Charles Perron-Piché

Charles Perron-Piché asked about the balance between volume and price, specifically how Builders FirstSource maintains pricing for value-added services amidst competitive pressures and builders' desire to lower stick-built costs, and if there's a change in appetite for value-added products. He also inquired about the acquisition of Pleasant Valley Homes, a strategic move into modular housing, and how this segment fits into Builders FirstSource's overall growth strategy, particularly regarding its outlook for modular housing.

Answer

CEO Peter Jackson acknowledged pricing pressure but highlighted Builders FirstSource's success in offering package and integrated value-added solutions to protect its position and price. He also clarified that the company is pursuing share growth, balancing it against prior erosions. He described Pleasant Valley Homes as an 'exciting experiment,' noting their high-quality modular and HUD-compliant manufactured homes, explaining the vision is to partner with home builders to provide affordable, factory-built options, leveraging BFS's capacity-filling model similar to truss operations.

Charles Perron-Piché inquired about the volume versus price dynamics, discussions with builders regarding lowering stick-built costs, and the company's ability to maintain price for value-added services in a competitive environment. He also asked about any changes in the appetite for value-added products and the strategic outlook for modular housing following the acquisition of Pleasant Valley Homes.

Answer

CEO Peter Jackson acknowledged significant price pressure but highlighted the company's success in offering package and integrated value-added solutions to protect its position and price. He emphasized BFS's advantage in offering more options for affordable home building and superior execution. He clarified that the guidance includes share growth, balancing against 2025 erosions. Regarding Pleasant Valley Homes, he described it as an exciting experiment to explore partnerships with builder customers for manufactured modular homes, aiming to fill factory capacity similar to truss operations, and believes there are cost savings relative to site-built construction.

Charles Perron-Piché of Goldman Sachs asked about the reasons for the reduced productivity savings forecast and the biggest challenges limiting the adoption of the company's digital tools beyond the tough market conditions.

Answer

CEO Peter Jackson explained that while productivity work continues, the P&L benefit is being offset by deleverage from lower sales volumes. CFO Pete Beckmann added that facility closures are part of ongoing operational management. On digital, Jackson stated that while adoption continues, it's slower than anticipated as smaller builder customers are focused on survival, but he remains convicted in the long-term strategy of using technology to improve efficiency.

Charles Perron-Piché from Goldman Sachs asked about the commodity price outlook, specifically how higher lumber prices might flow through to results and impact the value-add product mix. He also inquired about the confidence in achieving the $200 million digital sales target for 2025.

Answer

CFO Pete Beckmann noted that while lumber prices are up, depressed OSB prices are pulling the overall commodity composite down. CEO Peter Jackson clarified that Canadian lumber is exempt from recent tariffs but subject to existing duties. Regarding digital tools, Jackson expressed confidence in hitting the target, citing strong customer reception, a focused internal rollout, and the stable performance of their target audience of smaller builders.

Charles Perron-Piché asked about the risk of value-added content degradation in the multifamily business and how the company is positioning itself against potential tariffs and changes to labor and immigration policies.

Answer

CEO Peter Jackson confirmed that multifamily sales declines disproportionately impact value-add products, which is factored into the guide. Regarding policy, he stated that while higher tariffs and tighter labor would be net negatives for housing starts, the company's value-added offerings would be advantaged in a labor-constrained environment.

Charles Perron-Piché inquired about the confidence in M&A activity normalization for 2026 and how SiteOne Landscape Supply would prioritize capital allocation if M&A remains soft. He also asked about the expected benefits and service improvements from the fifth distribution center opened in Q4 2025, beyond its initial dilutive costs.

Answer

Chairman and CEO Doug Black indicated that active discussions suggest a more typical average deal size for 2026, contrasting with the lighter 2025. CFO Eric Elema stated that if M&A activity is light, capital would be redeployed to return cash to shareholders. Doug Black explained that the fifth DC in Wisconsin will support 100-150 branches, driving down total delivered cost of goods sold, improving margins long-term, enhancing stocking and service, and increasing inventory efficiency and turns, despite being initially dilutive. Eric Elema added that it also accelerates the private label strategy.

