Jennifer Pasquino - Builders FirstSource, Inc. M. Chad Crow - Builders FirstSource, Inc. Peter Jackson - Builders FirstSource, Inc.

Nishu Sood - Deutsche Bank Securities, Inc. Trey Morrish - Evercore Group LLC Keith Hughes - SunTrust Robinson Humphrey, Inc. Michael Dahl - RBC Capital Markets LLC John Allen Baugh - Stifel, Nicolaus & Co., Inc. Jay McCanless - Wedbush Securities, Inc. Trey H. Grooms - Stephens, Inc.

Good morning, and welcome to the Builders FirstSource Second Quarter 2018 Earnings Conference Call. Today's call is being recorded and will be archived at www.bldr.com. It is now my pleasure to introduce Ms. Jennifer Pasquino, Senior Vice President, Investor Relations. Jennifer Pasquino - Builders FirstSource, Inc.: Thank you. Good morning, and welcome to the Builders FirstSource second quarter 2018 earnings conference call. Joining me on the call today is Chad Crow, Chief Executive Officer; Peter Jackson, Chief Financial Officer; Binit Sanghvi, VP of Investor Relations. A copy of the slide presentation referred on this call is available on the Investor Relations section of the Builders FirstSource website at bldr.com. Any reproduction of this call, in whole or in part, is not permitted without prior written authorization of Builders FirstSource. And as a reminder, this conference call is being recorded today, August 8, 2018. Builders FirstSource issued a press release after the market closed yesterday. If you don't have a copy, you can find it on our website at bldr.com. Before we begin, I would like to remind you that, during the course of this conference call, we may make statements concerning the company's future prospects, financial results, business strategies and industry trends. Such statements are considered forward-looking statements under the Private Securities Litigation Reform Act of 1995 and are subject to certain risks and uncertainties, which could cause actual results to differ materially from expectations. Please refer to our most recent 10-K filed with the SEC and other reports filed with the SEC for more information on those risks. The company undertakes no obligation to publicly update or revise any forward-looking statements. The company will discuss adjusted results on this call. We have provided reconciliations of non-GAAP financial measures to the GAAP equivalent in our earnings press release and detailed explanations of non-GAAP financial measures in our Form 8-K filed yesterday, both of which are on our website. At this time, it is my pleasure to turn the call over to Mr. Chad Crow. M. Chad Crow - Builders FirstSource, Inc.: Thank you, Jen, and good morning. Welcome to our second quarter earnings call. I will start with a brief update on our second quarter performance as well as an update on our progress against strategic growth initiatives. Then, I will turn the call over to Peter, who will discuss our financial results in more detail. After our closing comments regarding our outlook, we will be happy to take your questions. Let's start on page 4. I'm very pleased with our performance in the quarter as we continue to deliver profitable growth initiatives while successfully managing through challenges, including commodity price volatility. Our results highlight our team's ongoing focus on cost discipline and flexible response to changing market factors as well as strategic growth in value-added products and capturing share through strong customer relationship management. Our sales for the quarter of $2.1 billion grew a solid 13.4% over 2017. Approximately 8.8% of this year-over-year growth was achieved by successfully passing on commodity price inflation and approximately 4.6% from increased sales volume, including 6% in the single family homebuilding end market. Turning to slide 5. Commodity prices showed large fluctuations in the quarter, rising sharply most of the quarter before retreating in recent weeks. Framing lumber and sheet good prices ended the quarter up 26% and 27%, respectively, over prices at the beginning of the year. As we manage through this period of commodity inflation, our short-term pricing agreements caused gross profit margin compression. Our team reacted quickly and, again, showed the ability to respond to these challenges and mitigated the impact on EBITDA margin through cost leverage and disciplined cost management. The result was a substantial year-over-year improvement in total EBITDA dollars, while maintaining our EBITDA margin percentage and setting the stage for margin expansion as commodity prices ease. Our increased investments in manufacturing capacity also continued to pay off with 19% growth in manufactured products, leading to double-digit growth in our overall value-added products in the second quarter, considerably faster than the overall growth of the residential housing market. We will continue to invest in our growth initiatives. As the results show in the second quarter, these platforms provide us significant ongoing opportunities to increase both our overall market share and penetration of our higher margin products. We also remain committed to our initiatives focusing on developing our sales force and management pipeline and have invested over the last several years in adding to our exceptional talent. We believe these initiatives are positioning our business for future accelerated growth. We continue to execute on our strategic plan to expand our manufacturing and value-added capacity this year, including 3 new truss plants, 10 new lines in existing plants, 1 new millwork facility and capacity additions to many more. We'll continue to invest in these higher margin products in order to grow them faster than the overall housing market by adding further to our existing network of 57 manufacturing facilities strategically located across the country. With the continuing labor challenges being faced by our customers, demand for our labor-saving products should continue to rise, providing us incremental opportunities. Moving on to page 6 with an overview of the housing market. The outlook for new residential housing demand and activity remains very bright. The U.S. homebuilding industry has now reached approximately 1.25 million annual starts with approximately 880,000 of those being single family starts. This remains approximately 20% below the long-term historic average and is just now reaching the levels that we have seen in previous recessionary troughs. Demographic trends, market demand, employment and other underlying economic conditions remain very supportive. Homeownership rates have recently started to