Trey Grooms

Trey Grooms from Stephens Inc. asked about the sustainability of TopBuild's recent cost reductions, inquiring how much is permanent versus what would need to be reinstated during a market recovery. Grooms also sought to understand the key swing factors, beyond synergies, that could drive TopBuild's EBITDA margins to the high or low end of its guidance range.

Answer

CFO Robert Kuhns stated that facility consolidations and back-office fixed cost reductions are expected to be sustainable, while installer headcount would need to be added back with volume recovery. Kuhns identified higher volumes and an improved price-cost situation as the primary swing factors for achieving the high end of the margin guidance, in addition to operational excellence and synergy realization.

Trey Grooms asked about the sustainability of cost reductions (headcount realignment, other actions) versus what would need to be brought back during a recovery, and inquired about other swing factors for margin guidance (high vs. low end) beyond synergies.

Answer

Robert Kuhns, CFO, stated that some cost reductions (facility consolidations, back-office fixed costs) are sustainable, with automation efforts aiming to reduce the need to add back as much. Installer headcount will need to be added back as volumes recover. He identified higher volumes (leading to 22%-27% incrementals) and an improved price-cost situation as the main swing factors for reaching the high end of the margin range, in addition to operational excellence and synergy outperformance.

Trey Grooms of Stephens Inc. sought clarity on why Q2 is projected to have the largest year-over-year sales decline when the Q3 comparison appears similar, and asked if the guidance assumes a demand pickup in the second half.

Answer

CFO Rob Kuhns clarified that the guidance does not assume a significant improvement in the demand environment. He explained that the Q2 year-over-year sales decline is expected to be similar to Q1's. The comparisons become slightly less challenging in late Q3 and Q4 because demand began to soften in the back half of the prior year.

Trey Grooms commented on Bryan Fairbanks's more positive tone compared to three months prior, asking about the reasons for this change. He also inquired about the split of SG&A investments between field resources and marketing, and whether there's any scenario where SG&A could exceed 18% of sales going forward.

Answer

Bryan H. Fairbanks, President and CEO, attributed his changed tone to the market not deteriorating as expected in Q4 and the early benefits seen from Q3 actions. He stated that the largest piece of SG&A increase is on the marketing side, with carryover headcount from the sales team. Both Bryan Fairbanks and Adam D. Zambanini, EVP and COO, expressed surprise if SG&A were to exceed 18% of sales, noting it has only happened opportunistically a couple of times historically.

Trey Grooms noted a change in Bryan Fairbanks' tone compared to three months prior and asked what factors contributed to this shift in assessing the 2026 environment. He also questioned the split of the expected $220 million SG&A for 2026 (up $40 million from 2024) between field resources and marketing, and whether there's any scenario where SG&A investment might exceed 18% of sales.

Answer

Bryan Fairbanks, President and CEO, attributed his changed tone to a significant Q3 reset, the absence of further R&R sector deterioration in Q4, and the early positive results from actions discussed in the third quarter. Regarding SG&A, he stated the largest piece of the increase is marketing, with some carryover headcount from sales, and expressed surprise if SG&A were to exceed 18% of sales. Adam Zambanini, EVP and COO, concurred, noting that exceeding 18% has been rare and typically opportunistic during strong market conditions. Adam also outlined his strategic focus as the new CEO, emphasizing high-performance innovation to create a 'durable, defensible moat' through solutions like heat mitigation, submersible marine capabilities, and fire resistance.

Trey Grooms of Stephens Inc. asked about any demand shifts observed between the pro and DIY channels and which new products beyond railing were significant growth drivers.

Answer

President & CEO Bryan Fairbanks noted that the home center channel is becoming more aggressive in pursuing pro business, but the traditional pro channel is adapting competitively. He highlighted continued additions to the Trex Lineage and the recently launched Select decking lines as key new product drivers.

Trey Grooms of Stephens Inc. asked about any observable demand shifts between the pro and DIY channels and which new products, besides railing, were significant growth drivers.

Answer

President & CEO Bryan Fairbanks noted that the home center channel is becoming more aggressive in pursuing the pro customer. He highlighted the new additions within the Trex Lineage and Select decking lines as key new products contributing to recent sales performance.

Trey Grooms sought clarification on the Q1 margin impacts, asking if the three headwinds (railing conversion, lower production, Enhance changeover) were each approximately $4 million. He also asked if the adjusted gross profit figure excluded all three items and whether the Arkansas start-up costs would recur.

Answer

CFO Brenda Lovcik confirmed his interpretation was correct, stating the impact was like '4, 4, 4' ($4 million each) and that the adjusted gross profit only excludes the $4 million for the railing conversion. She added that while Q1 SG&A included Arkansas training costs, there will be related production inefficiencies impacting COGS in the remaining quarters of the year. CEO Bryan Fairbanks reiterated the full-year guidance for ~$15M in onetime costs for Arkansas and railing.

Trey Grooms asked about the improved Q4 sales outlook and the importance of the Snavely exclusive railing distribution announcement.

Answer

CEO Bryan Fairbanks explained the Q4 outlook improved because the market stabilized in Q3 rather than deteriorating further, with the difference being serviced by lower channel inventory. He highlighted the Snavely deal as a key milestone in a multi-year strategy to gain railing exclusivity with distributors by offering a complete product portfolio.

Trey Grooms requested additional details on the PB Materials acquisition, an aggregates-led business with ready-mix operations in West Texas, which contributes $180 million in annual revenue. He sought information on its annual production or tonnage and its expected contribution to Amrize's overall aggregates volume growth for the year.

