Good afternoon, ladies and gentlemen, and welcome to the Beacon's Third Quarter 2020 Earnings Conference Call. My name is Lisa, and I will be your coordinator for today. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. This call will contain forward-looking statements, including statements about its plans and objectives and future economic performance. Forward-looking statements are only predictions and are subject to a number of risks and uncertainties. Therefore, actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including, but not limited to, those set forth in the Risk Factors section of the company's latest Form 10-K. These forward-looking statements fall within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 regarding future events and the future financial performance of the company, including the company's financial outlook. The forward-looking statements contained in this call are based on information as of today, August 6, 2020, and except as required by law, the company undertakes no obligation to update or revise any of these forward-looking statements. Finally, this call will contain references to certain non-GAAP measures. The reconciliation of these non-GAAP measures is set forth in today's press release. The company has posted a summary financial slide presentation of the Investors section of its website under Events & Presentations that will be referenced during management's review of the financial results. On the call today for Beacon will be Mr. Julian Francis, President and CEO; Mr. Frank Lonegro, Executive Vice President and CFO. I would now like to turn the call over to Mr. Julian Francis, President and CEO. Please proceed, Mr. Francis.

Thank you, Lisa, and good afternoon, everyone. Welcome to our third quarter 2020 earnings call. On the call, as we said, is Frank Lonegro, our Chief Financial Officer. This is Frank's first call as Beacon's CFO. Please note that today's prepared remarks will follow along with the supplemental earnings slides posted to the Investor Relations section of Beacon's website, and I will begin on Page 4 of our slide materials. Given the circumstances, we are pleased with our third quarter results. I'd like to recognize the extraordinary efforts of the Beacon team to work safely and continue to serve our customers during this period. Their dedication to maintaining high levels of service amidst numerous challenges has been outstanding and our results are the product of their effort. Beyond Beacon, our customers and our markets have shown remarkable resilience to weather an external environment none of us could have imagined. In addition to COVID-19, we are also facing the challenge of entrenched social inequities and discrimination. As such, Beacon will take steps to expand its role as an employer that champions diversity, inclusion and equality of opportunity. I believe that everyone at our company must have the opportunity to reach their full potential in order for the business to realize its full potential. We have established a framework that will guide us. We will listen, learn and then act. We will use our talent system, learning platforms and employee outreach to build more understanding and support all our employees as they strive for success. I have signed the CEO Action for Diversity & Inclusion pledge, along with over 1,000 CEOs, so that we may learn from one another and use our role as business leaders to advance diversity and inclusion at our companies and in our communities. Our goal at Beacon…

Thanks, Julian, and good afternoon, everyone. Before getting into the details, I'd like to echo Julian's overall commentary about our performance this quarter, delivering an adjusted EBITDA margin of 8.2%, consistent with last year's performance in a very different demand environment, is truly a major accomplishment for the Beacon team. Historically, when Beacon experienced mid-single-digit or larger quarterly sales declines, our year-over-year EBITDA margin usually compressed by nearly 200 basis points. I'd also like to highlight our strong 8% decremental margins this quarter. This better-than-expected performance resulted from the combination of increasing sales throughout the quarter and a steadfast focus on all aspects of our cost structure as we endured COVID's impacts during our fiscal third quarter. Turning to the specifics on Slide 9. Gross margin in the third quarter was 24.1%, up nicely on a sequential basis. On a year-over-year basis, third quarter gross margins were down 45 basis points. [Price-cost] was negative by nearly 60 basis points, partially offset by a favorable mix shift to our higher-margin residential roofing products. Not surprisingly, we do believe COVID's overarching impact on demand, as well as its disparate geographic impacts affected our gross margin performance in the quarter. Turning to the highlight of the quarter. Adjusted operating costs were $306 million, down $33 million versus a year ago. Adjusted OpEx to sales was 17.1%, improving more than 50 basis points from 17.6% in the year ago period. This type of improvement is unique in a period of rapidly declining sales given the speed of reaction required and the challenges of leveraging fixed costs, truly an incredible accomplishment by our team, especially on the operating side of the house. To help you better understand the drivers of the $33 million year-to-year improvement, we felt it was important to provide you with additional…

