Good afternoon, ladies and gentlemen, and welcome to the Beacon Roofing Supply's Fiscal Year 2016 Third Quarter Earnings Conference Call. My name is Mariana, and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be conducting a question-and-answer session toward the end of this conference. At that time, I will give you instructions on how to ask a question. As a reminder, this conference 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 2, 2016, 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 those non-GAAP measures is set forth in today's press release. The company has posted a summary financial slide presentation on the investor's section of its website under events and presentations that will be referenced during management's review of the financial results. On the call for today Beacon Roofing Supply will be Mr. Paul Isabella, President and CEO; and Mr. Joe Nowicki, Executive Vice President and Chief Financial Officer. I would now like to turn the call over to Mr. Paul Isabella, President and CEO. Please proceed, Mr. Isabella.

Thank you. Good afternoon and welcome to our 2016 third quarter earnings call. Similar to last quarter, the 10-Q will be filed later this week, and as such Joe and I will spend slightly more time on our prepared remarks to ensure we provide enough detail for the quarter. As you can see from our press release, we continued the momentum established in the second quarter and delivered very strong results in the third quarter. Aided by the acquisitions made this year, most notably the RSG acquisition, good organic growth, and benefit from increased storm activity, we achieved record sales in the quarter of over $1.15 billion. This is quite an accomplishment as this quarter represents the first time we crossed over $1 billion of sales in a quarter. This represents over 60% growth over the prior year with existing same days growth of nearly 9%. We delivered record EPS of $0.68. That's $0.77 adjusted representing a $0.12 improvement versus last year. Our team did an excellent job of delivering strong results, integrating our eight acquisitions made this year, and as always staying extremely focused on servicing our loyal customer base. And now a little more color on the quarter before I provide updates on some of our strategic initiatives and what we're seeing in the industry. Five of our seven reported regions reported positive growth. Our Southwest region led the way with very strong double-digit growth fueled by storm demand in North Texas and San Antonio markets. In addition, the Southeast and West regions saw strong double-digit sales growth as a result of strong demand. The Mid-Atlantic and Midwest grew single digits, while the Northeast and Canada declined single digits. On an existing same day basis, sales were up for all three product lines as well, demonstrating the strength…

Thanks, Paul, and good afternoon, everyone. Now I'll highlight a little more detail on a few key financial results and metrics that are contained in our earnings press release and also the third quarter slides that were posted to our website. Similar to last quarter we've included a few extra slides to help explain the results in more detail. In my prepared comments I'll also go into more depth on a few of the key areas this quarter like gross margins, operating expense, inventory and synergies. Overall, as Paul said, it was a very solid quarter producing several new records for the company. Slide 3 provides an income statement for the quarter, and slide 4 provides an adjusted income statement which excludes the one-time costs primarily associated with the RSG acquisition as we've highlighted in our press release. We had strong top line growth of over 60% for record third quarter sales of $1.15 billion. As Paul mentioned this was a first quarter of over $1 billion in sales, great achievement. The growth is primarily driven by the nine acquisitions we've made since Q3 of last year. In addition we saw good growth in our existing markets of 8.7%. Gross margin increased over the prior year by 90 basis points. Operating expenses were up in total, mainly due to higher volumes and costs related to the RSG acquisition. The operating expenses in our existing markets declined 30 basis points as a percentage of sales. As a result, for the quarter we achieved record EPS of $0.68, $0.77 on an adjusted basis. For comparison purposes, there were 64 days in both Q3 of fiscal 2015 as in Q3 of 2016. Paul already went through our Q3 sales results as shown on slide five, so I'll not repeat any of that information…

Each caller is limited to one question. Your first question comes from the line of Keith Hughes with SunTrust. Your line is open.

Good afternoon, Keith.

Looks like we lost Keith.

Your next question comes from the line of Ken Zener with KeyBanc. Your line is open.

Hello, gentlemen. Can you hear me?

Yes, we can.

We can hear you, Ken. How are you?

Yes, we can, Ken.

Okay. Good. I wasn't sure if it was me. The – thank you very much for breaking out the guidance as well as the detailed working capital. Obviously with some manufacturers reporting, it's well known that there's been a lot of volatility certainly on the residential side. So, the assumptions, if I could just delve a little bit, I mean, I think operationally you're obviously – you've been working on these branch savings for the integration, you're moving on to procurement. Is that procurement in terms of rewriting contracts, or is it just, you know, the more generic stuff? Because it seems like you've gotten ahead of the integration costs, so if you could just go into a little of the detail there. Like, what surprised you? Where do you think some of those risks still are?

Sure, Ken, I'll take a first pass at it and then I'm sure Paul will add some color as well too. Yeah, the synergies or savings we're seeing on the procurement side are really from two areas. Yes, it's the contract switching, as we talked about, moving everybody onto the lowest price contract, right, our contract or RSG, whoever was the lowest. But in addition to that, we're also seeing benefit from the scale buying as well too. We talked about that early on that we mentioned we'd see some scale buying savings as well too, and that's also beginning to roll into it. And I think both of those have been positive from what we had expected through the initial work.