Answer

Chairman and CEO Jan Jenisch highlighted the acquisition's size ($180 million in revenue), its expected Q1 close, and its strong margin profile with significant synergies. He noted its strategic fit with Amrize's Texas footprint, comprising 26 operating sites (13 quarries, 13 ready-mix) and a 30% market share in the region.

Trey Grooms asked for additional details on the PB Materials acquisition, beyond its $180 million annual revenue and West Texas location, specifically seeking information on annual production, tonnage, and its contribution to overall aggregates volume growth for the year.

Answer

Jan Jenisch, Chairman and CEO, highlighted the strategic fit of PB Materials with Amrize's Texas footprint, noting its $180 million annual revenue and imminent Q1 closing. He specified that the acquisition includes 26 operational sites (13 quarries, 13 ready-mix sites), making it a well-balanced business with a 30% market share in its region.

Trey Grooms asked about the confidence levels for 2026, considering the Q4 2025 performance, and the outlook for end market demand, pricing, and profitability.

Answer

Ronnie Pruitt, Chief Executive Officer, expressed confidence in leveraging demand growth and a healthy pricing environment for 2026, citing solid public starts, increasing private non-residential activity (especially data centers), and potential residential improvement in the second half. Mary Andrews Carlisle, Senior Vice President and Chief Financial Officer, provided context on Q4 2025, noting impacts from weakening residential activity, early winter weather, and incremental timing-related costs.

Trey Grooms asked about the confidence levels and key factors influencing the 2026 outlook for end market demand, pricing, and profitability, especially considering the fourth quarter 2025 performance.

Answer

Ronnie Pruitt, SVP and COO, expressed confidence in leveraging demand growth and a healthy pricing environment, citing solid public starts, strong backlog, and increasing private non-residential activity, particularly in data centers. He noted expectations for modest growth in 2026, which could provide tailwinds for both costs and pricing. Mary Andrews Carlisle, Senior VP and CFO, added context on the fourth quarter 2025, attributing flat year-over-year EBITDA (excluding hurricane relief) to weaker residential activity, early winter weather, and incremental timing-related costs.

Trey Grooms asked Ronnie Pruitt to highlight his top priorities for the Vulcan Materials team as he transitions into his new CEO role.

Answer

Ronnie Pruitt, COO, stated his priorities include building on Tom Hill's culture of safety, enhancing the core business through 'Vulcan Way of Operating' and 'Vulcan Way of Selling,' and strategically expanding reach via disciplined aggregate-centric acquisitions and greenfield initiatives.

Trey Grooms of Stephens Inc. asked what provides Vulcan Materials with the confidence to reaffirm its full-year EBITDA guidance, considering the significant weather-related volume impacts in the first half of the year.

Answer

Chair & CEO J. Thomas Hill explained that despite weather challenges, the company achieved strong first-half results with a 6% price increase and a 13% rise in unit margins, demonstrating high-quality earnings. He cited strong double-digit shipment growth in July, accelerating bookings, growing backlogs, and improving underlying demand as key factors supporting the second-half forecast.

Trey Grooms from Stephens followed up on profitability, asking about the cadence of delayed expenditures and the outlook for the downstream segments.

Answer

CEO James Hill explained that volume is expected to be back-half loaded, pricing should remain consistent with the 5-7% guide, and costs will be lumpy. CFO Mary Andrews Carlisle added that the downstream businesses are performing well and are still expected to contribute approximately $360 million in cash gross profit for the year, with about two-thirds from asphalt and one-third from ready-mix, driven by both organic profitability and acquisition contributions.

Trey Grooms of Stephens Inc. followed up on the aggregates volume outlook, asking for clarification on the cadence of organic volume trends between the first and second halves of 2025.

Answer

CEO Tom Hill confirmed the expectation for flat organic volumes, with growth in public projects offsetting weaker private construction. He agreed that performance would likely be back-half loaded, citing easier comps in Q3 and a slow start to the year due to weather. Hill also noted a potential recovery in single-family and non-residential construction could provide a tailwind in the second half of the year.

Trey Grooms asked for a breakdown of the third-quarter's 10% volume decline, seeking to distinguish between the impact of adverse weather versus underlying market demand.

Answer

Chairman and CEO James Hill estimated that underlying demand, excluding weather, was down mid-single digits. He attributed the remainder of the 10% decline to significant weather disruptions, including four hurricanes and above-average rainfall in 17 of their 20 largest markets. He noted that while Q4 also started with a hurricane, daily shipping rates have since recovered with better weather.

Trey Grooms asked about the expected working capital investment in the second half of 2026, contrasting it with the working capital release in 2025, and whether this signals expectations for a more robust environment in 2027. He also inquired if the previously communicated earnings power in a normalized housing environment (1 million-1.1 million starts, $2.1 billion-$2.4 billion EBITDA, 30%-33% gross margins) still holds true, or if there have been any changes to this view.

Answer

CFO Pete Beckmann clarified that the working capital investment is primarily driven by the anticipated higher sales pace and commodity values at the end of 2026 compared to 2025, rather than taking specific inventory positions for 2027. He confirmed that the company's thinking on its earnings power in a normalized environment has not changed, despite not being explicitly included in this quarter's materials.

Trey Grooms asked if the anticipated working capital investments in the second half of 2026, contrasting with 2025, indicate expectations for a more robust environment in 2027. He also sought confirmation on whether the previously communicated earnings power in a normalized housing environment (1-1.1 million starts, $2.1-$2.4 billion EBITDA, 30%-33% gross margins) still holds true.

