
Of what is ultimately the maturing of an industry to meet some of the challenges that we face right now and that to me that's share wins.
Absolutely, yes, so the two main investments, we're making right now are in the digital and technology space. So that when we've been working on for quite a while now thats paradigm and increasingly AI I think there's two aspects to it right right one is.
I absolutely believe that we are we are positioned to do that we're certainly better positioned to do it in a growth environment.
Peter Jackson: We're certainly better positioned to do it in a growth environment. That's evident in our performance over the last decade. I think, as you see, even in this tough market, we can hold our own. We can do well. There are certain categories where we're doing very well. I'd say installed continues to be a bright spot. There are certain aspects of value-added. There are certain markets in value-added where we are continuing to outperform the competition in the market. It's just a little tough to see with all the headwinds right now.
<unk>.
That's evident in our performance over the last decade, but I think as you see it even in this tough market. We can hold our own we can do well and there are certain categories, where we're doing very well I would say install continues to be a bright spot there are certain aspects of value add or certain markets and value add where we're continuing to outperform.
Just the <unk>.
They believe that it delivers our team to be the preferred partner right. So if you think about the speed at which we can turnaround and estimate the accuracy.
Reliability of our delivery all of that is really dependent on high quality communications internally and with the customer clarity around what it is that the customer needs and our ability to provide it.
For them the competition in the market is a little tough to see with all the headwinds right.
No. That's super helpful. Thank you, Peter and maybe diving more into the tech piece that you spoke on at the end of your comments. There can you talk more about the tech investments that youre, making in the business and how specifically how these could provide maybe outsized incremental returns when demand recovers versus prior cycles.
[Analyst]: That's super helpful. Thank you, Peter. Maybe diving more into the tech piece that you spoke on at the end of your comments there, can you talk more about the tech investments that you're making in the business and how specifically how these could provide maybe outsized incremental returns when demand recovers versus prior cycles?
That comes more easily when you have a wonderful tool and a structure around managing it like we have with paradigm for three dimensional digital twin the capabilities that we're building around that those will increasingly empower our team to win head to head in the marketplace. So I see that as share gains.
Peter Jackson: Absolutely, yeah. The two main investments we're making right now are in the digital and technology space. That one we've been working on for quite a while now, that's Paradigm, increasingly AI. I think there's two aspects to it. One is just the capability that it delivers our team to be the preferred partner. If you think about the speed at which we can turn around an estimate, the accuracy, the reliability of our delivery, all of that is really dependent on high quality communications internally and with the customer, clarity around what it is that the customer needs, and our ability to provide it. That comes more easily when you have a wonderful tool and a structure around managing it like we have with Paradigm, the three dimensional digital twin, the capabilities that we're building around that.
Absolutely, yes, so the two main investments, we're making right now are in the digital and technology space. So that when we've been working on for quite a while now thats paradigm increasingly AI I think there's two aspects to it right right one is.
<unk> is what it boils down to.
And then there's a second piece of that is and Thats, obviously, there's significant investment, we're making tickets dialed out in your adjusted.
Just the <unk>.
Adjusted EBIT number around.
They would need that it delivers our team to be the preferred partner right. So if you think about the speed at which we can turnaround and estimate the accuracy.
The elevated project elevate as we call. It internally is an initiative around introducing more modern software solutions into our field operations. So the management at the location level.
The reliability of our delivery all of that is really dependent on high quality communications internally and with the customer clarity around what it is that the customer needs and our ability to provide that comes more easily when you have a wonderful tool and a structure around.
It is a challenging project write all ERP implementations are but hopefully you've seen right. We kicked it off this quarter it didn't materially impact our numbers at the consolidated level, but what it will do over time is accumulate in meaningfully improved deficiency, we see the opportunities for our folks to be more.
Managing it like we have with paradigm to three dimensional digital twin the capabilities that we're building around that though.
Again more capable more insightful, we're able to partner with vendors more able to manage the costs more able to.
Peter Jackson: Those will increasingly empower our team to win head to head in the marketplace. I see that as share gains is what it boils down to. There's the second piece of that, and that's obviously the significant investment we're making that gets dialed out in your adjusted EBITDA number around SAP. The Elevate project, Elevate, as we call it internally, is an initiative around introducing more modern software solutions into our field operations. Management at the location level, it's a challenging project. All ERP implementations are. Hopefully you've seen, we kicked it off this quarter. It didn't materially impact our numbers at the consolidated level. What it will do over time is accumulate in meaningfully improved efficiency.
<unk> will increasingly empower our team to win head to head in the marketplace. So I see that as share gains as what it.
Provide consistent and high level on time and in full performance.
It boils down to.
And then there's the second piece of that is and Thats, obviously, the significant investment, we're making that gets dialed out in your adjusted.
Those are the things that will over time contribute to productivity.
A lot about continuous improvement, Peter where youre going to get all of this money from well there's your answer.
Adjusted EBIT number around SAP right. The elevate project elevate as we call. It internally is an initiative around introducing more modern software solutions into our field operations. So the management at the location level.
We see the opportunity we have targets that we're going after.
It will take some time to deliver it is as it always does with these types of large scale initiatives.
I'm as confident as I ever have been that there is a pot of gold at the end of that Rainbow.
And there are advantages that sort of derive from that capability technologically that we will have.
It is a challenging project write all ERP implementations are but hopefully you see it right. We kicked it off this quarter it didn't materially impact our numbers at the consolidated level, but what it will do over time is accumulate in meaningfully improved deficiency, we see the opportunities for our folks to be more.
A halo effect on the broader business as well.
Thank you that's very helpful. I appreciate it.
Peter Jackson: We see the opportunities for our folks to be more, again, more capable, more insightful, more able to partner with vendors, more able to manage the costs, more able to provide consistent and high level on time and in full performance. Those are the things that will over time contribute to productivity. We talk a lot about continuous improvement. Peter, where are you going to get all this money from? There's your answer. We see it, we see the opportunity. We have targets that we're going after. It'll take some time to deliver it as it always does with these types of large scale initiatives. I'm as confident as I ever have been that there is a pot of gold at the end of that rainbow and there are advantages that sort of derive from that capability technologically that will have a halo effect on the broader business as well.
We will take our next question from Phil <unk> with.
More capable more insightful, we're able to partner with vendors more able to manage the costs more able to.
With Jefferies. Your line is open.
Hey, guys relative to your guidance last quarter, good to see strong <unk> results better than expected in your revised outlook higher particularly on single family.
Provide consistent and high level on time and in full performance.
Those are the things that will over time contribute to productivity.
So I believe last quarter, you had some insights on how perhaps your customers were pursuing land development and how they are managing production or whatnot.
A lot about continuous improvement, Peter where youre going to get all this money from well there's your answer.
We see the opportunity we have targets that we're going after.
Guess, what new insights how do you kind of picked up from your builder customers and how much input do they provide.
It will take some time to deliver it is as it always does with these types of large scale initiatives, but.
