Garik Shmois

Garik Shmois sought more details on the non-residential market guidance reduction, asking if specific regions or categories were driving the downgrade to mid-single-digit declines. He also asked for clarity on the NDS acquisition's sales and EBITDA contribution to the Q4 guidance, and any preliminary insights into its expected contribution for calendar year 2026.

Answer

Mike Higgins, VP of Corporate Strategy and Investor Relations, explained that the guidance update is a 'mark-to-market' adjustment after nine months, not a signal of further deterioration. He noted continued variability by geography, with strong activity in data centers and improved warehouse sales, particularly in horizontal, low-rise commercial construction. Higgins stated that the current guidance includes approximately $40 million in NDS revenue with a 20% EBITDA margin for the last two months of the fiscal year, directing to the previously filed 8-K for details on calendar 2026 performance.

Garik Shmois asked for more details on the reduction in non-residential market guidance, specifically if any regions or categories were driving this downgrade.

Answer

Mike Higgins, VP of Corporate Strategy and Investor Relations, clarified that the guidance update was a 'mark-to-market' adjustment after nine months, not an indication of market deterioration. He noted that the market remains highly variable by geography, with strong performance in data centers, improving warehouse activity, and solid general commercial construction. Shmois also asked about the specific sales and EBITDA contribution of NDS in the Q4 guide and its expected contribution for calendar year 2026 (fiscal year 2027). Higgins stated that NDS contributes approximately $40 million in revenue with a 20% EBITDA margin for the last two months of the fiscal year, referring to a previously filed 8-K for further details on future performance.

Garik Shmois asked for an update on price-cost dynamics for the second half, specifically regarding material costs and whether pricing stability would change given the conservative demand outlook. He also inquired about the pickup in SG&A costs in the second quarter and how to contextualize SG&A expectations for the second half.

Answer

Scott Cottrill (EVP, CFO, and Secretary) reiterated that the second-half outlook is demand-driven, with price-cost remaining largely stable on both material and pricing fronts. He attributed the increase in SG&A to the Orenco acquisition and costs associated with the NDS transaction. Scott Barbour (CEO and President) emphasized the company's control over costs and long-term investments, noting that current performance reflects initiatives started a year ago.

Garik Shmois asked about the price-cost dynamics in the back half of the year, specifically material cost trends and whether stable pricing should be expected given the more conservative demand outlook. He also inquired about the increase in SG&A in the second quarter and how it should be contextualized for the second half.

Answer

CFO Scott Cottrill reiterated that the second-half outlook is demand-driven, with price-cost (both material and pricing) largely stable. He noted no significant downdraft or trend in manufacturing, transportation, or SG&A. Scott Cottrill and CEO Scott Barbour explained the Q2 SG&A increase was due to the Orenco acquisition and costs related to the NDS transaction, emphasizing control over these costs and long-term investments.

Garik Shmois of Loop Capital Markets asked for confirmation that the fixed cost absorption headwind from Q1 is now fully resolved. He also inquired about any changes in the competitive landscape, particularly given the "tepid" demand environment and new capacity in the market.

Answer

CFO Scott Cottrill confirmed that the fixed cost absorption issue from the winter inventory build is now mostly behind them. President & CEO D. Scott Barbour provided a detailed response on competition, emphasizing that sequential pricing has been stable for over a year. He stressed the resiliency of ADS's business model, cost management, and operational execution, stating that radical price actions do not increase demand in the current market.

Garik Shmois asked for management's level of confidence in maintaining stable pricing in a soft market and inquired if there was an opportunity to accelerate M&A activity given the company's strong balance sheet.

Answer

An executive expressed confidence in their daily pricing management process, which analyzes jobs, customers, and competitors, noting it has been effective for the past four quarters. Another executive affirmed that acquisitions are a key part of the growth strategy and that with leverage at 1.1x, the company has significant capacity to act on opportunities. They are actively looking at all options to put the balance sheet to work for incremental growth.

Garik Shmois inquired about the variance in the manufacturing and transportation cost line between Q2 and Q3 and asked if there were quantifiable cost savings from recent facility consolidations.

Answer

CFO Scott Cottrill explained that the company continues to realize efficiencies in transportation and network operations, with benefits from recent productivity investments reflected in Q3 performance. He confirmed the facility consolidations will generate savings but stated they are already embedded in the full-year guidance and will not be quantified separately.

Garik Shmois requested more detail on the nonresidential market's performance during the quarter, asking if conditions worsened progressively or if the choppiness was broad-based. He also inquired about inventory levels and any potential risk of channel destocking.

Answer

CEO Scott Barbour explained that the nonresidential slowdown was most evident in the flattening growth of Allied Products, as projects were consistently being pushed out rather than canceled. He attributed this to general uncertainty holding up project releases. CFO Scott Cottrill confirmed there is no risk of destocking and noted that while some prior-quarter interplant freight costs were a headwind, transportation is expected to be favorable in the second half of the year.

