OperatorOperator 0.0
Greetings, and welcome to Gibraltar Industries' Second Quarter 2026 Financial Results Conference Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Carolyn Capaccio of Alliance Advisors IR. Please go ahead.
Carolyn CapaccioInvestor Relations 0.0
Thank you, Operator. Good morning, everyone, and thank you for joining us today. With me on the call is Bill Bosway, Gibraltar Industries' Chairman, President, and Chief Executive Officer; and Joe Lovechio, Gibraltar's Chief Financial Officer. The earnings press release that was issued this morning, as well as the slide presentation that management will use during the call, are both available in the Investors section of the company's website, gibraltar1.com. Gibraltar's earnings press release and remarks contain non-GAAP financial measures. Tables of reconciliation of GAAP to adjusted financial measures can be found in the earnings press release that was issued today. Further, please note that continuing operations exclude net sales and operating results of the Renewables business, which was classified as held for sale and as a discontinued operation with second quarter 2025 results, the divestiture of which was subsequently completed on July 15, 2026. The acquisition of OmniMax International closed on February 2, 2026. Also, as noted on slide 2 of the presentation, the earnings press release and slide presentation contain forward-looking statements with respect to future financial results. These statements are not guarantees of future performance and the company's actual results may differ materially from the anticipated events, performance or results expressed or implied by these forward-looking statements. Gibraltar advises you to read the risk factors detailed in its SEC filings, which can also be accessed through the company's website. Now we'll turn the call over to Bill Bosway. Bill?
William BoswayChairman, President & CEO 0.7
Thanks, Carolyn. Good morning, everyone, and thank you for joining today's call. We're going to review our second quarter results, which include our first full quarter of OmniMax operations. Then we'll review the reporting segments, the balance sheet, and our full year 2026 guidance, which we are reiterating today. And then we'll open the call for your questions. Let's start with turning to slide 3 and we'll discuss the second quarter. It's been a very busy time for us, but we delivered solid second quarter results with our residential business delivering strong organic growth and participation gains in a flat to down market. Our Residential and Agtech segments both delivered organic growth and all segments delivered sequential margin expansion as well. Our building products business grew 12.7% organically. Now, if you assume we owned OmniMax in Q2 2025, the combined business actually grew 15.5%, showing the strength of this combination in the marketplace. In line with our long-term strategic plan for our Residential business, Residential continues to become a larger part of the overall portfolio and represented 83% of our total revenue in the quarter, with segment EBITDA margin improving 340 basis points sequentially to 19%. OmniMax integration continues to accelerate as our leadership team and integration management office drive our top 11 critical work streams and synergy capture. We're also excited to announce we were recently awarded an additional 630 locations, now making us the supplier of trims and flashings to sell to more than 1,700 locations across the country for one of our key customers, validating our ability to support our customers locally on a national basis with a value proposition that makes sense for them. We believe the combination of Gibraltar and OmniMax and our product portfolio was instrumental in receiving this award, and I give our team a lot of credit for staying focused on executing well while simultaneously managing through today's dynamic geopolitical situation as well as an ongoing inflationary environment. Including a full quarter of OmniMax, total Gibraltar net sales increased 64.6% to $510 million on total Gibraltar organic growth of 5%. Our Residential segment delivered organic growth of 5% and Agtech delivered organic growth of 8.7%. Adjusted operating income reached $66 million, adjusted EBITDA increased 59.7% to $88 million, and we delivered adjusted EPS of $1.11, which included a net interest impact of $20.6 million. GAAP results include $5.8 million or $0.15 per share of OmniMax acquisition, integration, and restructuring cost. Overall, we managed relatively well through a slow residential market along with inflationary headwinds by executing price actions, generating more participation wins, and executing synergy initiatives. And as a result, adjusted EBITDA margin expanded sequentially 350 basis points to 17.3%. We generated $45 million in operating cash from continuing operations, including acquisition integration and restructuring costs related to OmniMax. And we have now completed the divestiture of the renewables business, including the eBOS sale in Q1 and the Racking Business sale in July. Now let's turn our attention and we'll review the business segments and Joe will start with Residential.
