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Greetings. welcome to TopBuild' Earnings Call and Webcast. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I will now turn the conference over to your host, Tabitha

Thank you, and good morning. On the call today are Robert Buck, President and Chief Executive Officer; and Rob Kuhns, Chief Financial Officer. We have posted senior management's formal remarks and a PowerPoint presentation that summarizes our comments on our website at topbuild.com. Many of our remarks will include forward-looking statements, which are subject to known and unknown risks and uncertainties, including those set forth in this morning's press release, as well as in the company's filings with the SEC. The company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events. Please note that some of the financial measures to be discussed on this call will be on a non-GAAP basis. The non-GAAP measures are not intended to be considered in isolation, or as a substitute for results prepared in accordance with GAAP. We have provided a reconciliation of these financial measures to the most comparable GAAP measures in a table included in today's press release, and in our first quarter presentation, which can also be found on our website. I will now turn the call over to Robert Buck.

Good morning, and thank you for joining us. First, I want to thank our entire TopBuild team for their hard work and dedication, producing another great quarter for our Company and shareholders. Our financial performance continues to prove the strength of our operating model and the ability of our team to successfully navigate market opportunities and challenges. In the second quarter, revenue increased 52.7%, 20.7% on a same-branch basis, and adjusted EBITDA margins at both business segments expanded. Our installation business grew 21.6% on a same-branch basis, with volume handily outpacing completions. Specialty Distribution, on a same-branch basis, grew just over 20%, driven by strong execution and price realization in this prolonged supply-constrained environment. We are particularly pleased with DI’s performance, bolstered by the continued improvement of the commercial and industrial mechanical insulation end-markets. Revenue is growing ahead of plan, due to strong project performance, and the steps we’re taking internally to enhance operational efficiency and execution, are driving strong margin expansion. As these strong results demonstrate, the DI integration is proceeding very well, and we could not be more pleased with the great effort coming from the functional teams managing this process. We are ahead of schedule from the standpoint of projected cost synergies, as well as the blending of the outstanding DI operations team into the TopBuild organization. The benefits of this strategic acquisition focused on our core business of insulation, are exceeding our expectations. No other installer or distributor comes close to matching our size, scale, and service capabilities, which, driven by our talented team, gives us a significant competitive advantage. In addition, the timing of the DI acquisition could not have been better. Although the long-term fundamentals of the housing industry are solid, we are well aware of the shifting economic environment and growing consensus that the U.S. economy is heading towards a recession. DI has increased our penetration into the commercial and industrial end-markets, which, on a pro forma basis, now account for over 36% of our annual revenue. These two end-markets operate on a different cycle than residential housing, providing a buffer against a housing market slowdown. With this diversified mix of business, TopBuild should be able to outperform in any environment. Another buffer is the large backlog of homes under construction that still need to be completed. The starts data published on July 19, reports that homes under construction totaled almost 1.7 million. Assuming about half of these units have already been insulated, that still leaves nearly 850,000 homes that need our installation or distribution services. Plus, as mentioned, we are seeing growing strength in the commercial, industrial, mechanical insulation end-markets, hence our optimism for the second half of this year. In the event of a slowdown, our cycle tested team across the country will respond quickly, using the branch operations data mined from our integrated ERP system. Our playbook, honed over the years, has multiple levers we can pull to take costs out of the business. Our decade-long focus on operational efficiency, sales, and labor productivity, and strong balance sheet management, will continue to serve us well and enable us to best serve our customers. In a shifting economic environment, we continue to believe acquisitions are the best use of our capital, and we have a robust pipeline and exciting prospects across all three end-markets we serve; residential, commercial, and industrial. Acquisitions serve as important additions to the overall momentum of our business and, given our industry-leading scale and focus on operational excellence, the synergies we achieve are significant. Furthermore, our success in integrating acquisitions onto our systems and supply chain, is a core competency and unmatched in our industry. As a reminder, since June of last year, we have acquired 11 companies, including five year-to-date. In total, these 11 acquisitions are expected to contribute over $800 million in annual revenue. While our number one capital allocation priority remains acquisitions, share repurchases are also an attractive option. In addition to the recently completed $100 million ASR, our Board has approved a new $200 million share repurchase program. Our positive free cash flow puts us in a great position to return value to shareholders by repurchasing shares. Turning to ESG, we published our fourth annual Sustainability Report in May. We are now disclosing our Scope One emissions, more detailed workforce demographic data, and enhanced safety performance information. We are extremely proud that since 2017, we have shown five consecutive years of improvements in total recordable and lost time case rates, demonstrating the priority we put on the safety lifestyle of our over 13,000 employees. On the environmental front, I want to again emphasize that the products we install and distribute, drive thermal efficiency, lower energy usage, and reduce carbon emissions for heating and cooling. The benefits we deliver to our customers in energy efficiency, are recurring and far outweigh the impact of our operations. What is clearly inherent in our business is that we bring energy efficiency to life every day at the over 16,000 job sites where we install and deliver our products. Finally, before turning the call over to Rob, I want to thank those of you who joined us for our Investor Day in late May, either in-person or via the webcast. We were thrilled to highlight the strength and depth of our team, and give you a better understanding of why we are so excited about TopBuild’s future, and why we are confident we should outperform the market in any environment. Rob?