show improvement with household formation among young buyers trending higher but remained below pre-crisis levels. We continue to anticipate mid- to high-single digit growth in the single family homebuilding market this year with ongoing growth in the years ahead. Moving to page 7. We are on track in executing our plans to accelerate growth, further expand profitability and create meaningful incremental shareholder value. We will continue to develop our sales force and invest in our manufacturing and value-add facility expansion initiatives. These growth platforms provide us significant ongoing opportunities to increase our market share and increase the penetration of our higher-margin products. Beyond our expectations that the market will return to historical average housing starts over the next several years, we have growth and operational excellence initiatives underway geared to generate an additional $100 million of profitability, independent of market growth. We have set challenging but achievable targets based on the strengths of our core business along with our operational excellence initiatives and strategic growth investments. The plan is to double 2016 EBITDA of approximately $380 million and to generate over $1 billion in free cash flow after capital investments and deliver an EPS between $3 and $3.50 as housing starts reach historical averages. Our strategic plan balances cash generation, high return reinvestment opportunities and profitable growth and ongoing debt reduction to achieve our leverage target of 2.5 to 3.5 times EBITDA. Turning to slide 8. I would like to provide a bit more detail on our specific growth initiatives. Leveraging our existing core business strengths, including our national footprint, unmatched scale and manufacturing capability and best-in-class sales force, we are confident that our plans enable us to capitalize on growth in the residential housing market to generate an incremental $250 million to $280 million in EBITDA. We call this core growth. In addition to this core growth, we continue to expand our national manufacturing footprint and capabilities to keep growing our higher-margin value-added products faster than the overall market over the next several years. Our plans call for investing in 17 new truss and 8 millwork indoor facilities over the next 4 years, including the 4 facilities underway this year, expanding our national footprint to serve a number of locations that do not currently have adequate access to these higher-margin products and where we see great opportunities to serve market needs with our customers. Our strategic plan further includes a set of operational excellence efficiency initiatives across our organization, including distribution and logistics, pricing and margin optimization, back-office efficiencies and system enhancements that are expected to contribute between $65 million and $75 million in incremental annual EBITDA. We have made good progress implementing these initiatives and are focused on creating substantial, strategic and economic value for the organization through efficiencies and customer service advancements. These projects when leveraged across our 400 locations should offer a significant profit margin expansion opportunities and further differentiate our service and connectivity with our customers, providing economic and strategic value that is unrivaled by our smaller competitors. We are starting to see benefits from our initiatives that give us confidence that these projects should generate the anticipated value creation. I will now turn the call over to Peter, who will review our financial results in more detail. Peter Jackson - Builders FirstSource, Inc.: Thank you, Chad. Good morning, everyone. As a reminder, we have included adjusted figures to normalize for one-time integration and other costs. We reported net sales of $2.1 billion, a 13.4% increase compared to the second quarter of 2017, including an estimated 8.8% benefit from commodity price inflation and a 4.6% from organic volume growth. Our underlying sales volume grew approximately 6% in the single family new construction end-market. And as Chad highlighted, our value-added products increased 11.1%, led by a solid 18.7% growth in manufactured products. Gross margin of $496.3 million in the second quarter of 2018 increased by $35.5 million or 7.7% over the second quarter of 2017. Our gross margin percentage was 23.7%, down 130 basis points from 25% in the second quarter of 2017. The margin percentage decrease on a year-over-year basis was attributable to sharp increases in commodity prices. Framing lumber and sheet goods prices increased 26% and 27%, respectively, from year-end 2017 to the end of the second quarter. As we have discussed in prior calls, commodity inflation causes short-term gross margin percentage compression when prices are rising and margin percentage expansion when prices are falling due to the short-term pricing commitments we provide customers versus the volatility of the commodity markets. Additionally, higher prices in commodity products had a negative mix impact on gross margin percent. I am pleased with our team's ability to mitigate the impact through continued cost discipline and strong growth in high-margin products. Furthermore, in the quarter, through the combination of our team's execution and ability to pass on higher commodity product prices on a year-over-year basis, we are reaping the benefits of EBITDA dollars versus 2017. As we near the end of the quarter, commodity prices started to ease, albeit at a high level. As this trend in lumber price continues, we should further benefit with enhanced profitability and a return to more normalized gross margin percentage in the coming quarters. Our SG&A as a percentage of sales decreased by 130 basis points on a year-over-year basis. This reduction was driven by operating leverage and ongoing cost management. Interest expense for the quarter was $29 million compared to $33.7 million in 2017. The reduction was largely the result of transactions the company executed in 2017 to lower our go-forward cash interest expense and further strengthen our capital structure, slightly offset by a rising interest rate environment. Adjusted net income for the quarter was $62.6 million or $0.54 per diluted share compared to $43 million or $0.37 per diluted share in the second quarter of 2017. The year-over-year increase of $19.6 million or 45.6% was primarily driven by robust sales growth and ongoing cost management. Second quarter adjusted EBITDA grew $15.1 million or 12.2% to $139.1 