Installed Building Products Third Quarter 2026 Financial Results Conference Call - INSTALLED BUILDING PRODUCTS INC

Greetings. Welcome to the Installed Building Products Third Quarter 2026 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Ryan Ricketts, Vice President of Investor Relations. Thank you, Ryan. You may begin. Good morning and welcome to Installed Building Products Third Quarter 2026 Earnings Conference Call. Earlier today, we issued a press release on our financial results for the 2026 third quarter, which can be found in the investor relations section of our website. On today's call, management's preliminary remarks and answers to your questions may contain forward-looking statements within the meaning of federal securities laws. These forward-thinking statements are based on management's current beliefs and expectations and are subject to factors that could cause actual results to differ materially from those described today. These refer to our SEC filings for cautionary statements and risk factors. We undertake no duty or obligation to update any forward-looking statement as a result of new information or future events, except as required by federal securities laws. In addition, management refers to certain non-GAAP and adjusted financial measures on this call. You can find a reconciliation of such non-GAP measures to the nearest GAAP equivalent the company's earnings release and investor presentation, both of which are available in the investor relations section of our website. This morning's conference call is hosted by Jeff Edwards, our chairman and chief executive officer, Michael Miller, our chief financial officer, and we are also joined by Jason Neiswanger, our Chief Administrative and Sustainability Officer, and Brad Miller, Chief Operating Officer. Jeff, I will now turn the call over to you. thanks ryan and good morning to everyone joining us today as usual i will start to call some highlights and then turn the call over to michael who will discuss our financial results in more detail before we take your questions third quarter revenue reached a record 808 million dollars up four percent driven by our commercial multi-family other segment and recent acquisitions that result came in a residential market where single family demand remains soft and it is direct evidence that the diversification strategy we have built is working as designed our residential installation business continued to outperform broader housing market trends demonstrating the strength of our operating teams the benefits of our diversified platform and the multiple avenues available to support growth across varying market conditions overall we believe these results demonstrate the value idp provides customers across the markets we serve and products we install throughout the quarter lower consumer confidence along with affordability concerns and a rise in mortgage rates have made new home sales more challenging even with industry-specific headwinds expected to continue to affect our new residential installation sewing segment in the near term our overall business remains resilient all the credit goes to the hard-working men and women across our more than 250 branches throughout the united states and those who support them from our office in columbus ohio to everyone at ibp thank you for your hard work and dedication looking at our 2026 third quarter performance consolidated sales increased four percent in same branch sales were slightly positive our commercial end market continued to show strength delivering double digit installation sales growth for the sixth consecutive quarter with heavy commercial sales growth exceeding 13 percent during the quarter with respect to our new single family end market activity remains challenged as a result of affordability concerns and lower consumer confidence with some geographic markets feeling more upbeat than others in our multifamily end market sales grew eight percent during the quarter and our contract backlog continues to grow our other segment revenue grew 19 percent net of eliminations partly due to acquisitions and is up 33 percent year to date we continue to effectively manage both material and labor to meet the needs of our customers remain flexible to adjust to the varying demand across regions during the 2026 third quarter we completed four acquisitions representing approximately 22 million dollars in annual revenue our pipeline supports our expectations of at least 100 million of acquired annual revenue for the full year acquisitions during the quarter included an installer of shower doors closet shelving mirrors and other accessories across residential markets serving customers throughout minnesota and surrounding states with annual sales approximately seven million dollars an installer of door bath and fencing hardware primarily in new residential markets throughout south carolina georgia with annual sales of approximately seven billion dollars an install of fireplaces primarily in new residential market throughout maryland virginia west virginia and north carolina with annual sales for approximately four million dollars finally an installer of insulation fireplaces and gutters primarily in new residential markets throughout oklahoma with annual sales for approximate four million i'm proud of our team's continued success and commitment to doing an excellent job for our customers once again to everyone at ibp thank you i remain encouraged by the fundamentals of our industry our competitive positioning and are optimistic and i'm optimistic about the prospects ahead for ibp in the broader installation complementary building product installation business with this overview i'd like to turn the call over to michael to provide more detail on our 2026 third quarter financial results thank you jeff and good morning everyone consolidated net revenue for the third quarter was up four percent to a record 808 million dollars compared to 778 million for the same period last year Same brand sales for the installation segment increased 0.3% for the third quarter, as a 5% decline in new single-family same brand sales was offset by a 10% increase in commercial same brand sells and an 8% increase. In multi-family, same brand cells, price next increased 0,4% during the third quarter, or 2%, including heavy commercial volume during the 2026 third quarter decreased by 2%, primarily due to lower new single-family