Charles Perron-Piché asked about SiteOne Landscape Supply's confidence in the normalization of M&A activity for 2026 and how the company would prioritize capital allocation if M&A activity remains soft, given its strong balance sheet. He also sought details on the expected benefits and service improvements from the fifth distribution center opened in Q4 2025.

Answer

Chairman and CEO Doug Black expressed confidence in a more typical M&A year, citing active discussions that suggest an average deal size of $15 million-$20 million in revenue. EVP Strategy and Development Scott Salmon added that if M&A is light, capital would be redeployed to return cash to shareholders. Doug Black explained that the fifth DC in Wisconsin will support 100-150 Midwest branches, driving down total delivered costs, improving margins long-term, enhancing customer service, and increasing inventory turns, while also accelerating the private label strategy.

Charles Perron-Pich inquired about SiteOne Landscape Supply Inc.'s capital allocation strategy, specifically if a higher focus on shareholder returns, such as share repurchases, would be considered if the M&A market remains softer, given the company's leverage is at the low end of its target range. He also asked about the benefits of commercial initiatives on pricing this quarter and if further mix benefits are expected.

Answer

John Guthrie, EVP, CFO, and Assistant Secretary, confirmed that being at the bottom of their leverage range, coupled with a softer M&A market, certainly supports increased share repurchases, though acquisitions remain the primary investment priority. He clarified that commercial initiatives primarily contribute to gross margin improvement through factors like private label growth and small customer initiatives, separate from direct pricing benefits, with both contributing to overall performance.

Charles Perron-Piché inquired about SiteOne Landscape Supply Inc.'s capital allocation strategy, specifically asking if the company would consider a higher focus on shareholder returns, such as increased share repurchases, if the M&A market were to remain softer for longer, given that leverage is currently at the low end of the target range. He also asked for further elaboration on the benefits of commercial initiatives on pricing this quarter and if further mix benefits are expected on top of like-for-like pricing.

Answer

EVP, CFO, and Assistant Secretary John Guthrie confirmed that with leverage at the bottom of the target range, it certainly lends itself to increased share repurchases, while acquisitions remain the primary investment priority. He clarified that the benefits from commercial initiatives are distinct from pricing, contributing to gross margin through efforts like private label growth and small customer initiatives, which both contributed to overall performance in addition to price benefits.

Charles Perron-Piché of Goldman Sachs asked about mitigation actions for tariff-related cost inflation beyond pricing and whether competitors were taking different pricing approaches. He also inquired about the opportunity for freight savings and its potential contribution over time.

Answer

CFO John Guthrie stated that there are not significant mitigation actions for tariffs other than passing through costs, which is standard in the market. CEO Doug Black added that the market remains rational but competitive, with no major changes in competitor behavior. Regarding freight, Black highlighted significant savings opportunities in customer delivery, noting a 40 basis point improvement on delivered sales in H1 driven by efficiency gains from their DispatchTrack system, with more progress expected over the next few years.

Charles Perron-Piché inquired about the company's inventory management strategy, particularly the balance between pre-buying ahead of price hikes and managing macro uncertainty. He also asked about capital allocation between M&A and share repurchases.

Answer

Executive Vice President John Guthrie stated that the company has been selective in its pre-buying of inventory, focusing on specific at-risk products to secure supply and mitigate disruption. On capital allocation, Guthrie affirmed that while strategic acquisitions remain the primary focus, share repurchases have become more attractive at current stock price levels. He stressed the importance of maintaining a strong balance sheet to support both growth and shareholder returns.

Charles Perron-Piché from Goldman Sachs asked for a breakdown of the commercial initiatives driving market share gains and questioned the company's confidence and path to returning to double-digit adjusted EBITDA margins over the next three years.