Thanks, Frank. I'll be wrapping up with Page 12 of the slide materials. I will reiterate, we're very pleased with our third quarter performance. Sales stabilized in May and June as states reopened following initial COVID response actions. Our leadership team acted quickly to proactively reduce costs in the face of this uncertain environment. The results of these actions are evident in our year-to-year improvement in adjusted OpEx to sales. We produced record third quarter operating cash flow of just over $400 million contributing to a meaningful reduction in net debt, which stands at $2.4 billion at quarter-end. There are a lot of positives in our third quarter. Before we transition to your questions, I want to provide additional details that will help frame the rest of the year. First, you will have seen that residential roofing manufacturers have announced product price increases. With this unexpected rise in our input costs, we will have no choice but to pass the increase on to our customers. We [have increases] that will become effective later this month. Beacon will be disciplined with regards to passing through any product cost increases we take on. For Q4 2020, we see the period unfolding similar to analysts' current expectations for the quarter. This assumes no new construction-related shutdowns post COVID and average weather conditions. We see seasonal demand favorability continuing in the fourth quarter with sales expected to increase high single digits sequentially off a low Q3 base. Amid the uncertain backdrop created by the pandemic, this implies a low single-digit year-over-year quarterly sales decline. Our July monthly daily sales were down approximately 1% year-over-year. Both states and provinces, less impacted by the pandemic, produced a low single-digit sales increase. In other geographies, we continue to experience demand headwinds tied to COVID. Despite the still…

[Operator Instructions] Your first question comes from the line of Garik Shmois with Loop Capital.

Hi, thanks for taking my questions today. I had a question just on how you're thinking about decremental margins. You highlighted the outperformance relative to your initial guidance in the third quarter. Just curious if that 15% to 25% range that you had initially anticipated is a good expectation moving forward. And I'm thinking more specifically as a steady state long-term number.

Garik, thanks for the question. Yes. I mean, I think that our 15% to 25% number still remains sort of in our head. I think our outperformance in Q3 is really the result of looking at the forward outlook that we had at the time and expecting both a more severe downturn than we experienced and perhaps a longer one. We cut deep and hard and went early. So I think as the sales rebounded, we leveraged down a little bit more than we'd anticipated sort of going into this in April. So steady state, as you – I think you – the words you used was, sort of 15% to 25%. We still think about it in that range. Obviously, we'd like to outperform against those numbers, but as we look going forward, that's kind of the benchmark that we are operating against.

Your next question comes from the line of Trey Grooms with Stephens.

Hey, good afternoon. Thanks for taking my question. So, I guess the main question I have, I guess, the first one is just the free cash flow in the quarter. Clearly, tight working capital controls, what you mentioned, especially the – as you look at inventory and payables. I guess how are you thinking about working capital and the impacts to cash flow as we move through the fourth quarter? And then longer-term, where are you targeting free cash flow conversion for the business as things normalize?

Trey, it's Frank. Thanks for the question. I think we had some unique experiences in Q3 with what we were able to do across the board on working capital, so I'd love to tell you that we could have another $400 million quarter in Q4, but we're going to have a good cash flow quarter in Q4, but it's going to obviously pale in comparison to what we did in Q3. But managing working capital is a big part of what we do. We've been disciplined in holding on to a lot of the inventory gains that we were able to make in Q3. So, I think you'll see good inventory performance in Q4. The receivables obviously grow as your sales improve. So, we'll probably have a little bit higher AR going into Q4, and then we'll taper that off as we hit the slower season. And then AP, we'll do everything we can there to stretch it within the terms that we have. So, we're really focused on working capital. I think what you're ultimately going to see is the even less – the interest and the taxes should give you a good indication of where we ought to end up in Q4.