volume. Third quarter adjusted gross profit margin was 32%. Roughly 180 basis points of the year-over-year decline is attributive to specific input costs. Aluminum at 100 basis points, fuel at 40, and freight at 20, with a further 20 basis points from the faster growth of our other segment. Gross margins were also negatively impacted by a mix shift to the complementary products which have a lower gross margin profile than insulation importantly insulation product margin was essentially flat year over year illustrating that the core business is performing for the first nine months of this year adjusted gross margin was 32.4 percent and installation gross margin with 35.7 compared to 36.5% in the prior year. The decline in installation gross margin was attributable to the higher cost of aluminum and fuel, which were a negative impact of 50 basis points and 40 basis points, respectively. Adjusted selling and administrative expenses increased 4% compared to the 2025 third quarter. As a percent of third quarter sales, adjusted selling and administrative expense was 18.2%, consistent with the prior year. Adjusted EBITDA for the 2026 third quarter was $128 million, reflecting an adjusted EBITda margin of 15.9%, and adjusted net income was $73 million, or $2.76 per diluted share. Although we do not provide comprehensive financial guidance based on recent acquisitions, we expect fourth quarter and full year 2026 amortization expense of approximately $10 million and $42 million, respectively. We would expect these estimates to change with any acquisitions we complete in future periods. Also, we continue to expect an effective tax rate of 25% to 27% for the full year ending December 31st, 2026. Our third quarter net interest expense was $10 billion compared to $7 million for the 2025 third quarter, we would expect fourth quarter net interest expense of approximately $15 million. At September 30, 2026, we had $396 million in working capital, excluding cash and cash equivalents. Capital expenditures and total incurred finance leases for the three months ended September 30 of 2026 were approximately $16 million combined, which was approximately 2% revenue we ended the third quarter with 416 million dollars in cash on the balance sheet and we will continue to prioritize prioritize acquisitions with long-term strategic benefits and attractive returns on invested capital we expect positive free cash flow will continue to support shareholder returns and stock buybacks based on prevailing market conditions at the quarter end we completed a 250 million dollar add-on to our existing term loan b on identical terms increasing the total to approximately 740 million dollars with all rating agencies reaffirming their ratings we raise this capital proactively from a position of strength at 1.3 times leverage to ensure we can perform on our acquisition strategy pro forma leverage remains comfortably below our two times target and we have no near-term maturities. At 10-30-2026, the company had approximately $398 million available under its stock repurchase program, which expires March 1, 2027. IVP's Board of Directors approved the fourth quarter dividend of $0.39 per share, which is payable on December 31, 2026, to stockholders of record on December 15, 2028. The fourth quarter of dividend represents a more than 5% an increase over the prior year period. We are committed to continuing to grow the company while returning excess capital to shareholders for our dividend policy and opportunistic share of the purchases. With this overview, I will now turn the call back to Jeff for closing remarks. Thanks, Michael. I'd like to conclude our prepared remarks by once again thanking IDP employees for their hard work and commitment to our company. Our success over the years is made possible because of you. Operator, let's open up the call for questions. Thank you. We will now be conducting a question and answer session. We ask that you please limit yourself to one question and one follow up. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions, Our first question is from Phil NG with Jefferies. Please proceed with your question. Hey, guys. You know, tough environment for sure, managing through that reasonably well, and particularly I appreciate the color, Michael, in terms of the install margins holding up pretty well in this backdrop. But I guess, you know, as we kind of look at the 27 and beyond, you know, there's a view that single-family starts could be down. your installed business take price to kind of at least offset inflation um you know are you in a position where you could maintain that longer term gross margin framework in that 32 to 34 range in a you know softer potential environment as we look out to 2027. yeah so thanks for the question um obviously a lot depends upon you know how the single family market develops in 27. our current expectation is that both single family and multi-family starts are down sort of mid single digits in the year i think you know we know that when single family starts are downs or mid single digit getting price realization is is tough for sure um however we've continued to do extremely well in terms of gaining market share and performing very well on the multifamily side, which I think, you know, this quarter's results, you know, reflects that in a very strong, positive way. So I think that in the multiffamily side, we will be able to offset some of that weakness. We'll feel it. And as everybody knows, the comps are just very, very difficult, you know. Coming in, I mean, a little bit weaker, obviously. This is the first quarter in, I don't know, six or seven quarters that multifamily inflected positively. And our backlogs are growing there, not by much, but they're definitely growing there. So to answer your question, yes, I think that we can stay within that 32 to 34 full year range, but we're clearly going to be at the low end of the range. We're not going to go at 34, and, you know, and certainly, as I think everyone on the call realizes, our fourth quarter gross margin last year was a record gross margin that we reported as a public company, and we clearly don't expect that to be the case in the fourth quarter of this year, because some of the headwinds that we noted in our prepared remarks will continue. I mean, clearly fuel and freight are going to continue to be headwinds. On the aluminum side, you know, if there