Gibraltar Industries, Inc. Q1 FY2026 Earnings Call

Good morning, ladies and gentlemen, and welcome to the Gibraltar Industries First Quarter 2026 Financial Results Conference Call. Operator provided instructions. This call is being recorded on Thursday, May 7, 2026. I would now like to turn the conference over to Carolyn Capaccio. Please go ahead.

Thanks, Joanna. 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 eBOS portion of which was subsequently sold on February 20, 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 I'll turn the call over to Bill Bosway. Bill?

Thanks, Carolyn. Good morning, everybody, and thanks for joining us for today's call. A lot of interesting and exciting things to talk about. We'll take you through our Q1 results, which include OmniMax operations for the last two months. And then we'll update you on our integration and synergy initiatives, our deleveraging progress and our 2026 guidance, which we are reaffirming today. And I'll talk about some positive trends we have seen in April and early May. And then we'll open the call for questions. So let's start by turning to Slide 3, and we'll talk about the first quarter. So the first quarter is very dynamic and busy with the closing of the OmniMax acquisition in the middle of the quarter on February 2, the subsequent launch of our integration efforts, managing through some additional inflation of aluminum in February and March and incremental commodity inflation in March post the start of the Middle East conflict. All being said, I'm very pleased with how our team responded and executed in the quarter. And I was excited to see good operating performance in March as we exited the quarter and head into Q2. So starting with the quarter. For the quarter, adjusted net sales were $356 million, up 44.6% driven by two months of having OmniMax as part of Gibraltar and our metal roofing and structures acquisitions. From a market perspective, residential remains soft, and we'll talk more about that today. And despite the start of the Middle East conflict in late February, we actually started to see customer order activity improve and become more consistent in March. Agtech and infrastructure markets remain solid with good backlog, but both businesses had some volume move into the second quarter, which we'll talk about. This is really related to some project schedules and timing of some shipments. Adjusted EBITDA increased 16.1% and adjusted EPS was down 50%, driven by a net interest impact of $14.6 million and unfavorable price-material economics from a 16% increase in aluminum market prices during the quarter, which really impacted mainly residential, but we also had increases in steel, resin and fuel prices in March at the start of the Middle East conflict. Despite the inflation and the lower volume and absorbing some inefficiencies with the OmniMax close in the middle of the quarter, we did perform very well in March with adjusted EBITDA accelerating to the high teens, which is supportive of our plan going into the second quarter. We used $35 million of operating cash flow, which included payments related to closing of the OmniMax transaction, and we applied the $70 million of the proceeds to eBOS divestiture to debt reduction. We ended the quarter with net debt of $1.2 billion. And finally, we continue to make progress with the sale of the renewables racking business, which we are still targeting to complete in Q2. So with that now, let's dig into the business segments, and we'll have Joe start with residential.