million. The year-over-year improvement was largely driven by strong sales growth, operating leverage and disciplined cost management, which fully offset the impact of commodity inflation on gross margin. Additionally, we realized the positive benefits in EBITDA dollars from our team's ability to pass on higher lumber prices on a year-over-year basis. We expect this benefit to expand as commodity prices normalize. Switching now to the year-to-date financial highlights. Please turn to slide 11. The company achieved strong results year-to-date in 2018, including 12.3% sales growth, 10.8% EBITDA growth, a $0.29 improvement in adjusted earnings per share and a 0.3 times reduction in leverage even after funding our strategic growth and capital investment. I'm very pleased to report that value-added sales per day grew at a healthy 10.5% year-to-date. Turning to page 12. We expect our free cash flow generation to be utilized to fund our balanced investments in strategic initiatives and continuing debt reduction. We believe this will be supported by EBITDA growth and our continuing focus on working capital efficiency, which is estimated to run approximately 10% of incremental sales. We expect to continue to invest in our business through capital expenditures at approximately 1.5% of sales. We expect our current NOL tax assets to shelter us from paying all but approximately $15 million to $20 million in cash taxes in 2018. As a result of the capital markets transactions we executed in 2017, our cash interest should be reduced to approximately $100 million in 2018. We expect one-time costs of $15 million to $20 million as we continue our systems integration work. And in total, we expect to generate $170 million to $190 million target range in net free cash flow after investing activities for the full year 2018, albeit likely at the lower end of the range given the headwind we have experienced from still elevated lumber prices in our inventory. We expect to utilize cash generation to pay down debt and fund our strategic growth investments, and we remain confident reducing our leverage ratio to below 3.5 times by yearend, achieving a major target set in 2015 with the ProBuild acquisition. Due to the seasonal pattern of working capital needs, we typically use cash in the first half of the year and generate cash in the second half of the year. Cash used in operations and investing year-to-date was $217.8 million, including $48.9 million of capital investments. This was in line with our expectations and with our annual guidance. We continue reducing our leverage ratio despite the impact of commodity price inflation on inventory. Our net debt to adjusted EBITDA ratio on a trailing 12 months basis as of June 30, 2018 was 4.5 times representing a 0.3 times reduction from the second quarter of 2017. Total liquidity at March 31, 2018 was ample at $298 million, consisting of net borrowing availability under our revolving credit facility and cash on hand which is more than sufficient for our operating needs. As we look forward with confidence in our team's execution and the housing market environment, I would like to provide color on how we are seeing the third quarter of 2018 as well as reconfirming how we are thinking about full year 2018. For full year 2018, we still expect single family starts to grow in the mid- to high-single digit range, R&R market volume growth of approximately 3% and declines in the multi-family end market. We anticipate 6 to 8 percentage points of top line sales growth from commodity inflation on a year-over-year basis. From a gross margin perspective, the recent relief in the rise of lumber and panel prices has started to benefit our gross margin percentage. And as we move through the remainder of the year, we expect to move closer to a more normalized gross margin in the 25% range. Commodity inflation driven gross margin compression during the balance of 2018 should not be nearly as impactful in the second half, allowing us to return to a more normalized incremental EBITDA conversion of 12% to 15% in the second half of 2018. We will continue our growth investments, including initial costs in our operational excellence initiatives. All of which combined, we expect to total $10 million to $12 million in incremental costs in 2018. Overall, we expect 15% to 20% year-over-year EBITDA growth for the full year in 2018 and current estimates still indicate that we will finish out at the upper end of that range. We expect the impact of the 2017 tax act to result in an effective tax rate of approximately 25% for the balance of 2018. For the third quarter specifically, we expect sales to be in the 10% to 15% over prior-year range with 5% to 9% coming from commodity inflation. Gross margin is expected to be up sequentially from Q2 by 40 to 50 basis points as we start to see the relief on short-term margin pressure from the recent commodity price moves. We will maintain our focus on cost discipline, efficiency improvements and leverage reduction while investing in our growth initiatives. We expect the EBITDA growth to be between 20% and 30% over Q3 2017. Before I turn the call back over to Chad for his closing comments, I would like to thank Jen Pasquino for all of her contributions to Builders FirstSource since joining us in 2011. Most of you know, she has decided to retire and this will be her last earnings call as our Investor Relations Officer. She will be transitioning responsibilities to Binit Sanghvi through the end of August. We wish Jen all the best in her future endeavors. And with that, I'll turn it back to Chad. M. Chad Crow - Builders FirstSource, Inc.: Thank you, Peter. As demonstrated by our solid second quarter results, our team continues to execute on plans and deliver value to our customers at an exceptionally high level. I am impressed with their execution in building an even stronger Builders FirstSource. I continue to look forward to capturing the substantial growth and value-creating opportunities that we have laid out and to further setting the groundwork for our future. We continue to execute a clear strategy, and I believe that we have never been better positioned to generate increasing returns for our shareholders and value for our customers by leveraging our national footprint, strong customer relationships, end market diversity and operational excellence initiatives. I want to thank all of our associates for their hard work and, once again, delivering such strong results as we build an even brighter future together. I'll now turn the call over to the operator for Q&A.