For your base case scenario for 2026, and then just to dig into that dig into that a little bit more how do you kind of envision the shape of the year unfolding in your base case for next year.
I'm as confident as I ever have been that there is a pot of gold at the end of that Rainbow.
And there are advantages that sort of drive from that capability technologically that we will have.
Thanks for the question Phil.
So I won't I won't be able to go down into the details about the shape of next year and that sort of thing I can tell you what your.
A halo effect on the broader business as well.
[Analyst]: Thank you, that's very helpful. Appreciate it.
Thank you that's very helpful. I appreciate it.
Okay.
What youre seeing in the results for this quarter from the publics in particular.
Operator: We'll take our next question from Phil Ng with Jefferies. Your line is open.
We'll take our next question from Phil.
With Jefferies. Your line is open.
That's what we've been hearing.
Phil Ng: Hey guys, relative to your guidance last quarter, good to see strong Q3 results better than expected and you revised the outlook higher, particularly on single-family. I believe last quarter you had some insights on how perhaps your customers were pursuing land development and how they're managing production and whatnot. I guess what new insights have you kind of picked up from your builder customers and how much input they provide for your base case scenario for 2026, and then just to dig into that a little bit more, how do you kind of envision the shape of the year unfolding in your base case for next year?
It's a mix it's a struggle out there there are certainly.
Hey, guys relative to your guidance last quarter, good to see strong <unk> results better than expected and you revise the outlook higher particularly on single family.
Yes.
Struggle from a bunch of different directions, obviously, the political climate has gotten trickier because housing is is continuing to be a high profile political discussion.
I believe last quarter, you had some insights on how perhaps your customers were pursuing and land development and how they're managing production or whatnot.
The good news I would say is that the road act and some of the stuff. That's out there. Good bipartisan support people are trying to come up with solutions to take away some of the barriers that have restricted our ability to build forward.
What new insights have you kind of picked up from your builder customers had how much input do they provide.
For your base case scenario for 2026, and then just to dig and dig into that a little bit more how do you kind of envision the shape of the year unfolding in your base case for next year.
I would argue sort of crept into American Society.
That's good but anytime you've got a political discussion I think its tough for the builders they've talked about that.
Peter Jackson: Thanks for the question, Phil. I won't be able to go down into the details about the shape of next year and that sort of thing. I can tell you what you're seeing in the results for this quarter from the publics in particular. That's what we've been hearing. It's a mix. It's a struggle out there. There is certainly struggle from a bunch of different directions. Obviously, the political climate has gotten trickier because housing is continuing to be a high-profile political discussion. The good news, I would say, is that the Road Act and some of the stuff that's out there, good bipartisan support, people are trying to come up with solutions to take away some of the barriers that have restricted our ability to build affordably that have, I would argue, sort of crept into American society. That's good.
Thanks for the question Phil.
So I won't I won't be able to go down into the details about the shape of next year and that sort of thing I can tell you what your.
I think that the affordability profile for them still continues to be a challenge you see that there is still dealing with very elevated incentives on their side of the fence you've seen.
What youre seeing in the results for this quarter from the publics in particular.
That's what we've been hearing.
Couple of key players acknowledging how hard that is being forced to maybe even get more aggressive and even want to be to clear some of the inventory that new home inventory is.
The mix, it's a struggle out there there are certainly.
<unk>.
Struggled from a bunch of different directions, obviously, the political climate has gotten trickier because housing is continuing to be a high profile political discussion.
It's not problematic in terms of the overall amount of inventory available in the market, but it is certainly high for new.
The good news I would say is that the road act and some of the stuff. That's out there. Good bipartisan support people are trying to come up with solutions to take away. Some of the barriers that have restricted our ability to build a quarter.
Certainly high Purdue and if not for I would say the depressed existing we would be paying even more attention to it.
What youre seeing I think in the behaviors is a real pullback in the starts pace in order to make sure that those new homes that new home inventory is being managed that's our results right that that's what we saw a comment that's what we signaled to you.
So I would argue sort of crept into American Society.
That's good but anytime you've got a political discussion I think its tough for the builders they've talked about that.
Peter Jackson: Anytime you've got a political discussion, I think it's tough for the builders. They've talked about that. I think that the affordability profile for them still continues to be a challenge. You see that they're still dealing with very elevated incentives on their side of the fence. You've seen a couple of key players acknowledging how hard that is, being forced to maybe even get more aggressive than they even want to be to clear some of the inventory. That new home inventory is not problematic in terms of the overall amount of inventory available in the market, but it's certainly high for new. If not for, I would say, the depressed existing, we would be paying even more attention to it.
I think that the affordability profile for them still continues to be a challenge you see that there is still dealing with very elevated incentives on their side of the fence you've seen a.
I think we've seen some stability at this low level.
But I think all of US are wondering about the uncertainty the uncertainty variable, it's something I hear from the builders a lot.
A couple of key players acknowledging how hard that is being forced to maybe you can get more aggressive and even want to be clear some of the inventory that new home inventory is.
Their concern their consumer their customer is uncertainty I don't know what to make of where tariffs are going to be where jobs are going to be what this AI thing is going to do and I think those are the themes that we hear that basically underpin some of these.
It's not.
<unk> in terms of the overall amount of inventory available in the market, but it's certainly high for new.
What I would characterize as Matt.
Certainly high Purdue and if not for I would say the depressed existing we would be paying even more attention to it.
Market numbers for for the last half of 'twenty five and the early part of 'twenty six.
Peter Jackson: What you're seeing, I think, in the behaviors is a real pullback in the start's pace in order to make sure that those new homes, that new home inventory is being managed. That's our results, right? That's what we saw coming. That's what we signaled to you. I think we've seen some stability at this low level. I think all of us are wondering about the uncertainty. The uncertainty variable is something I hear from the builders a lot. Their consumer, their customer is uncertain. They don't know what to make of where tariffs are going to be, where jobs are going to be, what this AI thing is going to do. I think those are the themes that we hear that basically underpin some of these, what I would characterize as meh, market numbers for their last half of 2025 and the early part of 2026.
What youre seeing I think in the behaviors is a real pullback in starts pace in order to make sure that those new homes is that new home inventory is being managed that's our results right. That's that's what we saw a comment that's what we signaled to you.
There's still a lot of optimism about where the market is going to go about what we're capable of doing about the value that's being offered and with a little bit of help on a couple of areas I do think there's room for growth.
And based on what we talked to the builders about.
I think we've seen some stability at this low level.
Okay Super.
And I appreciate that you guys want to be prepared and ready for a recovery.
But I think all of US are wondering about the uncertainty the uncertainty variable it's something I hear from the build is a lot.
From a supply standpoint capacity.
Their concern their consumer their customer is uncertain. They don't know what to make of where tariffs are going to be where jobs are going to be what this AI think is going to do and I think those are the themes that we hear that basically underpins some of these.