Perfect. Thanks for the detail Frank.

Your next question comes from the line of Truman Patterson with Wells Fargo.

Hi good morning or good afternoon and thanks for taking my questions. Nice quarter. First, on demand, do you think that the demand improvement is sustainable? Do you think there's pent-up demand that's being filled as the states have reopened? And I'm really thinking on and on, on two opposite sides as we move through the next couple quarters. On residential, existing home sales is down. It's usually a pretty big driver of reroof activity. And then also on non-res, we've been hearing just quite a bit of softness from other product categories, not necessarily roofing. So, just hoping you can walk us through some of those – some of your thoughts.

Thanks, Trey – sorry, Truman. So, as we said in our prepared remarks, we had the thesis of the year that the storm comp early on was a bit of a headwind, but the overall macro market was actually quite constructive. We would have expected positive new home builds, positive reroof in the back half of the year. And so coming in, we thought that, that would have been the environment we face. Obviously, as we hit this period of time, there was a little bit of a sort of shock and awe in the new residential construction markets, which dropped sharply, the new home starts in sort of April-May time frame. And we've got two parts of our business. Our roofing business there is impacted probably on a 30 to 45 day lag, where our interiors business and complementary products is impacted, probably on a slightly longer schedule, probably more of a 90-day lag. So, there's still some of that to be worked through, I think, in the fourth quarter, but obviously, the rebound in the new residential construction has been quite positive. On the repair side, look, I think this is the resilience of the business and the market we're in. It's a – really a non-discretionary purchase. If roof is worn out, even if you patch it, you're going to have to repair it fairly quickly after. So, I think that that's going to remain somewhat stable. And I think that, that remains a decent demand driver for us, and it's the biggest part of the market. So, then we get to the commercial side of the business, and I think you're quite right. I mean that seems a little opaque to us. As we look forward, we're seeing sort of choppiness in the market. You hear about financing being difficult to get for new projects. I think on the repair, I think it's going to be essential to continue roofing repairs. It's certainly not the piece of a building that you want to short change if you're trying to push out some costs because it can cost you a lot more to repair what's inside than it would to repair the roof. So, we would expect to see roofing remain reasonably well balanced, but obviously, the new side of the commercial construction is certainly elongating and is probably seeing a little bit of a slowdown.

Okay. Thanks for that. And then on the follow-up second question. On gross margins, you're guiding up slightly quarter-over-quarter. There have been a handful of price announcements from manufacturers. I believe you said that you've started pushing pricing in the market to cover, which I imagine competitors have been following suit, but is that sequential gross margin improvement essentially you all are realizing these pricing actions ahead of the manufacturer price hike, so you'll see a near-term benefit? Or is it product mix? What's going on there?

Sure. Truman, it's Frank. Look, we really didn't put a whole lot of that pricing flow-through into our thinking here. Obviously, if we're able to do that, it just happened so kind of late in the quarter that we didn't predict anything based on that. But look, better demand, obviously, is going to help us a little bit on the margin side. If you compare Q4 to Q3, obviously, the revenues are going to be up. We destocked. Everybody realized that by looking at our inventory numbers. So we destocked in Q3. We'll increase our buying in Q4. That will give us a little bit better on vendor incentives and discounts and rebates. And we probably have a little bit better geographic mix as well as some of the more heavily COVID-impacted geographies come back online. Some of those were more higher margin for us. So, we'll have a little bit better mix on a geographic basis. So we put all that together and gave you the guide that it was going to be up sequentially.

Alright. Thank you.

Thanks Truman.

Your next question comes from the line of David MacGregor with Longbow Research.