Thanks, Bill. Let's start with residential on Slide 4. Net sales increased just over $100 million to $281 million, which is up 56%, driven by the inclusion of two months of OmniMax results of operations, which contributed $89 million, and our metal roofing acquisitions, which contributed $18 million. Organic growth for the segment decreased 3% with building products down 3.8% and mail and package down 1.5% as the overall residential market continued to remain soft. Our metal roofing acquisitions, which we acquired at the end of Q1 2025, performed well. And overall, we are seeing a good start to Q2 in our residential segment. Adjusted operating EBITDA margins were down due to lower volume and inflation in the quarter, particularly with aluminum increasing 16% and other commodity inflation ramping up in March post the start of the conflict in the Middle East. Early in the quarter, we implemented price increases to help offset 14% aluminum price inflation in Q4 2025. And subsequently, we executed price increases in March and April across 14 of our brands and operating units to counter the additional aluminum inflation in Q1. The timing of our price increases and therefore, our price realization is governed by a well-defined approval process that takes 30 to 60 days, depending on the customer, the amount requested and the justification. Our teams did a good job addressing Q1 inflation in a timely manner, but we were not able to offset the full impact during the quarter. With these increases now in place, we expect price-material economics to be positive in Q2. As well, there was no incremental tariff impact in the quarter. And as it relates to the recent changes to Section 232 of the Trade Expansion Act, we are proactively managing any potential impact. Adjusted EBITDA margin for the quarter came in at 15.6%. But as Bill mentioned, we performed well in March with adjusted EBITDA accelerating to the high teens, which is supportive of our plan going into the second quarter. Let's move to Slide 5. We'll talk a little bit about the U.S. residential roofing market. The market remains soft in Q1 with ARMA reporting shingle shipments down 10% versus prior year, with results bearing quite widely by region and/or state. When we see big changes or swings in a particular quarter, it's often related to a weather event that occurred in an earlier period in a region or a state. And you can see, for instance, Florida down pretty significantly in Q1. General customer feedback remains consistent around affordability and interest rates. Limited weather impact in 2025 helped create demand in 2026. A lot of focus on inventory optimization while waiting for the season to start. And then, of course, most recently, the conflict in the Middle East and the timing when that may be resolved. We believe we outperformed the market in Q1. Our retail sales and units were down 6% to 8%, while our sales dollars were down to flat, and our sales to distribution were also down roughly the same. In contrast to year-over-year ARMA shipments, Q1 shipments were up 41% sequentially. It's an increase of approximately three times the average Q4 to Q1 increase we have seen during the last four years and likely driven by a correction to the market over-indexing on inventory correction in Q4 2025, some pull ahead related to upcoming OEM and shingle price increases, and I also believe some better end-market demand with some green shoots in certain markets and regions. And although it's early in the season, we started to see positive activity in April which is really reflected in our actual April shipments and bookings, which were on plan and ahead of 2025 levels. We'll see how the market evolves. And once the conflict in the Middle East is resolved, I expect the market to have tailwinds as oil and gas prices improve, mortgage rates move back to pre-conflict levels — if you recall, the 30-year mortgage rate went below 6% back in February — and existing home sales activity starts to improve. Until then, we're going to focus on winning more of the market. Our team sees there is quite a bit of opportunity given the U.S. has an installed base of over 80 million existing aging homes at an average age of 40-plus years, and a significant multifamily market, which now or in the future will require new roofs or roof maintenance and repair. Let's move to Slide 6. I want to discuss some of the commercial synergies and what we're doing to expand our participation in the market and what we've done in a relatively short period of time. When we announced the OmniMax deal, we emphasized the importance of being able to shape the future of our industry versus having someone shape it for us. Over the last 24 months, with customer consolidation happening across the industry and new ownership in the industry, we believed then and believe even more now that we are and will be an important partner for our customers moving forward. The combination of Gibraltar and OmniMax creates the local presence on a national basis to do things for this industry others cannot. We now have 39 locations serving most of the U.S. And by itself, this footprint and our local presence doesn't necessarily guarantee success; what matters is our ability to provide consistent high-level performance through great service, speed and flexibility, the right products and great quality from each of our locations. So we have a good foundation which we're going to further evolve. There are three core initiatives that you're going to see us start to focus more on as we go forward to help our customers even more. Number one, it has become very obvious from conversations with our customers that we can help streamline their supply base, particularly with customers that currently have between 50 and 100 suppliers making products similar to what we make. This is a tremendous 80/20 opportunity where simplifying a supply chain can drive substantial productivity and efficiency for customer supply chains. Being local on a national basis gives us a chance to do that better than anyone else can. Secondly, there's a lot of emphasis around what kind of digital solutions are needed to connect more seamlessly with customers to increase service levels while also reducing cost and the cost of doing business with us. This takes investment in technology, and we