Operator: Greetings and welcome to the Foundation Building Materials Second Quarter Conference Call. All participants are in listen-only mode. A question-and-answer session will follow the formal presentation. It is now my pleasure to introduce your host, John Moten, Vice President of Investor Relations for Foundation Building Materials.

John Moten: Good morning and thank you for joining us today for our second quarter 2020 conference call. Joining me today are Ruben Mendoza, our President and CEO; John Gorey, Chief Financial Officer; Pete Welly, Chief Operating Officer; and Kirby Thompson, Senior Vice President of Sales and Marketing. Last night, we issued our second quarter press release and slide presentation for today’s call and we have posted these materials on the Investor Relations section of our website at fbmsales.com under the Events and Presentations section. Our prepared remarks and answers to your questions this morning may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address matters that are subject to risks and uncertainties, which may cause actual results to differ from those discussed today. Example of forward-looking statements includes remarks about COVID-19 impacts on the business and financial performance, future expectations, beliefs, estimates, plans and forecasts as well as other statements that are not historical in nature. Forward-looking statements discussed today relate to, among other things, our acquisition strategy and integration, our e-commerce strategy, our Greenfield expansion plans and performance, our ability to gain leverage in our business and our ability to increase market share and expand into new markets. As a reminder, forward-looking statements represent management’s current estimates. We assume no obligation to update any forward-looking statements in the future unless otherwise required by law or the listing rules of the New York Stock Exchange. Listeners are encouraged to review the more detailed discussions included in our filings with the SEC regarding the various risks, uncertainties and other factors that could cause actual results to differ materially from those indicated or implied by these forward-looking statements. Additionally, during today’s call, we will discuss non-GAAP financial measures, which we believe could be useful in evaluating our financial performance. Other companies may calculate these measures differently, and our presentation of these non-GAAP measures should not be considered in isolation or as a substitute for measures prepared in accordance with generally accepted accounting principles, or GAAP. A discussion of how we calculate these non-GAAP financial measures, which includes net debt leverage ratio, adjusted EBITDA, adjusted net income and adjusted earnings per share, or EPS, as well as a reconciliation of each of these measures to the most directly comparable GAAP measure can be found in our earnings release, which has been furnished to the SEC and is available on our website. With that, I will turn the call over to Ruben.

Ruben Mendoza: Thank you, John. Good morning and thank you for joining us for a review of our second quarter results. Before we begin, let me update you on how we are managing the impacts of the COVID-19 pandemic. In March, we launched a business continuity plan to safeguard our team members, customers and suppliers. During the second quarter, we continued to take proactive actions to promote safe operations and right-size our business to reflect current market conditions and measures to strengthen our liquidity and capital resources. The health and safety of our team members is a core value at FBM, and we have implemented measures to help to ensure their welfare, including the use of additional personal protective equipment, frequent cleaning of our facilities and fleet and practicing safe social distancing. We continue to follow the safety precautions recommended by federal, state and local authorities. During the second quarter, we continued to have COVID-19 virus-related job site restrictions, which reduced our branch operations primarily in five states: Pennsylvania, New Jersey, Michigan, the State of Washington and California during April and May. In June, many of the job site restrictions were lifted, and we gradually resumed deliveries to our customers. As of today, all of our branches are operating in the United States and Canada. In response to the virus, we furloughed approximately 450 team members. But as of the end of July, substantially all of our employees have returned to work. In addition, we have restored all salary reductions and employee benefits as business conditions have gradually improved. Our number priority is the health and safety of our team members, and I would like to thank them for their dedication and sacrifice during this challenging time. Now turning to our second quarter results, Foundation Building Materials recorded net sales of $486 million, down 13%. Base business net sales decreased by 14.5%, primarily due to reduced net sales due to the pandemic. We estimate the negative impact of the COVID-19 pandemic and social unrest on our net sales to be over $100 million in the second quarter as shelter-in-place orders from state and local authorities and job site closures and restrictions impacted our ability to deliver products to our customers. Despite the decline in net sales, our stable underlying profitability highlighted our second quarter results, with gross margin of 30%, adjusted EBITDA margin of 8.7% and adjusted EPS of $0.27. Given this period of uncertainty, we maintained our profitability through proactive measures to restructure our business to reflect current market conditions. We have also improved our financial position by reducing our debt. In the second quarter, we paid down $195 million on our ABL revolving credit facility. At the end of the second quarter, our debt leverage ratio was 2.64x, an all-time low for the company. As we return to normal operations, we will continue to drive organic growth through Greenfield expansions in underserved markets with a 2020 objective of opening 3 to 5 Greenfield branches and a long-term goal of 4 to 6 branches per year. Our Greenfield branch investments yield high returns on invested capital in the first few years of startup, leverage our national scale, increase our market share and support our long-term growth. In addition, we are also resuming our focus on acquisitions to supplement our organic growth. In 2020, we have completed 1 acquisition, and we see opportunities to make additional acquisitions this year. We have a solid pipeline for future acquisitions, and we will continue to selectively acquire businesses that meet our strategic priorities and enhance our North American presence. As discussed on our last call, we are starting the pilot launch of our e-commerce initiative later in the third quarter. Our e-commerce initiative is a natural evolution of our digital platform. We see opportunities to empower existing and new customers to purchase our products online. We also see opportunities to grow our complementary products’ net sales through our digital platform. In addition, we are making investments to streamline our supply chain by lowering our cost of goods sold, increasing inventory velocity and improving our supply chain efficiency. Now more than ever, building a digital platform is a strategic imperative to enhance the customer experience and drive organic growth. Although the effects of the pandemic have adversely impacted our financial results, we have maintained stable profitability, demonstrating the resiliency of our business during these challenging times. Our company is well positioned to withstand market changes with a highly variable cost structure that allows us to scale costs with revenues in changing economic environments. We are adjusting our business to reflect the current challenging market conditions by rightsizing our operations and enhancing our financial flexibility. During the third quarter, our focus is to continue navigating this challenging environment and executing on our strategic initiatives. We will continue prioritizing the health and safety of our team members and keep in place enhanced safety procedures to safeguard their well-being, while fulfilling our responsibility to our customers and shareholders. We will continue to provide superior service to our customers while delivering long-term value to our shareholders. Now I will turn the call over to John Gorey for more details on our second quarter results.