Answer

CEO Doug Black detailed several growth drivers, including programs for small and Hispanic customers, private label product expansion, and a 180% increase in digital sales. He expressed strong confidence in returning to double-digit EBITDA margins, driven by these initiatives, organic growth, and significant performance improvements expected from underperforming branches.

Charles Perron-Piché inquired about the current progress of Vision 2030, identifying which key pillars offer the most leverage to achieve the $40 EPS objective, and whether M&A is becoming increasingly crucial for reaching this target given the evolving macro environment.

Answer

Chris Koch, Chairman, President, and CEO, Carlisle, highlighted CWT margin expansion and technology innovation (e.g., ThermaThin, new application gun, 10 new products planned) as the most important pillars. He reaffirmed the $40 EPS target remains in play, emphasizing that M&A was always a key component and expressing a desire for more productive M&A activity in 2026.

Charles Perron-Piché asked for an update on Carlisle's Vision 2030 progress since 2023, considering the changing macro environment and softer housing backdrop. He inquired which key pillars provide the greatest leverage to reach the $40 EPS objective and if M&A is increasingly important to achieve this target organically.

Answer

Chris Koch, Chairman, President, and CEO, highlighted CWT margin expansion (contingent on market recovery) and technology (new products like ThermaThin and a new adhesive gun, with 10 more products planned) as the most important pillars. He reaffirmed the $40 EPS target, stating that M&A was always a part of the plan and remains key, expressing hope for a productive 2026 on the M&A front.

Charles Perron asked about the $150M+ cost action tailwind for 2026, specifically differentiating between new actions and carryover from 2025. He requested elaboration on measures like automation, strategic sourcing, and footprint rationalization, and the factors considered for determining additional actions. He also inquired about balancing the growth momentum in small domestic appliances (SDA) with maintaining a 16% EBIT margin to maximize returns.

Answer

Chairman and CEO Marc Bitzer clarified that less than a third of the $150M+ cost savings is carryover. New initiatives include vertical integration (expected to yield sizable savings and supply chain stability), accelerated automation, and a strategic sourcing initiative (a complex, thorough process last undertaken six years ago, expected to contribute almost a third of savings). EVP of MDA Latin America and KitchenAid Small Appliances Ludovic Beaufils expressed satisfaction with SDA's 10% growth in Q3 and Q4, with similar projections for 2026. He stated that the highest value is created through growth, given the accretive margins, and they reinvest excess margin into further acceleration while maintaining the 15-16% margin range.

Charles Perron-Piché asked about the performance of D.R. Horton's operations in smaller markets where they hold larger market share, inquiring about the opportunities seen there relative to larger markets and how this influences their ability to outperform next year. He also questioned if the flat revenue guide for next year, alongside 3% growth in closings, suggests continued ASP pressure in fiscal 2026, and how ASP is expected to trend, distinguishing between like-for-like pricing and mix impact.

Answer

Paul Romanowski, President and CEO, noted that divisions in smaller, less competitive markets have shown higher achievement of intended absorptions, benefiting from their expanded geographic footprint and maturing teams. Bill Wheat, CFO, confirmed that D.R. Horton expects a net decline in ASP in fiscal 2026, driven by their focus on affordability, a mix shift towards smaller homes, and ongoing incentive levels.

Charles Perron-Piché asked about the performance of D.R. Horton's operations in smaller markets where it holds larger market share, inquiring about the opportunities seen there relative to larger markets and how this influences the ability to outperform next year. He also questioned the ASP trend for 2026, given 3% growth in closings and a flat revenue guide, suggesting potential for continued ASP pressure, and how much of this would be driven by like-for-like pricing versus mix impact.

Answer

President and CEO Paul Romanowski noted solid performance in smaller markets with lower competition, better inventory control, and higher absorption achievement, benefiting from D.R. Horton's expanded geographic footprint and maturing teams. CFO Bill Wheat stated that D.R. Horton continues to focus on affordability, expecting a net decline in ASP in fiscal 2026 due to both mix (smaller homes) and incentive levels.