Joseph LovechioChief Financial Officer 0.5
Thanks, Bill, and good morning, everyone. Let's start with residential on Slide 4. Net sales increased $195.6 million to $425.9 million, which is up 85% driven by the inclusion of a full quarter of OmniMax results of operations. OmniMax contributed $182 million. A metal roofing acquisition that we completed in July of last year contributed $2.5 million. And the Residential segment organic growth was 5%. As Bill mentioned, if you assume we owned OmniMax in Q2 2025, the combined building products business grew 15.5%, driven by price realization and participation gains in the Midwest, Northeast, and Texas, which helped to overcome a flat to down end market. Turning to margin, adjusted EBITDA margins accelerated sequentially 340 basis points to 19% as our executed price actions offset ongoing commodity and fuel inflation. On a year-over-year basis, adjusted EBITDA margin was down primarily due to price-cost alignment, business and product mix, and some inefficiencies with the integration. Our cost and commercial synergies through the OmniMax integration started contributing in Q2, and we expect those to continue to ramp going forward. So now let's move to slide 5 and let's talk a little bit about the U.S. residential roofing market. I'd say overall market demand in the quarter versus prior year, based on the ARMA data for shingle shipments to distributors and retailers, was flat. But the story varied greatly by region, with positive growth in shipments to the Northeast, Midwest, and West, while shipments to the Southeast, Southwest, Florida, and Texas were down in the quarter. Sequentially, shipments total were up 17.6% with just two of the seven regions not experiencing growth, which would be the Southwest and Texas. We do believe Q2 shipments were driven by restocking in the distributive channel and customers buying ahead of shingle manufacturers' price increases. For the first half of the year, ARMA shipments were down 4.7% year-over-year with similar demand patterns across the regions. In the retail channel, volume remains soft with point of sale results down anywhere between 8% to 10% in the quarter as customers remain concerned about the ongoing geopolitical situation impacting consumer sentiment, interest rates, and overall affordability. POS for the first half were also down roughly 8% to 10% versus prior year. So, based on ARMA and POS data to date, we believe the actual end market demand for the quarter and the first half was down mid-single digits and will probably remain so for the rest of the year. Now that we have a broader presence across the U.S., we have more visibility to the market in total and by region, which provides a stronger foundation to build and execute more effective local and national growth initiatives with our customers. And despite today's slower market, we were able to generate positive organic growth in the quarter. As I mentioned earlier, if you assume we owned OmniMax in Q2 in 2025, the combined building products business actually grew 15.5% organically, with price and mix accounting for 9.7% of that, participation gains, 7.1% of that, and the market being down 1.3%. Relative to channel, sales to wholesalers were up 25.1% and sales to retailers were up 8%. By region, the Northeast was up 43.6%, the Midwest was up 54.5%, the Southwest up 17.5%, and the West up 1.7%, and the Southeast down 11.1%. Effectively, we were able to outperform the market in each region and our strength in four of the five regions helped offset a slow market in the Southeast. We do believe that having more presence across the country does provide more leverage to us in managing our business. We have the ability to better align with local and regional markets, which creates an opportunity to better optimize and align customer and revenue initiatives within market demand situations. Our playbook is going to remain similar going forward as we expect the market to remain slow given the ongoing headwinds I mentioned. We will continue to identify and execute participation opportunities to help us in the second half and going into 2027. And with that, let's turn to slide 6 to talk about an exciting and big customer win for the team that happened here recently. So, if you remember, one of the core tenets of our strategy with the addition of OmniMax is to find a way to simplify our customer supply chain and become the easy button for them while also reducing the cost of doing business with each other. We believe we do this through great service and quality, local capability on a national basis, a harmonized and simplified product offering through 80/20 efforts for each region and location, optimizing our manufacturing and transportation logistics, and the ability to simplify and cost reduce transactions with our customers. We have work to do in each of these initiatives, but we are having some initial success just 149 days into the integration of this business. Just recently, we were awarded our first supply agreement where we will become the supplier of trims and flashings to more than 1,700 locations across the country for one of our key