John Gorey: Thank you, Ruben. I would also like to welcome everyone on today’s call. As Ruben highlighted, we recorded second quarter net sales of $486.1 million, a decrease of 13.2%, and base business net sales of $457.8 million a decrease of 14.5% over the prior year period. Net income for the second quarter was $9.9 million compared to $14.7 million in the prior year period. Adjusted EBITDA for the second quarter was $42.3 million, a decrease of 16.1% compared to the prior year period, with an adjusted EBITDA margin of 8.7%. Now turning to our product line results, sales in all our product lines were affected by the COVID-19 pandemic, shelter-in-place orders and, in certain markets, civil unrest. Second quarter wallboard net sales were $188.6 million compared to $214.1 million, a decrease of 11.9% compared to the prior year period. Wallboard base business net sales declined 13.3% with a 3.3% decrease in price and mix and a 10% decrease in unit volume. Suspended ceiling net sales were $91.5 million compared to $106.2 million, a decrease of 13.8% compared to the prior year period. Base business net sales for suspended ceilings decreased by 15% compared to the prior year period. Metal framing net sales were $82.2 million compared to $102.4 million, a decrease of 19.8%, primarily due to lower unit volume and lower selling prices. Complementary and other product net sales were $123.8 million compared to $137.3 million, a decrease of 9.8% compared to the prior year period. Gross profit for the second quarter was $145.7 million compared to $171.5 million in the prior year period, a decrease of $25.9 million or 15.1%. Gross margin for the second quarter was 30% compared to 30.6%, a decrease of 67 basis points compared to the prior year period. The decrease in gross margin was primarily due to lower net sales from high gross margin markets. Selling, general and administrative, or SG&A, expenses for the second quarter were $106.3 million compared to $122.7 million in the prior year period, representing a decrease of $16.5 million or 13.4%. SG&A expenses as a percentage of net sales were 21.9% or flat with the previous year. SG&A expenses as a percentage of net sales were flat due to actions taken to right-size our cost structure in response to a decline in net sales resulting from the pandemic. Now turning to our balance sheet and liquidity, we finished the quarter with cash of $31.1 million on the balance sheet and generated $88 million in free cash flow. During the second quarter, we paid down $195 million on our ABL credit facility to a balance of $40 million and have $325.6 million of available capacity. Our net debt leverage ratio at the end of the second quarter was 2.64x. We believe that we have sufficient cash and liquidity to meet our business objectives for the foreseeable future. Now, I WILL turn the call over to Ruben for some closing remarks.