Answer

CFO Pete Beckmann clarified that the working capital investment is primarily driven by the expected higher sales pace and higher commodity values by the end of 2026, leading to higher receivables and inventory balances, rather than taking positions for 2027. He confirmed that the company's view on earnings power in a normalized housing environment remains unchanged from previous communications, with the current macro environment being the primary driver of current outcomes.

Trey Grooms of Stephens Inc. requested an update on the progress and associated costs of the new ERP system rollout and asked about the expected timing for stabilization in the multifamily business and the lag from starts to revenue.

Answer

CFO Pete Beckmann confirmed the full-year cash expense for the technology implementation remains $140 million and is excluded from adjusted SG&A. CEO Peter Jackson reported that the pilot went live on July 1 in 22 locations and the team is working through typical implementation issues. For multifamily, Beckmann noted the business is stabilizing sequentially and that the 9-to-18-month lag means recent positive starts data will likely benefit 2026.

Trey Grooms from Stephens inquired about the company's current appetite for additional M&A. He also asked about the potential for streamlining the branch network if the market were to slow further.

Answer

CEO Peter Jackson noted that the M&A market has cooled significantly due to uncertainty, and while the company is always looking, a large deal seems unlikely soon. He also explained that footprint optimization is an ongoing, disciplined process, mentioning that BLDR has already closed 17-20 locations over the last year as part of its standard operating hygiene.

Trey Grooms asked for specifics on past market share loss and what enables share gains in 2025. He also asked how a significant lumber price increase from tariffs would flow through to manufactured product margins.

Answer

CEO Peter Jackson explained past share loss was in commodities with aggressive production builders, which has since stabilized. He expects 2025 gains to come from install, value-add, and digital. On tariffs, he reiterated a rule of thumb for commodity price impacts but cautioned that the velocity of change makes the outcome uncertain.

Trey Grooms asked for more detail on the in-market assumptions and mix that contribute to the 1%-3% volume growth outlook for the year, considering contract awards and customer feedback, and identified potential swing factors within that range.

Answer

Chair, President and CEO Ward Nye provided a breakdown: infrastructure (37% of business) is expected to be up mid-single digits, driven by IIJA funds peaking in 2026 and strong state DOT budgets (up 7% in top 10 states). Non-residential (35% of business) is seeing strong demand from data centers (e.g., Project Jade, Meta's CapEx), energy (LNG, nuclear), and a recovery in distribution/warehousing. Residential is expected to be relatively flat, with potential upside from declining interest rates. Senior Vice President and Chief Financial Officer Michael Pietropola added that in Q4, data centers grew ~60% and warehouses ~40%, while manufacturing's decline rate was the lowest for the year.

Trey Grooms asked for more color on Martin Marietta's in-market assumptions and mix contributing to the 1%-3% volume growth outlook for 2026, and potential swing factors within that range, based on contract awards and customer feedback.

Answer

Chair, President and CEO Ward Nye provided a detailed breakdown: infrastructure is expected to be up mid-single digits with potential upside, driven by IIJA funds and strong state DOT budgets. Heavy non-residential, particularly data centers, energy, and warehousing, shows strong momentum and upside. Residential construction is expected to be relatively flat for the year, with potential for recovery in 2027.

Trey Grooms inquired about the cost side of Martin Marietta's business, specifically the drivers for the expected improvement in price-cost spread in Q4, and preliminary thoughts on the price-cost equation for 2026.

Answer

Chairman and CEO Ward Nye noted that while Q3 cost performance was 'okay,' it is expected to improve, with an implied Q4 cost performance around 2%. He identified personnel, DD&A, and freight (especially rail) as primary cost drivers. SVP and CFO Michael Petro added that Martin Marietta expects to deliver a price-cost spread in excess of 250 basis points in 2026, with cost per ton growth around 2.5% and mid-single-digit pricing.

Trey Grooms inquired about the cost side of the business, specifically the drivers for the expected improvement in price-cost spread in Q4, and early thoughts on the price-cost equation for 2026.

Answer

Ward Nye, Chairman and CEO, stated that Q3 cost performance was acceptable but could improve, with Q4 implied cost performance around 2%. Key cost drivers were personnel, DD&A, and freight (especially rail). Michael Petro, SVP and CFO, projected a price-cost spread exceeding 250 basis points for 2026, anticipating cost per ton growth around 2.5% and mid-single-digit pricing.

Trey Grooms requested additional details on the Premier Magnesia acquisition, including its expected financial impact beyond 2025 and its strategic fit with the existing Magnesia Specialties business.

Answer

CEO C. Howard Nye highlighted the strategic fit, noting Premier's natural magnesia complements Martin Marietta's synthetic magnesia business. CFO Michael Petro added that the limited 2025 contribution implies an annualized pre-synergy EBITDA of approximately $60 million, with expectations for significant commercial and operational synergies.

Trey Grooms of Stephens Inc. asked for an analysis of the cement segment's margins, noting that ready-mix headwinds appeared to offset cement improvements. He also inquired about the potential impact of tariffs on the Texas cement market and the pricing outlook.

Answer

Chair and CEO Ward Nye clarified that the core cement business performed well, with pricing up 6% and margin growth despite lower production volume. He attributed the ready-mix weakness to seasonality, residential softness, and the absorption of higher internal aggregate and cement costs. Regarding tariffs, Nye sees potential upside for the Texas cement business, as they would further insulate it from waterborne imports. He stated that tariffs are generally helpful from a revenue perspective for aggregates and could drive reshoring and manufacturing demand, with minimal cost impact due to a largely domestic supply chain.

