Our first question will come from John Lovallo with UBS.

The first one is you reduced your single family starts outlook, and you now expect to mid-single digit to high single-digit declines. Your fourth quarter revenue outlook, though implies sales are up about 4% year-over-year. So if we think about roughly a 3-month lag between starts and revenue, wouldn't single family starts need to inflect positively year-over-year over the next few quarters to hit that target?

Yes, that's right. I think the context for this is the dramatic decline we saw in builder behavior last year. I think that's the right sort of lens to look at this through. It's not really an increase in this year. It would be a seasonal decline like you'd expect, but compared against last year's precipitous decline, it looks a little bit better.

Okay. Understood. And then some of our checks, it seems like some of the more recent high-cost market entrants that have been sort of competing on price have been flushed out of the market. One, if you could maybe confirm that. And then has this resulted in any easing in sort of the competitive dynamic in those markets?

Well, I don't know that I can speak to specifics about flushing out. I hope you're right. I think that the reality is, there's been some pretty aggressive price discovery. Folks have gotten -- have been absolutely focused on filling capacity around the industry. I think that people have made aggressive moves, sometimes too aggressive and shown meaningful regret. The ability of our team to be able to navigate through that, certainly, margins have been under pressure. That's obvious. But to be able to do that and hold share from our leadership position. I think our team is doing a great job on that. I also think there are some tailwinds coming and we've all seen lumber moving in a stronger direction. If OSB hadn't sort of eroded underneath it, I think that might be a nice story on the strength line. But all of this is really dependent on what the overall market is going to do, the sense of uncertainty that the consumer feels and what builders are trying to do to react. I think that's really what it boils down to.

Our next question will come from Matthew Bouley with Barclays.

I guess a question around, again, what your homebuilder customers are doing around trying to reduce their direct costs. Maybe you can update us on their pushback versus the sort of vendor price increases that we're seeing out there. Obviously, you're calling out lower price in, I think, manufactured products and specialty building products. Certainly in the market, we're seeing vendor price increases and siding, roofing, et cetera. So maybe just kind of update us kind of tick through all your major categories and what you're seeing from a pricing perspective and the ability to push that down to builders.

Yes. Thanks, Matt. Good question. There's been a lot of activity. Certainly, some categories are able to pass through just by virtue of what they are and what they're made of. The reality of petroleum internationally right now is under pressure. There are certain categories that are moving in response to that. I would say most of the other categories are pretty flat. There hasn't been much movement in terms of inflation. There are a couple of categories, some subcategories that on a year-over-year basis, are still showing pretty meaningful declines on the prices that the manufacturers are charging. You think about some of the things we've talked about in the past, an EWP on a year-over-year basis is still down. There are certain millwork subcategories that are still down. There are absolutely competitive dynamics in certain of the categories that have limited manufacturers' ability to pass through. I think that applies to us in some degree. We've, I think, done a good job of managing our capacity, but I think it's fair to say we have more capacity than we need for the existing market. So we're making the prudent steps necessary to resize down, but also trying to make sure we're prepared to take advantage of a return to growth, which we think is likely to happen, at some point in the future. So therein lies kind of that challenge of finding the right pricing levels. We are seeing pass-through -- builders rightfully so, are fighting for every penny and trying to manage their own affordability, but this has to be a win-win. And I think as the market works through that price discovery process, we're getting to a more predictable outcome on margins. I'd say we're not quite where we want to be yet, but it's a lot more stable over the past 6 months than we've seen over the past few years.

Got it. Okay. Second one is on M&A. Obviously, from a leverage perspective, presumably, you're going to be more careful with share repurchase here. But I would think from an M&A perspective, certainly, you can acquire EBITDA in a perhaps leverage-neutral fashion. So what are you seeing out there in terms of the pipeline? And when you have the kind of challenging market conditions like this, whether from a historical perspective or sort of what you're actually seeing now, is there a scenario where you might see more assets come to market? And how would you be looking to approach that?

Yes. Thanks, Matt. Good question. We still think M&A is a great opportunity for us, right? There are a lot of players out there. There are a lot of desirable players out there in our space. So we're continuing to probe and stay close. We certainly have been speaking to a handful of players that are looking to make a move now various reasons. And think this is a good time for us to continue to lean into those opportunities. So we'll continue to do that. You're right. I mean, the elevated leverage not because of debt, but because of the cycle, certainly is something we're attentive to. I want to be respectful of it. But do not feel concerned with where we are. Our liquidity is strong. Our maturities are strong. Our disciplines, our cash flows are still good. So our ability to take advantage of opportunities that present themselves at a time like this, in particular, absolutely. We are still interested. And there are some deals in the pipeline at this point, and we keep looking for the right ones to keep showing up. So looking forward to that opportunity, no doubt.