When we kind of look out at your normalized situation call. It 1 million or one point million roughly 1 million starts what type of <unk> does that imply I know you guys got it built this up during the pandemic. So.
And the muted demand environment, which we're seeing right now is there more work to do on the capacity front, because if I look at your deck, where you show single family starts over a 10 year horizon main threat at seven years were actually below your normalized level like how do you kind of balance that dynamic going forward in terms of capacity and head count and just cost going forward as well.
What I would characterize as Matt.
Market numbers for for the last half of 'twenty five and the early part of 2006.
Peter Jackson: There's still a lot of optimism about where the market is going to go, about what we're capable of doing, about the value that's being offered. With a little bit of help on a couple of areas, I do think there's room for growth based on what we talk to the builders about.
And there's still a lot of optimism about where the market is going to go about what we're capable of doing about the value that's being offered and with a little bit of help on a couple of areas.
Yeah, No that's a great question.
So the short answer is that the high level of averages I would describe as useless effectively.
Think theres room for growth.
And based on what we talk to the builders about.
Because you get small markets with low capacity in big markets with no capacity looks like an average capacity, but neither is true.
Phil Ng: Okay, super. I appreciate that you guys want to be prepared and ready for recovery from a supply standpoint. Capacity, when we kind of look at your normalized situation, call it 1 million to 1.1 million starts, what type of capacitualization does that imply? I know you guys kind of built this up during the pandemic. In a muted demand environment, which we're seeing right now, is there more work to do on the capacity front? If I look at your deck where you show single-family starts over a 10-year horizon, I mean 3 out of 10 years, we're actually below your normalized level. How do you kind of balance that dynamic going forward in terms of capacity and headcount and just cost going forward as well?
Okay Super.
And I appreciate that you guys want to be prepared and ready for a recovery.
Hum.
What I would tell you is this the way we think about capacity is very local market drove a meeting as we looked at the results and what happened during the last five year windows are kind of.
From a supply standpoint capacity.
When we kind of look out at your normalized situation call. It $1 million, one point million monthly 1 million starts.
Type of capacity utilization does that imply and I know you guys got it built this out during the pandemic so.
Five six years, so 2019 through today.
Seeing the arc of utilization of some of these facilities.
And the muted demand environment, which we're seeing right now is there more work to do on the capacity front, because if I look at your deck, where you show single family starts over a 10 year horizon main threat of seven years, we're actually below your normalized level like how do you kind of balance that dynamic going forward in terms of capacity and head count and just cost going forward as well.
We never got in my opinion to a dramatically high.
The level of production, but we still struggle.
So what that reveal but I think where the opportunities for us to enhance capacity to recognize.
We are over time. This shift has occurred in terms of where the starts are and where the starts DVD and then where in those markets do we need to have a better footprint or capacity, that's what you've seen us invest.
Peter Jackson: Yeah, no, that's a great question. The short answer is that the high level averages I would describe as useless effectively because you get small markets with low capacity, and big markets with no capacity looks like an average capacity, but neither is true. What I would tell you is this. The way we think about capacity is very local, market driven. Meaning as we looked at the results and what happened during the last five year window, so kind of five, six years, so 2019 through today, and seeing the arc of utilization of some of these facilities, we never got, in my opinion, to a dramatically high level of production, but we still struggled. That revealed, I think, the opportunities for us to enhance capacity, to recognize where over time the shift has occurred in terms of where the starts are and where the starts need to be.
Yes, no that's a great question.
So the short answer is that the high level averages.
Scribe is useless effectively.
Because you get <unk>.
All markets with low capacity in big markets with no capacity looks like an average capacity, but neither is true.
Sort of a rifle shot approach to capacity additions in response to where we got pinched versus Oh, well. There is a need we'll just abbott who added across the country are well well peanut butter. It that's.
What I would tell you is this the way we think about capacity is very local market drove that meeting as we looked at the results and what happened during the last five year windows or comp.
Not how we think about.
So in light of that we have definitely built into some of those holes I would say, where we were we had the biggest issues. We've moved the most aggressively we're best positioned because of a handful of stuff that we will continue to do but.
Five six years, so 2019 through today and seeing the arc of utilization of some of these facilities. The we never got in my opinion to a dramatically high.
But I do see it being less than it has been.
The level of production, but we still struggle.
Certainly over the last three or four years as we move forward until we get better clarity as to what the next leg of growth.
So what that move yield I think where the opportunities for us to enhance capacity to recognize.
Where the next leg of growth is going to be.
We are over time. This shift has occurred in terms of where the starts are and where the starts DVD and then where in those markets do we need to have a better footprint of capacity, that's what you've seen us invest.
Okay I appreciate the color. Thank you so much.
Yeah.
Peter Jackson: Then where in those markets do we need to have a better footprint of capacity? That's what you've seen us invest in. It's sort of a rifle shot approach to capacity additions in response to where we got pinched versus oh well, there's a need, we'll just add it, we'll add it across the country or we'll, we'll peanut butter it. That's not how we think about it. In light of that, we have definitely filled in some of those holes. I would say where we had the biggest issues, we've moved the most aggressively. We're best positioned.
And we'll take our next question from Colin Baron with Deutsche Bank. Your line is open.
Sort of a rifle shot approach to capacity additions in response to where we got pinched versus Oh, well. There is a need we will just at who added across the country are well well peanut butter.
Good morning, Thank you for taking my questions.
And when you look at the factors that have made <unk> track below lag single family starts in your markets do you think that Thats fully stabilized at this point so you'll track more in line with lag starts in 2026 are you anticipating more headwinds in 2006 and if so can you help quantify what those might look like.
How we think about it.
So in light of that we have definitely built into some of those holes I would say, where we were we had the biggest issues. We have moved the most aggressively we're best positioned because of a handful of stuff that we will continue to do.
We look at LDR single family sales versus starts.
Peter Jackson: There's a handful of stuff that we'll continue to do, but I do see it being less than it has been certainly over the last three or four years as we move forward until we get better clarity as to what the next leg of growth, where the next leg of growth is going to be.
Yeah. Thanks Colin.
But I do see it being less than it has been.
I think what we've tried to outline for you is that we are tracking with the lack of single family starts at this point taking into consideration the structural adjustments.
Certainly over the last three or four years as we move forward until we get better clarity as to what the next leg of growth.
If you are thinking about when on the face of the financial that'll come true without having to do the additional adjustments I think it depends on.
The next leg of growth is going to be.
Phil Ng: Okay. Appreciate the color. Thank you so much.
Okay I appreciate the color. Thank you so much.
Okay.
That <unk>.
Stabilization of the home size and be content team, which we're starting to see more of but what's a little more.
Operator: We'll take our next question from Collin Verron with Deutsche Bank. Your line is open.
And we'll take our next question from Colin Baron with Deutsche Bank. Your line is open.
[Analyst]: Good morning. Thank you for taking my questions. When you look at the factors that have made Builders FirstSource track below lag single-family starts in your markets, do you think that that's fully stabilized at this point so you'll track more in line with lag starts in 2026, or are you anticipating more headwinds in 2026? If so, can you help quantify what those might look like as we look at Builders FirstSource single-family sales versus starts?