Trey Grooms asked for a breakdown of the puts and takes in the 2025 guidance, focusing on the aggregates price and volume outlook, and sought clarity on the timing of price increases.

Answer

CEO Ward Nye explained the 2025 guidance is a measured approach, with aggregate volume growth of 4% at the midpoint driven by infrastructure and data centers, offsetting a private construction slowdown. He noted pricing guidance of 6.5% growth is solid, but the cadence will differ from recent years, with many price increases effective April 1 instead of January 1, particularly for ready-mix concrete customers. This shift, influenced by cement price timing, means the typical Q1 pricing pop will be less pronounced, with growth building in Q2 and Q3.

Trey Grooms inquired about the recovery efforts in the Carolinas following Hurricane Helene and the potential business implications for Martin Marietta given its local presence.

Answer

CEO C. Nye detailed the significant rebuilding required, citing an NCDOT estimate of $5-6 billion in recovery expenses. He highlighted Martin Marietta's strategic position to serve the area from both Western North Carolina and Eastern Tennessee. Nye also emphasized North Carolina's strong fiscal health, with a $6 billion surplus, ensuring the state can fund the multi-year recovery without disrupting other projects.

Trey Grooms inquired about Simpson Manufacturing's expectations for the commercial and national retail segments in the U.S., given the flat housing outlook. He also sought a deeper explanation of the slightly lower gross margin outlook for 2026, including the impact of carryover pricing benefits and tariff costs, and the expected leverage from SG&A.

Answer

President and CEO Mike Olosky projected the commercial market to be flat to up 1-2% (after being down mid-single digits in 2025) and national retail to be flat to low single digits (after being up low single digits in 2025), with Simpson aiming to outperform these markets. CFO Matt Dunn detailed the gross margin outlook, citing $100 million in annualized pricing (with $40 million incremental in H1 2026) and $100 million in annualized tariff costs, which, due to timing and mix shifts, will lead to some gross margin erosion. He confirmed SG&A leverage from cost savings initiatives, expecting absolute operating expenses to decrease by $10-$15 million in 2026, even with a $5 million foreign exchange headwind.

Trey Grooms asked if the expected operating income margin improvement to the 20% range for 2026 implies leverage from SG&A cost reductions.

Answer

CFO Matt Dunn confirmed that absolute operating expenses are expected to decrease by $10 million-$15 million in fiscal 2026, benefiting from cost savings initiatives despite a $5 million expected FX headwind and other inflationary costs. President and CEO Mike Olosky added that this includes some FX impact from Europe.

Trey Grooms inquired about the company's strategy for balancing the new $1 billion stock repurchase authorization with future M&A, especially with the NDS integration underway, and the appetite for deals in the medium term.

Answer

Scott Cottrill, CFO of Advanced Drainage Systems, emphasized that the immediate focus is on organic growth and NDS integration. He noted the company's strong balance sheet with 1.5x leverage (within 1x-2x guardrails) and strong cash generation, allowing for future M&A focused on tuck-ins and bolt-ons in the $150M-$300M range. Scott Barbour, President and CEO, added that capital infusion into NDS for automation and new products, similar to past successful investments in Infiltrator, is a high priority. Grooms also asked if accessing capital markets this year for near-term maturities implied incremental leverage or purely refinancing. Cottrill confirmed the primary focus is on extending the weighted average maturity of debt.

Trey Grooms asked about the company's capital allocation strategy, specifically balancing the new $1 billion stock repurchase authorization with future M&A, and the appetite for deals given the ongoing NDS integration. He also followed up on the company's plan to access capital markets, asking if it aims to bring on incremental leverage or solely address near-term maturities.

Answer

Scott Cottrill, CFO, emphasized that the primary focus is on organic growth and NDS integration, leveraging the engineering and technology centers for innovation. He stated that M&A would primarily involve tuck-ins and bolt-ons in the $150 million-$300 million range, given the strong balance sheet. Craig Taylor, President of Infiltrator, added that NDS presents significant organic opportunities for capital infusion. Cottrill clarified that accessing capital markets is primarily to address near-term maturities and extend the weighted average maturity.

Trey Grooms asked for more detail on the potential revenue synergies and enhanced top-line growth opportunities specifically with the NDS acquisition, beyond the initial conference call color. He also inquired about the longer-term margin profile of the business, given organic improvements, setting aside the NDS acquisition.

Answer

CEO Scott Barbour detailed NDS revenue synergies, highlighting its complementary product lines (e.g., market-leading standard catch basins, channel drains) that can be packaged with ADS's offerings, expecting increased visibility on projects and deeper relationships with distribution. CFO Scott Cottrill discussed the longer-term margin profile, emphasizing the higher growth and gross margins of allied and Infiltrator products, new product introductions, capital allocation towards innovation, and accretive acquisitions as key drivers for continued margin expansion beyond current levels.

Trey Grooms asked for more details on the potential revenue synergies from the NDS acquisition, specifically where cross-selling and other opportunities could exist, and their potential impact on top-line growth. He also inquired about the longer-term margin profile of the business, setting aside the NDS acquisition, given the organic improvements made.