customers. The win adds 630 locations to our existing service footprint, effectively covering all regions of the U.S. We are grateful for this opportunity and appreciate the confidence our customer has in us to support them across the country. Our team did a fantastic job creating a value proposition that makes sense, which really focused on three things. First, finding the best way to support and assist our customers while they focus even more on the pro contractor and leveraging some of our local presence and experience with the distribution channel and contractor market. Secondly, solving the pain point of high freight minimum requirements through better logistics optimization across our national network. And third, creating an easy-button service capability while also focusing on lowering the cost of doing business. We now expect the business to start late in the fourth quarter as the transition of the incumbent happens accordingly. So overall a good start, but we are still in the very early innings of this type of effort and looking forward to doing more as we go forward. Now let's move to slide 7 for an update on our integration efforts. At the end of Q2, just 149 days post the transaction close, the business continues to evolve from organization transition to capture and driving more synergy opportunities. Our integration management office is executing our 11 core work streams, which will continue throughout 2026 and into 2027. During the second quarter, we completed phase 2 of our organization optimization, and we'll continue with more initiatives as we further commonize operating systems and data flow across the business. Our focus going into the third quarter is driving additional performance lift by bringing service reliability to benchmark levels. For us, that's 95% plus on-time delivery. It's making sure that we're operating in the safest way possible and driving our lean and 80/20 initiatives, while also focused on upgrading commercial excellence and expanding margins. We are also starting 80/20 initiatives in two regions focused on product and SKU harmonization, operations optimization, and transaction reduction. These initiatives will begin late in Q4 and early next year. Let's now turn to Slide 8. I'll talk a little bit about our work streams and touch on a few accomplishments for the team and then review progress on our cost and commercial savings. The 11 work streams that are listed on the left side of the slide provide a brief summary of some key wins to date. We have implemented phase 1 and 2 of our organizational realignment, an important initiative related to creating the right foundation for all our other initiatives. About 65% to 70% of our targeted 2026 project exit rate organization savings has been implemented. The other 12 wins span across initiatives in production, supply chain, commercial team development, commercial participation gains, corporate synergies, and the beginning of 80/20 efforts. We will continue to execute across the entire organization as we strengthen our foundation for the business. Now let's move to Slide 9 for an update on the 2026 synergy saving targets and realization. During the quarter we identified additional synergies to be implemented this year. First, we executed a logistics freight initiative worth $1.2 million annually, of which $600,000 will flow into this year. Secondly, we executed a large participation gain expected to generate approximately $2 million in annual margin improvement, with $100,000 flowing into this year. As a result, we are again raising our synergy commitment, now expecting $29.4 million executed in 2026 with $17 million to be realized in 2026. As well, $7 million of synergy commitment has been realized to date, which will ramp further in Q3. Now let's move to Agtech on slide 10. Our Agtech segment net sales grew $4.7 million or 8.7%, all of which was organic. This growth was driven by strength in structures and our commercial greenhouse applications. The backlog for this segment stands at a solid $66.2 million, but reflects a 34% decrease from last year with timing of projects in the second half compared to last year. We are seeing strong quoting activity across end markets and demand at Lane Supply is strong. Remember, our Lane Supply structures business has orders that turn much more quickly and are therefore of shorter duration. Adjusted operating margin and EBITDA margin improved 450 and 430 basis points year-over-year respectively, driven by stronger volumes, favorable business mix, and 80/20 operating initiatives. We are also bringing online our powder coating painting capability, which is expected to drive additional cost productivity for future controlled environment agriculture projects, particularly for berries and lettuce. Let's quickly move to infrastructure on Slide 11. Segment sales decreased slightly due to the timing of projects. Our backlog grew 2% and our quoting activity remains very strong. Segment adjusted operating and EBITDA margins were impacted by lower volume and product mix. Let's move to Slide 12 to touch on our balance sheet and cash flow. Gibraltar's policy with respect