is one thing we're disappointed about in this quarter is that we didn't get on top of the gutter margins as quickly as we should have. We are very deliberately and actively working with our customers to get that margin back up, and we do not think it'll be the same kind of headwind that it was in the third quarter and the fourth quarter. We do not Think we'll recover 100% of the margin, but it definitely won't be as much of a headwind. I would say on the positive side, the team, while they didn't do a great job on the gutters, they did an amazing job on spray foam. And as we had talked about last quarter, you know, there was a very hard, significant 20% plus price increase in spray foam, and they maintained margin throughout the whole quarter. So we were very pleased with the result there. Okay. Helpful, Michael. You know, I think a weaker single-family backdrop is well appreciated. But with rates going higher, have you seen an air pocket in your commercial business, particularly light commercial? And then on the multifamily side, I mean, you said you're expecting multifamily starts to be done mid-single digits. But on the flip side, your business turned positive and contractor backlogs remain good. Is that a backdrop where, one, given your share gains in multifamily, you can grow a multifamily next year? And just any color in terms of what you're seeing on the commercial side of things? Yeah. I mean, you're absolutely right. On the light commercial side, it's definitely getting tougher because of the rate environment. I would say on the heavy commercial side we continue to literally knock the cover off the ball, quite frankly. At the end of the quarter, their backlogs were up mid-teens from what was already high record levels. So while the comps there that began as everybody knows are extremely difficult particularly in the fourth quarter but the team there has continued to perform very well and you know we feel good about you know the progress that they're continuing to make um on that side on the multi-family side the rate environment has definitely taken a little bit of the wind out of the sales for multi-family developers. I mean, what you're seeing is a lot of equity is trapped in existing multifamily projects that are actually doing better from a rent growth and occupancy perspective. But the developers can't get the equity out because cap rates have gone up and the value of the buildings have gone down so that's definitely taking wind out of the multi-family sales right now and uh well we have a lot of confidence about our ability to outperform relative to the market we just think it's a tough market quite frankly so you know they will continue to uh yeah again we have confidence around our ability to gain share and perform well i mean when we look at the quarter on you know the multi family revenue that we generated in the quarter i mean it was across pretty much all regions that we had a pretty solid uh you know multi-family number i would just bouncing back to the heavy commercial just kind of remind um people that the fourth quarter revenue for both um total revenue and uh same branch revenue 38 and a half percent in the fourth quarter that is the toughest comp we're going to face as a company um since we've been reporting heavy commercial business separately so just as a you know level set relative to where we expect that business to do uh in the 4th quarter and through 27. can you still grow on that tough comp in the fourth quarter with heavy commercials given the backlog you're seeing year of year Yeah, I mean, obviously we don't provide guidance, but the portion of the business that we are most excited about clearly is the heavy commercial business and the opportunities that are there. Okay. Really helpful, Culler. Appreciate it, guys. Thank you. Sure. Our next question is from Michael Rehart with Mylas. Please proceed with your question. hey thanks it's uh mike rehart from melius uh research um appreciate you taking my questions um first on the uh m&a uh update and you know the four companies acquired um uh you know during the third quarter you know all in the complementary side um and i'm just wondering you know in terms of what you're seeing out there from an m&A landscape if it's also a little bit more oriented towards complementary? And if so, what might that mean for gross margins over the next two to three years if that shift continues? Yeah, this is my love story, then Jeff can kind of follow it up. But I would say the pipeline is very robust. We feel great about the deals that are there. And it's a mixture of things, including regular way insulation installers. I would say that, you know, your average single market insulation installer has not delivered the kind of performance that we have delivered. And as a consequence, you Know, they're not super excited about selling their business in, you know, for them, what is what is a pretty tough environment. I mean, keep in mind, you know, one of the things that we think is most attractive about IVP is not only our broad geographic dispersion and the geography that we have and our overweight towards the top half of the country, which continues to do better than the bottom half of country but it's the diversification of the business and the strength of the multi-family and the strengths of the commercial and the you know traditional insulation installer that we're buying doesn't have that kind of diversification to offset you know what are pretty tough conditions in the single family side now that being said we have deals that you know we expect to close in the near term that are regular way insulation installers um but some that are you know other products we feel you know really good about our ability to continue to execute and perform on the acquisition strategy uh this is jeff i agree with mike on in terms of just kind of the way that chips came in and per se that the mix is normal but the other thing that happens is when the market's a little tougher like this some of our our leads come from the field and come from the branch managers and to the extent that they're trying to get into other products to bolster you you know, sales volume in their locations, there's, you know sometimes a tendency to kind of surface more of the other product fields, and it's an intentional move on our part. Yeah, it actually is the best time for us to really build out more of a