are in a position to support this effort going forward both on a local and national basis. Third, and I think this is our biggest 80/20 opportunity we have that we can bring to the industry but also bring to our business, is our ability to better optimize codes, specs and material selection. That will be done by working through local municipalities, working with our contractors as well as distributors and retailers and really focusing on SKU and product harmonization. It's a lot of heavy work, but pretty exciting stuff, as well as bringing in new products. The result is taking an 80/20 approach to an entire quote-to-cash process that our industry has grown up with. We believe we bring the broadest product and service offering to the market, and that has, in a short period of time, enabled more geographic expansion, some cross-selling opportunities and private label programs. In a short period of time, we've made good progress with each of these three initiatives. First, we expanded our presence geographically. We established new business in over 40 branch locations across nine different customers located in Texas, Florida, the Midwest, Northeast, Southeast and Mid-Atlantic regions. These are branches we were not serving before when Gibraltar and OmniMax were independent of each other. Secondly, we now have over 60 locations where existing customers are buying new product categories from the combined business, and there are over 1,700 branch locations in the U.S. So a lot of opportunity in front of us to do more cross-selling. Our ventilation family of products is a great example, but there are others as well where we've had some success. And thirdly, we have manufacturers with adjacent and complementary product lines that are starting to source private label product from us or grow their private label business with us. Some of this work is starting to create new business and open new doors for us. These commercial synergies also represent participation gains, and we will realize $4.3 million in our 2026 EBITDA as a result of these initiatives. As I mentioned earlier, we started to see positive results in April with our shipments and orders on plan and ahead of 2025 levels. I think these initiatives are contributing accordingly to some of the trends that we're currently seeing. Now let's turn to Slide 7, and I'm going to give you an update on integration and what we've been doing over the last 90 days with a lot of effort over the last 75 days. First, the combined business has evolved from an organization transition when we started to integration discipline focused on building and executing synergy capture, inventory optimization, network rationalization opportunities and further optimizing procurement. The integration management office and our 22 integration teams have delivered 500-plus milestones and organizationally, we've accomplished quite a bit as well. We've completed Phase 1 of the organization structural work, with Phase 2 to be completed in May and June. We have integrated and consolidated Gibraltar's corporate supply chain team and are leveraging this team to support other businesses, including the mail and package business. And we've combined and communicated a single 2026 financial plan and set of goals for the new team. Let's turn to Slide 8, and I'm going to discuss a little bit on how the integration management office is now operating. In February, on our paper earnings call, I shared our leadership team, the role, integration management office structure and the process to drive integration across the combined business in the first 100 days. The first 100 days focused primarily on organization transition to build one culture, ensuring we get our internal structure right and build an ownership mindset across the team. Our teams have done excellent work to create and execute charters and work plans for effectively every function in the business. We now have a good foundation in place as we move into our next phase, post-100 days, where we'll narrow focus to 11 high-value work streams with key synergies, continue to execute the 2026 work plans and start working on plans for 2027 and finalize all our business cases for the remaining work streams. It's an important step as we move from integration to transformation, which means moving into a way that we expect the organization to execute the business going forward. Now we'll move to Slide 9. I'll give you a quick update on our 2026 synergy savings. As our team digs in, we continue to identify additional cost and commercial synergy opportunities. We have raised our synergy commitment an additional $2 million to $26 million with $16.3 million realized in our full year 2026 adjusted EBITDA. Over 50% of our 2026 commitment has been executed and realized savings will ramp up in the second quarter and accelerate further in the second half of the year. We have also created a corporate synergy category where we are identifying structural and spend reduction opportunities across Gibraltar as we continue to develop the portfolio and further leverage shared service capabilities. Recently we identified $600,000 in insurance premium savings based on a rate differential with the same provider, which will be realized on renewal of the policy. Looking at every cost line item, you find things like the example of insurance premium where we think there will be more and more opportunity. As I mentioned earlier, we have already consolidated and integrated our corporate supply chain team. Finally, I want to recognize our commercial team. It's really coming together. We've got the right leadership with great experience and a very good reputation and they are really focused on execution. We also have very strong leaders dedicated specifically to business development and sales enablement. This is foundational for us as we drive more wins and participation gains. So with that, we'll move on to Agtech, Slide 10. Agtech net sales grew about $10 million or 23.6%, driven by the Lane Supply acquisition, which continues to perform as expected with solid demand. This offset organic volume decreasing approximately 3% in the quarter, with project movement during the year. Total backlog of $84 million supports the full year plan, but is down 13% in Q1 with the removal of the Arizona CEA project. Adjusted operating