Garik Shmois inquired about Carlisle's 2026 volume assumptions, specifically if they anticipate any distributor restocking activity, and whether the distribution disruptions mentioned in the prior quarter have been resolved.

Answer

Chris Koch, Chairman, President, and CEO, confirmed that progress has been made in resolving distribution issues as they moved into Q4. He noted that seasonal destocking and higher interest rates led to lower inventory levels. He anticipates nice volume improvements in Q2 with a positive start to the summer construction season.

Garik Shmois inquired about Carlisle's 2026 volume assumptions, specifically regarding anticipated distributor restocking activity, and whether the distribution disruptions mentioned in the prior quarter have been resolved.

Answer

Chris Koch, Chairman, President, and CEO, Carlisle, confirmed that progress has been made in resolving distribution issues, which is a positive sign despite the typical seasonal destocking in Q4 and Q1. He noted that higher interest rates have led to lower inventory levels, and anticipates volume improvements in Q2 with a positive start to the summer construction season.

Garik Shmois from Loop Capital Markets asked for the specific EBITDA margin outlook for both the CCM and CWT segments in the fourth quarter. He also followed up on Carlisle's market share in CCM relative to the industry, particularly in light of recent distributor dislocations.

Answer

Kevin Zdimal, CFO, projected CCM's Q4 adjusted EBITDA margin to be around 26%, driven by low single-digit volume decline (reroofing strength offset by new construction and distribution headwinds), flat pricing, and negative raw material impacts. For CWT, he anticipated margins to be down 250-300 basis points year-over-year, with low single-digit revenue growth (acquisitions offsetting mid-single-digit organic decline) and slightly negative pricing. Chris Koch, Chair, President, and CEO, confirmed that underlying CCM market share remains largely unchanged long-term, acknowledging minor, temporary share loss in Q3 due to specific distributor M&A turmoil, which he expects to resolve by 2026.

Garik Shmois requested the outlook for EBITDA margins in the fourth quarter by segment and inquired about Carlisle Companies Incorporated's market share in CCM relative to the industry, given current distributor dislocation.

Answer

Kevin Zdimal, CFO, detailed Q4 EBITDA margin outlook: CCM at ~26% (volume down low single digits, flat pricing, negative raw materials, continued investments) and CWT margins down 250-300 basis points year-over-year (revenue up low single digits, organic down mid-single digits, pricing down slightly). Chris Koch, Chair, President, and CEO, stated that CCM's underlying market share is stable long-term, but acknowledged some Q3 share loss due to M&A turbulence and management turnover at a key distributor, which he expects to be temporary and resolved by 2026.

Garik Shmois of Loop Capital Markets LLC inquired about the EBITDA margin outlook by segment for the second half of the year and sought details on cost-saving initiatives within the CWT segment, including footprint rationalization and automation.

Answer

CFO Kevin Zdimal provided specific margin guidance, projecting CCM margins around 31% in Q3 and 29% in Q4, with CWT margins expected to be around 20% for both quarters. VP of Investor Relations Mehul Patel clarified that the ~$30 million in CWT opportunities consist of $12 million in annualized savings from automation and footprint consolidation, plus roughly $14 million in synergies from the PlastiFab and ThermoFoam acquisitions.

Garik Shmois from Loop Capital Markets asked about the nature of the $15 million in pre-buying during Q1, the state of channel inventories, and the company's sourcing strategy for MDI and other non-North American materials, particularly from China.

Answer

CEO D. Koch clarified that the pre-buy was minimal, mostly isolated to Canada, and not expected to have a meaningful forward impact. He stated that channel inventories remain light due to carrying costs and market uncertainty. Regarding sourcing, Koch explained that the strategy for MDI hasn't changed, relying on a competitive RFP process and strong supplier relationships, and that the company has multiple options to manage potential cost pressures, including passing them through, absorbing them, or changing suppliers.

Garik Shmois asked for more detail on the 2025 volume and price assumptions for the CWT segment and whether insulation pricing had stabilized. He also requested more color on the improving bidding activity mentioned for late Q4, specifically regarding different verticals and the outlook for new construction.

Answer

CEO D. Koch noted that a new leader and a revised go-to-market strategy should drive improvement in the spray foam insulation business. VP of IR Mehul Patel added that CWT's guided growth is primarily from M&A, with the underlying market expected to be flat and pricing adding 50-100 basis points. Regarding bidding activity, Koch attributed late-year improvement to increased market stability and the inability to delay projects further due to tight labor. He reiterated that reroofing remains strong while new construction will likely start soft before picking up.

Garik Shmois of Loop Capital Markets asked about pricing trends in the CWT segment and whether the cadence had changed during the year. He also sought more color on CWT's sales trends and outlook, given the negative revision from expectations set after Q2.