Our strong second quarter results are evidence of the strength of our business model, and a testament to the hard work of our teams across the U.S. and Canada. Both business segments performed well. As Robert mentioned, we could not be more pleased with the financial results, integration progress, and synergy realization at DI. As we move into the second half of the year, our Installation and Specialty Distribution businesses remain busy, and the long-term fundamentals of our markets remain strong. However, we are cognizant of the changing economic environment, and we will be proactive in the event of a slowdown. With our diversified end-market revenue streams and our flexible cost structure, we are confident we will continue to outperform in any environment. Moving to the financials, I will start with an overview of our second quarter results, update you on our balance sheet, and provide the latest on our full year guidance. Second quarter net sales increased 52.7% to $1.3 billion, with acquisitions and same-branch sales contributing 32.0% and 20.7%, respectively. Our Installation Segment’s second quarter net sales were $749.0 million, an increase of 23.7%. Specialty Distribution’s net sales were $587.8 million, an increase of 115.0%. On a same-branch basis, both segments grew over 20%. We had a strong quarter for project deliveries at DI, which is reflected in their solid performance. As a reminder, because a significant portion of DI’s sales are project-driven, their revenue can be a little lumpier due to the timing of deliveries. Second quarter adjusted gross margin expanded 90 basis points to 30.1%. On a same-branch basis, gross margin expanded 200 basis points to 31.2%, driven by higher sales volume, operational efficiencies, fixed cost controls, and higher selling prices. Second quarter adjusted EBITDA increased 61.7% to $242.3 million, and our adjusted EBITDA margin was 19.0%, a 100-basis point improvement compared to last year. On a same-branch basis, our adjusted EBITDA margin was 19.9%, an improvement of 190 basis points from last year. Our second quarter same-branch incremental EBITDA margin was 29.4%, and our acquisition EBITDA margin came in at 15.6%. Second quarter adjusted EBITDA margin for our Installation segment was 20.8%, and 17.2% for our Specialty Distribution segment, an improvement of 170-basis points and 70-basis points, respectively. Second quarter interest expense increased from $6.1 million to $13.4 million, primarily as a result of the additional borrowings on our term loan, and our $500 million senior notes offering last October, both of which were used to fund the acquisition of DI. Second quarter adjustments to Net Income were $1.6 million, and primarily related to acquisition integration costs. Second quarter adjusted earnings per diluted share were $4.43, a 60.5% increase from prior year. Moving to our balance sheet and cash flows, our June 30th year-to-date operating cash flow was $217.7 million, compared to $202.2 million last year. This was driven by our 72% increase in Net Income, which was partially offset by growth in working capital. Working capital as a percent of trailing twelve-month sales was 15.0%, 510 basis points higher than a year ago. This increase was driven by the higher working capital requirements of DI, continued price inflation, and certain strategic inventory buys. Over the long term, our working capital target remains 11% to 13%, but in the near term, while we continue to experience supply chain constraints, we expect working capital to remain at elevated levels. On the capital allocation front, June year-to-date CAPEX was $36.0 million, approximately 1.5% of revenue, and consistent with our long-term guidance. In addition, year-to-date, we have allocated $18.7 million to acquisitions, and $150 million to share repurchases. There were no significant changes to our debt structure, as our outstanding short-term and long-term debt balances remained at $1.5 billion. Our debt structure remains roughly 60% fixed and 40% variable, with our current average cost of debt at 3.18%. We ended the second quarter with net leverage of 1.68 times trailing 12 months adjusted EBITDA. This is down from 1.84 times at the end of the first quarter as we continue to delever post the DI acquisition. Total liquidity at June 30, 2022 was $554.0 million, including cash of $123.9 million and accessible revolver of $430.1 million. Moving to our annual guidance; based on our first half performance and our outlook for the remainder of the year, we expect 2022 to be a solid year for TopBuild. We are now projecting total sales to be between $4.8 billion and $4.9 billion, a $150 million increase on the low-end of the range and a $100 million increase on the high end. Given our backlog and continued industry constraints, we expect sales volume in the second half of the year be in the low to middle single digit range, similar to the first half, and for material inflation to begin to moderate. We have also raised our guidance for adjusted EBITDA to be between $860 million and $900 million, a $50 million increase on the low-end of the range, and a $40 million increase on the high end. Our long-range modeling targets are unchanged from those we published on February 22nd. I will now turn the call back to Robert for closing remarks.