to cash allocation during the debt pay down period will be to keep a minimum amount of cash on hand, use the revolver as needed to fund seasonal needs, and pay down debt with excess cash flow. During the quarter, Gibraltar generated $44.5 million in operating cash flow from continuing operations and used $40.8 million from discontinued operations. The discontinued operations cash use includes the payment of a settlement agreement regarding warranty claims as we discussed last quarter. We generated free cash flow from continuing operations of $39 million, or approximately 8% of sales. We used $8 million for working capital, primarily due to accounts receivable. Capital expenditures were $5 million, or 1% of sales in the quarter. At quarter end, we had borrowing on our revolver of $21 million, and our cash on hand was $15 million. At quarter end, our net debt on the balance sheet was $1.2 billion and our net leverage, which includes anticipated synergies as allowed in our credit agreement in the pro forma adjusted EBITDA was 3.9x. The availability on a revolving credit facility was $470 million, and total available liquidity was $485 million. Let's review our deleveraging roadmap on Slide 13. Over the next 12 to 18 months, our priority and focus is to deleverage as quickly as possible. The left side of this slide shows a plan of strong EBITDA delivery and synergy realization, working capital optimization and utilization of cash tax benefits. Our planned uses of cash include capital expenditures at 2% to 3% of sales, interest payments on our debt, and special charges related to acquisition, transaction, integration, and restructuring related costs. The special charges we reported today for the second quarter were $6 million. Year-to-date we have recorded $41 million of special charges, which is approximately 80% of the expected amount in 2026. During the second year post-transaction close, we continue to expect strong EBITDA margin, the realization of additional synergies, benefits from continued working capital optimization, and cash taxes, lower interest payments as our debt level is reduced, and a reduced amount of special charges. These factors are expected to increase our free cash flow year-over-year and facilitate continued reduction in our net debt level. Also in line with our long-term strategic plan, we are evaluating other non-core asset divestitures that could create additional liquidity for debt reduction. Our deleverage path targets the net leverage ratio of approximately 2.5x adjusted EBITDA in 24 months ended first quarter of 2028. Again, during this two-year period, our capital allocation will be focused on funding the growth of our business through capital expenditures and on debt reduction. Let's move to Slide 14, where we are reiterating our 2026 guidance. For continuing operations, our guidance remains consolidated net sales between $1.76 billion and $1.83 billion compared to $1.14 billion in 2025. Adjusted operating income between $222 million and $238 million compared to $151 million. Adjusted EBITDA between $310 million and $326 million compared to $185 million for 2025. GAAP EPS between $2.40 and $2.80 compared to $3.25 in 2025, which the 2026 number includes the expected impact of special charges related to the acquisition, transaction integration and restructuring related costs. Adjusted EPS between $3.65 and $4.05 compared to $3.92 in 2025, and free cash flow of approximately 8% of sales for continuing operations. Some key assumptions in our 2026 plan include total depreciation, amortization, and stock compensation expense of approximately $90 million for the year, which includes an approximately $40 million annual assumption for non-cash amortization related to intangibles due to the OmniMax acquisition. We anticipate approximately $50 million in special charges related to acquisition, transaction integration and restructuring costs, of which approximately 80% has already occurred in the first half. We would expect the remaining to occur throughout Q3 and Q4 this year. We expect over $70 million in interest expense financing and commitment fees, which will be dependent on the timing of our debt repayments and interest rates, capex of approximately 2% of sales, and finally, a 26% tax rate. Now let me turn it over to Bill.
William BoswayChairman, President & CEO 0.6
Thanks, Joe. We delivered solid first half 2026 results and made good progress in execution, integration initiatives, synergy capture, and further simplifying the portfolio. We expect the current macro environment to remain dynamic and the residential market to remain unchanged relative to the first half of the year. Our playbook for residential remains focused on execution, integration, synergy capture, and participation gains as we drive towards residential representing an even larger part of our portfolio. Our Agtech and Infrastructure businesses are focused on building backlog and executing existing contracts. And finally, our capital allocation strategy is to remain laser focused on cash performance and debt reduction. So with that, now let's open the call up and we'll take your questions.