Ruben Mendoza: Thanks, John. In closing, our long-term strategic focus is unwavering. As we navigate through these challenging market conditions, we remain committed to our strategic priorities that will lead to long-term value creation for our company. As business conditions improve, let me reiterate our long-term goals. First, we will continue to strengthen our balance sheet by reducing our debt leverage ratio. Second, we will drive organic growth by opening Greenfield branches to grow our market share and expand the range of products we offer our customers through e-commerce. Third, we’ll continue to focus on profit margin expansion across our business by leveraging our economies of scale, executing our cost-out initiatives and investing in company-wide initiatives that will drive long-term profitability. And finally, we will continue to make strategic acquisitions. Our industry remains highly fragmented, and we continue to see opportunities to expand our geographic footprint and build our presence in the markets we serve. We continue to believe these actions will drive growth, improve profitability and deliver long-term value to shareholders. That concludes our prepared remarks and now we will be happy to take your questions.

Operator: Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question is from David Manthey with Baird. Please proceed with your question.

David Manthey: Thank you. Good morning, guys.

Ruben Mendoza: Good morning.

David Manthey: Ruben, you talked about rightsizing the business into the third quarter and based on the July trends that you are seeing and assuming some improvement, it looks like third quarter revenues might end up similar to the first quarter levels roughly. Would it be correct to assume that SG&A would be closer to first quarter levels under that scenario, but still remain lower because of the actions that you have taken and the costs that have not been restored as the business bottomed and started coming back a little bit?

Ruben Mendoza: Thanks, Dave. I think as far as SG&A goes, for the rest of the year, not just the third quarter its 22% to 23% is really what we anticipate SG&A being. And so third quarter and into the fourth quarter, we are going to estimate full year about mid single-digits down in 2020 versus 2019 in revenue.

David Manthey: Got it. Okay. Thanks for that, Ruben. And then what was the contribution to overall growth in the Greenfields this quarter? And then one for John, the tax rate that you are assuming for the third quarter and the full year.

John Gorey: So the tax rate is going to be approximately 27% as it was in Q2.

Ruben Mendoza: Overall growth in the Greenfields?

David Manthey: In the Greenfields?

John Gorey: Greenfields?

Ruben Mendoza: Here we go. We’re going to have to get back to you on that, Dave. We’re looking at each other here, and we don’t have that number. I apologize.

David Manthey: Okay. That’s fine. We’ll follow up. Thank you

Operator: Our next question comes from Ryan Merkel with William Blair.

Ryan Merkel: Hey good morning everyone. Nice job on the margins.

Ruben Mendoza: Thanks.

Ryan Merkel: So first off, on the last call, you talked about very few project cancellations. Is this still the case?

Ruben Mendoza: Yes. So thanks, Ryan. Good question. So we talked about 1.8% cancellations and about 4,000 jobs that we were tracking the last call. In this call, it’s over 10,000 jobs, and it’s up just under 4%. So out of about 10,000 jobs, it’s – yes, it’s about 380-something cancellations.

John Gorey: 385.

Ruben Mendoza: 385, yes, is what we’re tracking. So yes, it has gone up, but it’s still a vast amount of good jobs postponed or continuing on at a little bit slower pace in some markets.

Ryan Merkel: Okay. Yes, that’s actually pretty encouraging. And the complexion of that backlog or those jobs is pretty broad-based. I think that’s what you said last time, right?

Ruben Mendoza: Yes. That is correct. And not just this year, it goes into next year. And I know that something that maybe you or others might be thinking as well is we don’t have a crystal ball, but we have plenty of good outlook on backlog for the rest of this year and into next year, definitely.

Ryan Merkel: Okay. And then my other question, the $100 million impact from COVID. How did you calculate that number? I’m just curious on the math.

Ruben Mendoza: Yes. So last year, we did about a little over $550 million in our second quarter. We had a good second quarter last year. And our budget, which we were tracking towards, and all of our jobs and our regions were tracking to a number in the 590s. So that’s how we calculated it, Ryan.

Ryan Merkel: Got it. Okay, great. I will pass it on. Thanks.

Ruben Mendoza: Thanks.

Operator: Our next question is from Matthew Bouley with Barclays.