Answer

CFO Kevin Zdimal and VP of Investor Relations Mehul Patel explained that CWT pricing had steadily improved, with the year-over-year decline moderating to about 2% in the second half, in line with expectations outside of some pressure in spray foam. CEO Chris Koch attributed the weaker-than-expected CWT performance primarily to the further deterioration in residential markets, driven by affordability issues and interest rate uncertainty, which caused consumers to delay projects.

Garik Shmois inquired about the specific factors, beyond delayed tariffs, that gave the company confidence to reinstate the 401(k) match, and whether any incremental cost-cutting measures are planned for the year given the choppy macro indicators.

Answer

Chair, President, and CEO Heidi G. Petz emphasized that the decision to reinstate the 401(k) match was not short-term, but aimed at protecting the company's operating strength and jobs during prolonged uncertainty. She highlighted the importance of a differentiated strategy, world-class team, and investing in execution capacity to attract and retain talent. VP of Investor Relations Ben Meisenzahl added that the flexibility preserved by pausing the match allowed for its reinstatement when risks didn't materialize as severely as anticipated. He confirmed that tariff pressures remain a factor in the 2026 raw material guide, but expressed confidence in teams continuing to unlock costs through cross-business unit collaboration.

Garik Shmois asked about the specific factors, beyond delayed tariffs, that gave confidence to reinstate the 401(k) match, and if any incremental cost implementations are planned given the choppy macro environment.

Answer

Heidi G. Petz, Chair, President, and CEO, emphasized that the decision was made to protect the company's operating strength and jobs during uncertainty, not for short-term optics. She highlighted the importance of a differentiated strategy, world-class team, and investing in execution capacity. Ben Meisenzahl, VP of Investor Relations, added that while tariff pressures remain a low single-digit raw material headwind for 2026, confidence in cross-business unit teams to unlock costs supported the decision.

Garik Shmois asked if the 30% incremental margins on low single-digit volume growth in the Paint Stores Group in Q3 2025 is a good benchmark moving forward, and how to think about incremental margins in other segments when demand improves.

Answer

SVP of Finance and CFO Al Mistysyn noted that historically, Paint Stores Group expects mid-20% incremental margins on lower volume growth, with Q3's 30% reflecting cost reduction efforts and SG&A leverage. He explained that Performance Coatings Group's incremental margins are harder to predict due to business and regional mix, but strong North America growth would yield 20-30%. For Consumer Brands Group, stronger volume would boost supply chain efficiencies and incremental margins. President and CEO Heidi Petz added that simplification initiatives are ongoing to improve the cost position.

Garik Shmois asked if the 30% incremental margin achieved on low single-digit volume growth in the Paint Stores Group during the quarter is a reliable benchmark moving forward for that segment. He also sought insight into incremental margins on volume in other segments once demand improves more consistently.

Answer

Al Mistysyn, SVP of Finance and CFO, stated that historically, the Paint Stores Group expects mid-20% incremental margins on low single-digit volume growth, with the 30% in Q3 reflecting cost-cutting and SG&A leverage. He noted that for the Performance Coatings Group, incremental margins vary by region and business mix (e.g., higher in North America). For the Consumer Brands Group, strong volume would improve supply chain efficiencies and incremental margins. Heidi Petz, President and CEO, added that 'simplification' and 'self-help' initiatives during the downturn are improving their cost position.

Garik Shmois from Loop Capital Markets asked for more detail on the unfavorable mix that impacted pricing in the Performance Coatings Group and whether a similar mix effect was present in the Consumer Brands Group.

Answer

SVP of Finance & CFO Al Mestyshin confirmed that a negative mix shift affected both segments. He explained that North America is typically a higher-margin region for both businesses, and when it grows slower than other regions, it results in an unfavorable geographic mix that pressures the consolidated price/mix metric.

Garik Shmois of Loop Capital Markets asked for more detail on the unfavorable mix that impacted pricing in the Performance Coatings Group and whether a similar mix effect occurred in the Consumer Brands Group.

Answer

CFO Allen Mistysyn explained that for both segments, North America is typically a higher gross margin region. Because North American sales did not grow as fast as other regions during the quarter, it created a negative mix shift that pressured the overall price/mix realization for both segments.

Garik Shmois asked if Sherwin-Williams was seeing any pull-forward of demand from customers pre-buying ahead of tariffs, or conversely, any destocking.

Answer

Executive Heidi Petz provided a direct response, stating, 'Not really, Garik.' She clarified that while there might be minor exceptions, any such activity is not material and is not an active conversation across the company's business units.

Garik Shmois inquired about the volume trends for DIY and PRO paint within the Consumer Brands segment during the fourth quarter and the outlook for 2025.

Answer

CEO Heidi Petz confirmed that DIY demand was weaker than expected, while SVP & CFO Allen Mistysyn added that PRO paint was also under pressure in Q4. For 2025, they anticipate that volumes for both will improve as existing home turnover recovers, with a sales trajectory similar to the broader company: a choppy first half followed by improvement.

Garik Shmois asked about the company's high-level approach to SG&A leverage, questioning if there is a target investment-to-sales ratio or if the strategy is more situational.

