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CEO Aaron Erter and CFO Rachel Wilson addressed the questions. Mr. Erter noted the company's strong partnerships with large builders concentrated in the South, which has been disproportionately affected by market softness. Ms. Wilson added that national single-family start estimates have been revised down by over 10 points since May. Regarding AZEK's EBITDA, she explained the outlook assumes a conservative low single-digit sell-through growth to account for potential macroeconomic uncertainty, despite not currently seeing a moderation in trends.

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President & COO Amy Rice stated that the year-over-year RPU delta should compress in the coming quarters as the company laps the beginning of the spot market softness from Q3 2024. She attributed the strong unit growth to the Brothers acquisition, a full quarter of new market share gains, and some organic growth. Management also confirmed they expect to maintain the Q2 adjusted operating ratio in Q3 despite seasonally lower revenue.

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President and COO Amy Rice explained that Q1 visibility comes from near-term pipelines, such as import cars already in transit, and customer conversations indicating a ramp-up in March. CFO Bradley Wright clarified the Q1 outlook applies to revenue and operating ratio. Rice advised that conservatively assuming the current weak spot premium continues is prudent, and highlighted that new business can come from both recent contract wins becoming more visible and from several large OEM bids occurring this year.

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CFO Bradley Wright attributed the October volume increase to a broader market rebound, while President & COO Amy Rice clarified the trend had pulled back in early November, warranting caution for Q4. Rice noted that they are seeing more dealer incentives, which, along with new models, should help clear inventory. She attributed market share opportunities to the company's expanded nationwide offering rather than commenting on specific competitor weakness.

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CEO Matt Tobolski expressed confidence that the new guidance is achievable with upside potential, noting the recovery path is visible. He explained that immediate actions included deploying teams to manage third-party supplier constraints. He clarified the Q4 guide assumes continued, albeit incomplete, ERP recovery and production ramps at Tulsa and Memphis. For 2026, he suggested margins would approach the long-term target of 32-35%, even with further ERP rollouts planned.

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President and COO Matthew Tobolski confirmed that the Q4 booking softness is resolved and order cadence is strong, indicating market share gains. He explained that while there was activity before the 6% surcharge, the company capped pre-surcharge orders to manage the impact. Regarding Q2 guidance, Tobolski stated that while operating income will be up significantly, modest EPS growth is expected due to a higher anticipated tax rate compared to Q1's unusually low rate and increased interest expense from higher debt.

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CEO Gary Fields explained that the Oklahoma segment's Q1 performance is affected by the lead time on new R-454B orders booked late in Q4. President and COO Matthew Tobolski clarified that while the BASX segment (Redmond facility) is capacity-constrained, the overall BASX brand, including production at the Coil Products segment, is experiencing strong growth. Tobolski added that the full-year guidance is tempered by uncertainty around the recovery pace in the traditional nonresidential market affecting the Oklahoma segment, which offsets the dynamic growth expected from data centers.

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CEO Gary Fields explained that the Oklahoma segment's softness is due to typical seasonality amplified by a reduced backlog, but he expects a turnaround as headwinds like the refrigerant transition, election uncertainty, and interest rates subside. He also noted the new Longview facility will take a quarter to ramp up, affecting Q1. President and COO Matthew Tobolski clarified that the Q1 earnings decline is expected to be sequential (from Q4) not year-over-year. He added that the large order was for a liquid cooling deployment for an existing customer across their enterprise and that the pipeline contains numerous other orders in the $20+ million range.

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CEO Scott Rajeski confirmed an uptick in orders post-Memorial Day, with strength in auto covers and liners, and noted fiberglass has 'turned nicely.' He stated the fiberglass backlog has held up well, though short lead times of 2-4 weeks make it a dynamic measure. Rajeski affirmed his expectation that fiberglass will return to growth in the second half, citing positive trends over the last several weeks.

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CFO Oliver Gloe explained that SG&A leverage is expected to increase as the year progresses due to sales growth and the anniversarying of certain costs. CEO Scott Rajeski added that progress in the sand states is encouraging, with new models resonating well, and the company anticipates accelerating its revenue improvement in those states by 200-300 basis points in 2025.

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Executive Scott Rajeski stated that dealer feedback is more positive this year compared to last, describing the sentiment as "cautiously optimistic." He noted that about a third of larger dealers report backlogs are flat or up, a significant improvement from the prior year. In the sand states, Rajeski highlighted a 40% year-over-year increase in leads in Texas following the "GOOTSA" ad campaign and good traction at the Babcock Ranch master planned community. He also quantified that fiberglass sales in the sand states grew from 15% to 17% of the company's total.