Difficult right now is some of the cost basis and inputs that we're seeing from our manufacturers and suppliers.
Good morning, Thank you for taking my questions.
And when you look at the factors that have made <unk> tracked below lag single family starts in your markets do you think that thats fully stabilized at this point so you'll track more in line with lag starts in 2026 are you anticipating more headwinds in 2006 and if so can you help quantify what those might look like.
That are being challenged with given different market dynamics and the portability.
Items so.
We're going to continue to do our analysis the way we have in one wont be happy to share with you on future calls but.
We look at the LDR single family sales versus starts.
But we think that we're getting to a point, where those structural adjustments are starting to get a little bit less impactful.
Pete Beckmann: Yeah. Thanks, Collin. I think what we've tried to outline for you is that we are tracking with lag single-family starts at this point, taking into consideration the structural adjustments. If you're thinking about when on the face of the financial, that'll come true without having to do the additional adjustments. I think it depends on that stabilization of the home size and decontenting, which we're starting to see more of. What's a little more difficult right now is some of the cost basis and inputs that we're seeing from our manufacturers and suppliers that are being challenged with given different market dynamics and affordability items. We're going to continue to do our analysis the way we have, and we'll be happy to share it with you on future calls.
Yes, Thanks Colin.
Still in there for a reconciliation.
I think what we've tried to outline for you is that we are tracking with lack of single family starts at this point taking into consideration the structural adjustments.
Okay. That's helpful color and then.
You quickly mentioned some branch consolidation actions and you guys are taking any color as to like what the annual cost savings from these actions are.
If you are thinking about when on the face of the financial.
And just given the current demand environment do you anticipate any further actions.
Come true without having to do the additional adjustments I think it depends on.
That stabilization of the home size and the content team, which we're starting to see more of but what's a little more.
Yes, so we've taken out 16 facilities. This year 30 last year, so 46 over the last.
21 months so it's.
Right now as some of the cost basis and inputs that we're seeing from our manufacturers and suppliers.
That we do as part of the fabric of who we are and we've talked about that last quarter, we're constantly evaluating where we have.
<unk> are being challenged with given different market dynamics and affordability.
Excess capacity, so we just talked about capacity with Peter.
Items so.
On the prior question.
We're going to continue to do our analysis the way, we have and we'll be happy to share with you on future calls.
But we look at where we are.
We have excess and we're rationalizing that and keeping in mind first and foremost our customer trying to make sure that we're taking care of our customer so where are we have additional facilities in a market that we can service more effectively from a single location versus multiple locations, we're going to continue to make those decisions.
Pete Beckmann: We think that we're getting to a point where those structural adjustments are starting to get a little bit less impactful, but they're still in there for our reconciliation.
But we think that we're getting to a point, where those structural adjustments are starting to get a little bit less impactful, but there.
Still in there for a reconciliation.
[Analyst]: Great. That's helpful, caller. I think you quickly mentioned some branch consolidation actions that you guys have taken. Any color as to what the annual cost savings from these actions are? Just given the current demand environment, do you anticipate any further actions?
Great that's helpful color.
And then.
You quickly mentioned some branch consolidation actions and you guys are taking any color as to like what the annual cost savings from these actions are.
The the capacity is across the board so it's.
And just given the current demand environment do you anticipate any further actions.
Multifamily trust plants, where we saw multifamily pullbacks, we've talked about that locations that are down in the from a start standpoint, and we just don't need as much fixed cost.
Pete Beckmann: Yeah. We've taken out 16 facilities this year, 30 last year, so 46 over the last 21 months. It's something that we do as part of the fabric of who we are. We talked about that last quarter. We're constantly evaluating where we have excess capacity. We just talked about capacity with Peter on the prior question. We look at where we have excess and we're rationalizing that. Keeping in mind first and foremost our customer, trying to make sure that we're taking care of our customer. Where we have additional facilities in a market that we can service more effectively from a single location versus multiple locations, we are going to continue to make those decisions. The capacity is across the board. It's multifamily truss plants where we saw multifamily pullback. We've talked about that.
Yes, so we've taken out 16 facilities. This year 30 last year, so 46 over the last.
21 months so it's.
We're going to continue to evaluate this on a.
That we do as part of the fabric of who we are and we've talked about that last quarter, we're constantly evaluating where we have.
Go forward basis, all the time.
Part of what we do and as we integrate acquisitions and we look at the best way to service our customers from the right locations, where we have overlap so.
Excess capacity, so we just talked about capacity with Peter.
On the prior question.
But we look at where we are.
I hope that answers your question, but it's going to be something we will continue to bring up and address as we move forward.
We have excess and we're rationalizing that and keeping in mind first and foremost our customer trying to make sure that we're taking care of our customer so where are we have additional facilities in a market that we can service more effectively from a single location versus multiple locations. We are going to continue to make those decisions.
Great. Thank you.
Well move next to Min Cho with Texas Capital Securities. Your line is open.
The the capacity is across the board so it's.
Great. Thanks for squeezing me in here just two quick questions. So it's nice to see the good progression on sales and bids through your digital tools can you provide any update on the pilot has expanded homebuilders and to the pilot and just kind of what they are using the most are getting domestic value out of and your expectations for the pilot kind of go.
Multifamily trust plants, where we saw multifamily pullback so we've talked about that.
Pete Beckmann: Locations that are down from a start standpoint and we just don't need as much fixed cost. We're going to continue to evaluate this on a go forward basis all the time. It's just part of what we do and as we integrate acquisitions and we look at the best way to service our customers from the right locations where we have overlap. I hope that answers your question, but it's going to be something we will continue to bring up and address as we move forward.
Locations that are down in the from a start standpoint, and we just don't need as much fixed cost.
We're going to continue to evaluate this on a.
Go forward basis, all the time.
Into 2026.
Yeah, no happy to talk about it so.
Part of what we do and as we integrate acquisitions and we look at the best way to service our customers from the right locations, where we have overlap so.
We have today is.
Because it's an end to end platform the participation rates in different aspects of the tool.
I hope that answers your question, but it's going to be something we will continue to bring up and address as we move forward.
Is pretty varied as you might imagine so.
I would say every piece of it is being used that's good adoption levels, obviously for the for the easy stuff are sky high.
[Analyst]: Great. Thank you.
Great. Thank you.
Operator: We'll move next to Min Cho with Texas Capital Securities. Your line is open.
We'll move next to Min Cho with Texas Capital Securities. Your line is open.
Pretty much everybody is using it for invoice review delivery photos and payments.
There is a.
Heather Kos: Great. Thanks for squeezing me in here. Just two quick questions. It's nice to see the good progression on sales and bids through your digital tools. Can you provide any update on the pilot? Have you expanded Home Builders into the pilot and just kind of what they're using the most or getting the most value out of and your expectations for the pilot going into 2026?