EBITDA margin decreased mainly due to lower volume and the impact of a full quarter's results of the Lane acquisition in 2026 which included January and February, which are the lowest margin months of the year. Now let's move to infrastructure on Slide 11. Net sales decreased $2.1 million or 10% as two separate weather events occurred in March that resulted in our factory losing power and impacted our production schedules. One event caused the entire community where we operate to lose power and the second event was a lightning strike to the plant's key power source. As a result, some customer shipments were pushed into April. Backlog decreased 3%, driven by the timing of project awards, while quoting and bid activity remains strong. Segment adjusted operating EBITDA margins declined due to the lower volume as well as business mix. Let's move to Slide 12 to touch on our balance sheet and cash flow. The company's current position with respect to cash allocation will be to keep a minimum of $20 million to $25 million of cash on hand, use the revolver as needed to fund seasonal needs and pay down debt with excess cash flow. During the quarter for continuing operations, Gibraltar used $35 million in cash from operations and used $41 million of free cash flow or 11% of sales. Of the $35 million in special charges that occurred in Q1 related to the close and initial integration efforts of OmniMax, $25 million of those were cash. Also, we used $43 million for working capital, including the use related to OmniMax as is typical given the seasonality of the business. Capital expenditures were $6 million or 1.6% of sales in the quarter. At quarter end, the drawn balance on the revolver was $25 million and our cash on hand was $20 million. Debt repayment was $75 million, including the proceeds from the eBOS renewables sale, so as a result, at quarter end, our net debt on the balance sheet was $1.2 billion, and our net leverage ratio as defined by our credit agreement, which includes $35 million of anticipated cost synergies and the pro forma adjusted EBITDA, was 3.9x. The availability on our revolving credit facility was $467 million and total available liquidity was $487 million. Let's talk now on Slide 13 about our deleveraging road map. As we noted on our last call, our priority and focus is to deleverage as quickly as possible over the next two years through, as shown on the left side, a plan of strong EBITDA delivery and synergy realization, working capital optimization and utilization of cash tax benefits. Planned uses of cash include capital expenditures of 2% to 3% of sales, interest payments on our debt and special charges related to the acquisition transaction, integration and restructuring-related costs. The special charges we reported today represent approximately two-thirds of the charges we expect to record this year. During the second year post transaction close, we expect continued 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. We expect these factors to drive additional free cash flow and our net debt down even further. We may also create additional liquidity from other noncore asset divestitures. Our deleverage path targets a leverage ratio of approximately 2.5x adjusted EBITDA in 24 months ending first quarter of 2028. Again, during this two-year period, our capital allocations will be focused on funding the growth of our business through capital expenditures and on debt reduction. Also during the quarter, the renewables business, which has been reclassified as discontinued operations, reached a settlement agreement regarding unresolved warranty claims related to projects with certain discontinued products installed dating back as far as 2017. This settlement in the amount of approximately $25 million is expected to be paid in Q2 and has been factored into our deleveraging plan. Now let's move to Slide 14 to talk about our key assumptions for 2026 for continuing operations. First, given OmniMax closed on February 2, we will recognize 11 months of ownership in 2026. The expected contribution from OmniMax plus synergy realization, which will occur both within legacy OmniMax and the legacy Gibraltar business is approximately $570 million to adjusted net sales and approximately $70 million to adjusted operating income and $120 million to adjusted EBITDA. As we execute our integration efforts across the combined business, we expect synergies to start to flow through in Q2 and accelerate in Q3 and Q4. More broadly, in residential, we see a continued soft market as we already indicated. In Agtech, we have removed the Arizona project from our plan and will continue to monitor the funding status supporting. Within infrastructure, engineering backlog and quoting activity remains strong. In regard to free cash flow for continuing operations, given the seasonality of earnings in the business, the ramp up in synergies and working capital initiatives starting in Q2 and the cash outlays of the special charges related to the close and initial integration of OmniMax that already occurred in Q1, we would expect free cash flow generation throughout the rest of the year. We continue to expect CapEx to be 2% to 3% of sales, free cash flow of approximately 8% of sales, and we will be focused on debt paydown. Lastly, some additional assumptions to factor in. With the combined company, we expect depreciation, amortization and stock compensation expense to be approximately $90 million for the year, which includes approximately $40 million annual assumption for noncash amortization related to intangibles due to the OmniMax acquisition. We anticipate approximately $50 million in special charges related to the acquisition, transaction, integration and restructuring costs, of which two-thirds already occurred in Q1. We expect greater than $70 million in interest expense, financing and commitment fees, which will be dependent on the timing of our debt repayments and interest rates. And lastly, we are assuming a 26% tax rate. Now let's move to Slide 15, where we are reconfirming our 2026 full year guidance. For continuing operations, we still expect 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, including the expected impact of special charges. And adjusted EPS between $3.65 and $4.05 compared to $3.92 in 2025. Now let me turn it over to Bill.