Thank you, Rob. In closing, the long-term fundamentals of our industry are strong. We recognize in the short term, there are many macroeconomic factors beyond our control, influencing the environment in which we operate. What we can control is how we manage our business. TopBuild has a unique operating model that differentiates us from our peers. Our size and scale are key advantages, as is having all of our branches roll up to a common ERP system. This allows us to track daily activity in every branch, enabling us to proactively address business changes in real time. Plus, the three end-markets we serve, residential, commercial, and industrial, represent a $16 billion total addressable market opportunity, and, accordingly, we see a long runway of growth for our Company. With an engaged and energized team, a culture founded on entrepreneurship and local empowerment, and a focus on continuous improvement and operational excellence, we are confident we will perform well in any environment. Operator, we are now ready for questions.

[Operator Instructions] Our first question comes from the line of Adam Baumgarten with

Hey, good morning. Thanks for taking my questions. I guess, could you give us some more color on the strategic inventory buys, maybe what types of products and markets? Was it in residential or was it more related to DI or both? Just some more color on that would be great.

Hey, good morning, Adam. It's Robert. So, yes, I'd say mainly attributed to DI where we made some strategic buy decisions relative to - Rob talked about some of our project deliveries, making sure we were going to continue to provide great service there, as well as some capacity issues that we want to make sure we recovered for service. So, I'd say, mainly on the DI side of the business, for sure. And then where we had some opportunity in Service Partners and TruTeam, we took advantage of that. But again, mainly heavily weighted on the DI side of the business. So, strategic buys that we think were really valuable, and I think you probably see that in the performance of some of the margins and what we produced here in the quarter.

Yes, Adam, and this is Rob. I would just add to that. With inventories up about $83 million year-to-date, if you look at our cash flow statement, I'd say the biggest increase there is just higher inventory to support the higher level of sales we have going on right now versus the end of last year. Probably the second biggest chunk then is just raw inflation that's flowing through the inventory. And then the third is the strategic inventory buys.

Okay, got it. That's helpful. And then just - I don't know if I missed it, but I didn't hear any mention of the commercial business performance notably within installation. Maybe if you could walk through the trends you saw on the quarter on the heavy and light sides of the business.

Yes. So, it’s Robert again. So, really good performance on the commercial side of the business, led by DI, both industrial and commercial. So, some good project delivery on the side of the business. We continue to see some elongated in the strictly - side of the commercial business, we saw some elongated project timelines there. I think you're hearing that more and more. You hear that from some other heavier commercial-type businesses. So, just being elongated by some of the labor there. But overall, we were happy with the commercial performance in the quarter, but we do see some projects being - just slowed down because of the labor shortages and stuff, and other trades. The other leading indicator for us around the commercial business is definitely the bidding side. So, whenever we look at bidding and backlog, we continue to see the backlog grow in that side of the business. So, that's why we're pretty optimistic for the future, both light and heavy commercial.

Great. Thanks a lot.

Thank you. Our next question comes from the line of Ken

Good morning, everybody. Given your residential market share, which is pronounced, obviously, on the service and the distribution, with builders kind of talking about taking starts down, obviously orders are coming in. They have more inventory than needed because of slower cycle times, but a lot of that stuff seems to be resetting, but because you have such a high market share and you see bids and how do you think that might play out as builders just kind of slow up? I'm not saying a huge cyclical downturn, but they obviously have more inventory than they need near-term. And they've kind of talked about normalizing their own level of starts, which kind of feeds into your volume. How do you think that 8% we saw in the installation side - obviously, a lot of price, but how do you think that might trend given what the builders you saying over the next, let's say two to three quarters? I'm thinking into the beginning of ‘23.