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CEO Scott Rajeski and CFO Oliver Gloe confirmed that returning to and exceeding 20% EBITDA margins is a key objective. They attributed this potential to restructuring, lean manufacturing, and investments in scale that create significant operating leverage. Rajeski noted improved dealer sentiment for 2025, while Gloe specified that the increased S&M spend is targeted at building a presence in the Sand States ahead of a recovery.

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President & CEO Bryan Fairbanks explained the revised R&R outlook reflects reports from other industry experts and general consumer uneasiness. SVP & CFO Brenda Lovcik stated that level-loading is accretive because it enables higher production volumes in Q3 and Q4, leading to greater operational efficiencies, but did not quantify the impact.

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President & CEO Bryan Fairbanks explained the revised R&R outlook reflects external industry reports and general consumer uneasiness. SVP & CFO Brenda Lovcik stated that level-loading is accretive because it enables higher production volumes in Q3 and Q4, driving manufacturing efficiencies, but declined to provide a specific quantification of the benefit.

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CEO Bryan Fairbanks explained the Enhance product change was driven by customer feedback to create a stronger, more aesthetically pleasing board, which incurred some one-time changeover costs in Q1. CFO Brenda Lovcik clarified that the Q2 margin guidance refers to gross margins and will be impacted by level-loaded production and residual costs from the Enhance changeover. She noted the three primary margin headwinds—railing conversion, level loading, and the Enhance changeover—were roughly equal in impact.

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CEO Bryan Fairbanks explained that the flat Q2 comparison is due to a revised inventory strategy, which avoids the significant channel loading seen in Q1 of the prior year and shifts about $40 million in sales to later in the year. CFO Brenda Lovcik added that EBITDA margin will be more back-half loaded, as Q1 and Q2 will see higher SG&A spending on marketing for new product launches and retail initiatives.

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CEO Bryan Fairbanks confirmed a low single-digit decline in Q4 sell-through, with high single-digit growth in premium products and a mid-single-digit decline in entry-level products. CFO Brenda Lovik added that the 2025 EBITDA margin guidance of over 31% is adjusted for onetime costs and reflects continued margin expansion from cost takeouts.

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CFO Deidra Meriwether and CEO D.G. Macpherson reiterated that the majority of the headwind is from LIFO, stating that gross profit margin would have been flat year-over-year without it. On future tariffs, Macpherson noted that while there is always risk, the announced tariffs on countries other than China would not have a huge impact on Grainger.

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CFO Deidra Meriwether and CEO D.G. Macpherson both emphasized that the LIFO impact is the 'main event' and constitutes the entirety of the current gross margin pressure, stating that gross profit margin would have been flat year-over-year without it. Macpherson added that the tariffs announced that day were unlikely to have a significant impact, as China remains the most critical trade partner to watch.

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Chairman and CEO D.G. Macpherson stated that business has actually accelerated, with April being the best month of the year, and that customers are more focused on their daily operations than on tariffs. He clarified that the recent price increase was modest overall, applying mostly to Grainger's direct imports and a few specific suppliers, with more significant price changes for certain products.

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CFO Dee Merriwether clarified the outlook assumes market volume will be flat to down 1.5%, similar to 2024, and does not include any potential tariff impacts due to uncertainty. CEO D.G. Macpherson described AI as a powerful set of tools that enhances the business, emphasizing that Grainger's advantage comes from its proprietary data assets (PIM and KIM) and its long-standing use of machine learning.

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Chairman and CEO D.G. Macpherson attributed the Endless Assortment growth to strong performance with enterprise customers at MonotaRO and the dissipation of B2C headwinds at Zoro, which now showcases robust B2B growth. He also confirmed that the Q4 forecast assumes a stable macro environment and that the temporary sales bump from the hurricane will phase out in November and December.

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EVP Paul Johnston attributed soft Q2 volumes to lumpy demand and a 15-20% decline in residential new construction. EVP Barry Logan noted weakness in Mexico but confirmed July trends were improving. On margins, Logan acknowledged a temporary benefit from OEM price hikes but stated a new floor of '27% plus' is expected for the second half. President A.J. Nahmad and CEO Albert Nahmad added that internal pricing technology and a future mix shift to parts also support margin strength.

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CEO Albert Nahmad gave a direct 'Yes' to confirm Q1 weakness should not be extrapolated. Executive Barry S. Logan detailed the negative factors, including declines in non-equipment sales, a ~10% drop in commercial products (also impacted by the transition), weak international sales, and a nearly 2% negative impact from one less selling day.

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Executive Rick Gomez clarified that the new customer growth trend built throughout the year, not just in Q4, and that it was driven by attracting mid-tier contractors who benefit from Watsco's product depth and technology. Executive Barry S. Logan explained that any new product transition energizes the sales force and creates value, which, combined with Watsco's investment capacity, presents a share gain opportunity.