Great. Thanks for squeezing me in here just two quick questions. So it's nice to see the good progression on sales and bids through your digital tools can you provide any update on the pilot had an expanded homebuilders into the pilot and just kind of what they are using the most are getting the most value out of and your expectations for the pilot kind of going.
Oh, sorry.
Subset of that that's using it for things like <unk>.
Estimates in quoting.
There is a SaaS theres a subset is really engaged on the home configure aspects of the visualization tools.
Customers are or are working through and actually an expansion of what is in the catalog within home configure for the consumer to select from.
Into 2026.
Peter Jackson: Yeah, happy to talk about it. What we have today is because it's an end-to-end platform, the participation rates in different aspects of the tool are pretty varied as you might imagine. I would say every piece of it is being used. That's good. Adoption levels, obviously for the easy stuff, are sky high. We have pretty much everybody using it for invoice review, delivery, photos, and payments. There's a subset of that that's using it for things like estimates and quoting. There's a subset that's really engaged on the Home Configure aspect. The visualization tools, customers are working through actually an expansion of what is in the catalog within Home Configure for the consumer to select from. We've got a couple of customers that are leaning into that, using it as a virtual model home type of a tool set for rendering and drafting.
Yes, no happy to talk about it so.
We have today is.
We've got a couple of customers that are leaning into that using use of virtual.
Because it's an end to end platform that participation rates in different aspects of the tools.
Virtual model home type of the type of the toolset.
Pretty varied as you might imagine so.
For rendering and drafting certainly scheduling has been an interesting piece because it's a it's an included functionality builders or are taking advantage of it when theyre scheduling trades.
I would say every piece of it is being used that's good adoption levels, obviously for the for the easy stuff are sky high.
Pretty much everybody is using it for invoice review delivery photos and payments.
The pace of the build so I would say those are some of the bigger more common pieces that utilization what we.
There is a.
Subset of that that's using it for things like estimates in quoting.
We've talked about in the past and that I'll re emphasize on this call is a big piece of this is also making sure we've got the training and the comfort level with our internal staff and people are in.
There is a SaaS theres a subset that's really engaged on the home configure aspects of the visualization tools.
That's why we emphasize that both the quoting and the sales that are flowing through the tool that people within the BFS four walls are.
Customers are or are working through and actually an expansion of what is in the catalog within home configure for the consumer to select from so we've got a couple of customers that are leaning into that using it as a virtual.
Increasingly seeing the value of a centralized repository because remember it's a library, it's a place for the builder to store their plans and for us to be able to access them do the work you can do.
Virtual model home type of the type of the toolset.
That's where we see a dramatic increases and I think thats, an indicator of where we expect the pilot to continue to build momentum.
For rendering and drafting certainly scheduling has been an interesting piece because it's a it's an included functionality builders or are taking advantage of it when theyre scheduling trades.
Peter Jackson: Scheduling has been an interesting piece because it's an included functionality. Builders are taking advantage of it when they're scheduling trades and the pace of the build. I would say those are some of the bigger, more common pieces of utilization. What we've talked about in the past, and that I'll re-emphasize on this call, is a big piece of this is also making sure we've got the training and the comfort level with our internal staff. That's why we emphasize that both the quoting and the sales that are flowing through the tool, that people within the BFS four walls are increasingly seeing the value of a centralized repository. Remember, it's a library really. It's a place for the builder to store their plans and for us to be able to access them to do the work that we need to do.
We will have another nice booth at the Ibs show this year, so youll see some of the latest.
The pace of the build so I would say those are some of the bigger more common pieces of utilization.
You know things were working on in terms of the development side is really leveraging increasingly.
What we've talked about in the past and that I'll re emphasize on this call is a big piece of this is also making sure we've got the training and the comfort level with our internal staff the people are.
The AI capabilities.
That we've been developing to increase two main things right, it's quality and accuracy and ease of use.
Those are the things that we think we have tremendous opportunity to improve we've had some really nice team member adds internally that have been working on that and I think we're going to continue whether some really powerful.
That's why we emphasize that both the quoting and the sales that are flowing through the tool that people within the BFS four walls are.
Creasing, the seeing the value of a centralized repository because remember it's a library really it's a place for the builder to store their plans and for us to be able to access them to do the work that we need to do that's where we see really.
Powerful tools for the space, both internally to empower our team to enable our team.
But also very importantly, obviously for the customer and for their experience for them to Battle. This affordability challenge to build these higher quality more efficient we constructed homes.
Peter Jackson: That's where we've seen really dramatic increases, and I think that's an indicator of where we expect the pilot to continue to build momentum. We'll have another nice booth at the IDS show this year, so you'll be able to see some of the latest things we're working on. In terms of the development side, it's really leveraging increasingly the AI capabilities that we've been developing to increase two main things, right? It's quality and accuracy and ease of use. Those are the things that we think we have tremendous opportunity to improve. We've had some really nice team member adds internally that have been working on that.
Dramatic increases and I think thats, an indicator of where we expect the pilot to continue to build momentum.
Great. Thank you for that detail and then lastly, you've mentioned installation your insulation business in the past and you mentioned it today is when you say value added services.
We will have another nice booth at the Ibs show this year, so youll see some of the latest.
Things were working on in terms of the development side is really leveraging increasingly.
It seems like labor has not been that big of an issue for homebuilders right. Now can you just talk about the longer term outlook for this business.
The AI capabilities.
We've been developing to increase.
Yeah, no you're right and install the labor side has certainly been a bit of a relief.
Two main things right, it's quality and accuracy and ease of use.
The real question I think that nobody really nobody that I've talked to yet at least.
Those are the things that we think we have tremendous opportunity to improve we've had some really nice team member adds internally that have been working on that and I think we're going to continue with some really powerful.
Has clarity on is what is the impact of immigration.
Peter Jackson: I think we're going to continue to deliver some really powerful, powerful tools for the space, both internally to empower our team and enable our team, but also very importantly, obviously for the customer and for their experience, for them to battle this affordability challenge and to build these higher quality, more efficiently constructed homes.
So there's been actually a reasonable stability in the labor market certainly pressure downward pressure on on cost per hour and perhaps an increased availability, but not perhaps as much as one might expect given how far down we are from the peak.
Powerful tools for the space, both internally to empower our team enable our team.
But also very importantly, obviously for the customer and for their experience for them to Battle. This affordability challenge to build these higher quality more efficiently constructed homes.
In the sense that I've heard from folks is that there was a meaningful drag from.
[Analyst]: Great.
Great. Thank you for that detail and then lastly, just you mentioned installation your insulation business in the past and you mentioned it today is one of your value added services.
Heather Kos: Thank you for that detail. Lastly, you've mentioned insulation, your insulation business in the past, and you mentioned it today as one of your value-added services. It seems like labor has not been that big of an issue for home builders right now. Can you talk about the longer-term outlook for this business?
The immigration work that's been done.