Answer

Scott Barbour (CEO and President) highlighted NDS's highly complementary product lines, such as standard catch basins and channel drains, which will enable effective packaging and cross-selling by both sales forces, deepening relationships with distributors and increasing project visibility. Scott Cottrill (EVP, CFO, and Secretary) discussed the company's long-term margin expansion drivers, including the faster growth and higher margins of allied and Infiltrator products, new product introductions, strategic capital allocation, and accretive acquisitions, affirming that ADS is not a 20-25% EBITDA margin business long-term.

Trey Grooms asked about the SG&A expense outlook for fiscal 2026, including potential cost-control levers, and requested more detail on geographic performance trends beyond Florida and Texas.

Answer

An executive guided for SG&A to be around 14% of revenue, noting the figure includes the impact of the Orenco acquisition and that initiatives are in place to manage outside spend. Executive Michael Higgins added that a group of 15-16 priority states, primarily in the lower half of the U.S., continued to grow faster than the company average, helping to offset softness in more mature geographies like the Northeast and parts of the Midwest.

Trey Grooms asked for an update on the expected margin improvement trajectory for the recently acquired Orenco business.

Answer

CEO D. Barbour reaffirmed the potential to increase Orenco's margins from the mid-teens to over 20% but emphasized this would be a gradual build over time, not an immediate change. He noted the acquisition is performing well, slightly ahead of its initial forecast, and that the strategy will be a key topic at the upcoming Investor Day.

Evan Roberts, on behalf of Trey Grooms, asked about the price/mix implications of lower commercial demand and a higher mix of agriculture sales. He also inquired about the cross-selling and potential bolt-on acquisition opportunities related to the Orenco acquisition.

Answer

CEO Scott Barbour acknowledged that the slowdown in high-margin Allied Products and a higher mix of agriculture sales created a headwind, though the company is managing through it. CFO Scott Cottrill detailed immediate Orenco cross-sell opportunities, including selling Infiltrator septic tanks with Orenco systems, leveraging Orenco's controls business, and expanding the reach of Orenco's liquid-only sewer products through Infiltrator's sales and distribution network.

Trey Grooms asked for an update on the demand outlook for the Home and Building Products (HBP) business for calendar 2026, specifically across residential remodel and commercial segments. He also inquired if the strong price and mix in the quarter was primarily due to the flow-through of 2025 price increases and mix benefits.

Answer

Ron Kramer, Chairman and CEO, expressed optimism for an improving housing market macro environment, noting strong performance in the premium repair and remodel segment despite residential declines. He anticipates recovery in housing, lower interest rates, and improved mortgage markets will benefit Clopay. He also highlighted the commercial business, balanced by CornellCookson, as a growth driver due to infrastructure spending. He confirmed that the strong price and mix was indeed a flow-through of 2025 price increases and mix benefits.

Trey Grooms from Stephens Incorporated asked for an update on the demand outlook for the Home and Building Products (HBP) business, specifically across residential remodel and commercial segments, given the reported volume decline. He also sought clarification on whether the strong price and mix benefits observed in the quarter were primarily due to the 2025 price increase and favorable mix.

Answer

Ron Kramer, Chairman and CEO, expressed optimism for a housing market recovery, noting strong performance in the premium repair and remodel segment. He highlighted Clopay's efficiency and growth potential, balanced by the commercial business, which is expected to grow with infrastructure spending. He confirmed that the price and mix benefits were indeed a result of the 2025 price increase and favorable product mix.

Trey Grooms of Stephens Inc. questioned the potential timing of a demand rebound for the CPP segment and requested an update on the global sourcing initiative's progress and its effect on long-term margin targets.

Answer

EVP & CFO Brian Harris found it difficult to project a timeline for a consumer comeback but suggested tariff stability could help. Chairman & CEO Ronald Kramer added that the company's strong brands and asset-light model position it for recovery. Kramer confirmed the global sourcing actions are complete and reiterated the long-term 15% margin target for the CPP business.

Trey Grooms of Stephens Inc. sought confirmation on the $325 million of CPP revenue exposed to China tariffs and questioned if the long-term 15% EBITDA margin target for the CPP segment remains achievable.

Answer

Executive Brian Harris confirmed the annualized $325 million figure. Chairman and CEO Ronald Kramer affirmed the 15% margin target for the Consumer and Professional Products (CPP) segment is still "on the table," contingent on the broader economy. Kramer emphasized that 85% of Griffon's EBITDA is from the largely unaffected Home and Building Products (HBP) segment and expressed confidence in CPP's asset-light model to navigate challenges.

Trey Grooms sought clarification on whether the company's fiscal 2025 guidance already incorporates the potential impact of tariffs. He also asked about the sustainability of Home & Building Products (HBP) margins and the current pricing environment in that segment.

Answer

Executive Brian Harris confirmed that Griffon's guidance for 2025 does account for potential tariffs, as the company believes its mitigation strategies will keep results within the guided range. Regarding HBP, CEO Ronald Kramer highlighted the strength of the Clopay brand in the repair and remodel market. Brian Harris added that they expect both price and cost to be in line with 2024, and any increases in input costs would likely be offset by price adjustments.

Trey Grooms questioned the profitability trajectory for the Consumer and Professional Products (CPP) segment in fiscal 2025, including the potential exit rate, and asked about the price-to-cost outlook for the Home & Building Products (HBP) segment.

Answer

Executive Brian Harris projected that CPP margins will improve as fiscal 2025 progresses, driven by a transition from manufactured to sourced inventory, though the first half will remain muted due to soft North American demand. For HBP, he expects pricing and costs to be stable, similar to 2024. CEO Ronald Kramer added that HBP is a sustainable, leading business with significant growth potential.