complementary product strategy, which as you all know is something we've been working on for a long time. No, absolutely. Appreciate that. And I guess just following up on the comments in the prior question around, you know, what you're hoping to do with recovering some of the aluminum headwinds that you saw in the gutters business in 3Q into 4Q, I just want to try and make sure that I'm appreciating the dynamics there in terms of, A, I would assume you'd be able to only recover, let's say, a portion of that, you you know, maybe on the 50% type of range of that 100 bps, if that's, broadly speaking, the right way to think about that. And conversely, if there's any other incremental headwinds that you might see sequentially, specifically, I'm talking about, I've been thinking about fuel or freight. But if there are any others, you know just trying to think of the sequential progression here you know aluminum may be being less of a headwind but if there are any other incremental headwinds uh relative to 3q into 4q that that would be helpful yeah i mean i think um you know again obviously we don't give guidance but we're working very hard to offset that 100 basis points headwind within gutter sales i mean you know the one positive is that aluminum prices on average in the month of october were down about six and a half percent and that's still up 15 from last year but that will help us um offset some of the headwinds that we experienced in the third quarter i mean is it going to be 50 basis points 100 basis points again we don't provide guidance but you know the team's working very hard to make it be as little of an impact as possible but there will still be some i mean we just have to be honest about that And we will continue to have, unless something changes very dramatically here, like tomorrow, we're going to continue to add, you know, the headwinds associated with fuel and freight. And then, I mean, it's a good thing, but it's the bad thing for gross margin is the continued strong growth of the other segment. The one thing that I will comment around the other section is the overall growth rate there will come down in the fourth quarter because something that is driving that growth rate as high as it is is the fact that in the fourth quarter of last year, we did two acquisitions that were in the other segment. So we would expect that other segment revenue growth is going to be more similar to what the other segment same-brand sales growth was in the third quarter, which is, you know, mid-single digits. Great. Thank you. Sure. Our next question is from Sam Reed with Wells Fargo. Please proceed with your question. Awesome. Thanks so much, guys. You know, I wanted to touch on competitive dynamics in install more broadly. You know. Obviously, there is a competitor that is under new ownership. You know? And it's now, let's call it, four or so months into that ownership. So, any senses to changes in competitive behavior and dynamics that we should be mindful of? Yeah. This is Michael. i'll start that and then let brad sort of follow up but um i you know our general sense you know obviously it's different markets market and i think as as everyone can appreciate that particularly the production builders the public builders you know are definitely under considerable margin pressures themselves and you know it's this educated significant dialogue in conversation with all of their trades and i would say during that process we've been very disciplined and you know i think our competitor our largest competitor has been very disciplined as well yes this is brad i would agree i mean our largest competitors they've always been a good competitors and they still are nothing's really changed we haven't noticed anything in the field that contrary to that Really helpful. Maybe switching gears here, I wanted to dig a little deeper on spray foam. You know, it sounds like based on some of the earlier answers that you guys really did a good job of recovering some of those cost increases, which is good. It's quite interesting because the messaging around that on the Q2 call was a lot more cautious. So just curious maybe how that changed throughout the quarter with respect to some of these spray foam price pass-through initiatives um you know and sort of you know areas where the team really excelled thanks yeah it was pretty much across the board i mean i think as we've indicated or certainly have talked to investors about you know spread the spray foam product is a semi-custom custom home product for the most part and that customer set is the most willing to accept price increases and you know I would say, unlike with gutters and aluminum, you know, we had a lot of advanced knowledge about the price increase coming, and it was very well telegraphed to the, certainly our customers and to our employees so that people were ready for it. And as a consequence, particularly because with the custom home, the bid to install time can be quite long, just given the nature of the length of those projects. So I think the team did a better job than we expected them to do, quite honestly, in forward pricing, the price increases, the material price increases to maintain the margin. And quite frankly, it also helps that there is pretty good discipline within the spray foam contractor base to maintain margin. Brad, do you want to add to that, but? No. You covered it. Really appreciate it, guys. Thanks so much. Sure. As a reminder, we ask you to please limit yourself to one question and one follow-up. Our next question is from Stephan Kim with Evercore ISI. Please proceed with your question. Hi, this is T-Shon for Steve. I just want to touch on the commercial side, specific heavy commercial. Can you give us an idea of which verticals specifically are supporting growth, which are a little bit more consistent in terms of that growth contribution versus ones that may be a little more lumpy or volatile? Sure. I mean, the big drivers of growth in the backlog, which is then, you know, comparable for what the reported results are. but recreational and entertainment has been strong industrial and manufacturing has been very strong actually retail has been solid for us it's not a big portion of the overall revenue but it has been growing significantly from a backlog perspective and then uh lodging in a hotel has been pretty solid the areas of weakness um you know maybe not surprising uh