Just to summarize for today, a lot to unpack and a lot of heavy lifting, as I mentioned. We have accomplished a lot of the heavy lifting and made good progress in the quarter, and we continue as we move into Q2. The entire team has contributed, obviously, over the last 90 days to make that happen. We are transforming the business, as we said, going into the year, and we're going to continue to do that. In residential, regarding the near-term market situation, we're going to stay really focused on winning more with our customers. We're going to continue to expand geographically. We're going to continue to do more cross-selling initiatives as well as support our private label programs. If the market remains soft throughout the year, we're already working on all the right integration costs, commercial synergy capture and price management initiatives to deliver our plan. In our Building Products leadership team and integration management office teams, we will maintain their intensity and discipline and focus on executing our plan while improving safety, service levels, productivity, 20 initiatives and winning more business. In Agtech, the business is in a position to deliver a solid year with $84 million of backlog at the end of Q1 with robust design and bid activity across North America in process. We also expect infrastructure to deliver another good year and transition some key projects in engineering backlog to order backlog over the next two quarters. So with that, let's open the call up and we'll take some questions.

The first question comes from Daniel Moore with CJS Securities.

Start with residential. Obviously, good to hear the progress you're making thus far in Q2. Has the inventory drawdown at retailers — I know it's seasonal — largely run its course? Where would you say customer inventories are now on a historic basis? And maybe just talk about the monthly cadence of volume growth both at legacy Gibraltar and OmniMax through Q1 and thus far into Q2?

Yes. Thanks, Dan. We think inventory levels are much better aligned than they have been in the last two or three years with demand. We've talked about that in the last quarter. I think it differs a little bit by channel, so distribution versus retail. The retail guys seem to be a little bit more cautious managing inventory as they wait to see how the season evolves. Distribution may be less cautious; contractors source about 80% of their needs through distribution. Distribution may see demand normalize sooner than big box retail. Right now, the general feedback from customers is inventory is in a decent position. It probably varies a little by product line, which I don't have specific stats on. Our point-of-sale results give us visibility into how inventory is positioned; it's in a better position than it was last year. The regional piece matters too: as weather patterns kick in through the spring season, you'll start to see orders move based on those events in different regions. Wherever folks are a little bit short, we've seen them correct quickly when they have sustained weather. For our situation, it's been a pleasant surprise to see how we got off to a start in April with the demand profile we've seen; the first four or five days in May have been pretty consistent as well. Part of that is there are some green shoots out there. We're a much broader company now with access to more of the U.S. than we did six months ago, so we're seeing more opportunities. Some of the cross-selling work is starting to kick in; participation gains as we pick up more branches are starting to kick in. I don't think the end market is highly different than before; I just think we're taking opportunities to participate more in it than we were before. Inventory is in a better position right now, so for us it's been a decent start to Q2. I'm a little surprised that we're ahead of last year's levels, and it's good to see that. We'll watch it closely. As I mentioned earlier, people are waiting to see what happens with the Middle East. If the conflict is prolonged it has implications for oil, gas and consumer sentiment. Back in late February, the 30-year mortgage rate went under 6% and existing home sales started to pick up; then the conflict occurred and rates moved up. If interest rates correct, gas prices come down and mortgage rates move back, that should help as we move through the year. That's a factor to watch, but overall inventory seems better aligned and our demand is benefiting from that and the other activities I mentioned.

That's helpful. You mentioned if the market doesn't pick up, you'll keep focusing on participation, but is there a market growth rate or band for the back half of the year that underpins the fiscal 2026 guidance?

When we went into the year, we had growth of around 4% to 5% built into the base plan for the residential business, and we still feel good about that as we go into the season based on what we're seeing so far. But internally our mantra is that if the market doesn't improve, or if it stays soft, we're doing all the right foundational things regardless. Everything we're doing to integrate the business, get the right cost structure in place, put the right people in the right seats and capture synergies is about building an organization to serve the industry over the next five to ten years, not just reacting to a softer market. So even if the market gets more challenging, we're proactively ahead of the game to operate in whatever situation arises. I'm not anticipating the market to be worse than it is right now relative to our plan, but we're taking actions that prepare us for multiple scenarios.