OperatorOperator 0.0
The first question comes from Daniel Moore of CJS Securities. Please proceed with your question.
Daniel MooreAnalyst, CJS Securities 0.0
I'll start with just the participation gains. Just talk to the sustainability of the gains that you achieved in Q1, particularly in building products, where you're seeing the greatest impact from cross-selling, be it product, geography, obviously increased penetration within the existing customer account as well. But any additional color of where that's coming from and how we're thinking about the back half of the year?
William BoswayChairman, President & CEO 0.6
Yes, so we mentioned that if you looked at where our sales growth was, you saw the Northeast and Midwest, which reflected not just participation gains, which were good in those areas, but also that's where a lot of storm activity occurred. There were good participation gains there also in Texas. The flip side of that is you have some really down regions, particularly the Southeast, driven by Florida still, which hasn't had the storm activity the last two or three years. In general the participation gains have been around the team doing a great job, knocking on doors, explaining our value proposition. We're going to continue down that path. There's more work to be done and more opportunity out there for us to go after over time. It's hard work. The market's not robust right now, so your value proposition has to be of value for a customer and they're unique to each customer and somewhat unique by region and locale as well. So the ground game doesn't change. We're going to continue to fight for more of those things. As you think about the types of things, it's geographic. There are potential cross-selling opportunities. We've done a little bit of that, and there's potentially more to come. There are other things around 80/20 rationalization and harmonization of product lines that can matter relative to the value proposition. So a lot of levers to pull as we think about how to go win more business, and we're going to continue to do so.
Daniel MooreAnalyst, CJS Securities 0.0
And then just maybe talk to the incremental revenue opportunity from the 600 plus store expansion beyond fiscal '26 and conversations you're having with other national retailers, in kind of how we're thinking about that opportunity continuing to grow?
William BoswayChairman, President & CEO 0.7
Yes, so it's a big one for the team. We have six really large customers and a host of others that are also very important to us. Whether it's distribution on a national level or regional, or retail on a national level or regional, I think there's going to be more opportunity for us to engage. Every value proposition is a little bit different in terms of where the starting point is and what their pain points are, what they're trying to realize. But it's a big win for us. The majority of that, if not all of that, is going to start late this year, but it really is a 2027 impactful thing. It's sizable and we're excited about it.
Daniel MooreAnalyst, CJS Securities 0.0
Maybe one more and I'll jump back. But just in terms of what you're seeing in Agtech, 9% growth, certainly impressive. Just break it down between volume and price. And then with the backlog declining to some degree, can you talk to order rates and your expectations for backlog as we move through the back of the year?
William BoswayChairman, President & CEO 0.5
On the Agtech side it's as much volume as anything else. These are actual projects that are flowing through. Lane Supply is a much quicker turn in a lot of projects. On the CEA side, we're growing fruits and vegetables. Those are larger projects that don't turn near as quickly. So it's really two different types of businesses, but they're effectively volume associated with projects that people are starting to construct on. There's a lot of activity out there right now that we're working through engineering and design and bidding with both businesses. We're excited about those opportunities. On the larger projects, those may help you this year but also set up for 2027. On the Lane side, it's really just a lot of activity across our core customer base as they expand and invest more in their retail sites.
OperatorOperator 0.0
Our next question comes from the line of David MacGregor with Longbow Research. Please proceed with your question.
David S. MacGregorAnalyst, Longbow Research 0.0
Congratulations on the progress to date. I guess I wanted to ask about the synergies, $29.4 million, just to clarify, that's a 2026 year-end run rate. And are we pulling forward from a timing standpoint or are we finding new opportunities?