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EVP Barry S. Logan detailed that Q3 total unit volumes were up 4%, driven by double-digit ductless growth, while ducted units declined 1% with a 1% price decline due to mix. CFO Rick Gomez explained that the path back to 27% gross margin is clear, as underlying transactional margins remain stable. The recent variance is due to mix shifts between equipment/non-equipment, residential/commercial, new construction/replacement, and the faster growth of larger, tech-enabled customers.

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President and CEO Kevin Holleran attributed the record Q2 gross margin to productivity gains, product line rationalization, higher volume, and price-cost neutrality. SVP & CFO Eifion Jones explained that while second-half margins will moderate as tariff-related price increases offset costs, the full-year guidance still implies year-over-year margin improvement. Regarding the new pool market, Holleran stated the outlook remains for a modest decline in 2025 but noted the market is near trough levels and represents a "coiled spring" that could rebound with improvements in interest rates and the housing market.

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CEO Kevin Holleran explained that approximately 3% of the price increase is to achieve price-cost neutrality against inflation, with the remainder coming from strategic value-based pricing. He clarified that value pricing is an ongoing initiative, not a one-time project. CFO Eifion Jones added that while the company has opportunities to enhance gross margins through its strategic pillars, he would not provide a definitive target for 2025.

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CEO Doug Black stated that the company feels confident about landing solidly within the provided guidance range. He identified the primary risk as a potential further deterioration in market demand, though he expressed confidence in the company's ability to outperform the market. Regarding long-term targets, Black explained that both gross margin and SG&A leverage will drive margin expansion, but he expects SG&A leverage to be the larger contributor, driven by focus branch improvements and productivity initiatives.

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Executive Vice President John Guthrie stated that SiteOne anticipates low single-digit organic growth in Q2, with pricing expected to be between negative 1% and flat. Guthrie clarified that the 10-15% tariff exposure is primarily indirect, stemming from suppliers sourcing from countries like Mexico and China, as SiteOne's direct imports are less than 1% of sales. CEO Doug Black added that the most affected product categories are irrigation, lighting, and some landscape supplies. Guthrie noted supplier price increases are mostly in the 4-8% range, which the company expects to pass through.

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CEO Doug Black attributed the performance to both resilient maintenance and new construction markets and more consistent market share gains, despite continued weakness in repair and remodel. Regarding future growth, he clarified his comments referred to enhanced adjusted EBITDA growth, expecting margins to expand as headwinds from price deflation and the dilutive Pioneer acquisition subside, complementing ongoing operational initiatives.

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SVP & CFO Tex Clark attributed the 200 basis point gross margin expansion roughly equally to FIFO inventory timing and favorable transportation costs, noting that about 100 basis points of this benefit is expected to reverse in the second half. Regarding July's mid-single-digit growth, Clark stated it was broad-based but strongest in strategic accounts. CEO Anesa Chaibi added that new go-to-market pilots are contributing to the momentum and explained that being 'intentional' means aligning the organization around specific customer needs and shifting focus from price-sensitive customers to those with higher lifetime value.

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CEO Peter Arvan attributed the guidance adjustment to the lack of anticipated interest rate cuts, which dims the outlook for a new pool construction rebound in the second half. Regarding pricing, he confirmed that the competitive pressure seen in Q1 has abated and current competitive activity is within normal seasonal patterns.

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CEO Peter Arvan confirmed that a low single-digit top-line growth expectation for Q2 is a fair assessment and noted that the full impact of recent price increases would be more weighted towards the second half of the year. CFO Melanie M. Hart added that the guidance midpoint assumes improving trends in discretionary spending in the back half, particularly in Florida, California, and Arizona, while acknowledging that Texas remains a softer market.

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President and CEO Peter Arvan stated the new construction outlook is based on positive dealer feedback, though he conceded growth would likely be weighted to the second half of the year. SVP and CFO Melanie M. Hart added that gross margins are expected to be supported by supply chain initiatives, increased sales of higher-margin private label products, and ongoing pricing discipline, which will offset negative mix and an accounting headwind.

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President and CEO Peter Arvan confirmed that expected equipment price increases are in the 2% to 3% range. VP and CFO Melanie M. Hart clarified that the Q4 gross margin should be similar to the prior year and that the full-year margin will align with the year-to-date rate. She emphasized that current margins are well ahead of pre-pandemic levels, even with headwinds from lower new construction sales.