Yeah, and I would add that I think, you know, as we look at – I wouldn't say there's been any issues at all. If anything, I think we're still early in the process because the other big element for us, quite frankly, is to look at vendor consolidation. We still – not even necessarily at the larger vendors, but we have so many other vendors below that where we have multiples by region, and we're working on that and we've made progress, but it still will be a good funnel because RSG had a list, we had a list, and we're working very hard to consolidate that. So we've made good progress, and I think there's more as we continue – our supply chain team continues to dig deep for us to become as efficient as we can on the material side.

Yeah, and not to mention, even besides material, Ken, there – we're also doing some work on the indirect contracts as well which is adding to our synergies. So as we look across the indirect contracts outside of materials that the company has, we're consolidating those and driving some benefit there as well too. So, it's been going very well.

Your next question comes from the line of Jason Marcus with JPMorgan. Your line is open.

Hi. My question is on the inventory levels that you had at the end of the quarter. Just wanted to get a sense of how much inventory was up on a per branch basis when you look at legacy Beacon versus RSG. And then I guess just more generally, how you're thinking about inventory levels right now I guess both at your company and what you're seeing in the overall channel?

Yeah, we feel – I'll start out with how we feel. We believe and we feel our inventory is in very good shape; well-positioned. We also believe a key measure for us and for us going forward is turnover because it really speaks to velocity, and that's what we want. So we showed great progress year-over-year and sequentially from a velocity standpoint. Per branch to us, really as we looked at it, doesn't really mean a lot. We have so many different diverse branches, so many different diverse product lines, and now with RSG having much larger branches, that tends to skew things. And it even would skew it more as we have stocked up in our storm-related markets. So I think if you see the increase of our inventory sequentially or year-over-year, I think, it's very logical and it supports higher sales volume. A lot of that driven by storms in Texas, but we have also seen storm activity in the Southeast and the Midwest. So we typically in Q4 reduce – Q4 reduce inventory, which we will do, and we should see continued turns improvement year-over-year and sequentially. So all in all, we feel great about our inventory level and we believe we're doing the right thing, whether it's stocking up for service for our contractors or buying a tad more due to price increases that the manufacturers have pushed through and supporting that that into the end market. The key metric to really watch on inventory is the turns. And 4.3 to 4.8, great progress, great improvement we've made. And as Paul said, in fourth quarter you'll see us continue to work down the inventory levels as we always do. And we'll make even better – even more improvement on the inventory turns in the fourth quarter as well too. Feeling really good about our inventory.

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

Hey. Good afternoon, everybody.

Good afternoon. (43:32)

It sounded like you – in terms of pricing, it sounded like had some optimism about the price increases you had in place kind of throughout June. And it sounded like maybe they're getting some traction here so far into this quarter. So wondering if you could give me a sense for how those are going, kind of your price increases to your customers as well as the price increases that the manufacturers have into distribution.

Yeah, Kevin, pertinent topic. Again I'll go back a little higher level because we think it's so critical for us, and that's to manage gross margin. And within that of course, we're going to continue to take advantage of our material cost strength, the continued mix we should see. And then the balancing effect with that is price. And as we've said before, price is very, very specific to specific regions around the country based on competitive factors, amount of distribution and the economic health of that region. So we support the price increases from the manufacturers. They push them through. They're going through in June, and we'll continue to support those. We've raised price. We issued the price increases. I alluded to in my prepared remarks, whether it was launching early June, mid-June, there's typically that gap. So we wouldn't expect to see any major year-over-year change when you really think about it, just given the fact that there is inventory in the channel priced lower. That being said, we've been measuring very, very tight our operating units on a sequential basis and by customer because obviously, as the manufacturers push price to us, we need to offset it, right? And that's the whole theory behind this, and that's what we want to do. So as you look sequentially, not necessarily our reporting units, but if you go across our discrete regions, about a half of those saw sequential gains Q2 to Q3, albeit a point that's very encouraging for us. And then I think as we dig a little deeper into July, we see the Texas market making even greater gains. So there's even more optimism there, as you can imagine, given the amount of homes that are being re-roofed, given just the amount of the magnitude of the volume there in North Texas and San Antonio. We should expect to see price increases – one, because the manufacturers have pushed those through; and two, we are spending a tad more on the expense side bringing in equipment, people, the OT we're working, things like that. So we feel pretty good. Summary, sequentially, we're seeing an uptick. We hope and believe it will continue. But again I think the fallback is always, we're not going to lose share. We're going to continue to protect that, and the offset and balance is mix and the material cost out to get us to the gross margin level we talk about for the fourth quarter, which is at 24.5%-ish range, as Joe alluded to, and that's our focus.

Your next question comes from Philip Ng with Jefferies. Your line is open.

Hey, guys.

Hey, Philip.