William BoswayChairman, President & CEO 0.6
I would characterize it more as finding new opportunities. The team has done a nice job finding opportunities across every functional area. Some of the items were coming sooner than we thought, and on top of that we're identifying more. I had said early on that you tend not to go to the street with a number assuming that's all you had, and we thought there might be more out there, and I think some of that is happening as we had expected, and probably a little bit sooner than we had expected. So the $29.4 million is what we think will get implemented this year. Then you'll start to see a run rate of that impact next year.
David S. MacGregorAnalyst, Longbow Research 0.0
So should we be adding to the $35 million, which was the articulated target in total, or how should we be thinking about the total?
William BoswayChairman, President & CEO 0.6
I think there's potential to find more than that. We're going to work hard to do so. As we go forward, we'll talk more about other potential opportunities and make adjustments to the plan accordingly. Right now we're running pretty strong, maybe close to a year ahead of where we thought we would be, and hopefully we'll continue to accelerate which could result in identifying more. As we quantify more we'll share more of that with you as we get a little bit closer.
David S. MacGregorAnalyst, Longbow Research 0.0
And then just again on the synergies, Bill, you made passing reference to commercial opportunities or revenue synergies. Can you dig in a little further on that and just give us a sense of what you're seeing so far and maybe what you've learned from this big win and how to dimension that opportunity?
William BoswayChairman, President & CEO 0.7
I think we talked a little bit about the value proposition the team brought to the table. Every customer has a different scenario and starting point. Ultimately, we're trying to lower the cost of doing business with us and the rest of the supply chain that our customers have had to manage. That includes being local enough to optimize on behalf of the customer, addressing freight minimums, logistics and transportation costs, and reducing transaction costs when we simplify the product portfolio. The combination of great service and quality plus those other items matters over time. Just having the opportunity to prove ourselves to customers on a broader basis is a good first step, and now we have to go out and execute really well. We believe there's runway to build organically if we execute and differentiate ourselves, regardless of the market's overall health. There are specific things we must do better than others, and those are the focus areas going forward.
David S. MacGregorAnalyst, Longbow Research 0.0
Last question for me is just on price-cost and how you're seeing that play out, how we should be thinking about that in the second half of the year?
William BoswayChairman, President & CEO -0.1
It's been a bit of a roller coaster. We still are dealing with things like fuel surcharges and we'll see how things play out. It's been an up-and-down environment to manage through. Commodities have swung up and down. There's still work to be done to overcome some of those incremental costs that are out there. As we've talked in the past, when we see inflation, we have a good track record of executing price with our customers and working with them through that process. But as long as costs continue to go up, you're always chasing because of the price process you have to go through. It's hard to balance until the commodity you're trying to overcome stabilizes. We'll see how the second half works with some of these commodity costs and what happens with fuel, fuel surcharges, overall transportation costs, aluminum, steel, etc. These are the items we have to deal with, and we're continuously focused on that, but there is still work to be done to address inflationary pressures. That outlook is baked into our plan.
OperatorOperator 0.0
Our next question comes from the line of Julio Romero with Sidoti. Please proceed with your question.
Julio RomeroAnalyst, Sidoti & Company 0.0
You mentioned the OmniMax synergies began to contribute in the second quarter. That's obviously a big step. Congratulations on that $7 million realized, I believe. And then you broke out $17 million realization for the full year. Can you help us understand the cadence of the remaining $10 million and realization expected over the course of 3Q and 4Q?
William BoswayChairman, President & CEO 0.3
I think they'll be split somewhat evenly based on the type of synergies. It may vary 60/40, but you'll see a chunk flow through in Q3 and then Q4. I think of them splitting that $10 million in that way, whether 50/50 or 60/40, somewhere in that range.
Julio RomeroAnalyst, Sidoti & Company 0.0
Staying on Residential, the operating margins and the EBITDA margins were impressive, definitely growth sequentially. Given that this is the first full quarter of OmniMax contribution, is there any way to bracket out how much legacy Rock's residential operating margin and EBITDA margin performed or maybe asked another way, did legacy Rock Residential margins expand on a year-over-year basis?