So the real question comes on the turn when the turn comes when we start trying to build more homes, how much labor is actually going to be there and be available to do some of this work.
It seems like labor has not been that big of an issue for homebuilders right. Now can you just talk about the longer term outlook for this business.
Don't know.
Peter Jackson: Yeah, no, you're right. Installed labor side has certainly been a bit of a relief. The real question I think that nobody, really nobody that I've talked to yet at least has clarity on is what is the impact of immigration. There's been actually a reasonable stability in the labor market, certainly downward pressure on cost per hour and perhaps an increased availability, but not perhaps as much as one might expect given how far down we are from the peak. The sense that I've heard from folks is that there's a meaningful drag from the immigration work that's been done. The real question comes on the turn. When the turn comes and we start trying to build more homes, how much labor is actually going to be there and be available to do some of this work? Don't know.
Yeah, no you're right and install the labor side has certainly been a bit of a relief.
It's too early to say at this point.
Because I think the reverse immigration and where people have sort of backed out of the market.
The real question I think that nobody really nobody that I've talked to yet at least.
It's hard to see.
So, we'll see but I do think that.
Has clarity on is what is the impact of immigration.
Yeah.
These will likely to be.
So theres been actually.
Reinforcing characteristic or a reinforcing factor as to why our value add is more valuable to builders over time. The more we can do to maximize the use of skilled trade labor.
A reasonable stability in the labor market, certainly pressure downward pressure on on cost per hour and perhaps an increased availability, but not perhaps as much as one might expect given how far down we are from the peak.
Do it in a way that is <unk>.
In the sense that I have heard from folks is that there is a meaningful drag from.
Liable and high quality for builders I think the more successful we're going to be and we've got a lot of experience doing it.
The immigration work that's been done.
Excellent great. Thank you good luck.
So the real question comes on the turn when the turn comes when we start trying to go more homes, how much labor is actually going to be there and be available to do some of this work.
Thank you.
We will take our next question from Reuben Garner with benchmark. Your line is open.
I don't know.
Peter Jackson: I think it's too early to say at this point because I think the reverse immigration and where people have sort of backed out of the market go hard to see. We'll see. I do think that it is likely to be a reinforcing characteristic or a reinforcing factor as to why our value-added is more valuable to builders over time. The more we can do to maximize the use of skilled trade labor and do it in a way that is reliable and high quality for builders, I think the more successful we're going to be and we've got a lot of experience doing that.
Okay.
Thank you and good morning, and thanks for squeezing me in guys. So I'm going to squeeze two into one quick question. The specialty building products category has been pretty steady of late I don't think there's been a lot of acquired revenue in that space.
Too early to say at this point.
Because I think the reverse immigration and where people have sort of backed out of the market.
It's hard to see.
So we will see but I do think that.
Yes.
The install and the digital initiatives large enough or growing fast enough that that's driving the bulk of that and then in the same vein for 26 would it.
These are likely to be.
Reinforcing characteristic of our beam, forcing factor as to why our value add is more valuable to builders over time. The more we can do to maximize the use of skilled trade labor.
Do you view the digital initiatives the install initiatives is the biggest.
Growth above the market drivers for you guys or is there some other initiatives that you would point to that.
Do it in a way that is reliable and high quality for builders I think the more successful we're going to be and we've got a lot of experience doing it.
Likely to be what helps you grow above the market.
Thanks, guys.
Heather Kos: Excellent.
Excellent great. Thank you good luck.
Yeah. Thanks for the question on the first part and that specialty products.
Operator: Great.
Heather Kos: Thank you. Good luck.
Peter Jackson: Thank you.
Thank you.
Operator: We'll take our next question from Ruben Garner with Benchmark. Your line is open.
Just real quick on the digital.
We will take our next question from Reuben Garner with benchmarks. Your line is open.
The digital software sales will flow through that that hasn't largely changed.
[Analyst]: Thank you. Good morning and thanks for squeezing me in, guys. I'm going to squeeze two into one quick question. The specialty building products category has been pretty steady of late. I don't think there's been a lot of acquired revenue in that space. Are the install and the digital initiatives large enough or growing fast enough that that's driving the bulk of that? In the same vein for 2026, would it, you know, do you view the digital initiatives, the install initiatives as the biggest growth above the market drivers for you guys, or is there some other initiative that you would point to that's, you know, likely to be what helps you grow above the market? Thanks, guys.
Thank you and good morning, and thanks for squeezing me in guys. So I'm going to squeeze two into one quick question. The specialty building products category has been pretty steady of late I don't think there's been a lot of.
Our focus on digital sales and the pull through is really going to be in the product categories.
So the digital software sales isn't really influencing that per se. The install however, as Peter mentioned is a good growth.
Acquired revenue in that space or the install and the digital initiatives large enough or growing fast enough that that's driving the bulk of that and then in the same vein for 26 would it do you view the digital initiatives. The install initiatives is the biggest.
Driver for us.
It may be down a little bit year over year, largely driven by the multifamily, but it's not down nearly as much as.
The overall market from that standpoint, we are outpacing the market with installed and the labor portion goes through that specialty and other category, whereas the product categories will be in the natural product categories.
Growth above the market drivers for you guys or is there some other initiatives that you would point to that.
Likely to be what helps you grow above the market.
Thats, what youre seeing from that install and other we haven't materially bought anything that would influence the specialty bucket otherwise.
Thanks, guys.
Pete Beckmann: Yeah, thanks for the question on the first part in that specialty products. Just real quick on the digital, the digital software sales will flow through that. That hasn't largely changed our focus on digital sales. The pull through is really going to be in the product categories. The digital software sales isn't really influencing that per se. The install, however, as Peter mentioned, is a good growth driver for us. It may be down a little bit year over year, largely driven by the multifamily, but it's not down near as much as the overall market from that standpoint. We are outpacing the market with installation and the labor portion goes through that specialty and other category, whereas the product categories will be in the natural product categories. That's what you're seeing from that install and other.
Yes. Thanks for the question on the first part and that specialty products.
Just real quick on the digital.
But it is performing well it's been more stable from a cost standpoint, and it's been stable from a sales standpoint.
The digital software SaaS sales will flow through that that hasnt largely changed our focus on digital sales and the pull through is really going to be in the product categories. So the digital software sales isn't really influencing that.
Imagine that the specialty is something that.
Has a strong correlation to a lot of our more R&R and other focused markets, which are more stable in general than the single family space.
The install however, as Peter mentioned.
So that's a component of why it does that in terms of.
Is a good growth.
The driver for us.
Thinking about the future and where we see continued growth again I think that.
Yes, it may be down a little bit year over year, largely driven by the multifamily, but it's not down near as much as the.
Our ability to provide a.
The overall market from that standpoint, so we are outpacing the market with install and the labor portion goes through that specialty and other category, whereas the product categories will be in the natural product categories.
Our superior product within both the value add space. If you think about what ready frame offer is about trust.
Doors offer.
That's still very impactful, we think that over time that will continue to grow faster than market.