Trey Grooms inquired about the widespread nature of cement and organic aggregates volume strength, its continuation into calendar 2026, the drivers behind cement margin impacts despite strong volume, and the expected near-term and long-term trends for wallboard pricing.

Answer

CFO Craig Kesler confirmed broad-based strength across markets, with continued optimism for infrastructure and non-residential sectors into 2026, acknowledging winter weather impacts. He noted cement costs were largely in line, with some increases in purchased raw materials. For wallboard, Mr. Kesler stated that 2025 shipments were at 2018 levels, leading to expected range-bound pricing with potential for modest declines, but not drastic swings due to structural industry changes. He also sees upside with housing recovery.

Trey Grooms with Stephens Inc. inquired about the widespread nature of cement and organic aggregates demand strength, factors driving cement margins, and the near-term and long-term outlook for wallboard pricing trends.

Answer

Craig Kesler, CFO, and Michael Haack, President and CEO, indicated that cement demand was broad-based across markets with continued optimism for infrastructure and non-residential sectors. They noted that cement costs were largely in line, with some raw material cost increases. For wallboard, they acknowledged downward pricing trends consistent with a challenging residential market but emphasized that structural changes in the industry suggest range-bound pricing rather than drastic swings seen historically, with potential upside upon housing recovery.

Trey Grooms of Stephens Inc. asked about the drivers behind Eagle's wallboard volume outperformance amid a weak housing market and inquired about the cost outlook for the segment.

Answer

EVP & CFO Craig Kesler attributed the strong performance to Eagle's favorable geographic positioning and advised looking at volumes on a trailing twelve-month basis. He noted that key input costs like natural gas and recycled fiber have stabilized, and he does not foresee significant immediate cost pressures, which supports the segment's margin profile.

Trey Grooms inquired about the drivers behind the sequential decline in wallboard pricing, the impact of freight costs, and the outlook for wallboard volumes heading into the seasonally stronger period.

Answer

CFO D. Kesler explained that higher freight costs accounted for at least half of the sequential price decline in wallboard. He noted the company is moving forward with a price increase in the spring. Regarding volume, Kesler stated that Eagle is well-positioned in better-than-average geographic markets and expects homebuilding to remain range-bound until interest rate and affordability issues are resolved, as the U.S. remains underbuilt.

Trey Grooms asked for details on the recent Bullskin aggregates acquisition, its strategic fit, and whether Eagle plans to increase capital deployment to aggregates. He also inquired about the wallboard demand outlook, questioning if volumes will remain stable until interest rates fall.

Answer

Michael Haack, an executive, explained that the Bullskin acquisition is a rare pure-play asset that strengthens their network in a market they already serve with cement. He affirmed Eagle's interest in growing its heavy materials business, including aggregates. CFO D. Kesler added that wallboard demand has been stable at low levels for four years and should increase as housing affordability improves, driven by strong underlying demand and low inventory.

Trey Grooms of Stephens Inc. inquired about the impact of recent hurricanes on volumes, recent volume trends in the heavy materials business, and the state of Wallboard pricing, including the reason for delaying a planned price increase.

Answer

Craig Kesler, Chief Financial Officer, explained that while hurricanes did not damage equipment, associated rainfall did impact volumes in the Southeast. He noted that October volumes have been strong with drier weather. Regarding Wallboard, Mr. Kesler stated that a March price increase is driving year-over-year improvements and that slight sequential declines are due to mix. He expressed confidence in pricing resilience and sees a favorable setup for future increases as monetary policy becomes more accommodative.

Trey Grooms asked for clarification on sales expectations for the year (flat to slightly down) and Q4 (up year-over-year). He also inquired about the factors that would lead to the higher versus lower end of the reiterated EPS guidance range, given the sales expectations and the forecast for roughly flat gross margin year-over-year.

Answer

SVP and CFO Melanie Hart confirmed expectations for Q4 sales to be flat to slightly up, benefiting from incremental pricing offsetting last year's weather-related hurricane benefits. She also expects Q4 gross margin to be up slightly year-over-year due to ongoing initiatives and product mix. President and CEO Peter Arvan added that Q4 performance, particularly for construction and remodel, is largely dictated by weather in seasonal markets. Ms. Hart noted that reaching the higher end of the EPS range would be weather-dependent, similar to last year's benefit.

Trey Grooms asked about any inventory-related benefits to Q2 gross margin, the outlook for gross margin drivers in the second half, and for clarification on improving discretionary spending trends.

Answer

CFO Melanie Hart detailed that Q2 supply chain benefits stemmed from logistics efficiencies and higher margins on private label products. For the second half, she expects margin benefits from price increases and moderating headwinds from building materials mix. She clarified the 'improving trend' in discretionary was sequential, with building material sales declines moderating from Q1 to Q2, not turning positive year-over-year.

Trey Grooms asked for clarity on the timing of operating expenses throughout 2025 and inquired about the status of hurricane-related rebuild demand in Florida.

Answer

SVP and CFO Melanie M. Hart detailed that operating expenses for new sales centers would be weighted to Q1/Q2 and Q4, while incentive compensation would follow the normal seasonality of operating income. President and CEO Peter Arvan explained that significant hurricane rebuild work in Florida remains, tied to homes that are still uninhabitable, representing a future source of demand.

Trey Grooms asked for clarity on the factors that could push results to the high or low end of the reiterated full-year EPS guidance, given that much of the year is complete. He also pointed out a slight change in the inflation guidance and asked for the reason behind it.