Good afternoon everybody and congratulations on the progress you seem to be making on the productivity front. I guess I wanted to ask the question because it's interesting that, in the chart, you show sales per hour worked, 124 versus sort of a typical range over the last year at 88 to 103. It seems like you're making productivity improvement on relationships, the OTC networks. You seem to be leveraging well. The problem with a quarter like this is just a limited interpretive value just because of all the noise in the quarter. But I guess I'd be interested in your thoughts in terms of the sustainability of the progress on productivity through the fourth quarter and into the first part of next year and going forward from there.

Thanks, Dave. Yes, we've obviously emphasized this. I think we learned a lot during the quarter. Obviously, we pushed the limits of [indiscernible] we could do in -- going into this and trying to figure out how we were going to manage through what we thought would be perhaps a much deeper and more prolonged downturn. So certainly, we've pushed the envelope on this one a little bit. But I mean we – on the chart that we showed, we showed quarterly progression, and really, the benchmark would be from the year ago – same quarter a year ago and the improvement there. And I think that, that really represents, on a low demand environment, what we can do to manage hours at the branch more efficiently and really understand it. And I think what we did during this sort of crisis period was think a little bit differently about how we can manage hours worked, how we can manage day to day. And I think it was that ultimate day-to-day management of hours is – we found to be really important and impactful. What we haven't been able to do yet, as you rightly said in your question, is it's a really difficult quarter to sort of try to benchmark off and say this is sort of where we should be. What I am convinced of and what I think we're convinced of as a leadership team here is that this is a significant area of opportunity. And what we're working on now is really trying to establish what is the right benchmark for improvement. So while we might not be able to sustain what looks like a 24% improvement year-over-year going forward, it's certainly going to be better than what we've done historically. And as Frank mentioned in his comments, labor is such a significant component of our cost structure, but this should yield significant benefits to the company on an ongoing basis. As we work through the next several months and the next few quarters, we're going to start establishing benchmarks for what we need to be doing on a branch-by-branch basis.

Congratulations on the progress. Thanks.

Thank you.

Your next question comes from the line of Philip Ng with Jefferies.

On that note, you talked about headcount being down quite a bit. Are you at a good level, more to do? And on the flip side, as demand kind of ramps back up, is that something to bring back up just because at least there's pockets of labor being well tighter given some of the unemployment incentives out there?

Yes. I wouldn't attribute anything to the unemployment incentives. As you said, I don't think that's the driver. Look, I'll be frank. We went in and we cut into the muscle, and you probably get into the bone. I mean we're going to have some folks come back. We went deep and hard in order to get our cost structure right for like – for what I thought could be, like you said, a deeper and more prolonged downturn. I mean our benchmark coming at this in sort of late March was looking at what was going on in Europe and seeing complete shutdowns of economies. And in that sort of outlook that we were facing, we needed to get our costs out as quickly as possible and act. So, we will see some of the costs come back, as Frank indicated. We are looking at the metrics that we can measure certainly the branch productivity on. And this ties to something I've said before about our overall strategy, and it's about productivity improvements. We have to find out. We've taken actions. We've taken some permanent action with both primarily corporate staff, but I think now as we start to see demand improve, obviously, some return from furlough. We continue to look for qualified people to be at the branches, and drivers and helpers are always in short supply. But I don't think there's anything related to sort of incentives to stay out of work. I don't think we believe that. I think it's more the management of the seasonality is what we're looking at in terms of efficiency. We have to make sure we can manage the seasonality of this business more efficiently as we go forward.

Your next question comes from the line of Mike Dahl with RBC Capital Markets.

Hi, thanks for taking my question. Wanted to ask about just the – a lot of margin commentary and helpful color around kind of the OpEx gross margins, but when I'm just looking at the guidance here, it seems like if gross margin's up slightly, OpEx is up slightly, that would be the EBITDA margin roughly unchanged from 3Q, but I think consensus is kind of around $150 million, which would be more like a [high 7s] EBITDA margin, so down sequentially. Just wanted to clarify that and any additional color you have on your comment about expectations being close to consensus? Any more granularity there?