I guess on the OpEx side – hey – strong quarter. On the OpEx leverage side of things, I think you guys called out I think AR receivables being a bigger outlier this quarter. Can you kind of parse out how much of the hit was that to the quarter? And how should we think about OpEx leverage in the back half and go into 2017? Is that going to look more like the first half of this year? Thanks.

Good question. Thanks for asking. To give you a little better feel for that, we've traditionally talked about the operating expenses being roughly 50% fixed, 50% variable in there, right? And this quarter didn't quite get to the level that we wanted to. We had roughly – we made good leverage on it. If you look at our operating expenses from an existing market perspective, we moved from 16.9% down to 16.6%. So, which was great, but if you do the math, if we wanted to try to get to our 50% variable, we probably were about $3 million high. That's what it would have taken to get to our 50% fixed and variable rate, and it really results from two things. One of them was with receivables, which were running about $2 million over where we had expected they would be, this is the bad debt expense number. All of that was driven primarily by specific receivables or accounts, and it was all tied to some of the acquisitions that we have done and just getting the initial reserves set up and established. That was the biggest driver of it. Besides that, solid (8:39) as I mentioned earlier, a little bit had to do with just the timing of when we brought people on board, and then some of the wetter weather in May that caused an impact to it. Overall, good performance, still got good leverage out of it. I think our improvement next quarter could be getting to that 50% variable rate as we've talked about.

Your next question comes from David Manthey with Robert Baird. Your line is open. David J. Manthey - Robert W. Baird & Co., Inc. (Broker): Hey, guys. Good afternoon.

Hey, David. David J. Manthey - Robert W. Baird & Co., Inc. (Broker): First off, I don't know if you can quantify or estimate the impact of the Dallas, Fort Worth and San Antonio storms in the quarter. And then secondarily, Paul, I think you said that you expected that to stretch into 2017.

Yeah. David J. Manthey - Robert W. Baird & Co., Inc. (Broker): Is it your belief that because of the labor constraints that we're seeing on the contracting side, that this could stretch on longer, and maybe it doesn't have as much of an acute impact in a given quarter, but it stretches on longer than even historical experience?

Yeah, Dave, I'll start with the duration. Although very hard to predict the future, there are some factors at play here. One is, for sure, may tamp things down a bit with a bit of rain. All right, so that pushes things out and that's why you saw our number being a little down, but we recovered some of that in June and then July. And then of course the heat, you talked about labor. I think also for sure our belief is the San Antonio storm, just because of activity and some of the other reasons you talked about, will extend. And given the overall size, the data we have is about 300,000 homes. I mean, this could at first blush go into our Q3 of next year, and we'll have to continue to assess that. Again, David, it'll be based on how fast things are re-roofed, et cetera. And it's difficult to influence that, so what it is what it is. The good news for us, the first part of your question, is we have great presence and density in Texas in general. We have close to 40 branches, so we have a tremendous ability to serve the contractor base. We've nearly tripled our capacity in North Texas post-acquisition, that's adding Wholesale Roofing Supply, Grand Prairie and RSG, so that all bodes well from an existing sales at 9%. And there's no exact science but as we try to eyeball it, we think three points of that came from that North Texas and to a lesser extent San Antonio, because it hasn't fully aired out yet in San Antonio. So overall, I think if you look at that existing sales, three points on storms, a couple points on greenfields, and then the rest four points or so normal market growth, which would be share gain and just penetration in each of those legacy markets. So all in all, I think pretty good performance. And if anything, that quarter, I don't think from a storm standpoint has reached its peak. I think it will in Q4. Depending on the weather in Q1, we could also see very strong sales that could be equal or greater than this quarter. So we feel pretty good about what's happening, again given our – whether it's Beacon legacy or RSG, branch size, we're in great position to take care of our contractors that are servicing the storm.

Your next question comes from the line of Jim Barrett with C.L. King & Associates. Your line is open. Jim Barrett - C.L. King & Associates, Inc.: Hi, Paul and Joe.

Hi.

Hey, Jim. Jim Barrett - C.L. King & Associates, Inc.: Paul, you touched upon this briefly. But if we exclude the market growth from storm activities and Beacon's own market share gains from greenfields and other market share initiatives, what is your sense as to the underlying growth volumetrically within the residential market across the U.S.?

Within res? Well, again, we had in the... Jim Barrett - C.L. King & Associates, Inc.: Yeah.

...quarter the 13%. We didn't break it down to that level. I alluded to the bigger piece of 4% total market. So if you took half it, it's probably still in that 7% to 8%, which is healthy. We think most markets still have strong re-roof demand, even outside of storm. And again, Jim, this gets mixed, right, because as you look at the Southeast there's a storm in South Carolina area; then Nebraska had some healthy activity and that tends to get mixed up a bit. But I'd say of the 13%, close to three quarters of it was normal growth and then the balance, the storm and greenfields hit roughly.

That concludes the questions. Now I would like to turn the call back over to Mr. Isabella for his closing comments.