Yes, good morning, Ken. It’s Robert. So, I think you're right. While the builders have said they've really emphasized the next couple of quarters, and what we see based, one, on backlogs, but two, as you know, this is a seasonally busy time of year in that the public builders are pushing hard to get their closings done here, and they're still quite a bit in backlog. So, we think that definitely plays to our advantage. If you remember, probably years past, we would tell stories where we get into September, October, early November, the builders have such a push that typically it leads to some share gains for us, because we're able to move labor around, move material around, move equipment around across the footprint, given the power of our ERP system. So, I'd say, based on what your - the question that you're asking, it really plays to our advantage here. And again, we have good local relationships with all those builders, builders of all sizes, quite honestly, across the footprint. So, I'd say really plays to our advantage here coming up. Service is still at a premium, especially as folks are trying to get closed quickly here. And again, a strength for TopBuild in that area.

Appreciate it. And recently, one of the things we were all talking about was with DI, I think about, you said 70% is material. It really occurred how much purchasing power since a lot of the fiber - the installation companies themselves are the same ones running through DI. Can you maybe describe - since DI seems to be running ahead of schedule on integration stuff, I mean, are there items related to your purchasing power or relationships with manufacturers that's actually delivered some upside? If you could go into that a little bit, I would appreciate that. Thank you.

Yes. Ken, this is Rob. I'd say on the - as we talked about, I mean, the synergies are rolling in, I'd say ahead of schedule right now. We feel really good about the $35 million to $40 million targets we’ve put out there. As far as the buckets go, they're not significantly different than what we put out to begin with. I'd say, supply chain is going to be around 40%, back office 35, and the operational improvements around 25%. We're not too far off of that. And I'd say that's just a testament to the diligence we did upfront and the work we did ahead of time on the deal.

Thank you.

Thank you. Our next question comes from the line of Philip Ng with Jefferies. Please proceed with your question.

Hey, guys. Congrats on a really impressive quarter in a choppy backdrop. I guess my first question is for you, Robert. Great that you've diversified into industrial and commercial. I view those businesses as longer cycle. It sounds like orders are still tracking pretty good. You talked about potential recession dynamics and then certainly slowing housing. So, kind of help us think through 2023, how much line of sight do you have in either your commercial, your industrial business, and how do you see those end markets holding up for you, whether it's on your legacy installed distribution side or DI?

Yes. Good morning, Phil. Great question. So, to think about that, so the back half of this year, we expect to remain steady. I think you can see that, what we put out relative to our guidance for the back half of the year. I think about 2023 that we look, multi-family, obviously that's where you have line of sight, if you think about in the residential side. So, multi-family, very strong, very strong backlog. We see there are a lot of bidding activity from that perspective. So, that gives us a lot of insights into 2023. And then as I think about the commercial side of the business, both commercial and the industrial side of the business, so backlogs are growing, I think both light and heavy commercial. And if there is some air pocket or slowness in residential, I think you'll see resources move over to that commercial side. I think you see, when we talk about elongated cycles now in the commercial, you've heard that from other companies, I think some of that could be made up as people shift resources and potentially even material over to the commercial side of the business. So, we're pretty positive on that. As we look at the industrial side, some nice bigger projects coming online there the back half of this year and going into 2023. And again, just looking at bidding activity and backlogs, which are good leading indicators for us, we feel good. And that's why we talk about we believe we have the opportunity to definitely outperform in the environment is because what we see on that commercial industrial side. And again, now our mix being call it 63%, 64% on the residential and 36% or so on the commercial industrial, we think that mix and that diversification couldn't have come at a better time. And then just looking how the DI acquisition is performing, I mean, we're really happy with the EBITDA margins, the improvement we've seen in the business that's coming from all the buckets that Rob talked about, and just generally operational improvements happening in the DI side of the business. So, we feel really good about it and good about the mix of the business and relative to commercial industrial as well.

Super. And Robert, you talked about how your customers still value service and being able to deliver product on time. In a slower demand environment, especially on the housing side of things, how do you kind of see pricing shaking out next year? And then a question for Rob, just given the amount of pricing you've gotten already this year, help us kind of size up care pricing. And then the last piece, Rob, I think you said inflation was moderating in the back half. Is that just from a comp standpoint, or are you actually seeing some of your costs saved a bit here? Any color would be really helpful, guys.