Thank you. Our first question comes from Matt Bouley with Barclays.

(00:21:42) on for Matt. Thanks for taking the questions. M. Chad Crow - Builders FirstSource, Inc.: Good morning.

I wanted to start on your manufactured products growth. Was there any benefit in the quarter from the timing of your capacity expansion? And I guess, more specifically on that, where do those projects stand that you have outlined for this year? Peter Jackson - Builders FirstSource, Inc.: So, I wouldn't say that there's a significant change due to the facilities – the four facilities that were opening up this year. Generally, the ramp-ups are pretty smooth. They're elongated over the first year. There's always a little bit of a headwind associated with the inefficiencies when you do that. So, that's part of what we called out in the investments in our strategic initiatives. But the benefit you're seeing this year was primarily from the facilities we opened last year.

And then, was there any sort of – presumably there's some pricing in there, is there any comment that you can give about the level of pricing benefit in that growth percentage? M. Chad Crow - Builders FirstSource, Inc.: Yeah. There's around 4% or 5% benefit from inflation in there.

Thanks. Peter Jackson - Builders FirstSource, Inc.: So, still very, very strong volume growth.

And maybe switching to gears to obviously a more minor segment, the roofing, gypsum and insulation. Presumably, there's some price in there, a couple quarters of sales declines sequentially here. Have those categories just seen an inflection in the competitive landscape? Or how should we think about those specific categories going forward? M. Chad Crow - Builders FirstSource, Inc.: Well, a couple of things. Yes, I would say you're right. The competitive landscape is changing and we're certainly not considered one of the major players in those categories. And so, from a competitive positioning, that has gotten a little tougher. I will also say that a lot of our business that we do, especially in gypsum, is multi-family and commercial. And then, we've obviously seen a tail-off in that business.

Thank you. That's helpful.

Our next question comes from Nishu Sood with Deutsche Bank. Nishu Sood - Deutsche Bank Securities, Inc.: Thanks. Yeah. This is Nishu Sood from Deutsche Bank. So, I wanted to ask about the gross margin outlook. Lumber prices were peaking by some of the indices in kind of mid-2Q or so, and then declining after that. So, obviously, it's going to help your margins. Would we expect to see a little more though than just I think you said 40 bps to 50 bps in gross margins? Wouldn't that trajectory – I guess, it depends on what you're assuming kind of going forward. But wouldn't that get us pretty much back to normalized with that kind of peaking in mid-2Q based on the kind of 60 to 90 days you're normally pricing out those contracts? M. Chad Crow - Builders FirstSource, Inc.: Well, Nishu, I would say that the price has peaked at the beginning in June. And so, we had maybe two to three weeks of prices falling in the back half of the second quarter. And so really obviously no benefit in the second quarter. And given the transportation issues that we were all experiencing before prices started falling, we had a six, seven-week backlog of orders coming in, which were at the higher prices. And so what we saw in July was the tail on our – on order products still coming in. We obviously weren't buying much additional inventory because prices were falling so fast. You typically don't like to be buying when prices are falling that rapidly. You'd rather wait till you hit a bottom. And so our average cost on hand was slow to change. Combine that with the 30-day tail we have on most of our pricing. And so most of July was spent finishing out projects that were priced in the second quarter. And so the net result of all that is we saw minor margin improvement in July. But in the last couple of weeks, we've started to see a marked improvement invoiced margins up 50, 60 basis points. But remember that – after July, it was relatively flat with the second quarter. So a little bit of lag there. I hope that helps explain some of it. But certainly like the trends we're seeing now, and we expect those trends to continue and even accelerate. Nishu Sood - Deutsche Bank Securities, Inc.: Got it, got it. No, that makes a lot of sense. And this extreme volatility – so obviously, it has made it more difficult from your folks' perspective. What about the behavior on the customer perspective? When prices are so volatile, obviously, it makes inventory management a little more complex as you mentioned. Do builders change the timing of their purchases as well? Or is that – not purchase. I meant obviously, the amount of timing the contracts and the price locks or does it really just entirely dependent upon the construction cycles? M. Chad Crow - Builders FirstSource, Inc.: It's hard for them to move houses back and forth that easily, and time is money for them and they want houses completed and done. You do get a few customers and we've seen it who have asked for us to reset our price agreements because prices were falling. And the short answer was no. We took it in the shorts the last year on the way up and we committed – we stayed committed to our contracts, and we expect our business partners to do the same. And so the answer was no to that. And something else I'll mention on the commodity prices, prices have fallen a lot in recent weeks but they're just now getting back to where they were at the beginning of the year. And so it's easy to lose sight of how high a point they started to fall from. Prices are still at a healthy level even though they've fallen as much as they have. In fact, they could fall, gosh, another $100 or $1,000 and we would just then be getting back to a historical average price for both framing lumber and OSB. And so we feel like prices will start to bottom out in the next couple of weeks. There's a lot of folks that have been on the sidelines not buying. Inventory positions are getting low, and folks are going to have to start buying again. So it feels like we're going to find a floor here in the next couple of weeks. Nishu Sood - Deutsche Bank Securities, Inc.: Got it. And just following up on the earlier question about the strength in the manufactured products, what do we – obviously, very encouraging to see that strength and obviously that's the higher value-add, higher margins part of the business. So to what extent is that sustainable? Obviously, you've laid out the 10% to 15% sales growth for the year. And yeah, so just wanted to kind of understand the sustainability of that. M. Chad Crow - Builders FirstSource, Inc.: I'm fairly confident it will sustain itself. We're really happy with what we're seeing and hearing from the demand side. I know there's been a few negative headlines on housing recently on prices – our home prices getting expensive and interest rates creeping up. But in my opinion, the tailwind still outweigh the headwinds. And we're liking what we see from a demand standpoint, and I think that's going to feed right into those value-add products. Nishu Sood - Deutsche Bank Securities, Inc.: Got it. Great. That's it for me. And thanks – and, yeah, congrats to Jen. Peter Jackson - Builders FirstSource, Inc.: Thanks, Nishu.