Answer

Executive Allen Mistysyn described the approach as situational, with the primary focus on driving operating margin. He explained that in some years leverage comes from SG&A control, while in others, like the present, strong gross margin performance allows for opportunistic reinvestment into long-term growth initiatives.

Garik Shmois asked about any mixed impact on pricing, either from product or geographic factors, and whether the pricing in the company's backlog is accelerating.

Answer

Ward Nye, Chairman and CEO, indicated a product mix headwind due to higher basestone shipments, which typically have lower ASPs but signal new construction. He noted no significant geographic mix headwind, with the West Group showing healthier pricing than the East. He also mentioned attractive activity in energy and data centers, which should provide momentum for future pricing.

Garik Shmois asked about any mixed impact on Martin Marietta's pricing, either from product or geographic factors, and whether the company is observing an acceleration in pricing within its backlog.

Answer

Chairman and CEO Ward Nye stated there was no significant tailwind from product mix, noting that basestone, which has a lower ASP, saw the largest growth in shipments, potentially acting as a headwind. Geographically, the West Group had healthier pricing than the East, which was expected. He indicated that while more details on backlog pricing would come later, current activity in energy and data centers in key corridors suggests positive momentum.

Garik Shmois of Loop Capital Markets sought to drill down on why management feels better about the outlook now than after Q4. He asked if it is fair to assume the outlook for infrastructure volumes, specifically, is directionally stronger than it was three months ago, given concerns about private construction.

Answer

Chair and CEO Ward Nye confirmed this assumption was 'entirely fair.' He noted that infrastructure represented 33% of the business in Q1, a seasonally low number that he expects to grow given the quantum and aggregates-intensity of upcoming projects. While acknowledging that the company isn't putting 'a lot of stock' in a near-term residential recovery, he highlighted the market is structurally underbuilt and well-positioned for when demand returns, which would not require a large move in interest rates or home prices.

Garik Shmois asked for quantification of the remaining inventory drawdown impact in the first half of 2025 and whether the components of the volume outlook had changed since the prior quarter.

Answer

CEO Ward Nye quantified the recent inventory drawdown impact as a $30 million headwind in Q3 and $20 million in Q4, expecting the process to be complete by mid-year 2025. Regarding the volume outlook, he noted that while the private construction outlook has become more muted due to 'higher for longer' interest rates, the public infrastructure outlook feels more robust. He suggested this is driven by the need to deploy IIJA funds, resulting in a net effect that feels like a wash compared to the previous outlook.

Garik Shmois requested more details on the recent acquisitions in South Florida and California, including their size, volume contribution, pricing dynamics, and expected impact on Q4 and 2025.

Answer

CEO C. Nye described the deals as margin-accretive, pure aggregate bolt-ons with over 150 million tons of reserves in key markets. He stated there would be minimal P&L impact in Q4 due to purchase price accounting. He highlighted their success in raising prices at prior acquisitions, noting the price delta on the Blue Water assets has already narrowed from $5 to $3 per ton, demonstrating their integration strategy.

Garik Shmois asked about the sequential tick down in pricing growth for the quarter, seeking specific drivers and more detail on the pricing outlook for 2026.

Answer

Tom Hill, Chairman and CEO, attributed pricing to expectations, including 150 basis points of mix and acquisition drag, noting higher base volumes (lower price, lower cost) maintained unit margin. Ronnie Pruitt, COO, confirmed improving public and private non-res demand supports 2026 pricing, with positive early conversations on January 1 price letters and accelerating bid work.

Garik Shmois of Loop Capital Markets asked about the breadth of mid-year price increases and how the geographic mix, particularly a recovery in the Southeast, might affect pricing in the second half of the year.

Answer

Chair & CEO J. Thomas Hill described mid-year increases as occurring in 'some products in some markets,' primarily setting up for 2026. He noted H1 pricing was impacted by geographic mix from weather in the high-margin Southeast. Senior VP & CFO Mary Carlisle emphasized the strong underlying momentum, with 8% mix-adjusted pricing, as the key metric.

Garik Shmois of Loop Capital asked for more detail on pricing, including the integration of Wake Stone's pricing and whether there was any pushback on mid-year increases from ready-mix customers.

Answer

CEO James Hill described pricing as 'as expected,' with successful January 1st increases and ongoing discussions for mid-year hikes. He noted that strong public demand helps offset challenges on the private side. CFO Mary Andrews Carlisle added that acquisitions are performing well and are expected to contribute about $150 million for the full year, with a focus on capturing synergies through the 'Vulcan Way' disciplines.

Garik Shmois of Loop Capital Markets asked about the potential for mid-year price increases in 2025 and how much the 2024 mid-year increases are contributing to 2025 results.

Answer

CEO Tom Hill confirmed that Vulcan will 'absolutely' announce mid-year price increases, likely near the end of Q1, though they are not included in the current guidance. He noted that while parsing out the exact impact of prior mid-year hikes is difficult, they definitely help both the amplitude and timing of subsequent January 1 increases by giving customers more time to react.