Yes. I’ll answer the first part of that, Phil, relative to service and the builders. I think that the main thing to think about there is the labor side, right? So, even if there is a little bit of an air pocket or a slowdown, the labor piece is still going to be highly valued and be a constraint in the industry. And as you know, we're really - we do a really nice job of providing the labor and providing great service. So, we think the labor will carry the day there, even if there is a slowdown, labor will still be super valued by the builders and by the customer side.

Yes. And I'd say on the pricing side, like we said on the call, we are expecting in this environment for material inflation to start to moderate. There aren't any announced price increases out there right now. So, we've got our assumption for the carryover baked into our guidance, but that's why you'll see kind - if you back half our - if you do the math on the back half of our guidance versus what we did in the first half, it's basically flat. And so, that's saying we've got some carryover price in there, plus in the first half, we had a little bit of extra volume, like we talked about with some key projects on the DI side.

Okay. Thanks a lot. Great color.

Thank you. Our next question comes from the line of Mike Reher with JP Morgan. Please proceed with your question.

Hi. Good morning, guys. Doug Wardlaw on for Mike. I was wondering if you could give a little bit further insight into the M&A pipeline across your different end markets.

Yes, good morning. This is Robert. So, very active from that perspective, very active pipeline really across all three. So, and I'll take each one of them. So, residential, this type of environment, you see some more folks coming to the table wanting to talk to us on top of the healthy and robust pipeline that we had on the residential side. So, definitely plenty of conversations and activity happening on the residential side. And then on the commercial industrial, I mean, we had a nice pipeline there, but DI just really helped know, bring more to the table from that perspective. So, lots of conversations and relationship being built there. Now, you've heard us say this, that DI integration is our top priority. And I think you see that in the results that we're living up to our very good execution of the integration of DI. That being said, we’ve got a lot of things working on the M&A front. We feel excited about things that are in the pipeline there really across all three of the end markets that we're servicing.

Yes, Doug, and this is Rob. I would just add to that. I mean, since DI, we've done eight deals, more on the smaller side, but we're remaining active on that front. It's still our top capital allocation priority. And we feel like there's a ton of runway out there with the $16 billion market that we address. We've got a combined 20% share of it today.

Great. And then lastly, I just want to get some further insight on the supply chain for you guys and just, is this something that you have seen that has even gotten slightly better for you guys? And if not, like how do you - how are you envisioning the supply chain moving forward?

Yes, so Doug, it’s Robert again. So, on the supply chain, maybe I’ll hit two or three different points there. So, relative to you, heard the builders say, we would say the same thing. Things didn't get worse in the second quarter. It probably didn't get better in the second quarter relative to the cycle time, if you will. If I think about our supply chain, fiberglass is still tight. No doubt about it. No really new capacity. Some new capacity came on Q4 of last year, Q1 of this year. A lot of that capacity was offset by maintenance that happened in the first half of the year. So, there may be a little bit of loose fill material, a little more loose fill material in the back half of the year. I’d say, where we've seen it moderate more, Rob talked about some moderating in inflation, has really been on the spray foam sides of the business. So, if you remember about spray foam, there's an open sale product and a closed sale product. We've definitely seen things loosen up on the open sale side. There's more of that product available. In the market closed sale, given the blowing agent and given some of the new innovation that product around the HFO blowing agent, that product is still tight. So, a little bit of mixed bags. Fiberglass still remains tight. Spray foam loosening up on the open sale side, still tight on the closed sale side of the business.

Great. Thank you.

Thank you. Our next question comes from the line of Keith Hughes with Truist. Please proceed with your question.

Thank you. You had some very nice volume in the installation segment in the quarter. You talked about that a little bit. Obviously, there's a lot of controversy on homebuilding, where it's going to be going in the future. Was this quarter - did you just catch up on some of the backlog? Was weather an advantage? What specifically drove one of your better volume numbers?

Yes. Keith, this is Rob. So, I'd say, for sure, it was on the residential side where we saw the stronger volume on our legacy business, call it, right? So, residential definitely stronger than completions for the quarter. Like Robert mentioned, commercial projects on that side of the business, have been a little slower due to constraints on that side. So, it was definitely on the resi side. And then, like we've talked about, on the DI side, things were very strong for the quarter from a volume perspective.

Okay. Thank you. And then final question. I just want to be clear, your discussion of inflation. You're basically saying inflation, I assume and insulation you're referring to, is flattening out. You're not seeing any declines in terms of input costs. Is that correct?