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CEO Alok Maskara explained the BCS volume guide was lowered because the expected market bottoming in Q1 did not occur, with industry volumes declining through Q2. However, they now see signs of stabilization, suggesting the market is 'bouncing along the bottom.' Maskara acknowledged a soft start to summer in May but noted that sales strengthened in June and early July, attributing the overall softness to multiple factors beyond just weather.

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CEO Alok Maskara explained that the commercial slowdown was due to destocking and customers transitioning to new R-454B products, an issue he considers largely resolved with some inefficiencies possibly continuing into Q2. He clarified that the lowered volume outlook is a proactive measure in anticipation of potential macroeconomic softness from tariffs, not a reflection of a current slowdown, as April orders remained healthy.

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CEO Alok Maskara estimated the prebuy at $125 million, slightly above expectations due to temporary share gains from competitor product shortages. CFO Michael Quenzer confirmed this would create a revenue headwind in Q1 and Q4 of 2025. Alok Maskara justified the flat HCS volume forecast by citing market uncertainties like high interest rates and low home sales, acknowledging the outlook may be conservative.

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CEO Alok Maskara stated the risk around the 65% A2L mix forecast is fairly balanced, noting it could be lower if R-410A prebuy is higher, or higher if competitors' inventory shortages pull demand forward. He emphasized that Q3's strength was driven more by restocking and share gains than prebuy, and expects the prebuy destocking impact to be most pronounced in Q1 2025.

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EVP & Interim CFO Sheryl Lisowski reiterated the expectation for full-year 2025 gross margin to be flat with 2024. CEO Daniel Florness added that the fastener expansion improves margin mix by stocking more MRO and spot-buy items, which carry a better margin profile. President & CSO Jeffery Watts expressed confidence in achieving double-digit sales growth for the rest of the year, citing a very strong contract pipeline.

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CEO Daniel Florness suggested the severe shutdowns were a way for companies to "clear the decks" and recharge for a new year after a challenging 2023. CFO Holden Lewis added that post-election certainty contributed to improved sentiment. Regarding sales concentration, Florness clarified that the top 1% of customer sites (about 2,500 locations) represent approximately 48% of sales, which he views as a sign of success in serving large, complex customers.

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CEO Dan Florness stated he believes the company has "turned a corner" due to recent organizational changes and expects outgrowth to improve into 2025. CFO Holden Lewis added that he expects Q4 gross margin to perform slightly better than typical seasonality, with the negative impact from lower rebates seen in Q3 likely to be less significant.

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Neil Ashe, Chairman, President & CEO, stated that Q3 was largely unimpacted by price increases or tariffs, but the dilutive margin impact from dollar-for-dollar tariff coverage will begin in Q4. He reiterated that combining Q3 and Q4 should yield a normalized second-half performance. He confirmed there was evidence of order acceleration as customers sought certainty, and the company is monitoring how demand rebuilds.

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CEO Neil Ashe agreed that Acuity is likely advantaged by the tariffs due to its diversified supply chain, including its Mexico and U.S. manufacturing footprints. CFO Karen Holcom attributed strong gross margins to the growing contribution from the higher-margin Acuity Intelligence Spaces (AIS) segment and the successful product vitality strategy in the lighting business. Neil Ashe added that while a pricing lag may be mildly dilutive to percentage margins temporarily, the company will focus on covering the full dollar cost of tariffs.

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Neil Ashe, Chairman, President and CEO, stated that a full-year accretion figure isn't the focus, but the integration is off to a good start. He noted that while it's too early to call a demand inflection, the company is confident about calendar 2025, citing positive data and field interactions. He attributed strong performance in the C&I channel to the company's product segmentation strategy, while noting that weaker retail results were a point-in-time issue.

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CEO Jon Adinolfi noted that Q4 was pressured but stable, and this trend has continued into Q1 2025, aligning with their expectations. On tariffs, Adinolfi confirmed they would manage them as they did in 2018 by passing on costs dollar-for-dollar and that nothing is currently in the guidance due to uncertainty. Executive Chairman Douglas Cahill added that tariffs could create an opportunity for Hillman to take over categories that retailers previously imported directly.

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CFO Kristen Actis-Grande clarified the slide is a reference point for modeling, not formal guidance, due to low visibility. CEO Erik Gershwind noted that performance hinges on both internal initiatives and the macro environment. On SG&A, Actis-Grande stated second-half expenses will be volume-dependent, with productivity gains like the Columbus CFC closure partially offset by ongoing investments.

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CEO Erik Gershwind attributed the ADS improvement primarily to macro stabilization and internal initiatives, as recent pricing was not a major factor. He confirmed that marketing for core accounts is in full swing, enabled by last year's web pricing realignment, with the ultimate goal of growing the core customer base at 400 basis points or more above the IP index.

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