multi-family a little bit of uh education and a little bit of transportation part of the transportation weakness though is that those projects tend to be pretty high dollar value so when some of them roll off it takes a while to get to build back up the backlog in those but i mean as we look at it overall as i mentioned a mid-teens increase in their backlog is phenomenal the only thing disappointing about it is that they're only, like, 10%, 11% of revenue. Great. That's super helpful. And then I just wanted to come back to the multifamily conversation, a lot of detail there and kind of the challenges that you're expecting. But I guess in terms of the kind of outperformance versus the market, can you kind of touch on how the CQ team is kind of contributing to that and, you know, any context there would be helpful? Yeah, CQ is helping drive that for sure, although the teams, the non-CQ teams, if you will, actually did a really nice job on the multifamily side of the quarter as well. What's really starting to happen is the success of CQ in the South Census region is starting to expand into the other regions, particularly the West and the Mid-Atlantic. and we're starting to see the the fruits of that that effort and that work and we believe we have tremendous potential particularly in those two regions to increase our market share you know we estimate that in the south census region where cq is dominant that we have over 50 market share in multi-family which is phenomenal but our market chair in those other markets is considerably lower So, or the other census regions. So there's, there's a lot of runway there. You know, it's a runway in a market that is admittedly, you know, very challenged. You know as I think pretty much everyone on this call would know is that in the third quarter multifamily starts, you which has been growing uh we're down you know almost 10 in the third quarter so that i think is indicative of you know the rate increases and you know uh the headwinds that multi-family developers and owners are are seeing and there definitely appears to be a near-term pullback in multifamily development, which I think everybody understands the dynamics around rates and that. Great. Thanks a lot. Sure. Our next question is from Susan McCleary with Goldman Sachs. Please proceed with your question. Thank you. Good morning, everyone. Good morning. My first question is, in your prepared remarks, you mentioned that there were some markets that had outperformed other markets can you talk a bit about what you're seeing geographically and did that have any implications in terms of this quarter's results or how we should think about the end of the year or even early 27 yeah i mean i'll call out some states that um states that we had a lot of headwinds in um you know like and i'm only talking about the big states for us not some of the smaller states But Colorado, Indiana, Texas, Virginia, Washington, you know, were a little challenged. We were very pleased that California and Florida stabilized in the quarter, which was nice to see, particularly Florida stabilizing. You know, North Carolina was pretty good for us. We had some incredible performances in some of our states, like Georgia, Minnesota, our hometown, Ohio, South Carolina, Wisconsin. Some of those states were actually up double digits, believe it or not. So, yeah, we felt like it was balanced. But when we look at state-by-state performance, two things that really stood out for us was the performance in California and Florida. and I felt like they hit bottom, which is good. Yeah, okay, that's encouraging to hear. And then switching to the volume versus price mix, it's been nice to see how price mix has been flat, excluding heavy commercial, even with the volume pressures that are coming in, right? Your volumes have been down, call it low to mid-single digits. Can you talk about the ability to sustain that going forward and how we should think about the different moves coming through as perhaps single family starts further moderate? Yeah, thanks for that question, Sue. I do think that price mix is going to continue to get more challenged as we progress through the fourth quarter and going into 27 based upon our expectations um you know for the market so you know one of the things that we mentioned you know last quarter and for several quarters you know what are the things we do is we track when the public builders report their numbers and their home building revenue was down in the third quarter seven percent or so and our revenue with them was down about seven percent so we track pretty closely with them based upon their current guidance slash consensus for the fourth quarter it would imply that our fourth quarter revenue with them is going to be down roughly six percent um so we think that's going to be tough both from a volume and a price mix perspective i would say in the quarter that the private builders were basically flat um in q3 we this has been a trend now for multiple quarters that the private builder has continued to outperform with us anyway relative to the public builders you know it's uh i think everybody appreciates this on the call that the toughest part of the single family market right now is the entry level which the public builders have very very high market share and so it is um you know going to continue to be a challenge but you know fortunately we do have the benefits and the diversification with the commercial business and our ability to you know continue to take share on the on the multi-family side and you know we were talking about and i get it focusing on stars because that's a much more forward-looking metric versus the backward looking metric. But I think we really need to highlight the company's performance relative to completions in the quarter. With single family completions down 12% and multifamily completions down 27%, our performance relative to that in the corner highlights the strength of our team and of our business model And while it's not a perfect correlation on a quarterly basis, it is a good indication of the performance that we had and what was and what continues to be a very tough environment. Okay. Thank you for all the color. Good luck with the quarter. Thanks. Our next question is from Adam Baumgarten with Vertical Research Partners. Please proceed with your question. Hey, guys. Good morning. Noticed that you guys didn't buy back stock in