Garik Shmois asked for more detail on the high single-digit pricing outlook for 2025, including the impact of carryover from 2024, the expected pacing of price increases, and any potential mix impacts.

Answer

Chairman and CEO James Hill explained that successful mid-year price increases in 2024 and strong backlogs provide good visibility and momentum for the high single-digit price growth forecast in 2025. He expressed confidence in achieving a ninth consecutive quarter of double-digit growth in cash gross profit per ton. SVP and CFO Mary Andrews Carlisle added that this focus on unit profitability is key to free cash flow generation, noting the 36% year-to-date increase in free cash flow despite lower volumes.

Garik Shmois of Loop Capital Markets LLC questioned the outlook for aggregates' gross profit per ton growth in the second half and inquired about any long-term targets for this metric. He also asked about the M&A pipeline as the company's leverage decreases.

Answer

CFO Gail Peck projected continued growth in gross profit per ton for the second half, aided by the accretive Stavola acquisition, focusing on sustained growth through pricing and cost discipline rather than a specific target. President and CEO Antonio Carrillo added that the M&A pipeline for bolt-on acquisitions remains full. As the company approaches its target leverage ratio, it will be more comfortable deploying capital for both M&A and organic growth projects, such as the recently announced plant conversion.

Garik Shmois sought clarification on aggregates pricing, specifically the difference between the 7% organic growth and the 10% total growth including Stavola, and also asked for the margin outlook for the Construction Products segment.

Answer

CFO Gail Peck confirmed the pricing figures and reiterated the full-year guidance for mid-single-digit organic price growth. CEO Antonio Carrillo explained that Stavola's hard rock operations carry a higher average selling price, which lifts the overall reported pricing. Peck affirmed a positive outlook for segment margins, expecting pricing to continue outpacing cost inflation and reiterated guidance for high single-digit organic EBITDA growth for the year.

Garik Shmois from Loop Capital Markets questioned the 2025 organic volume outlook for the aggregates business, especially after weather impacts. He also asked for details on the lower CapEx guidance and the expected earnings contribution from recently completed organic growth projects.

Answer

CFO Gail Peck projected flattish to slightly up organic volumes for aggregates in 2025, acknowledging a slow start to the year due to cold and wet weather. CEO Antonio Carrillo explained the CapEx reduction is focused on growth spending to prioritize deleveraging post-Stavola. He detailed that completed projects, like the Florida concrete plant and New Mexico wind tower facility, are expected to be accretive and contribute to 2025 growth.

Garik Shmois asked if there were any signs of improvement in the Americas Outdoor Living business and sought clarification on the product or geographic mix impacting aggregate pricing.

Answer

CEO Jim Mintern described the Outdoor Living business as resilient, with particularly strong performance in premixed products. COO Randy Lake explained the aggregate pricing mix was impacted by weather, which delayed sales of higher-value premium products. He expects this to normalize as activity increases and reaffirmed the full-year mid-to-high single-digit pricing outlook.

Garik Shmois asked two follow-up questions: whether there has been any change in M&A sellers' expectations given the macro environment, and if any maintenance costs were pulled forward into Q1 due to weather.

Answer

Executive Jim Mintern responded that CRH is not yet seeing any change in sellers' aspirations or entry multiples for acquisitions, noting the 8 deals in Q1 were done at typical average multiples. Executive Randy Lake clarified that Q1 maintenance activities were standard for the winter season and planned to match expected demand, not an unusual pull-forward caused by weather.

Garik Shmois of Loop Capital Markets LLC inquired about the timing of the merger given the choppy market, sought details on the cost synergy buckets, and asked about potential channel cannibalization and regulatory hurdles.

Answer

MasterBrand President & CEO Dave Banyard cited the compelling value creation for customers, a fortified financial profile, and expanded associate opportunities as key drivers for the timing. American Woodmark President & CEO Scott Culbreth added that the merger benefits customers, shareholders (via $90M in synergies), and team members. Banyard noted synergies are roughly 40% G&A/indirect costs and 60% COGS, and expressed confidence in navigating the regulatory process, highlighting that the deal creates better channel diversification.

Garik Shmois of Loop Capital Markets LLC inquired about the timing of the merger given the choppy market, sought more detail on the cost synergy buckets, and asked about potential channel cannibalization and regulatory hurdles.

Answer

Dave Banyard, President & CEO of MasterBrand, explained that the combination creates a compelling value proposition for customers, fortifies the financial profile, and expands opportunities for associates. Scott Culbreth, President & CEO of American Woodmark, added that the merger benefits customers, shareholders (via synergies), and team members. Regarding synergies, Banyard noted that over 40% are from G&A/indirect costs and under 60% from COGS. On regulatory matters, he expressed confidence in navigating the process and highlighted that the combined entity would have better channel diversification.