William BoswayChairman, President & CEO 0.4
It's getting harder for us to carve that out because we're starting to share facilities, materials, and organization. We're operating as one, and we're not necessarily tracking it by legacy business anymore. John Krause is running the combined business and they're operating as one team. Both legacy businesses are contributing to the improvement we saw in Q2, but it's difficult to separate those results precisely given the integrated way we're running operations now.
OperatorOperator 0.0
Our next question comes from the line of Walt Liptak with Seaport Global. Please proceed with your question.
Walter LiptakAnalyst, Seaport Global 0.0
I wanted to ask about the channel inventories. Last time you said there was some channel fill that was starting to happen with Residential distributors. I wonder if you could talk about how inventory levels are now in the channel.
William BoswayChairman, President & CEO 0.1
It differs by channel. Retail point-of-sale was down 8% to 10%, and because we see POS, we can see inventories in that channel. Distribution has likely turned a bit more, but we don't have the same comprehensive data for every distributor; it requires drilling into each customer. In general, inventory was built up for the season and it varies by region. Retail appears more cautious and distribution behavior depends on local market conditions. For example, Florida remains weak, so those locations are managing inventory differently than areas with storm activity like parts of the Midwest and Northeast. I wouldn't give a blanket statement for all channels and regions, but overall I'd say inventories are in decent shape, with variation by channel and region. That is partly why we don't expect the market to change much from Q2 to Q3; restocking was a Q2 dynamic and Q3 may not see the same level of restocking, so we expect demand to remain paced similarly.
Walter LiptakAnalyst, Seaport Global 0.0
Are you saying that you think the growth rate should be similar in the third quarter, or are you saying that the absolute dollars of revenue for residential would be about the same?
William BoswayChairman, President & CEO -0.1
What I'm saying is the end market demand itself is expected to be very similar to Q2, which we estimate was down mid-single digits. We don't think that will change materially unless there are significant weather events. Outside of that, we expect a consistent second-half market similar to Q2, and our playbook will remain the same.
Walter LiptakAnalyst, Seaport Global 0.0
You mentioned that there was some pre-buy that might be in the ARMA data. Do you think that you had a pre-buy in the quarter?
William BoswayChairman, President & CEO 0.0
Whenever there's a price increase, there's typically pre-buy activity as customers buy ahead of announced increases. Shingle manufacturers announced price increases, and that likely pulled some sales into Q2. ARMA data showed flat year-over-year and sequentially up, but POS at retail was down 8% to 10%, so ARMA may reflect restocking rather than pure end-demand. Considering ARMA and POS together across products sold into roofing, we think the market was down mid-single digits—not flat and not down double digits—somewhere in between.
Walter LiptakAnalyst, Seaport Global 0.0
You called out some regional work doing 80/20. Can you help us understand what the plan might look like?
William BoswayChairman, President & CEO 0.6
There are a couple of aspects. One is removing certain product lines, a smaller but important step, which is part of what we're doing in one region. The other is attacking SKUs sold to that region from multiple facilities and reducing SKUs significantly—potentially 20%, 30%, or 40%. The idea is to simplify operations, reduce complexity for customers, and lower transaction costs. We have a VP of Engineering and Innovation leading this work; we haven't had that role before. Her team is quantifying opportunities and starting with pilot regions where SKU sets and product mixes are unique. The work requires drilling into each design and component, harmonizing codes, specs, colors, widths, and materials, and closely coordinating with customers to ensure alignment. We will implement pilots and then expand based on learnings, with implementation toward the end of this year and early next year.
OperatorOperator 0.0
We have no further questions at this time. Mr. Bosway, I'd like to turn the floor back over to you for closing comments.
William BoswayChairman, President & CEO 0.5
Okay, thank you. I just want to thank everyone for joining us today and for your support. We will be at the Seaport Annual Summer Investor Conference on August 18 and the Sidoti Small Cap Conference in September. We'll speak to you again after the third quarter. So have a great rest of your summer. I appreciate you calling in today and appreciate your support. Thank you.
OperatorOperator 0.0
Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.