Hey Mike, thanks for the questions. It's Frank. Look, you're in the right neighborhood. It's obviously hard to predict the gross margin environment next quarter. It's really a question of is it going to be up minimal or is it going to be up a little bit more than that. The demand environment certainly feels, on the resi side, pretty good. And again, we have the elements that I mentioned in my answer to the prior question. If sales come back and we get a little bit more lift on the GM and maybe we're on the lower end of the scale of OpEx that Julian mentioned, we might be able to hit an handle, but I think you're in the right range.

Your next question comes from the line of Keith Hughes with Truist SunTrust.

Thank you. Question around the complementary product sales, they were a good bit below the company average. Just kind of what products were struggling in the quarter? And for the September quarter, what's your outlook on that business around the low single-digit guidance for the entire company?

Thanks, Keith. So, complementary products is really made up of two components that were impacted. One is they generally face more new residential construction and more commercial construction than sort of the repair and remodel side. So the two areas that we think would hit most during this crisis period were those segments. So, they would disparately hit in that area. And plus our strength in some of our complementary products on the interior side, geographically, we're more exposed to those areas in the Northeast and the West that were head early on and had significant COVID restrictions – construction restrictions. So, part of it is much more related to kind of where we operate and the markets that they've been exposed to, which was less sort of repair and remodel and more of the new, which is where we sort of see the near-term impact and then the bounce back. We haven't seen that bounce back yet. So – but that's primarily because of the lag that's impacted we believe. So, looking forward, as I'll reference you back to the answer I gave earlier, we think that the repair and remodel markets look reasonably good. We think there's been a decent bounce in the new construction, new residential construction. The commercial markets look – see that be a more choppy over the next 6 to 12 months. And that's kind of our outlook right now. Our complementary products would be more exposed to those markets.

Your next question comes from the line of Ryan Merkel with William Blair.

Hi, thanks. Two questions from me. First off, what do you think is driving the pause and the rate of improvement in July and in fiscal 4Q? And then secondly, I think you said that growth in the COVID-restricted states hasn't turned positive yet. So I was thinking the restrictions have eased a bunch and some others I cover have seen growth turn back positive in those states. So, what's sort of driving the continued weakness?

Thanks for the question, Ryan. Look, I don't think there's anything in the COVID-19 situation that supports above-market growth in our category. I don't think there's any demand drivers that's created – more demand created for roofing products, interiors, gypsum products, and that's been created by this crisis. I think the overall macro environment is still a little bit of a headwind. I think significant unemployment is going to have an impact on markets. I think that a lot of our business, particularly in the repair and remodel side tends to be over the kitchen table. And I think people are still holding off in terms of sort of getting back to that work and wanting to do that across [the table and sell]. So, I think our markets have just weathered it remarkably well to be only down 1%. I think that, on a month-to-month basis, that's not something that has me fundamentally concerned. I think that, as we look forward, we continue to see the underlying demand environment to be solid. But I think if you look at our total sales, we are also exposed to some of those markets that haven't recovered strongly, particularly in the commercial space. That would also be a little bit of a drag on our total sales outlook.

One other point, Ryan, I'd make is, when you look at the fourth quarter of last year, we had a really strong finish to the fourth quarter of last year. If we see a similar finish, then obviously, we'll be on the shorter end of what Julian mentioned. But we had a really strong finish last year that you just have to think about as you look at the year-over-year comps.

All right. So, then my own words, it's comps, it's macro still choppy, and then it sounds like there was a bit of pent-up demand that maybe hit and is now sort of waning.

I do think there's probably some pent-up demand. I think there's still friction in the market relative to try and get these things done. I think people have to take – continue to have to take precautions. I think our customer base has been very sensitive to go into people's houses. And that's just creating friction in the marketplace, which is probably creating a little bit of a drag on the ability to get the work done.

Your next question comes from the line of Michael Rehaut with JPMorgan.