Our next question will come from Charles Perron-Piche with Goldman Sachs.

First, I'd like to touch on the commodity. Given the move in lumber that we've seen year-to-date, I would have expected maybe incremental upside to your commodity price outlook for this year and contributions to result, the fact that your outlook remains the same reflect more of an expectation of a moderation in lumber and commodity prices in the second half? Or are you seeing greater difficulty to pass on some of those cost increases to your customers in this environment?

So thank you for the question, Charles. So the commodity outlook is in line with what we had projected last quarter. We expected it to continue to float up through Q2 and then retreat a little in the second half of the year, and it's performing pretty much in line with that expectation. That's the reason for no change to that guidance.

Okay. Okay. That's good color, Pete. And then in your prepared remarks, you noted that builders are increasingly offering build-to-order solutions to differentiate themselves. You're seeing increased traction to your digital offerings as a result. And how can you better serve your customers with your digital offering as a result of this shift?

Yes. The build-to-order is an obvious reaction from builders that have seen inventories grow, right? It's certainly a good discipline that they have displayed and I think will be effective in helping to manage the business over time, it will give us a more predictable target around which to make sure we're providing the right support. You're absolutely right. Our digital tools are particularly suited to people trying to do plans and designs and then trying to leverage the tools through to being able to offer the best possible service and value proposition for our builder customers. So we're continuing to find ways to refine those tools and to offer those 3-dimensional digital twins in a way that is going to create value for builders. So at the end of the day, that has to be the deliverable and the commitment that we live up to is to make the builders' life easier as they're building those homes. So you hit the nail on the head. I think our tools are absolutely good for that and built for that. And this is the type of market we think that plays to our strengths. As does our value-added offering, as does our bundling package, as does our extremely experienced sales team and the subject matter expertise that we have, those are all reasons that this build to order trend is going to play well for us.

Our next question comes from Rafe Jadrosich with Bank of America.

On the market share commentary, I think you said you held share in the second quarter. If I remember right, in the first quarter, I thought you gained some share. Did the competitive environment change in the second quarter relative to 1Q? And what's sort of the outlook for that in the back half of the year?

If it changed meaningfully, I'd say it's ebbs and flows. What I would describe is that the overall market constricted a little bit in the second quarter. I would say the feel of the market, given the uncertainty and the volatility in the Middle East, I think the sense was, this is harder. That's more of an emotional comment to you than a data-driven comment. But the conversations that we have with builders, the conversations we're having in our operating review calls and speaking with the teams around the country, I think there was a sense of optimism at the beginning of the year that faded pretty meaningfully into the midst of the second quarter as things sort of ebbed and flowed pretty aggressively. But I don't know that there's more than that. I think that generally speaking, the holding share is just an indication of the competition day in, day out.

Okay. That's helpful. And then can you just talk about the inbound and outbound freight impact from higher diesel prices? How does that flow through your P&L? And then just the time like -- how much of a headwind was that to 2Q and what you're anticipating for the third quarter?

Yes. Thanks for the question. So we haven't changed our position on what we expect for the full year. We're still expecting about a $100 million headwind from the higher fuel costs, the combination of the inbound and the outbound. We did see a little bit of softening during some of the ceasefire periods during the quarter. But that doesn't give us enough visibility into the balance of the year with the increased tensions that we're holding on to that $100 million. We have seen our fuel surcharge and pass-through increased about 20% in the quarter. So we are effective at passing some of it through. We have more work to do. But the inbound, I think as we talked about last quarter, is really going to show up in the cost of inventory, the cost of the materials and that flows through cost of goods sold. The outbound will be more in the SG&A line. So that's certainly a headwind in SG&A and the recovery of that is going to be up in sales and margin. So there's a little bit of distortion in geography on the P&L. But I think we're -- the team's job managing the costs, and we have -- there's always more work to do, but we're managing it in this kind of fluid situation pretty well.

Our next question will come from Mike Dahl with RBC Capital Markets.