the quarter and had recently raised some debt, as you guys mentioned at the top of the call. I guess, can you talk through your appetite for maybe some larger, chunkier acquisitions, perhaps, in tangential parts of the business, like mechanical installation, install? Yeah, thanks for the question. And a couple of things there. You know, the primary weakness in the share price during the quarter was during a closed window. And we are restricted from buying shares during closed windows. So the lack of purchases in the quarter isn't really a reflection of us not wanting to buy shares because that still is definitely one of our capital priorities. But our number one capital priority has been and will continue to be the acquisition strategy and buying creative acquisitions that continue to diversify the business. I mean, I think we've demonstrated over the past several years, and I think this quarter is even a highlight to that, that having a well-diversified business has improved and helps maintain a strong financial condition, even in a weaker environment. You know, we did the 250 million add-on, you know, recognizing that we have some larger things that are in the pipeline. Now, because they're in the Pipeline doesn't mean they're gonna close, but that capital is extremely flexible. Our leverage is still well below our two times stated net leverage. The rating agencies reconfirmed our ratings, including the investment grading, investment grade rating on our senior secured debt. So, for us, it was very opportunistic. It makes a lot of sense. The nice thing about the way that deal is structured, if we decide that we want to pay it off, we can pay it off without penalty. And, you know, it provides us tremendous amount of flexibility. But I will say, you Know, right now we have over a billion dollars in liquidity, given our cash position and the availability under our ABL facility. So, you Now, we feel very good about where we are. And we feel Very disciplined about both the acquisition strategy. that being priority number one certainly share repurchases and and then the dividend okay got it thanks that's helpful uh and then just maybe switching gears to insulation prices kind of what you're seeing out there it seems like based on one of your large suppliers that maybe prices softened a bit in the third quarter sequentially maybe what your outlook is there and if maybe you can capture some kind of price cost spread as price mix you know is still kind of flattish to up a little bit yeah let me start that and i'll let jeff sort of finish it up but i mean i would say really across now um coming into the fourth quarter we expect there to continue to be stability in fiberglass pricing and stability in spray foam pricing at this point so um we don't expect to see you know pricing moving one way or the other um you know and even if there is pricing it's going to be ex you know very modest you know so nothing that i think kind of moves the needle for for us or for the industry i don't know if you want to add anything to that That was my opinion also, yeah. Okay, great. Very helpful. Thanks a lot, guys. Best of luck. Sure. Our next question is from Trey Grooms with Steffens Inc. Please proceed with your question. Yeah, hey, guys, this is Ethan on for Trey. Thanks for taking the question. I wanted to start off with commercial sales. Organically, those were up double digits again this quarter, and as you mentioned, against a more difficult prior year comp. And the growth here has obviously been pretty impressive, backlog up mid-teens. And so, you know, while the backlog doesn't suggest this to be the case, I'm just curious that with the uptick in rates intra-quarter, if you're seeing any signs of some moderation in appetite here based on what you're hearing from your customers. So any color on that would be great. I'll start that, and Brad can add some color to that. But I would say no. And the fact that the backlog at the end of the quarter is up mid-teens suggests that there really hasn't been any fall off. And keep in mind that backlog is up mid-Teens against record upon record quarterly revenue. This is Brad. So our backlog is confirmed backlog as well. So it's already most of it is funded. And then our pipeline is as robust as it has ever been on a commercial So we have plenty of opportunity there. Okay, great. Yeah, that's encouraging. And then, you know, building on the prior question on the fiberglass side of things, you know, we know that there's a lot of supply out there and these OEM increases appear to continue to be pushed. And, you Know, it sounds like you guys were expecting mid single digit type declines in single family and multifamily next year that any increases would probably not be accepted by the market. But just curious your thoughts here and if maybe an increasing industry cost curve could potentially support some degree of pricing, all else equal, despite lower demand. Yeah, we would expect that to be a pretty difficult thing to realize, just given our expectation. I think everyone's expectation for a pretty muted environment next year. You know, one thing that could offset that a little bit, quite honestly, is, and I think OC talked a lot about this or not talked a lot, but talked about this in their insulation segment, is the mechanical industrial side of the insulation business is pretty much on allocation. And, you know, they are getting price appreciation there. Well, typically that's not going to impact the residential side. I think it could cause a little bit of pressure from a pricing perspective, but at this point, our belief is that we'll have stability in both fiberglass and spray foam pricing, certainly for the next couple of quarters, unless the on-the-ground macro conditions for new residential construction changes. But on the mechanical industrial side, it's definitely a hard market. There's a lot of activity there, as pretty much everyone on the call would know. We do have about $50 million of revenue in the mechanical, industrial, installation space, and that part of the business is doing well. All right, got it. That's very helpful. Thank you. Sure. Our next question is from Andrew Carter with Stifel. Please proceed with your question. Hey, thank you. Good morning. I want to focus back on something you said earlier about the competition from the homebuilders or just the kind of what they're looking to their