Aatish Shah

Aatish Shah asked about the overall size of the commercial business and its breakdown by segment, identifying which larger verticals are strengthening and which are most challenged. He also inquired about how the sales force is managed, distinguishing between commercial and residential segments during this challenging period.

Answer

Chairman and CEO Jeff Lorberbaum stated that commercial business accounts for about 25% of the company's total, with a larger portion in Global Ceramic, showing strength in the U.S. and Europe. He noted stable backlogs in U.S. Flooring North America, led by government and education, with Flooring Rest of the World having limited commercial exposure. He explained that sales forces are specialized by region, business, and segment, with distinct groups for retail, national accounts, multifamily, builders, and commercial categories, each with specialists to convey product value.

Aatish Shah, on for Stephen King, asked if the company's mid-single-digit pricing expectation has changed with the lower tariff forecast. Stephen King followed up, asking why the company wouldn't be 'over-mitigating' if pricing remains the same while the tariff headwind is smaller.

Answer

CEO Nicholas Fink stated that pricing has been maintained around the mid-single-digit average, and any further tariff mitigation provides flexibility to be more competitive. In response to the follow-up, Fink and CFO Jon Baksht clarified that the situation is complex. Pricing is not uniform across the portfolio, and some businesses like Outdoors are actually advantaged by tariffs. Baksht added a key point: as tariff rates fall, the calculated value of their supply chain mitigation actions also decreases, as it was measured against a higher baseline, meaning it's not a simple one-for-one offset.

Aatish Shah of Evercore ISI inquired about the drivers behind the recovery in commercial and industrial (C&I) projects, questioning why they are moving forward now given the financing environment has not obviously improved.

Answer

President and CEO Robert Buck explained that the recovery is due to a combination of factors. He noted that companies have come to accept the current financing environment for essential, large-scale projects. Additionally, he credited TopBuild's field teams for successfully executing a 'vertical market strategy,' which has led to market share gains across diverse sectors like oil and gas, food and beverage, and manufacturing.

Aatish Shah from Evercore ISI questioned how much the Kichler divestiture benefited the Decorative Architectural segment's margin guidance. He also asked about mix effects in the paint category and any consumer trade-down trends in DIY.

Answer

CFO Rick Westenberg acknowledged the Kichler divestiture was accretive to margins but stated that the improved guidance was equally, if not more, driven by strong operational performance and cost efficiencies. CEO Keith Allman added that there has not been a significant mix impact in paint, as the company has worked to reduce margin variability across its assortment.