First one on the 3Q sales dynamic. Obviously, a little bit of a wide range. But given your normal lag to commodity prices and the blended lumber OSB basket, I would have thought that would flip to a pretty nice like low single-digit tailwind from an inflationary standpoint for commodities, which then would imply at the midpoint or below of sales that the volume would actually step worse on a year-on-year basis in 3Q. So I'm wondering, is that the case? Or is it something where like we did know your inventory's up as a percentage of sales? Like is there still like a larger-than-normal kind of lag on commodities or some prebuying or contractual dynamic where it's just not impacting you as quickly in 3Q, yes?

Yes. I would say you're spot on. The lag on the commodities and seeing those higher prices coming through into our inventory is still the case. We anticipate to pass that through. It will flip even with the expectation of being at a $400 per thousand midpoint in our guide. That will be higher than the prior year on average for the year. So we should see a flip and a benefit in the back part of the year, but it's also on a lower sales activity level. So it's going to be muted from an overall contribution, but it will start to turn into a benefit.

Q3, kind of -- again, we are kind of had slipped from -- it was going well to the lights turned off happened in the third quarter. So you're also lapping that component. Obviously, it's more prevalent and it was more evident in the fourth quarter result, but there's a little bit of that there, too. So there's a couple of pieces that come into play.

Yes. No, I appreciate that. It seems like especially at the low end, it would imply at the 3Q specific color that it would imply something then maybe quite a bit worse on volume. And so I was trying to get at, like there is something unusual with the commodity relationship versus what we've normally seen? Or is that right that volume-wise, we should expect kind of almost like a worsening year-on-year trends within that guide. But the follow-up question then is on the gross margin dynamics, you're sitting at 28.2% in the first half of the year, your guide, obviously, at the midpoint 28.0%, I think last quarter, you talked about maybe it's down a little sequentially in 2Q, then up a little sequentially in 3Q, then seasonally down again in 4Q. Can you -- can you just talk to, with all the moving pieces now, what within the guide is the updated expectation for gross margin specifically in the second half and split between 3Q, 4Q?

Yes. So obviously, in the second half, that 28% midpoint would require a slightly below 28% in order to average down. We're seeing it kind of flat for the balance of the year at this point. There's still enough uncertainty on how it's really going to play out. But we took the approach based on where we exited Q3 and what we're seeing with the lower -- or Q2, excuse me, with the lower starts expectations for the full year, that it's going to be a continued competitive environment that we're going to have to continue to compete and win business every day. And so that's going to keep the pressure on the margins, but we're going to find a way to improve and capture every nickel we can.

I mean, hopefully, it's what we said in the past. I mean, Mike, that stronger markets allow for more opportunities to manage both mix and price in a way that gives us stable margins. If we're calling down the top line, it's a tougher environment. It's not dramatically tougher, but we're trying to signal that those 2 go together. Hopefully, that's clear on what we said. But we think it's pretty flat from where we're at now.

Our next question will come from David Manthey with Baird.

I was just wondering if you could give us your thoughts on multi-family housing. And I don't know if you gave any credence to the NAHB numbers, but you guys have multifamily down mid-singles this year. They're calling for up mid-singles this year and then down in '27. Just wondering if you could talk about why there would be that disconnect there? Why your view is different? And then given the long rates and affordability issues, it would seem like multi-family might be a reasonable relief valve, maybe short rates come down even if long rates don't. Could you talk about the medium term and maybe the prospects for multi-family?

Yes. No, absolutely. This one is a bit of an irritant for me. So I'm going to -- I'll say -- I'll anonymize this because it's not fair. We only play in a portion of the business. So I will readily admit that maybe my perspective is skewed because we're only in 5-storey and below wood structures. So that could be the beginning of the end of the explanation of the next thing I'm going to say. But the multi-family published numbers do not make sense to us. I believe they are incorrect. I believe something happened in the Fed numbers or the way they're doing their surveys or something, I don't think they're right. I don't think there's any way they can be right. And I've talked to a couple of other players, people in positions of authority that you would know their names, who do this for a living and they agree with me. This does not make sense. So maybe there's some aspect of the tower conversions or something that I'm not seeing that is causing these permits and starts numbers to be higher than what we are seeing. But I think we're actually doing decently in the multi-family space where we play. 100% agree with you that if rates turn a little, the short rates will absolutely release, and we will see an increase, I think we're positioned well to be able to take advantage of that with both trust and millwork as well as some other product categories that we've been leaning into. So feeling like that's a good opportunity for us when the time comes.