Garik Shmois of Loop Capital Markets inquired about the strategic timing of the merger, sought details on the sources of the projected $90 million in cost synergies, and asked about potential channel cannibalization and regulatory hurdles.

Answer

MasterBrand CEO Dave Banyard and American Woodmark CEO Scott Culbreth explained the timing is opportune to create a financially fortified entity with enhanced value for customers and expanded opportunities for associates. Banyard detailed that synergies are projected to be roughly 40% from G&A/indirect costs and 60% from COGS. He also expressed confidence in navigating the regulatory process, highlighting that the merger creates a more diversified channel mix that benefits all partners.

Garik Shmois of Loop Capital Markets asked about the timing of the merger given choppy market conditions, the details of the cost synergy buckets, and potential channel concentration or regulatory hurdles for the combined entity.

Answer

President & CEO of MasterBrand, Dave Banyard, and President & CEO of American Woodmark, Scott Culbreth, explained that the combination creates compelling value for customers and shareholders, fortifies the financial profile, and offers a better diversification of channel mix. Dave Banyard noted the synergies are split roughly 40% in G&A/indirect costs and 60% in COGS, and expressed confidence in navigating the regulatory process.

Garik Shmois inquired about MasterBrand's pricing strategy in response to tariffs, the potential impact on demand, and the demand cadence for Q2, including whether pre-buying was a factor. He also asked how the company is balancing near-term cost-saving measures with long-term growth during its footprint optimization.

Answer

CEO R. Banyard explained that additional pricing is being implemented via a surcharge to counter tariffs. He noted that recent demand spikes are likely pre-buying ahead of tariff impacts, not a signal of stronger underlying demand, and expects a downturn in late Q2 and into the second half. Banyard added that while Q2 decrementals will be impacted by unabsorbed tariff costs and ongoing factory realignment, the company is making adjustments to variable costs and has plans for further fixed cost reductions if needed, without sacrificing future growth at this stage.

Garik Shmois of Loop Capital Markets asked for clarification on whether the Q4 pricing pressure was from negative mix or like-for-like declines, sought specifics on the drivers of the February demand recovery, and inquired about the quantifiable long-term benefits of announced cost-saving initiatives.

Answer

President and CEO R. Banyard confirmed that negative mix was the primary driver of the 4% net ASP decline, as volume declines were concentrated in higher-priced, made-to-order products. He attributed the February recovery to a rebound in the repair and remodel (R&R) business to pre-holiday levels. Executive VP and CFO Andrea Simon added that stronger ASP was also seen in February, boosting confidence in price realization. Regarding cost savings, Banyard stated the goal is to offset the incremental $15 million investment in the 'Tech Enabled' initiative.

Garik Shmois of Loop Capital Markets asked for more detail on MasterBrand's ability to grow new construction volumes despite an anticipated 'air pocket,' the drivers of pricing softness in the quarter, and the company's plans for commercial synergies from the Supreme acquisition.

Answer

CEO Dave Banyard explained that while a summer slowdown in housing starts may create a future soft patch, significant new business wins with large builders should offset this and enable volume growth in Q4. He noted pricing pressure was consistent with prior quarters, driven by promotions in the R&R market and consumer trade-downs in new construction. Regarding synergies, Banyard described the Supreme integration as being in the 'middle innings,' with a focus on sales team organization and dealer training, with tangible results expected in 2025. CFO Andi Simon added that the price/cost lag is expected to correct in Q4.

Garik Shmois of Loop Capital Markets LLC asked whether the increase in larger backlog projects was strategic, about the ability to recover weather-delayed volumes, and for an update on July demand trends.

Answer

CEO Brian Gray clarified that the increase in larger jobs is a reflection of DOTs bundling projects rather than a change in company strategy. He noted that while underlying demand is strong, July weather remained mixed in certain areas. He confirmed that July's performance and the potential for volume recovery were already factored into the revised full-year guidance.

Garik Shmois asked about the balance between revenue and margins in contracting services and whether the recent decline in oil prices has impacted the company's cost expectations.

Answer

President and CEO Brian Gray stated that the contracting backlog is near record levels with similar margins to last year. While some markets face margin pressure, others are strong, and the Strata acquisition brings accretive margins, leading to a positive outlook. Regarding costs, Gray noted that the drop in oil prices has not been material enough to alter guidance, as the diesel benefit is minimal in the low-activity first quarter.

Garik Shmois of Loop Capital Markets inquired about the expected cadence of financial performance throughout 2025, particularly considering tough Q1 aggregates pricing comparisons from the prior year. He also requested an update on the implementation of the company's dynamic pricing strategy for aggregates.

Answer

President and CEO Brian Gray stated that the historical earnings cadence should remain largely consistent, with a small loss in Q1 and peak earnings in Q3, though he noted that an increase in private work could benefit the second half. Regarding pricing, Gray explained that their dynamic pricing model is continuous throughout the year, not tied to a single annual increase, and that the guided mid-single-digit price growth for aggregates is a sustainable level.