Yes, this is Rob again. So, yes, that's correct. We're definitely not seeing declines in material costs. We're just saying, with the environment out there and the slowdown in starts, we're not anticipating significant increases moving forward.

Okay. All right. Thank you.

Thank you. And our next question comes from the line of Stephen Kim with Evercore ISI. Please proceed with your question.

Yes, thanks very much, guys. Thanks for all the information and congrats on the strong performance. Wanted to ask you about the - where you might be seeing the greatest pricing power on your side, and where you might be seeing the greatest pushback in terms of your ability to implement pricing or pass-through pricing.

Yes. So, I'll take it - Stephen, this is Robert. I'll take it more from kind of a supply and demand perspective. I mean, the team is still doing a great job, has done a great job of balancing that material cost increases in selling price. And we've seen that really - the team has done a nice job, all businesses across the country. What I can kind of tell you is, let's talk about what we see relative to markets and stuff. So, the Midwest would be the slowest market if you think about it from that perspective. Southeast still strong, inclusive of Florida, inclusive of Texas. If I think about the Southwest, let's say Vegas is stronger than Arizona. And if you think about California, Southern California is stronger than Northern California. So, that kind of gives you, from a supply-demand perspective of with the builders. So, but that being said, again, everybody's pushing here from a service perspective, heading towards the closings and stuff. So, I wouldn't say one's been tougher than another per se, but that's definitely what we see from an activity level across the different markets and some of the bigger markets, to kind of give you some insights to that.

Yes. Okay, great. No, that's helpful. And then I believe last call, you had expected that the fiberglass manufacturer maintenance was on track to be done in August. Sounds like that’s happened now. And I think you articulated that loose fill product was pretty available. Are we - can you talk to how inventory levels look from what you can see in fiberglass, both bat and roll, as well as loose fill? And do you feel at this point that there is any excess inventory in the system, and how would you expect to run your inventory as you get into next year, if housing is in fact slower? Would you be looking to take up your inventory levels versus what you carried them at this year? Or would you continue to try to keep them very lean relative to this year?

Yes. So, relative to inventory levels, Stephen, I'd say, you're right. The additional loose fill capacity that came on was pretty well taken up the first half of this year based on maintenance. You're right. Most of that maintenance is done here in the month of August. So, we'd expect some loose fill material. But that being said, given seasonality, and I'll give you an example, I'm sure it’s something you're very familiar with. Seasonality, if I think about it on the retail side of the business, what happens, the seasonality there takes up a lot of that capacity. So, I think you probably know the manufacturers usually build some inventory around this time to service the demand from the retail side coming into the fall, as well, if there's any retail resets going on happening in the fall, which I know there are some, given some shifts of markets on the retail side of the business. Relative to 2023, as we think about our inventories, definitely some opportunity on the DI side as we think about inventories. Rob talked about, or we both talked about some strategic buys there. So, there's opportunity on inventory levels there. I think whenever - think about the TruTeam and Service Partners side of business, probably fiberglass runs about the same, I would say from that perspective. Maybe some opportunity in spray foam. You heard me talk about open sale spray foam has become more readily available. So, we probably don't see the need to carry as much in the open sale product. Closed sale still remains tight. So, I think you see some based on the different business or the different types of products in 2023. I would see dramatic differences on the overall fiberglass side.

Okay. That's very helpful. Appreciate all the color.

Thank you. Our next question comes from the line of Ryan Gilbert with BTIG. Please proceed with your question.

Hi. Thanks. Good morning, everyone. I just wanted to go back to your comments around the end markets and just to clarify, when you talk about steady demand, particularly in residential in the second half of the year, is that a reflection of your view that you expect housing starts to hold up here or kind of flatline or plateau at current levels? Or does that really reflect the lag between when a house is started and when you recognize revenue? Just any additional color would be really helpful. Thanks.

Yes, Ryan, it's really a little bit of both, but at the end of the day, the biggest thing for our optimism in the back half on the residential side is really the gap between starts and completions, right? The houses under construction, I think Robert mentioned it in his comments, it's 1.7 million houses under construction right now in the U.S., which is the most in the history of the census data. So, we know quite a few of those are still going to require insulation. And so, that's why we feel good about the back half of the year.

Okay. Got it. That's helpful. That's all I had. Thank you very much.

Thank you. ladies and gentlemen, we have reached the end of the question-and-answer session. I will now turn the call over to Robert Buck for closing remarks.

Thank you again for joining us today. We look forward to talking to you in early November when we report our third quarter results.