Thats, what youre seeing from that install and other we haven't materially bought anything that would influence that specialty bucket otherwise.
Pete Beckmann: We haven't materially bought anything that would influence that specialty bucket otherwise, but it is performing well. It's been more stable from a cost standpoint and it's been stable from a sales standpoint.
The install and what we're able to do it candidly a variety of product categories just to create ease of doing business for our builder customers. We think that's an offering that is has been and will continue to be well received.
But it is performing well it's been more stable from a cost standpoint, and it's been stable from a sales standpoint.
Peter Jackson: You can imagine that the specialty is something that has a strong correlation to a lot of our more R and R and other focused markets, which are more stable in general than the single-family space. That's a component of why it does that. In terms of thinking about the future and where we see continued growth, again, I think that our ability to provide a superior product within both the value-added space, if you think about what Ready Frame offers, what trusses and doors offer, that's still very impactful. We think that over time that will continue to grow faster than market, the install, and what we're able to do in, candidly, a variety of product categories just to create ease of doing business for our builder customers. We think that's an offering that has been and will continue to be well received.
I think you will see in 2006, some consistency in our areas of focus will certainly.
As you can imagine that the specialty is something that.
Has a strong correlation to a lot of our more R&R and other focused markets, which are more stable in general than the single family space.
<unk>.
We'll be leaning in and a lot of areas, because we're a pretty broad company and depending on which market. We're in we may have different priorities, but I think those components still will reign read through in 'twenty.
So that's a component of why it does that in terms of.
Thinking about the future and where we see continued growth again, I think that our ability to provide a superior product within both the value add space. If you think about what ready frame offer is what truss.
Thanks, again, guys and good luck to the rest of the year.
Thanks Ruth.
Well move next to Jeffrey Stevenson with loop capital Your line is open.
Hi, Thanks for taking my questions today.
Doors offer.
That's still very impactful, we think that over time that will continue to grow faster than market. The the install and what we're able to do it candidly a variety of product categories just to create ease of doing business for our builder customers. We think that's an offering that is has been and will continue to be well received.
So trust pricing continues to be pressured in a challenging residential demand environment then.
Wondered if you've seen any improvement in industry supply demand imbalances as we move through the back half of the year, what you expect trust pricing.
<unk> to trend lower as we move into 2026.
Peter Jackson: I think you'll see in 2026 some consistency in our areas of focus. We'll certainly be leaning in, in a lot of areas because we're a pretty broad company, and depending on which market we're in, we may have different priorities. I think those components still will ring true in 2026.
I think youll see in 2006, some consistency in our areas of focus will certainly.
Yeah. So I think it's a good observation, it's certainly been an area of pressure that I alluded to that earlier, we are seeing some stability I think the.
We will be leaning in and a lot of areas, because we're pretty broad company and depending on which market. We're in we may have different priorities, but I think those components still will bring ring true in 2006.
The market broadly has moved aggressively I think all of us have seen the opportunity to.
<unk> be part of the solution and the affordability space by being that partner to customers. The return on investment question I think.
[Analyst]: Thanks again guys, and good luck to the rest of the year.
Thanks, again, guys and good luck to the rest of the year.
Peter Jackson: Thanks, Ruben.
Thanks Robert.
Is what is important when you're thinking about trust right. There is there is a that's not an EBITDA metric right because of the depreciation associated with it.
Operator: We'll move next to Jeffrey Stevenson with Loop Capital. Your line is open.
We'll move next to Jeffrey Stevenson with loop capital Your line is open.
[Analyst]: Hi. Thanks for taking my questions today. Truss pricing continues to be pressured in a challenging residential demand environment. I wondered if you've seen any improvement in industry supply demand imbalances as we move through the back half of the year. Would you expect truss pricing to continue to trend lower as we move into 2026?
Hi, Thanks for taking my questions today.
I think what has happened is the market has made some aggressive moves and gotten some stability and some clarity around what a good return on investment is it's always hard to predict where it's going to go but our sense is that it's it's gotten to where it should be and where its going to get to for the time being.
So trust pricing continues to be pressured in a challenging residential demand environment then.
Wondered if you've seen any improvement in industry supply demand imbalance because as we move through the back half of the year, which you expect trust pricing.
Continue to trend lower as we move into 2026.
And it will have an opportunity to improve from where it is but.
Pete Beckmann: Yeah, I think it's a good observation.
Yes, I think it's a good observation, it's certainly been an area of pressure then I alluded to that earlier, we are seeing some stability I think the.
Peter Jackson: It's certainly been an area of pressure that I alluded to earlier. We are seeing some stability. I think the market broadly has moved aggressively. I think all of us have seen the opportunity to be part of the solution in the affordability space by being that partner to customers. The return on investment question, I think, is what is important when you're thinking about trusses. Right. That's not an EBITDA metric, because of the depreciation associated with it. I think what has happened is the market has made some aggressive moves and gotten some stability and some clarity around what a good return on investment is. It's always hard to predict where it's going to go. Our sense is that it's gotten to where it should be and where it's going to get to for the time being, and it'll have an opportunity to improve from where it is.
Obviously, we're going to stay close to it I think are our competitive position and our cost position.
The market broadly has moved aggressively I think all of us have seen the opportunity to.
B the productivity work, we've done over the years makes us.
Makes us the decider or at the end of the day do we want the business or not.
<unk> be part of the solution and the affordability space by being that partner to customers. The return on investment question I think.
Allows us to do that in a way that others can't compete with so we're interested in being a responsible market participant.
Is what is important when you're thinking about trust right. There is there is a that's not an EBITDA metric right because of the depreciation associated with it. So I think what has happened as the market has made some aggressive moves and gotten some stability and some clarity around what a good return on investment is it's always hard to.
<unk> got an appropriate margin and return on investment is the right way to think about it from a from a shareholder perspective, but ultimately we are going to win this battle and we're going to stay in this space in a way that maintains our leadership position.
Great. Thanks for all the color there.
Earlier this year Peter you mentioned there is some slowdown in the M&A pipeline due to macro uncertainties, but you've continued to make strategic bolt on acquisitions are an important value added categories, such as store in metalworking and I wondered if the M&A pipeline has started to see some improvement as the year progressed.
<unk>.
Where it's going to go but our sense is that it's gotten to where it should be and where its going to get to for the time being.
And it will have an opportunity to improve from where it is but.
Peter Jackson: Obviously, we're going to stay close to it. I think our competitive position and our cost position vis-à-vis the productivity work we've done over the years.
Obviously, we're going to stay close to it I think are our competitive position and our cost position.
Yeah, you don't want to it's a good point there have been some ebbs and flows and I think we've been fortunate that a few of the flows were with assets that we really thought were great additions I'm Super excited about the acquisitions in the Nevada market right that Las Vegas d'or.
<unk> be the productivity work, we've done over the years makes us.
[Analyst]: Makes.