suppliers. First thing, as I understand it, negotiations for your business on the install side go down to the house level. Has there been any change in terms of the national homebuilders trying to take more of an approach in terms of kind of negotiating, whether it be RFPs or whatever, between you and QXO? And then the second thing I would ask is kind of to build on the point, with all the kind of labor challenges in the specialty kind of the mechanical trades that come right before you in the cycle, I'm guessing that makes your life harder to try to figure this out. Maybe the softer volume outlook you've kind of set out there maybe assuages some of that. But I guess that would make your life harder. Does that show up in the margin? Can you manage to that? And is there any recognition of that value? Thank you. Yeah, that's a great question. Let me, I'll start that and let Brad provide some more color. But I would say that the bidding process and negotiating process really hasn't changed much. I mean, one of the large home builders very aggressively went out to all of their trades to kind of rebid everything. You know, the results of that, I think, were, you know, pretty reasonable from our perspective. So, you Know, I would say there's not that much change on the second part of your question. And the scarcity of labor for the trades that come before us does extend cycle times. But given how soft the environment is right now, we're not seeing any significant cycle time extensions. But, you know, it does help us because, you Know, we have the install labor and there are employees. and it's we become more important to the builder as somebody that can show up on time get the job done right the first time and pass inspection now does that mean we can get a 10 percent price increase no but it means we don't have to take a 10 price decrease right because they know and value the fact that we have the consistency of the labor and do you want to add yeah this is Brad, so on the RSA question, first, it's not just between us and QXO. When builders and customers go out to bid, it is all the independents as well. So I just want to be clear on that. Yeah, we've seen some, like Michael said, on some of the publics, but mainly it's one or two. But you mentioned it, the custom and smaller builder, it comes down to the price per house. and a lot of times that depends on the community that you're in, the county, and the requirements for that area. And on the second, on the labor, you know, when you really break it down, that's what we do. We're a labor company and also logistics, and we just happen to install products along with it. So this isn't really too much of a different story than what we've had in the past. Now labor's a little tighter, but this is what we need. second question uh just in terms of where fuel prices are today um i well i guess number one what is the kind of fuel price kind of headwind in your 26 margin just assuming you know what this week's rates hold through the fourth quarter and then if you took the current rates what would be the annualized kind of impact versus 25 just using kind of the fuel rates thanks yeah it's 40 to 60 basis points easily. Perfect. Thanks. I'll pass it on. I should point out, and this is maybe too much of a nuance, but the impact of fuel is really primarily felt at the installation segment, which has been the way for decades and decades, is that the installation segment does not do fuel surcharges with our customers you know we'd love to be able to do that but in we don't in the industry doesn't i should say um but in the other segments distribution and manufacturing segment they do do fuel charges so there's much there's less impact to the um to the margin on the uh other segments the distribution manufacturing business but obviously the installation segment is, you know, really the driver of the business. Thanks. Pass it on. Sure. Our next question is from Keith Hughes with Curious Securities. Please proceed with your question. Thank you. I'm just going back to the multifamily comments. It's been tough to track that market. Some of the government data doesn't seem to be tracking what's better than it is on the field. um whatever this weight patch is when do you think it'll start showing up in terms of your your install um and is there any comments for your customer of what their what their outlook is for next year at multifamily yeah i would say that the you know current rate environment has really um muted expectations within the the multifamily market um and i think that softness for the industry is definitely going to start showing up in the fourth quarter and in certainly the first half of 27, unless there's a meaningful change in kind of the rate outlook or rate environment. I mean, one thing that, you know, we try to make this point in answering an earlier question, but I think it is super relevant to understand or appreciate is that although the multi-family market is probably performing better than people expected from a rent profile and a um occupancy profile the equity for so many developers is trapped in the value of those buildings because of the the higher cap rates and the those projects just don't sell because You don't want to sell them at a loss, right? So it definitely puts a damper, if you will, on expectations for future starts and growth, you know, in 27 for sure. Thank you. Sure. Our next question is from Jeffrey Stevenson with Loop Capital. Please proceed with your question. hey thanks for taking my questions today i wanted to follow up on your comment michael on the private builders outperforming in the third quarter what have you been hearing from your regional and custom builder customers regarding 2027 expectations compared with their public counterpart and do you think being under indexed to the large production builders will continue to be a mixed tailwind next year. Yeah. I mean, I would just say, just to clarify, we don't really think of ourselves as under-indexed. To the public builders, I mean the reality is that they need our scale and volume, particularly in their high-volume subdivisions. It's just that they're weaker now given the market segment, the entry-level segment that they are heavily indexed to. In terms of the expectations that we have from our uh you know private and regional builders obviously it's different market to market but i think the mood there