Answer

VP and CFO Melanie M. Hart explained that Q4 results could be influenced by weather extending the season, the rate of new pool construction decline in Florida, and the pace of storm-related repair work. She and CEO Peter Arvan noted the minor change in the inflation forecast was due to a combination of factors, primarily the mix of products sold, including higher chemical volumes.

Trey Grooms of Stephens Inc. inquired about the specific segment-level changes within the updated full-year guidance and the key factors driving the outperformance and raised guidance for aggregates' average selling price (ASP).

Answer

CFO Gail Peck explained that while the guidance midpoint remains, the composition has shifted. Outperformance in Utility Structures and Barge compensated for weather-related softness in Construction during the first half. She reaffirmed confidence in a strong second half for Construction, expecting high single-digit organic growth. Regarding aggregates ASP, Peck noted that stronger-than-expected pricing in H1, successful mid-year increases, and the accretive impact of the Stavola acquisition prompted the raise in the full-year outlook from mid-single to high-single-digit growth.

Trey Grooms inquired about April demand trends in the legacy Construction Products business, the company's outlook for a single-family residential recovery, and recent trends in input costs such as cement.

Answer

CEO Antonio Carrillo stated that underlying demand is solid when weather permits, pointing to strong backlogs in leading indicators like the shoring and Amaron lighting businesses as evidence. He clarified that the full-year guidance assumes only a modest stabilization and recovery in housing in the second half. CFO Gail Peck added that the company is seeing some year-over-year relief on input costs.

Trey Grooms inquired about the 2025 demand outlook for construction products, the forward-looking free cash flow profile post-Stavola, and the drivers of margin expansion in Construction Products for 2025.

Answer

Executive Antonio Carrillo expressed optimism for 2025, citing strong non-residential demand and pricing momentum, despite near-term project delays from election uncertainty. Executive Gail Peck noted strong year-to-date free cash flow but cautioned that Q4 would be impacted by higher interest expenses from the Stavola acquisition. Carrillo and Peck attributed margin strength to a price-over-volume strategy, accretive acquisitions like Stavola (a 35% EBITDA margin business), and the pruning of underperforming assets.

Trey Grooms asked for more specific details on the full-year guidance, particularly the volume and pricing expectations for the U.S. Cement and Aggregates segments.

Answer

COO Randy Lake confirmed expectations for mid-to-high single-digit pricing growth for aggregates for the full year. For U.S. Cement, he reiterated guidance for low single-digit growth in both volume and pricing. Lake emphasized that strong backlogs provide good visibility and that the company anticipates further margin expansion for the remainder of the year.

Trey Grooms asked for more elaboration on the 2025 guidance in light of macroeconomic uncertainty, including any specific positive and negative factors assumed in the forecast.

Answer

Executive Jim Mintern expressed confidence in reaffirming the full-year guidance, citing a strong start to the year, positive underlying demand, and an experienced management team adept at navigating uncertainty. Executive Alan Connolly detailed the assumptions, noting an expected net M&A contribution of approximately $320 million, ongoing FX volatility, and a return to a more normalized level of land sales around $75 million for 2025.

Trey Grooms asked new CEO Jim Mintern if there would be any changes to the company's strategic direction under his leadership.

Answer

CEO Jim Mintern confirmed a continuation of the company's successful 'differentiated customer connected solutions strategy,' with an added emphasis on innovation and technology. He stressed that the company will maintain its relentless focus on performance, disciplined capital allocation, and proactive portfolio management, referencing the $35 billion of financial capacity available over the next five years.

Trey Grooms of Stephens Inc. asked about recent trends and the 2025 outlook for the Americas Building Solutions segment, particularly regarding margins and end markets. He also inquired about the potential business implications of the recent U.S. election results on infrastructure spending.

Answer

Executive Randy Lake confirmed that underlying demand for Building Solutions remains strong, driven by energy, water, and infrastructure projects with healthy backlogs. Executive Jim Mintern addressed the election question by noting the historically bipartisan support for construction and emphasizing CRH's long track record of delivering consistent performance through various political and economic cycles.

Trey Grooms of Stephens Inc. asked for clarity on the back-half seasonality with the Strata acquisition, positive trends in markets outside of Oregon, and the strategy behind recent bolt-on acquisitions.

Answer

CEO Brian Gray explained that the Strata and Albina acquisitions have increased seasonality, shifting more performance into Q3. He highlighted strong DOT funding and project activity in California, Hawaii, Alaska, Idaho, and Texas as key positives. Gray described the recent bolt-on deals as consistent with their strategy of acquiring aggregates-led businesses in high-growth markets, confirming the M&A pipeline remains active.

Trey Grooms inquired about volume trends across business segments as the construction season begins and asked for an update on the company's end-market mix following recent acquisitions.

Answer

President and CEO Brian Gray explained that recent northern-state acquisitions like Strata and Albina have increased Q1's seasonal loss to about 8% of annual EBITDA. Despite a small Q1 aggregate volume dip, he noted that 70% of their states saw volume increases and reaffirmed confidence in full-year guidance. Gray clarified that while public works remain dominant in their contracting business (87%), the company's overall private market exposure is concentrated in the aggregates and ready-mix product lines.

Trey Grooms from Stephens Inc. asked for more details on the Strata acquisition, focusing on the strategic appeal of its geographic markets. He also inquired about the 2025 outlook for the ready-mix segment, specifically concerning raw material inflation versus pricing power, and followed up on the recent increase in inventory levels.