Peter Jackson: Us, the decider at the end of the day, do we want the business or not, allows us to do that in a way that others can't compete with. We're interested in being a responsible market participant. We think an appropriate margin and return on investment is the right way to think about it from a shareholder perspective. Ultimately, we are going to win this battle and we're going to stay in the space in a way that maintains our leadership position.
Makes us the decider at the end of the day do we want the business or not.
Allows us to do that in a way that others can't compete with so we are interested in being a responsible market participant we think an appropriate margin and return on investment is the right way to think about it from a from a shareholder perspective, but ultimately we are going to win this battle and we're going to stay in this space in a way that.
Door and millwork category has been a.
Kind of an eyesore on my on my tracker for a while now and I don't like seeing a blank in that category because it's such a good one for us.
We picked up two fantastic businesses really excited about what we're going to be able to do working together.
Maintains our leadership position.
[Analyst]: Great. Thanks for all the color there. Earlier this year, Peter, you mentioned there's some slowdown in the M&A pipeline due to macro uncertainties. You've continued to make strategic bolt-on acquisitions in important value-added categories such as doors and millwork, and wondered if the M&A pipeline has started to see some improvement as the year progressed.
Great. Thanks for all the color there and earlier.
You know that to be that preferred partner in that market.
Earlier this year Peter you mentioned there is some slowdown in the M&A pipeline due to macro uncertainties, but you've continued to make strategic bolt on acquisitions are an important value added categories, such as door and millwork.
Market, where we already do very very well.
And seeing how much better we will do with that additional category as an example for us of where those opportunistic tuck ins can be very impactful and important to us and we continue to see them.
I wondered if the M&A pipeline has started to see some improvement as the year progressed.
No I think we saw a little bit of a boost there.
Peter Jackson: Yeah, you know, it's a good point. There have been some ebbs and flows, and I think we've been fortunate that a few of the flows were with assets that we really thought were great additions. I'm super excited about the acquisitions in the Nevada market. That Las Vegas doors and millwork category has been, you know, kind of an eyesore on my tracker for a while now. I don't like seeing a blank in that category because it's such a good one for us, and we picked up two fantastic businesses. I'm really excited about what we're going to be able to do working together to be that preferred partner in that market. It's a market where we already do very, very well, and seeing how much better we'll do with that additional category.
Yeah, you don't want to it's a good point there have been some ebbs and flows and I think we've been fortunate that a few of the flows were with assets that we really thought were great additions I'm Super excited about the acquisitions in the Nevada market right that Las Vegas.
Businesses that were sort of in in market.
But it ebbs and flows depending on the uncertainty around the space that's.
True within the M&A space, just like it's true for consumers at this point.
Doron Millwork category has been.
Great. Thank you.
You know kind of an eyesore on my on my tracker for a while now I don't like to see in a blank in that category because it's such a good one for us.
Sure.
We will take our last question from Adam Baumgarten with vertical research partners. Your line is open.
We picked up two fantastic businesses really excited about what we're going to be able to do working together.
Hey, guys. Thanks for squeezing me in.
And I think you had mentioned some procurement savings, which probably helped margins a lot of that can you maybe talk about where you saw some some better cost positions there.
To be that preferred partner in that market.
Market, where we already do very very well.
And seeing how much better we will do with that additional category as an example for us of where those opportunistic tuck ins can be very impactful and important to us and we continue to see them.
No, we're really not going to get there.
Peter Jackson: That's an example for us of where those opportunistic tuck-ins can be very impactful and important to us, and we continue to see them. I think we saw a little bit of a boost there in businesses that were sort of in market, but ebbs and flows depending on the uncertainty around the space. That's true within the M&A space just like it's true for consumers at this point.
What I can tell you is that.
Our team is well organized and our communication with our operations has put us in a good position to really be able to.
No I think we saw a little bit of.
A boost there in <unk>.
Identify those opportunities and take advantage of them in a in a way that has really helped us in the short term.
Businesses that were sort of in in market.
But it ebbs and flows depending on the uncertainty around the space that's.
That's the only bit of color I'll add as well.
True within the M&A space, just like it's true for consumers at this point.
Our advantage by virtue of our scale and who we are.
If you're a vendor you want something to go away. That's a problem for you. We were a very we're a very quiet customer we like helping people have problems go away and sometimes that creates opportunities for us.
[Analyst]: Great, thank you.
Great. Thank you.
Yes.
Operator: We'll take our last question from Adam Baumgarten with Vertical Research Partners. Your line is open.
We will take our last question from Adam Baumgarten with vertical research partners. Your line is open.
Pete Beckmann: Hey guys, thanks for squeezing me in.
Hey, guys. Thanks for squeezing me in.
Sure.
[Analyst]: I think you had mentioned some procurement.
We're committed to being that type of partner for our vendors and helping them and I think this is an example, where we were able to do that.
I think you had mentioned some procurement savings, which probably helped margins a little bit can you maybe talk about where you saw some some better cost positions there.
Pete Beckmann: Savings, which probably helped margins a little bit.
Peter Jackson: Can you maybe talk about where you.
Pete Beckmann: Saw some better, you know, cost positions there. No, we're really not going to get into details. What I can tell you is that our team is well organized, and our communication with our operations has put us in a good position to really be able to identify those opportunities and take advantage of them in a way that has really helped us in the short term. I think that's.
Okay, great. Thanks, that's all for me.
No, we're really not going to get built.
And this does conclude the question and answer session and also will conclude the builders first source third quarter 2025 earnings conference call and webcast. You may disconnect at this time and have a wonderful rest of your day.
What I can tell you is that.
Our team is well organized and our communication with our operations has put us in a good position to really be able to.
Identify those opportunities and take advantage of them in a way that has really helped us in the short term. So I think that's the only bit of color I'll add is.
[music].
Peter Jackson: The only bit of color I'll add is we're advantaged by virtue of our scale and who we are. If you're a vendor and you want something to go away, that's a problem for you. We're a very quiet customer. We like helping people have problems go away, and sometimes that creates opportunities for us. We're committed to being that type of partner for our vendors and helping them. I think this is an example of where we were able to do that.
We are advantaged by virtue of our scale and who we are.
If you're a vendor and you want something to go away. That's a problem for you. We were a very we're very quiet customer we like helping people have problems go away and sometimes that creates opportunities for us.
Sure.
We're committed to being that type of partner for our vendors in and helping them and I think this is an example of where we were able to do that.
[Analyst]: Okay, great. Thanks.
Okay, great. Thanks, that's all for me.
Peter Jackson: That's all for me.
Operator: This does conclude the question and answer session and also will conclude the Builders FirstSource third quarter 2025 earnings conference call and webcast. You may disconnect at this time and have a wonderful rest of your day.
And this does conclude the question and answer session and also will conclude the builders first source third quarter 2025 earnings conference call and webcast. You may disconnect at this time and have a wonderful rest of your day.
[Analyst]: It sa.
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Okay.
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Uh huh.
Yeah.
Heather Kos: It.