And then one more — on the cost and margin side. You've been adept at passing along input costs like steel and aluminum. I appreciate the color on the pricing mechanisms. Is the same generally true for OmniMax? Could the integration cause any incremental delays in how you're passing those through? Or just talk about how they have handled pricing and your expectations for the cadence of margins as we get into Q2 and beyond?

OmniMax historically has been quite disciplined and centralized in how they manage price. We were a bit more decentralized historically. Their centralized approach to pricing — systems and discipline — has served them well, and we're now applying that approach across the combined company. That has helped accelerate price actions we've taken in a short period of time utilizing their process, systems and discipline. For the quarter, recall we had a late price increase in legacy Gibraltar that came in January to catch up with 14% aluminum inflation in Q4. Inflation continued into the quarter, and we had to overcome that in our legacy business. Through the price increases in March, we brought those into the combined company's systems and were able to catch up to address the first-quarter incremental inflation — not offset it entirely, but get the price in place. As we go into Q2, our price-cost alignment is much better in total for the business than it would have been otherwise. I am pleased with OmniMax's approach to pricing and how it's helping us as one team.

And those are price increases, not surcharges, so presumably you get some benefit when...

Yes, we generally stay away from surcharges. Price increases tend to stick better and last longer. Everything we've done are actual price increases — aluminum, steel, resin, vinyl and fuel. That's our approach. I'm not saying it's 100% offset yet, but we have very little surcharge-type approach across the residential business; it's really about price increases.

The next question comes from Walt Liptak with Seaport Research.

So just a follow-on to the last question first. The price-cost drag that happened on aluminum in the first quarter, how much was that, in dollars? And how much of a profit benefit do you think you'll pick up as you catch up on that price-cost?

When you look at the aluminum we bought in the quarter and the delta in price from January 1 to the end of the quarter, it's roughly a $9 million to $10 million headwind. That assumes no inventory, which isn't the case, so we were able to offset a chunk of that because we had aluminum on hand at lower cost. We didn't have enough to cover everything, but we chipped away at it. We did get some pricing in March which helped, and we accelerated some synergies where we could, though those are time constrained. We probably ended up with a couple of million dollars of net incremental costs in the quarter associated with that, which should recover as we go into Q2.

Okay. Great. And I'd like to try one on the integration cost-out. I wonder if you could give us a feel for how you're feeling about the integration. It sounds like it's good. Maybe get a little granular. It looks like logistics is more of a headwind—where are you feeling better about things? And are there any planned assets you could sell to help generate cash in the first year and increase cash inflow?

On integration, there are a few key areas. For supply chain, we originally had $6 million in plan and moved to $7 million; we'll get about $3.7 million of that this year. Some of that depends on contracts that have to expire before we can get more implemented. Steel and aluminum contracts are typically signed in October/November, so those will be opportunities as contracts renew. On the indirect side, MRO and packaging, those tend not to have long-term contracts so we'll see savings sooner. We're reviewing leases, equipment leases, and everything we lease to find savings. On SG&A and organizational work, we've completed Phase 1 and Phase 2 will be completed in May and June, which will give us better run rate in the second half of the year. We're also pursuing many smaller line-item opportunities like the insurance premium example — $600,000 in savings on a renewal. We're attacking every cost line item across COGS and SG&A. Facility optimization is being evaluated — we are not talking about massive closures, many locations are leased, but we will optimize the footprint to support distribution and retail. We also hired a leader of product innovation starting next Monday. A big effort will be product line simplification and SKU harmonization. Simplifying the product portfolio from raw material purchase through finished product has big supply chain benefits. We'll start internally at our 39 facilities and work with local municipalities and customers for harmonization. That initiative will really pick up in earnest next year, but you'll see it begin this year. Commercially, we've been able to win incremental business and pick up branches faster than expected since closing in February. Logistics opportunities are linked to SKU harmonization; as we simplify SKUs it impacts logistics positively. Finally, on corporate, we've consolidated the corporate supply chain team and are looking for other shared service and structural opportunities as the portfolio evolves. Overall, the integration team is working hard across these buckets and we're seeing progress.