Garik Shmois from Loop Capital Markets asked for more detail on the company's expectation that pricing will outpace costs into 2025 and inquired about any weather impacts in Q3. He also questioned if recent acquisitions were offsetting lower volumes in the full-year revenue guidance.

Answer

President and CEO Brian Gray expressed confidence in continued pricing momentum into 2025, citing strong demand fundamentals, disciplined bidding, and ongoing benefits from dynamic pricing and PIT Crew efficiency initiatives. He confirmed wet weather in Texas had a negative impact on sales. CFO Nathan Ring clarified that revenue from recent acquisitions would be nominal in Q4 and was not a major factor in the guidance.

Garik Shmois requested a more detailed gross margin bridge for the second half of the year and asked about the drivers behind the improved performance in Europe.

Answer

CFO Melanie Hart projected that for the second half, pricing will be a more favorable contributor to gross margin, and the negative impact from product mix will lessen. CEO Peter Arvan attributed the European improvement to strong performance in southern countries and increased stability, which offset a slight decline in France.

Garik Shmois sought clarification on whether the June price increase was already included in the guidance and asked about any unusual factors that drove the return to sales growth in March and April.

Answer

CFO Melanie M. Hart confirmed that the announced June price increase from one vendor is included in the updated pricing benefit forecast. CEO Peter Arvan attributed the positive sales trend in the spring to the timing of the Easter holiday falling into the second quarter this year and a favorable weather comparison to a weaker April in the prior year.

Garik Shmois inquired about the types of opportunities being targeted with the M&A budget and asked about labor availability for new pool construction in light of new immigration policies.

Answer

President and CEO Peter Arvan stated that the M&A pipeline consists of typical consolidation opportunities and that nothing out of the ordinary is expected. On the topic of labor, Arvan commented that the company is not hearing of significant labor pool disruptions from its builders, as he believes the existing, experienced labor force is largely unaffected by recent policy changes.

Garik Shmois inquired about the deceleration in the commercial end market, which grew 7% after a 16% increase in Q2. He also asked about the diverging trends between flat Pinch A Penny franchisee sales and improving wholesale sales to independent retailers.

Answer

President and CEO Peter Arvan advised not to read too much into the commercial growth deceleration, attributing the volatility to the timing of large projects. Regarding retail, he explained that while non-discretionary chemical sales are steady, discretionary items like high-end robotic cleaners are facing headwinds, impacting overall retail performance despite strong wholesale sell-in to dealers.

Garik Shmois of Loop Capital Markets LLC questioned if there were any significant cost impacts to consider in the full-year guidance aside from tariffs and asked for quantification of savings from the recent facility closure.

Answer

President & CEO Scott Culbreth mentioned that beyond tariffs, the guidance models inflation for commodities, labor, and transportation. SVP & CFO Paul Joachimczyk quantified the annual EBITDA benefit from the Orange, Virginia facility closure at approximately $5 million to $6 million.

Garik Shmois asked for clarification on the maintained full-year sales guidance, questioning what offsets the moderated outlook for new construction. He also inquired about the cost outlook for the second half of the year, excluding potential tariffs.

Answer

Executive M. Culbreth explained that the sales guidance is maintained due to expected better second-half performance driven by pricing tailwinds, contributions from new stock kitchen and bath business, and easier year-over-year comparisons in the home center business. On the cost side, Culbreth noted continued inflationary pressures on particle board, labor, final mile delivery, and linerboard.

Garik Shmois questioned the new construction outlook, asking what underpins the view given the recent slowdown in housing starts. He also asked if the remodel market requires a similar series of rate cuts to accelerate and sought details on how EBITDA margin guidance is being maintained despite lower sales.

Answer

Executive M. Culbreth explained that while Q1 new construction demand was strong, a second-half slowdown is anticipated due to lagging housing starts. He confirmed that both new construction and remodel markets would likely need several interest rate cuts to see a significant demand boost, with benefits materializing in mid-calendar 2025. Culbreth attributed the stable EBITDA margin guidance to planned pricing actions and ongoing operational efficiencies.

Sought clarification on residential pricing, asking to reconcile the 'price-cost neutral' outlook with the 1% carryover pricing, and questioned the expected traction of the upcoming April price increase in a choppy market.

Answer

The company assumes a similar realization on the April price increase as in prior years, leading to an overall price-cost neutral position for the full year. The 1% incremental average selling price (ASP) for the year is supported by this increase. Despite choppy markets, underlying demand is considered strong, giving them confidence in their outlook.

Asked for more detail on the 50 basis points of positive price-cost achieved in the quarter, questioning if it was mainly from inventory profits, and also inquired about the price-cost outlook.

Answer

The positive price-cost was attributed to strong execution on the August price increase and diligent price management in the commercial business, rather than significant inventory profits. Looking forward, hurricane-related demand is expected to impact product availability and pricing dynamics into next year, and the company will continue to focus on price-cost management.