Our next question comes from Trey Morrish with Evercore. Trey Morrish - Evercore Group LLC: Thanks, guys, for taking some time to answer my questions. So first, I want to talk on the SG&A side. Clearly, you saw a good amount of leverage year over year. And part of that was likely due to just better top-line revenue from the commodity inflation. But could you talk about what types of internal initiatives you're doing and pushing to tighten the belt to really drive down some of those costs? M. Chad Crow - Builders FirstSource, Inc.: Well, I'll touch on one that's near and dear to my heart, and that's our delivery optimization efforts. We've targeted – of that $65 million to $75 million of annual savings, one-third of that is delivery optimization. And to-date, we've rolled out our new delivery dispatch management system to about 100 of our locations and then expect to have that rolled out to 140 by yearend. And we're starting to see a gap now between the markets that are on the system and have been on it a while and have adopted it versus those that aren't on it yet. We're seeing driver on road percentage go up. We're seeing engine idle times decrease. And basically, what you want to see an overall increase in your fleet efficiency. And so although diesel has gone up this year and driver wages continue to go up, these are starting to look like they're taking some – taking hold and really helping us offset some of these increases. And so I think that's part of what you're seeing. We're going to implement a driver incentive program in Q4 to further motivate our drivers to begin managing their day by these metrics. We've got a lot of really great information in the hands of our operators when it comes to delivery optimization and we're starting to see that take hold. So, that's just one area. Obviously, a lot of these initiatives, back-office efficiencies, things like that, some of them are really hard to measure from a hard dollar perspective. If we're turning our trucks a little quicker in the yards, if our drivers are on the road a little more during the day, there's obviously savings there, there's efficiencies there. Hard to put an exact number on these things. But the overall goal is to see your SG&A as a percentage of sales drop. And so, I think that's certainly part of what you're seeing. Trey Morrish - Evercore Group LLC: Got it. Thanks for that. And then, turning back to gross margins. You talked about some modest new improvement sequentially. It sounds like you're still working through some of that higher cost of lumber and you expect when they – when lumber falls or when it ultimately finds the bottom, you think – it sounds like you'll jump in and buy a lot more because you'll see some sense of stabilization. But assuming that lumber remains firm kind of from here, at what point do you think you will ultimately see your gross margins return to that 25% number? Peter Jackson - Builders FirstSource, Inc.: We generally talk about it, and I know you've heard us in light of the amount of inventory we have on hand and then the time lines around when we reset our pricing with our customers. So, we generally say, it's about a quarter or quarter and a half from the time the turn happens whether it'd be up or down. The things would level out kind of that three to four-month range. Trey Morrish - Evercore Group LLC: Okay. Peter Jackson - Builders FirstSource, Inc.: So, fourth quarter for us. Trey Morrish - Evercore Group LLC: Okay. Thanks very much, guys. Appreciate it. Peter Jackson - Builders FirstSource, Inc.: Thank you.

Our next question comes from Keith Hughes with SunTrust. Keith Hughes - SunTrust Robinson Humphrey, Inc.: Thank you. As we look out to the remainder of the year, given what you've said on the previous questions on inventory, we would see, all other things being equal, a step-up in gross margin in the fourth quarter from the third quarter. Would that be correct as the lumber flows through the income statement? M. Chad Crow - Builders FirstSource, Inc.: Yeah, yeah. And as long as we stipulate that commodity prices sort of stay where they're at now, that's a reasonable assumption. Keith Hughes - SunTrust Robinson Humphrey, Inc.: I've made a million assumptions in there, but I'm just trying to isolate the... M. Chad Crow - Builders FirstSource, Inc.: Yeah, agreed. Keith Hughes - SunTrust Robinson Humphrey, Inc.: Second question, on the – on SG&A, a lot of leverage here in the quarter. Is that something – and I'm going to – or I guess it's kind of actually a lumber question. Will we continue to see this kind of leverage going into the second half or will that sort of slow up to one degree or the other? Peter Jackson - Builders FirstSource, Inc.: Yeah. That will moderate. I mean, if you think about the impact of commodities on the business, to the extent that moderates, that will back off a bit. Q3 is probably in a favorable position still, but if – as we talk about Q4, that would be one of the offset. Keith Hughes - SunTrust Robinson Humphrey, Inc.: Okay. And you referred in the prepared statement about 17 new truss facilities, including 4 for this year. How long does it take for one of those to get up to full capacity where we – or just a rate where we – very additive (34:21) to the margins of the company? M. Chad Crow - Builders FirstSource, Inc.: You're usually looking about right on a breakeven after about one year and then, obviously, in years two to three being profitable and it's usually about overall three-year payback on those things. Keith Hughes - SunTrust Robinson Humphrey, Inc.: Okay. As you look at that, it's about four years, is that going to be the pacing we'll see? M. Chad Crow - Builders FirstSource, Inc.: Yes, sounds about right. Keith Hughes - SunTrust Robinson Humphrey, Inc.: Okay. And then, how about the mill work? How quickly will those come on? M. Chad Crow - Builders FirstSource, Inc.: Those are quicker. I would say – yeah, within a year, you're probably up and running and maybe slightly shorter payback, a little less expensive equipment. And not only are we opening some new facilities, but also upgrading some of the equipment in some of our plants too. And obviously, that's an immediate benefit when you're just replacing older equipment with more efficient equipment. Keith Hughes - SunTrust Robinson Humphrey, Inc.: Okay. Thank you.