Answer

President and CEO Brian Gray described the Strata acquisition as a perfect strategic fit, being an aggregates-led, vertically integrated business in high-growth markets that Knife River knows well. For ready-mix, Gray asserted that guided mid-single-digit price increases will outpace input cost inflation, allowing for continued margin expansion. CFO Nathan Ring attributed the inventory increase primarily to the balance sheets of recent acquisitions, along with cost inflation and slightly higher volumes.

Trey Grooms from Stephens asked for the drivers behind the revised, lower volume guidance for aggregates and ready-mix, questioning the balance between intentional pricing strategy and potential market softening. He also inquired about the strategic rationale and contribution of recent acquisitions.

Answer

President and CEO Brian Gray explained that most volume declines were intentional, stemming from a strategic shift to quality over quantity and resetting the customer base. He noted some project timing shifts and private work softening also contributed. Regarding acquisitions, Gray emphasized they are materials-based, fit within existing high-growth markets, and will complement the company's dynamic pricing and vertical integration strategies.

Trey Grooms from Stephens inquired about the outlook for working capital and free cash flow for the year, and asked if the M&A pipeline has been affected by the weaker demand environment.

Answer

CFO Michael Miller stated that in a volume-challenged environment, the balance sheet naturally shrinks, and he expects the company to continue generating good free cash flow. CEO Jeffrey Edwards added that the M&A pipeline remains active with plenty of candidates, describing deal timing as 'lumpy' but not impacted by market conditions. Mr. Miller reaffirmed that M&A is the company's top priority.

Trey Grooms asked about the fiberglass supply-demand outlook for 2025 and the potential for an inflationary environment. He also sought clarification on the comment that Q3's trend of volume growth exceeding price/mix would continue.

Answer

CEO Jeffrey Edwards stated that fiberglass supply remains tight and he expects a rising price environment to continue, anticipating manufacturers will announce price increases for early 2025. CFO Michael Miller clarified that his comment was forward-looking to 2025, where trends like higher production builder sales and lower multifamily sales will likely cause volume growth to be greater than price/mix growth.

Trey Grooms asked about the drivers of the Q4 EBITDA margin guidance, the potential for price-cost headwinds to bottom out, and whether the long-term 10% EBITDA margin target remains intact.

Answer

CEO John Turner clarified that the primary margin pressure is from lower vendor incentive income due to weak volumes, not transactional price-cost dynamics. He affirmed that the long-term target of 10%+ EBITDA margin is still reasonable, noting the company's leaner cost structure. He also stated the Q4 volume forecast reflects a stabilization at the weak levels seen in February.

Trey Grooms asked about the current dynamics of Wallboard price versus cost, inquiring about the progress in passing through manufacturer price increases in a competitive market. He also asked for the longer-term pricing outlook for Steel Framing and Ceilings, considering potential tariffs.

Answer

CEO John Turner explained that while they've made some headway on Wallboard pricing, the market remains difficult, and significant improvement will require a return to volume growth. He noted that about 60 basis points of gross margin pressure remains from this dynamic. For other products, Turner expects Ceilings to remain inflationary and sees potential tariffs on steel as a net positive for GMS as a distributor, though he anticipates steel prices will remain flat in the near term. CFO Scott Deakin clarified that GMS does not source steel framing internationally but is indirectly affected by global commodity prices.

Inquired about the progression of cost inflation into next year, specifics on margin improvement drivers to reach the Horizon 2 target, and any significant cost headwinds to be aware of.

Answer

The company is confident in reaching the 25-27% EBITDA margin range for the full year 2025. Margin drivers include strong pricing, operational excellence, and portfolio optimization in aggregates, plus synergy delivery in cement. Cost inflation is expected to moderate to low-single digits next year. The only notable headwind is slightly higher natural gas costs, which will be offset by alternative fuels.

Asked for an update on cement pricing, specifically the market reception to the April price increases in the Mid-Atlantic and Southeast, and for clarification on whether the upcoming June/July increases target legacy or newly acquired markets.

Answer

The January price increase on legacy Summit assets saw mixed but expected results, with the full impact to be realized in Q2/Q3. The April increases of $4-$6/ton in the acquired Argos markets are seeing 'nice realization' and are not fully baked into the guide. The company's mid-single-digit cement pricing outlook for 2024 is considered a 'floor'. Upcoming June/July increases will target underpriced legacy Argos contracts as they roll off and will also be opportunistic across the entire footprint as demand is expected to strengthen.

Asked about the Doman partnership, seeking to understand the magnitude of the opportunity in Canada, potential for further expansion there, and whether the wood conversion opportunity is similar to the U.S.

Answer

The Doman partnership expands AZEK's presence, particularly in Western Canada, and facilitates clearly defined shelf gains for 2025. It allows for more aggressive pursuit of both competitive and wood conversion. The combination of two strong distributors positions them to gain incremental share in the Canadian market.

Requested more detail on the timing of free cash flow, specifically why it is expected to be more weighted to Q4.

Answer

Free cash flow is back-half weighted due to the seasonal inventory build in the first half. The weighting towards Q4 is because inventory reduction will accelerate in the fourth quarter as demand seasonally slows. The company expects to generate roughly $750 million in free cash flow in the second half, with an approximate 60-40 split between Q4 and Q3.

Inquired about the expected business cadence for the remainder of the year, particularly for the second half, considering tough comparisons but also potential pricing improvements.

Answer

Executives expect Q2 growth from lower comps and good storm carryover demand. They are becoming more optimistic about the second half, citing momentum in the commercial market which should support pricing, as well as benefits from recent acquisitions and maturing greenfield locations.