Thanks. Good afternoon, everyone. Just wanted to circle back on a couple of points to make sure I understood fully, in terms of your outlook for 4Q, and obviously, I appreciate the guidance, the directional guidance. I just wanted to confirm whether within that outlook for a low single-digit year-over-year decline that you'd be expecting some growth out of residential roofing and maybe some declines in the other two segments and that, if complementary might, still represent the bigger decline of the two? And then, also just a clarification on the SG&A, when you talk about adjusted operating expenses or SG&A up slightly, is that off of the 17.1% adjusted number? In our model, we – just to be consistent with others, other companies, we include the COVID expenses in that number, so just wasn't sure about that. Thank you.

Michael, it's Frank. I'll take the second part of your question. In terms of the expenses, they are on the adjusted base. So the 17.1% up slightly in Q4, we adjust out the COVID expenses, which in the quarter, if you eliminate the CARES Act piece of it, was about [$3million or so], which were kind of severance-related costs for some of the permanent reductions that we made that Julian mentioned as well as some changes that we made to some of the branches to be able to handle business in a COVID-related environment.

And then with regard to your first question, I think you kind of nailed it in your question about its – looking at it, we would see solid demand on the residential repair side. We would see some choppiness in commercial markets, which affect our complementary business more so than our residential roofing business obviously, but then obviously, we do have a residential – commercial roofing business as well. But the outlook is a little bit [indiscernible].

Your next question comes from the line of Kathryn Thompson with Thompson Research Group.

Hi, thank you for taking my questions today. Just two-part question. Just first, this is really more based on feedback from other distributors broadly in the other product space. To what extent are complementary product sales impacted by lower foot traffic into kind of physical centers? And then the second on non-res, [indiscernible] industry contacts are telling us that there are just different types of products that reflect different types of demand. To what extent are you seeing different type of demand trends for, let's say, steel studs versus, say, wallboard in commercial end market? Thank you.

Thanks, Kathryn. So, on the first part of the question, which related to sort of foot traffic, I would say, one of the things I've been most pleased about with our branch operations and the team in the field has been their ability to reconfigure the branches and figure out how to continue to serve customers, whether it's been knocking holes in walls so that we can do sort of take a counter, where we can pass through and be safe, whether it's tents in yards. And actually, we've seen a – foot traffic, obviously, early on was up a little bit. More recently, we've seen a return to that. And we've – I've been quite pleased with the sort of branch operations, the ability of our folks to actually handle that. And I do think that, that goes to sort of the digital strategy able to pick up online. We've been able to do – develop sort of touchless and pickup, curbside pickup that type of behavior. And we've seen that hold up pretty well. So, I don't believe that, that would be a major impact on our outlook going forward. With regard to the different products inside of commercial, I haven't seen anything. I haven't seen anything – I don't think we've seen anything that would suggest that there'd be big shift between product lines in a commercial environment. Now, I would still say that it's early. I mean, you've got to remember the lag effect on the construction cycle. Clearly, it's been elongated and I'm convinced of that. It's more difficult to kind of get on the job sites, whether it's restricting access. So that's a piece of it. And then the sort of the R&R versus the new construction. I think we'll continue to see decent R&R activity because I think it's still important for building maintenance. There's a thesis out there that maybe there'll be more reconfiguration of office buildings coming out because of this situation. So, we haven't seen anything. I'd say we're still early in the game in the commercial arena to be making predictions.

Your next question comes from the line of Quinn Fredrickson with Baird.

Hey, good afternoon guys. You mentioned price-cost was the 60 basis points drag in the quarter. You said the price increase was just implemented, but probably not going to have a meaningful impact this next quarter. Would the expectation be then that you would close that gap in the first quarter? Or when might that occur? And then also just any sense for how much price realization you might be able to get? Thanks.