Our next question comes from Mike Dahl with RBC Capital Markets. Michael Dahl - RBC Capital Markets LLC: Hi. Thanks for taking my questions and nice results in what's obviously been a challenging lumber environment. A couple of questions just following up on some of the manufactured products questions. The first one is, I was hoping you could break down – so, it sounds like there's mid-teens volume growth in the quarter. Can you give us a sense of how much of that was same customer growth versus expanding your customer base there? M. Chad Crow - Builders FirstSource, Inc.: I'm not sure I understand it. Could you repeat the question? Michael Dahl - RBC Capital Markets LLC: So, how much of the growth in volume from manufactured products was coming from effectively your same customers buying more of that – of those products this year or further penetrating and expanding your customer base into new – like, new relationships? M. Chad Crow - Builders FirstSource, Inc.: I'm not sure I have that information. Do you have... Peter Jackson - Builders FirstSource, Inc.: Yeah. I don't have that – I would say my gut would say it's probably – by far, the lion's share is growth through additional customers. Maybe 90% of the growth was through the same customers and the remainder on acquiring new customers. Michael Dahl - RBC Capital Markets LLC: Got it. Okay. Second question on that is just around the margin profile. I know you don't want to get into specifics around margin – product categories. But could you give us any sense of at least directionally what the margin has looked like for manufactured products? Are you seeing the type of margin pressure that you've experienced in lumber just due to the pricing volatility there? Or has there been a stronger year-on-year trend in manufactured product margins? M. Chad Crow - Builders FirstSource, Inc.: I would say the margin trend on manufactured has been somewhat flat because there is some pressure on price due to lumber inflation. But also the incremental volumes and running these plants more efficiently has helped to offset that. So, I would say it's been relatively flat on a margin basis. Michael Dahl - RBC Capital Markets LLC: Got it. Thank you. And, Jen, we'll miss you. Enjoy retirement. Jennifer Pasquino - Builders FirstSource, Inc.: Thanks, Mike.