Following up on a comment about weakness in Florida, the analyst asked about the impact of geographic mix on results and the outlook, separate from product mix.

Answer

The executive explained that a geographic shift towards the southern U.S., which has inherently lower gross margins, can act as a drag on the overall corporate gross margin percentage. However, he emphasized that EBITDA margins are relatively stable across the country, so this geographic mix shift does not have a significant impact at the EBITDA level, which is the company's primary focus.

Garik Shmois requested more detail on the expected quarterly cadence for 2025, given the forecast for increased variability. He also asked if the sustained period of above-average AUV growth is becoming a new normal for the company.

Answer

CFO Chris Calzaretta clarified that for Mineral Fiber volumes, the company anticipates a softer first half of 2025 followed by a more favorable second half as market uncertainty settles. Regarding AUV, he noted that while the innovation pipeline offers potential for sustained future growth, the outlook for 2025 is relatively balanced throughout the year.

Garik Shmois inquired if the negative mix impact on AUV in Q3 was primarily due to retail channel growth and asked for more detail on the drivers of manufacturing productivity outperformance.

Answer

CEO Vic Grizzle confirmed the mix impact was almost entirely due to channel mix from a retail load-in for newly awarded stores, while underlying product mix remains positive. He attributed strong manufacturing productivity to fundamental operational excellence, including record plant reliability and reduced downtime, in addition to ongoing scrap and quality initiatives.

Garik Shmois asked for the drivers behind the 2025 CapEx increase and for guidance on a normalized maintenance CapEx level following the divestment of the glass reinforcements business.

Answer

CFO Todd Fister explained that the higher 2025 CapEx is driven by several multiyear strategic projects for growth, productivity, and sustainability. While spending will remain elevated in the near term to complete these projects, he reiterated the long-term target for CapEx is 4-5% of sales. This goal is supported by the addition of the capital-efficient Doors business and the sale of the capital-intensive glass reinforcements business.

Garik Shmois from Loop Capital Markets sought confirmation that pricing in the Composites segment has stabilized sequentially, despite being down year-over-year, and asked for an outlook on upcoming contract negotiations.

Answer

Chief Financial Officer Todd Fister confirmed that Composites pricing has shown good sequential stability, crediting strong commercial and operational execution. He noted that while it is too early to comment on contract negotiations, the business remains focused on adding customer value and managing costs to maintain stable margins in a challenging global market.

Garik Shmois, on for Jeff Stevenson of Loop Capital Markets, asked if fiberglass supply constraints impacted Q3 volumes and how TopBuild is positioned with inventory for Q4. He also requested color on regional performance across the U.S.

Answer

CEO Robert Buck acknowledged that supply was tight at times during Q3, with some impact on volumes, but stated TopBuild is well-positioned for Q4. He provided a detailed regional breakdown, noting improvements in the Northeast and Northwest; steady conditions in Utah, the Carolinas, and parts of Texas; and 'choppy' performance in Southern California, Arizona, Austin, and parts of Florida.

Asked about the supply and demand dynamics in the cement business, expectations for January price increases, and the conditions needed to implement mid-year price hikes.

Answer

Supply and demand are driven by robust public markets and choppier private markets. A second-half 2025 recovery in private markets, potentially spurred by interest rate cuts, could create a positive environment for a mid-year price increase. January price increases will be strong and implemented across the board, with the company maintaining its position as a value price leader.

Questioned the full-year guidance, asking why only the low end was raised despite a strong Q1, increased synergy targets, and potential pricing upside, and if anything was holding back a more bullish outlook.

Answer

The guidance reflects the company's conservative 'underpromise and overdeliver' approach, especially after the lowest volume quarter. While the Q1 beat and new synergies were significant, they were partially offset by divestitures. The remaining upside was held back due to integration risks (though none have materialized), costs that have not yet moderated, and variability in end markets. However, management stated the guide is 'beatable' and sees upside from mid-year pricing and any recovery in private markets, viewing Summit as a '$1 billion-plus EBITDA business'.

Inquired about the $30 million in operational synergies from the Argos deal, specifically how much has been secured and the expected pacing of these synergies throughout the year.

Answer

The company is very confident in delivering the $30 million in synergies, an increase from the initial $20 million estimate. The pacing will begin with scale synergies (SG&A, procurement), followed by ready-mix improvements, and then cement operational efficiencies. The realization of these synergies is expected to align with the general operational cadence and EBITDA performance of the business throughout the year, with potential for upside from commercial opportunities.

Garik Shmois of Loop Capital Markets questioned whether pro paint share gains were driven by increased shelf space or by outperforming the broader market. He also asked about performance in the bigger-ticket wellness business.

Answer

CEO Keith Allman clarified that pro paint share gains are driven by market outperformance based on product quality, brand strength, and sales effectiveness, not significant changes in shelf space. CFO Rick Westenberg described the wellness business as stable, with performance in line with the overall plumbing segment and benefiting from the Sauna360 acquisition.