is better than it is with the publics because i think we continue to see better strength in the you know semi-custom custom and move up market which the private builders you know that's that's really built basically so and us being over indexed at the top half of the country we've talked about this you know several times, you know, definitely helps us for sure. I mean, you know, the Midwest has been great for us. You know, the Northeast Minnesota has, which is our largest state by revenue has just knocked the cover off the ball. I mean, they're just doing extremely well. And, you know, so we feel very good about that. I appreciate, appreciate that. And I was wondering if you could dive deeper into, you know, complementary products demand during the quarter? You know, are you seeing any products, you Know, outperforming? And, you know, Are you seeing stronger demand and, you know, better single family markets like, you know, Minnesota, you just mentioned? Yeah, I mean, the complementary products had a better growth profile, certainly than insulation did in the quarter, you You know, bad news, good news is that, you know, gutter sales were up 16% in the quarter, which normally would be great. But in this quarter, it wasn't so great because of the margin pressure that they experienced due to the, you know, the very significant increase in aluminum pricing. But as we said earlier, you have the team is working very deliberately to get the margin back up and to get price. And I would say that there is a strong commitment to forego volume to get price. You know, the reality is that, you know, gutter install work is some of the easiest to lose and some of the easiest get back of all the things we install. So we're definitely approaching the fourth quarter and 27 with the mindset that margin is number one, volume is number two. Great. Thank you. Sure. Our next question is from Mike Dahl with RBC Capital Markets. Please proceed with your question. Hi. Thanks for taking my questions. Just a couple of follow-ups. On the heavy commercial side, I know it's really difficult to parse this out, but the disclosures you do make suggest that it obviously has a significant positive impact on overall price mix. That's just kind of the nature of it, but on a like-for-like basis, I was wondering if you could help us understand within the heavy commercial growth how much you think is kind of more volume-driven versus price mix? Quite a bit of it is price mix, yes. And part of that is that we're doing larger, on average, larger jobs than we historically have done. Okay. Got it. And then just a follow-up to, I think, Phil's earlier question, I want to make sure I understand because the numbers may end up being similar to 26 versus 27, but when you're talking about the mid-single-digit declines, and then I think you also said you expect to be at the lower end of your gross margin range for the in terms of full year dynamic what was that a reference to your 2027 initial expectations or was that a comment on just looking at how you expect to wind up this year it was definitely an answer to the question about 27 gross margins you know i would say when it comes to and again we don't provide guidance um and that's on a full year basis keeping in mind that the first quarter of every year is always our weakest margin quarter and our weakest sales quarter in the fourth quarter of this year again we're going against the most difficult gross margin comp we have ever had um and given the gross margin reports quite frankly that we've had um year to date and in this most recent quarter you know we're definitely going to be challenged at the 32 to 34 um for this year giving some of the dynamics around and it's really around fuel freight and aluminum you know as we've talked we're working hard to offset that aluminum piece um we will not fully offset it in the fourth quarter but we will make improvement um and the fuel it's just until fuel prices particularly diesel um stabilize and come back down it's it's got to be a headwind okay yeah that makes sense just want to make sure thank you sure our next question is from reuben garner with stonex please proceed with your question thank you good morning guys um just one for me uh i was wondering if you could talk about uh product availability on the commercial side whether it's mechanical industrial heavy light just across the board. Has that kind of slowed the pace of growth a little bit? I know you've been growing and taking share, but has it kind of limited the speed at which you can grow and kind of what's the outlook there from a pricing standpoint on the commercial side if that kind of remains or gets tighter as growth continues? Yeah, I'll start that and let Brad answer it correctly on the light commercial side the products there are the same as they are on the residential side so there is free availability generally speaking of material there on the mechanical and industrial side and on the heavy commercial side i would say that we are benefiting from the strength of our relationships with the manufacturers to support us and that's helping us to get um sufficient material to meet our our needs and requirements but you know there's definitely the manufacturers are getting price in their products and you know the team you know given the strength of those markets is working hard to pass that on i would also say that in the heavy commercial business as i think everybody knows it's not as insulation intensive as it is fireproofing fire stopping waterproofing intensive and that material is pretty readily available yeah this is brad you pretty much nailed it um the only thing i would add on commercial installations uh some of the manufacturers have increases out there and there they are getting price on those and uh the availability of that product has gotten a little tougher over the last month or two, let's call it, but as we're working with our manufacturers to make sure we have a product that we can supply that to our customers. Great. Very helpful. Thanks, guys, and good luck. Thank you. We have reached the end of the question and answer session. I would like to turn the floor back over to Jeff Edwards for closing comments. I just want to thank you for your questions. I look forward to our next quarterly call. Thank you This concludes today's teleconference. You may disconnect your lines now. Thank you for your participation.