Our next question comes from John Baugh with Stifel. John Allen Baugh - Stifel, Nicolaus & Co., Inc.: Thank you. And likewise, Jen, enjoy your future. I did have a quick question. The gross margin in the press release commentary says that the decrease was largely due to the commodity price. What other factors were in there, if any? And you did just touch on the manufacturing margin being relative really flat. I guess I'm curious – and this is a longer-term question not a Q3 question. Should we see the gross margin outside of inflation dissipating improve? If so, kind of, what should be the expectation and why and when? Peter Jackson - Builders FirstSource, Inc.: So, I think we hit on a couple of those. Clearly, we saw a decline – the bulk of the decline that we talked about attributable to commodities. There's also the mix component, again, through this quarter. So, that gets us to over 100 bps of the 130 bps. There's maybe a little bit in there on the gypsum piece. We've kind – I've kind of talked about that in a couple of discussions that the dynamics in that marketplace with regard to pricing and price increases has been a challenge for us. We definitely see, as you alluded to, an increasing gross margin level. There's the increase in EBITDA dollars on a year-over-year basis, which is great. But also, as the normalization in the commodity prices are seen, we see a leveling out or more of a return to normal for us; A, getting rid of the headwind; and, B, catching up on pricing. That's definitely a trend that we're seeing as we're getting into Q3 and one that we expect to see for the rest of the year. M. Chad Crow - Builders FirstSource, Inc.: And I'll just jump in because I love talking about these initiatives. But some of the pricing initiatives we have going, I'm excited about some early results we're seeing. We are piloting a new pricing tool in two markets this month. And once we get the kinks worked out of that, we plan on rolling that out to additional markets. We've got a special quarter margin initiative, so special order meaning items that we don't typically carry in stock, but with special order for customers. We've got an initiative we just started that in July. And in the first month, we saw a 25 basis point improvement in special order margin. I expect more to come on that. And then, our new BI platform that we're rolling out is giving us a lot better information around net profitability by customer and allows us to do some customer stratification. And so, it really helps the guys have some information at their fingertips to look at what are we really making off our customers. It's easier to say, hey, I'm selling this guy a 24% margin. That's a good margin. But are they paying by credit card or are we having to run additional hotshots out there? And so, we're getting reporting in place now where we can look at all the pieces of profitability, basically down to EBIT or EBITDA per customer and makes some more educated pricing decisions. And so, a lot of things like that are underway. Again, rolling these things out to 400 locations and adoption is always a challenge but – so we're still in the early stages, but really liking some of the early results so far. John Allen Baugh - Stifel, Nicolaus & Co., Inc.: Okay. That's helpful color. Thank you. And then, Chad, you sound fairly bullish about – I don't know the near and intermediate term outlook for housing in general. I guess, trying to look for potential issues, are you hearing or seeing anything from the people you talk with that you're concerned about? Certainly, we seem to be under building relative to household formation, but we have this dynamic with inflating cost of building a home. And I'm just kind of curious. We could have a two-hour discussion I'm sure on the building outlook. But the puts and takes, anything you're seeing on the horizon maybe that's concerning or cautious, I know you see us getting back to a normal build level. M. Chad Crow - Builders FirstSource, Inc.: The one thing I think could slow the rate of growth, I don't think it would be enough to send us backwards, would be the cost of homes, especially the higher-end homes. I think there are some markets now where it's getting pretty pricey and I think some folks may step aside and wait for prices to come down. I think if that happens, then prices will come down. Builders will have to adjust. I think there's still demand there. I think we're going to see an increase in demand in the entry level homes. But if there's any, I guess – if you would say, if there's any headwind at all that I think might have some teeth to it, it would be the upper-end homes and how pricey some of those are getting. But again, does that mean we go from a 8% growth in single family to a 4% or 5% for a period of time or, heck, even if we had a year where we flattened out, not the end of the world, that's still a very healthy environment for us, and we can still perform very well and generate a lot of cash even in that environment. So yeah, I am bullish about it. John Allen Baugh - Stifel, Nicolaus & Co., Inc.: Thank you. And then, lastly, any – you kind of know how you skew geographically to the national housing start numbers we talk about. Any color there on your 6% single family – I guess, (00:44:11) single family piece? Peter Jackson - Builders FirstSource, Inc.: So this quarter we didn't see anything specific in the geographic mix. We do see a strong trend with regard to the starter homes. We think that's a really positive part of the growth in the market right now in terms of that next leg of the stool if you will in the expansion to get us back to a more normalized build rate. So we think that's a component and what we're seeing in the discrepancy between the starts number and our number, we certainly in the markets we plan don't see share loss. John Allen Baugh - Stifel, Nicolaus & Co., Inc.: Great. Thanks, and good luck. Peter Jackson - Builders FirstSource, Inc.: Thank you. M. Chad Crow - Builders FirstSource, Inc.: So the only thing – sorry, go ahead and finish.

You can go ahead, sir. Peter Jackson - Builders FirstSource, Inc.: So the only thing I wanted to add and it was sort of a follow-up to the gross margin question was with regard to some of the impacts that we see. There was a component when I mentioned gypsum that I wanted to add to it I guess is the idea that we definitely see an exposure in the multi-family and the commercial sales, and that is a piece of it. But there's also the rule of thumb on the expansion of our facilities. So continuing to see declines in multi-family, but the other component was the rule of thumb on the new trust plant creation because there was some question about how that started up and where we were going to see the benefits. The cost in those facilities are about $5 million to $7 million on the facility, assumed leasing the land and the building and then revenues really in that $15 million to $20 million range on an annual basis. EBITDA, $2.5 million. We generally would see breakeven in about a year with payback in that two to three-year range. So with an IRR of around 20%, definitely excited about the opportunities to open up those new truss plants. Always have to cross the hurdle on expansions, on the timing and the building requirements as well as making sure we select the right locations. So it looks like we have a couple more questions, operator?

Yes, sir. And our next question comes from Jay McCanless with Wedbush. Jay McCanless - Wedbush Securities, Inc.: Thanks, everyone. Jen, congratulations. I'm sure you've got lots of fun stuff planned for retirement. I just wanted to double-check. What are you guys expecting for fiscal 2018 total revenue growth, including the commodity portion of it? Peter Jackson - Builders FirstSource, Inc.: So, it's a Q3 question? M. Chad Crow - Builders FirstSource, Inc.: Full year. Peter Jackson - Builders FirstSource, Inc.: Full year? Jay McCanless - Wedbush Securities, Inc.: Yeah. Peter Jackson - Builders FirstSource, Inc.: So sales growth for the full year, we haven't laid out – we have laid out the commodity impact, though, about 6% to 8%. Jay McCanless - Wedbush Securities, Inc.: I was just wondering because the – from 1Q to 2Q, the CapEx percentage went down to 1.5% from 1.7%, and I didn't know if that was a shift in some spending or what was going on there. Peter Jackson - Builders FirstSource, Inc.: So yes, we had some timing on a couple of projects. Nothing fundamentally changed in our investment strategy. We are certainly seeing (00:48:06) to the plant build discussion. The hurdles on building some of these facilities is extending the time line on them. Jay McCanless - Wedbush Securities, Inc.: And then, Chad, I know you discussed lumber prices earlier, and that's something I really wanted to touch on because we've seen OSB prices. The weekly numbers have turned negative in the last couple weeks. Framing lumber seems to be holding up a little bit better. Does this guidance that you guys have laid out there assume that maybe we see a couple more weeks of declines and then things turn? Or how are you thinking about it? And as part of that also, what should we think about the relative impact of OSB on you guys versus framing lumber? M. Chad Crow - Builders FirstSource, Inc.: Yeah. The guidance we laid out assumes that the price has bottomed out here in the next couple of weeks and kind of stabilized within a reasonable range. Framing lumber is the largest component of our commodity category. The one largest SKU is 7/16-inch OSB, which I think – and I could be off a little here – I think is about 5% of that category. But the framing lumber composite, it drives the majority of that category. Jay McCanless - Wedbush Securities, Inc.: All right. Thanks for taking my questions.