Charles Perron-Piché, on for Susan Maklari, asked for quantification of market share gains from the 'Measure by Latham' tool and how auto cover regulation changes factor into the growth model. He also inquired about capital allocation priorities.

Answer

CFO Oliver Gloe noted the liners business grew 6% YoY, with the measurement tool being a key contributor, but declined to quantify its specific impact. CEO Scott Rajeski added that auto covers are a core part of the growth algorithm, with high take rates where they can replace fences. Gloe reiterated that capital allocation priorities remain: 1) organic investment, 2) M&A, and 3) debt repayment.

Charles Perron-Piché from Goldman Sachs asked about the health of the consumer, how it informs the second-half outlook, the company's pricing strategy amid tariff impacts, and for a segment-level breakdown of the full-year guidance.

Answer

President, CEO & Chairman Karl Glassman and EVP & CFO Benjamin Burns addressed the questions. Glassman noted consumer health appears more positive than three months prior, driven by strong holiday promotions, though tariff-related inflation remains a risk. He affirmed the company has pricing power to pass through tariff costs. Burns then provided a detailed full-year outlook for sales, volume, and operating margins for the Bedding, Specialized Products, and Furniture, Flooring & Textile Products segments.

Charles Perron-Piché of Goldman Sachs asked about changes to broker commission strategies in response to rising resale inventory and the outlook for stick-and-brick costs, considering lumber prices and tariffs.

Answer

CEO Phillippe Lord stated that the company's strategy remains consistent: competing with resale by offering reliable, market-rate commissions. CFO Hilla Sferruzza added that resale inventory is not always a direct competitor. Regarding costs, she confirmed Q3 margin guidance already reflects current stick-and-brick costs and that tariffs have not been a material factor, with potential for future savings not yet modeled.

Charles Perron-Piché of Goldman Sachs, on behalf of Susan Maklari, asked about potential changes to broker commission strategies in response to rising resale inventory and the outlook for stick-and-brick costs considering lumber price movements and tariffs.

Answer

CEO Phillippe Lord stated that their strategy remains focused on competing with resale by offering consistent, market-rate commissions, noting that current incentive pressure comes more from other new home builders. EVP & CFO Hilla Sferruzza added that Q3 guidance already incorporates current construction costs, that tariffs have not been a material factor, and that while they see potential for future savings, none are currently modeled.

Charles Perron-Piché asked about the strategy for balancing price and pace if market conditions soften, and how the company is preparing for potential supply chain disruptions from tariffs.

Answer

CEO Phillippe Lord affirmed they would not pull back on new community openings, which are additive to sales. The strategy remains to target 4 net sales per month and then optimize returns, using incentives as needed. To mitigate tariff risks, he said the plan is to overcommunicate with vendors and leverage their spec-building model, which allows for substitute products, providing operational flexibility.

Asked how the back-half sell-out assumption compares to the broader R&R market, about confidence in long-term growth, and for details on channel wins and new product adoption.

Answer

The guidance implies outperforming the R&R market by approximately 7 percentage points. The company is confident in future growth due to its track record, new products, and potential merger synergies. The early buy period was successful with shelf space gains, and new products are performing ahead of expectations.

Charles Perron-Piché, on behalf of Susan Maklari, asked about the contribution of new product initiatives to recent growth and their potential to drive outperformance in calendar 2025. He also sought to distinguish between volume leverage and operational initiatives as drivers of margin performance and inquired about the M&A pipeline.

Answer

CEO Joseph Hayek clarified that the specific new products mentioned (like the Balloon Time mini tank) had minimal contribution in Q3 as they are just launching, but they are expected to add to revenue and margin going forward. He explained that growth in newer businesses like Tools and Grills is focused on taking market share, while legacy businesses focus on product innovation. Hayek reiterated the long-term goal of pushing gross margins toward 30% and SG&A toward 20% of sales. Regarding M&A, he noted the pipeline is healthy and the company maintains a long-term view, assessing opportunities despite current market uncertainty.