Ashley Kim: This is actually Ashley Kim on for Matt. So the first question I wanted to ask was on wallboard pricing. It came down a little bit in the quarter, but does what we would’ve seen in resi suggest pricing should be more stable in the back half of the year?

John Gorey: Yes. I think that’s a fair assumption, Ashley. We are seeing a lot of really nonevents going on with gypsum pricing. Obviously, it’s driven by demand. Demand still is uncertain. So there’s – we’re not really seeing any sort of issues as it relates to gypsum pricing. And ours is really a result of mix as much as anything.

Ashley Kim: Okay. Great, thank you. And then just on the commercial backlogs, what are you kind of seeing there? And do you think that the near-term results could see air pockets just from the choppy construction environment from the shutdown back in March, and April?

Ruben Mendoza: Kirby, can you take that?

Kirby Thompson: Yes. Ashley, this is Kirby Thompson. In speaking with our customers, I spoke with one of our larger customers in the Midwest yesterday, and they are very confident that they have the two biggest jobs in their market that have yet to start. We’ll start in the next 60 days. And they – their bidding activity is very robust. So our customers are indicating they have a pretty good outlook on what’s going to happen for the next 12 to 18 months.

Ruben Mendoza: And Ashley, just to follow-up on that, I am assuming the pocket you mean is kind of a reduction, and we don’t see that. We see our business from April, May, June, July, continue our daily sales on an increase. And we see – we continue to see that throughout the rest of the year.

Ashley Kim: Great, thank you for all that color.

Ruben Mendoza: Thank you.

Operator: [Operator Instructions] Our next question is from Keith Hughes with Truist Securities.

Joshua Timothy: This is Josh on for Keith. I just had kind of a question about the 2020. I know 2020, you guys were really kind of focusing on residential as a growth driver, and that’s recovered a lot more. I guess, could you just kind of give us a sense of where we are with residential? I think commercial is a little different, but just give us an update there, please.

Ruben Mendoza: Kirby?

Kirby Thompson: Yes. Residential continues to be a market that we are growing in, Josh. And it’s really driven regionally because most of those decisions are being made by the large production builders on a regional basis. But we have had a lot of success, and we are excited about the remainder of 2020 for the residential business, continue – mortgage rates are low, and the buying appears to be robust.

Joshua Timothy: Okay. And it sounded like from John’s comment a couple of questions ago that mix was the bigger kind of driver of the price/mix number. And I assume that, that’s probably fair to assume since residential is kind of rebounds a little bit faster.

Kirby Thompson: Right. There is more half inch drywall, correct.

Joshua Timothy: Great. Thank you.

Operator: Our next question is from Ryan Frank with RBC.

Ryan Frank: Hey, guys. Thanks for taking my question. Wanted to follow-up on the project delays and cancellations, is there any noticeable difference between kind of non-resi and resi delays and cancellations in there?

Ruben Mendoza: We don’t see too many resi cancellations, delays, sure, especially in multifamily. We consider 3, 4, 5-storey multi-families to be resi for us. And we consider high-rise residential in the cities with metal framing to be commercial, metal framing and curtain walls. So that’s what – that’s how we’re establishing resi versus commercial. And we don’t see too many resi cancellations. We see postponements, definitely multifamily, but, actually, I was just talking to one of our biggest contractors in the West here, Pacific region, and they’ve got a lot of multifamily and, I mean, a lot coming up for the rest of 2020 and ‘21. And so it’s very encouraging.

Ryan Frank: Okay, got it. Thank you. And then the next one would just be on ceilings. Can you talk a little bit about kind of the price/mix and then also volume dynamics in second half – in the second half?

John Gorey: So ceilings is a function of core ceilings and also architectural specialties, which are on the high end. And that continues to be a growth engine for our business. For us, we outperformed in the second quarter on ceilings, and we continue to believe that we’ll maintain that positive momentum in that business.

Ryan Frank: Alright, thank you. I will pass it on.

Operator: Ladies and gentlemen, we have reached the end of the question-and-answer session. I would like to turn the call back to management for closing remarks.

Ruben Mendoza: Great, Thank you. I appreciate everybody joining the call. And I would just, once again, want to thank all FBM team members for this – the hard work and the sacrifices they’ve made in the second quarter. Thanks again.

Operator: This concludes today’s conference. Thank you for your participation. You may disconnect your lines at this time.