Our next question comes from Trey Grooms with Stephens. Trey H. Grooms - Stephens, Inc.: Hey. Good morning, everyone. Peter Jackson - Builders FirstSource, Inc.: Good morning. M. Chad Crow - Builders FirstSource, Inc.: Hey, Trey. Trey H. Grooms - Stephens, Inc.: And yeah, I just want to start off by congratulating Jen as well, and good luck with your retirement. We'll miss you. Jennifer Pasquino - Builders FirstSource, Inc.: Thanks, Trey. Trey H. Grooms - Stephens, Inc.: So, one was just on the rollout. I think – the 17 plants that you highlighted. Is there a geographic – I mean, I know, Peter, you mentioned you're making sure that you hit the right markets with those and that sort of thing. But we're looking out over a three or four-year period as you roll these out, understanding these aren't three or four-year investments but longer term. Is there a geographic focus that you guys have in mind with those that you could talk about? M. Chad Crow - Builders FirstSource, Inc.: Well, it's – generically, Trey, it's out west largely. I mean, we've got a pretty concentrated footprint in the eastern part of the country. The holes in our geography are more western part of the country. Trey H. Grooms - Stephens, Inc.: Okay. And so I understand that right on the 2017 that's truss and millwork combined? Or is there – was it mostly truss plants? Peter Jackson - Builders FirstSource, Inc.: The new facilities is mostly truss plants. The expansion is blended between the truss and the door facilities – door and milling facilities. Trey H. Grooms - Stephens, Inc.: Okay. Got it. Thanks for clearing that up. And then, Peter, you mentioned the – you kind of reiterated the free cash flow guidance range for the year, but says that it may come in at the low end. Can you help bridge that for us? Where it would – if it could shake out low end versus where it would have maybe midpoint or higher end of the range? Peter Jackson - Builders FirstSource, Inc.: Yeah. I mean, what we're struggling with at this point – and you can imagine, right? The purchase price has changed quite a bit for the lumber and building materials. So, to-date, we've seen a pretty substantial headwind from that inflation on our inventory and, to some degree, in our AR. So, as we look at that sort of receding as it has, we start to get a sense of normalizing kind of that bottom end of the range. It's – the adjusted EBITDA, we sort of laid out integrated (00:52:06) some expenses in that $15 million to $20 million range, working capital in that. Right now, we think it's about 10% of sales on the incremental sales. Cash interest in the $95 million to $100 million cash taxes in the $15 million to $20 million. Capital expenditures like as we mentioned came down a little. So you're kind of not that 1.5% range. That gets you to the lower end depending on where we ended up – we end up with the year-end EBITDA and the year-end working capital as a kind of true variables here from this point to the end of the year. Trey H. Grooms - Stephens, Inc.: Right. And just so we're clear longer term. Kind of taking some of these fluctuations out, is it still kind of 9% or 10% of the working capital piece? Is that kind of what we should be looking for? Peter Jackson - Builders FirstSource, Inc.: Yeah. In that core piece, yeah, that 9% to 10% is still – we feel pretty good about that barring the kind of the lumpy fluctuations, correct. Trey H. Grooms - Stephens, Inc.: All right. Well, thanks for... Peter Jackson - Builders FirstSource, Inc.: (00:53:10) about the cash at the end of the day. Trey H. Grooms - Stephens, Inc.: Got it. Okay. Well, thanks for putting me in, and good luck. Thank you. Peter Jackson - Builders FirstSource, Inc.: Thank you. M. Chad Crow - Builders FirstSource, Inc.: I just wanted to follow up on the previous question from Jay. Just a little more clarification. Of our commodity product category, 70% of that is framing lumber driven and 30% is panels. And of that panel portion, 7/16-inch OSB is the largest piece of that. I think it's about 6% of that panel's category. So, I just want to clarify that.

At this time, there appears to be no further questions. Mr. Crow, I will turn the call back over to you for closing remarks. M. Chad Crow - Builders FirstSource, Inc.: Well, thank you once again for joining our call today. We look forward to updating you on the progress of our initiatives in the quarters ahead. And if you have any follow-up questions, please reach out to Jen, Binit or Peter. Thank you.