Okay. And then one for Joe around free cash flow. Could you get a little more granular around second quarter free cash flow and then how that might look for the back half of the year? Is it going to be a hockey stick as we go into the year, or is it loaded to the fourth quarter?

From a continuing operations perspective, two-thirds of the special charges occurred in Q1 and had a cash impact; that won't recur to the same level as we go through Q2, Q3 and Q4 because a third remains to be recognized. I would think of those remaining charges as fairly even by quarter from here on out rather than concentrated in one quarter. On working capital, we had a use in Q1, but as we bring the teams together we'll start working in earnest on working capital initiatives in Q2 and expect those to drive benefits into the back half of the year. The third piece is earnings seasonality: Q2 and Q3 are typically stronger for residential. These factors imply we do not anticipate a single hockey-stick back-half-weighted profile concentrated into Q4; rather, improvements will be more evenly distributed through the remainder of the year with ramping benefits from synergies and working capital optimization.

Next question comes from Julio Romero from Sidoti & Company.

Following up on some of the residential commentary. You mentioned the uplift in distribution was a little bit better than retail in April. As I understand, you guys are about two-thirds distribution, one-third retail in residential. How much more pronounced was that uplift in distribution versus retail? Did that surprise you? And does that factor into your confidence in passing through price across the segment?

I don't think the channel relationship changed significantly, but we saw more uplift in distribution in the last 60 days. Partly that's because branches are closer to contractors and can see demand in real time, unlike big box retail which is a different dynamic. Contractors get most of their needs through branches, so when weather starts to evolve, branches can react more quickly. Cross-selling and participation gains also tend to happen faster at the branch level than with retail, where product reviews and approvals are longer processes. Retailers appear a bit more cautious coming off a destocking period and are managing inventory more conservatively heading into the season. For us, picking up branches and winning business at the distribution level has helped; we were able to win incremental business with branches in a relatively short period. That contributed to the uplift we saw in distribution versus retail in April. It gives us some confidence on price realization because distribution's responsiveness can help with passing through price, but the nature of retail versus distribution dynamics should continue to differ.

Joe, the factory in Agtech that lost power in March — how much of an impact was that in the first quarter? You mentioned customer shipments were pushed out. Has that been fully caught up and realized in the second quarter?

We lost about seven days of production in March across two separate weather events. One event caused a community-wide power outage and a separate lightning strike damaged the plant's key power source. When power goes out and all machines lock down simultaneously, it takes time and expense to inspect tooling, reset machines and ramp back up. That caused the delay in bringing certain shipments forward, but the team worked to make those shipments up in April, and we believe we're back on track. There was also some mix effect that impacted the quarter, but the weather events were the primary issue.

It sounds like the integration is going well and the synergy target was increased. You realized $16.3 million and raised the commitment to $26 million — the incremental increase was about $1.2 million. Does that incremental $1.2 million start flowing sooner or is it fourth-quarter weighted? And where does that take the 2027 run rate realization figure?

The $16.3 million is what we've realized year-to-date. The incremental $1.2 million we added will start flowing in Q2, Q3 and Q4. The $26.2 million is intended as an annual run rate; we've implemented or executed over half of that and you'll start to see the executed portion flow through for the rest of the year. With Phase 2 of the organization structure implemented in May and June, we'll get a fuller run-rate effect in the second half of the year and into the next year. Many items have specific timing — for example, the insurance premium savings will flow when the policy renews — so we model the timing of each item to estimate when savings begin to appear. As we continue executing, the run-rate for 2027 will evolve, but the pathway is to continue to ramp synergies into next year based on the workstreams we have in place.

We have no further questions. I will turn the call back over to Bill Bosway for closing comments.

Yes. Again, thanks, everyone, for joining today. I know there's a lot to unpack and a lot of heavy lifting going on in the quarter. It can be complex to follow in some respects, but we're in the middle of the transformation and it's going as we expected. We're excited about what we've seen so far and how we enter Q2. I want to thank everyone for taking the time with us today. We will be at the Seaport Annual Growth Discovery Conference and the CJS Annual Conference in May and also the Wells Fargo 16th Industrials and Materials Conference in June, and we really look forward to connecting back with you to talk about Q2 when the quarter is done. Thanks again. Appreciate it.

Ladies and gentlemen, that concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.