I'll comment initially, and I'll hand over to Frank for any further additions. Look, the price increases have not gone into effect yet. I mean our increase will go out in a week or so. The manufacturer price increases have been announced for the next – over the next weeks or so. So, when we would start to see that impact, it doesn't have an impact on this quarter is our point. I think our determination around this is that really any cost increase that we see from this we're going to have to pass through to the customer base. And that's an important consideration for us. We need to maintain our margins in this. It's still a choppy environment, and obviously, we're not planning on any impact from price in the – in our fourth quarter as Frank said earlier.

Yes. Only extra commentary I'd put on it is, this was a unique environment. As I think everybody realizes, this is one of those environments where price was lower and costs were higher. And you look at the price side of the equation, the softer demand, especially in the commercial and the complementary side probably drove that more than anything. And we, in general, believe that pricing held up quite well given the chaos of the environment. On the cost side, I think I mentioned earlier, when you buy less, you don't get the benefit of what you normally would in a higher purchasing environment in terms of incentives and discounts and rebates. So, probably a bit unique and like one of the other questions, it's hard to draw parallels from this quarter to others just given the uniqueness of the environment.

Your next question comes from the line of Seldon Clarke with Deutsche Bank.

Hi, good evening. I had a little static, so if this was asked and answered, I apologize. But could you just provide a little bit more color around the step down in inventory and whether you view this as sort of a more structural shift to working capital management and how you're thinking about your positioning from a market share and gross margin perspective, things on the demand side, you know to start to improve or get stronger a little bit quicker than you expected?

Sure. I think, look, we did – I think the absolute right thing in managing inventories down, obviously, it's easier to manage your faster turning items. So, we probably went a little bit lower than we would have liked to on some of the shingle side, but we have ample inventory to be able to fulfill demand. It gives us the opportunity to perhaps test a little bit of a new paradigm in terms of days on hand of particular items. It also gave us an opportunity to look at some of the slower turning items and slow down of replenishment rates there. So, I think you're going to see this team and under Julian's leadership really focused on working capital. And if we can run a little bit leaner on inventory, a little bit leaner on operating costs, that's what we're going to do.

Yes. So, I'll add on to that. Just – look, it is a significant component of a distributor's arsenal. I think we need to make sure we've got an intense focus on the overall working capital situation and manage it aggressively.

Your next question comes from the line of Kevin Hocevar with Northcoast Research.

Hi, good afternoon everybody. To build on that last question, I was curious; you know we've heard lead times are pretty extended for shingle manufacturers. So, how much of the decline in inventory was kind of Beacon initiatives versus of an inability to replenish because of what lead times might be? And is your expectation that you'll get those inventories back up a bit as the year goes on or do you intend to keep them down kind of similar to what we've seen here in this quarter?

Sure, Kevin. Thanks for the question. It's Frank. Look, the inventory reductions in Q3 were Beacon driven and Beacon led. We know that when April hit us and we were all worried about how long April was going to last, obviously, it's not been quite as bad as what we all envisioned when we were staring at it in the March-April time frame, but that was Beacon driven. It wasn't a supply side challenge for us. As we go forward, again, managing working capital tightly, as Julian mentioned, we're not too far away from the winter. So, we're not going to aggressively buy so that we end up in a situation where we're carrying too much inventory during the winter. But we're going to fulfill all of our customers' needs, and we're working closely with each of the manufacturers. Even though they do have some constraints right now, we're working very closely with them to make sure that they're able to give us the inventory that's necessary to fulfill our customers' needs.

That concludes the questions. Now, I would like to turn the call back over to Mr. Francis for his closing remarks.

Well, thank you all for joining us today. We're very pleased with our results in the third quarter, and we believe it is, as I said earlier, a road map for our future. We've seen some green shoots, and we will build on that. We certainly hope that our employees, customers, our suppliers and investors are keeping safe and healthy, and we appreciate everyone's continued support during this time. Thank you for listening, and have a great evening, everyone.

This concludes today's conference. You may now disconnect.