Okay. Yes, that's good color. And then second, I wanted to just make sure I understand the cost actions here. So I think you realized $13 million in the first quarter. I believe you said $28 million in the second quarter. But then there was a comment about another $15 million. Now it's $115 million remaining or something. Could you just give us sort of what's been achieved so far? What is yet to come and the cadence through the remainder of the year? And then if you can just talk about how much of that is sort of variable, meaning comp and overtime and things like that versus structural that would remain in place even if the market gets better?

Yes. So there's two components. So I think what you were referencing was really the productivity savings that we've identified and called out. Those are separate and in addition to the cost actions that we are continuing to execute against. What we had stated previously was $100 million of cost actions, $75 million of those were cost out year-over-year, $25 million of cost avoidance. That number has now been increased to $115 million in 2026, but $140 million if you count the full run rate that we expect from the $40 million of new cost actions that we're putting in place immediately. Those are largely -- the original $100 million is largely complete and underway. It's just realizing it through the passage of time through the balance of this year. The $40 million, it's increasing what we were going after a bit more, and it's targeted specifically SG&A and more on the fixed cost side of the equation. So we see the reduction in the sales. We are very aware of the situation, and we're reacting to help make sure that we're not deleveraging more than we should. So that's the call and the reason for those cost actions, but they are separate from the productivity.

So I know how much you guys hate the cost avoidance, so I'll just take that out, right? We took the $75 million of cuts, got them done. We're adding another $40 million of cuts going to get them done. That is predominantly SG&A predominantly fixed. That's not the variable. The variable is already falling with the decline in sales and the work that the teams do day in, day out to run the business appropriately. So that $115 million annualized run rate of cuts is what we're executing, because we're starting the $40 million right now in July, you're not going to get all $40 million this year. So that's where Pete says $15 million of that is going to hit this year. And the rest of it will flow through in the run rate into next year.

Our next question will come from Keith Hughes with Truist.

Just kind of building on the last question, it seems like by the end of the year. On a down note, will you have to, in the beginning of the year, reassess more fixed cost, if there's no signs of life here for 2027?

Well, I mean just to maybe put a sharper point on it, we do it all the time. So by market, we are looking at what our capacity is, what our profitability is by location every month, every quarter. So we will absolutely do that. I think there is enough excess capacity based on where we are now, that will be a struggle for us for some time until the market turns. Now we're trying to find that balance. Near-term profitability and long-term capacity and opportunity. So we'll keep looking at it. But yes, that's our lot in life right now with the market as tough as it is.

How many locations have you closed over the cycle here?

I think we're up to 91.

What did you begin back in '22, what did you begin with?

Well, you guys remember, we're buying. So we're probably about 30 or 40 down net, but we've added a bunch, whatever the delta is 60.

So that 91, Keith, is over the last 2.5 years. So it's -- we completed a lot of acquisitions. We had some store openings on greenfield projects that were in process underway. So there is a lot of puts and takes.

Okay. And final comment for what is worth, I agree with you on multi-family. These numbers don't make any damn sense. You just don't see it out in the market at all.

Our next question will come from Ryan Merkel with William Blair.

First topic is just monthly sales trends. Can you talk about how revenues trended through the quarter and into July? And then were there any big surprises or mostly as expected?

Yes. Thanks. That's unfortunately the reason for the call down. I mean we -- what generally happens throughout the year, and we've talked about it is the seasonality and the seasonal curve. So we know by week what our expected run rate on a daily sales basis is coming out of the holiday, 4th July holiday, we had an expectation of sort of the normal run that sort of gets to the peak that you hold through late summer and then fades into the fall. That didn't happen. The run didn't happen. So basically, the peak leveled out lower than we expected in July. And the conversations with our customers and the public comments, we've sort of basically concluded that we shouldn't expect for a late pop to hit. We're probably going to see the normal seasonal based on where we are. If there's a ray of hope in all this, I think the good news is we don't expect last year's light switch. "Oh, we're not going to build anymore, we've got too much inventory." I think that the behavior of the builders this year has been a little bit better aligned, sell a unit, build a unit -- sell a unit, start a unit kind of an approach. So I think they're more comfortable with the inventory levels. But it's -- yes, it was an unpleasant July in that regard.

Got it. All right. That makes sense in the context of the guide. All right. And then gross margin, how should we think about 3Q? Should we assume normal seasonality or anything you want to flag?

I don't know that there's anything to flag as we mentioned, kind of flat from where we are today, and it's going to be down on average for the second half relative to the first half in order to meet the midpoint of the guidance. So we're seeing margins holding stable, a little bit of wiggle in different categories, but for the -- all intents and purposes, pretty much stable margin environment.

Our next question will come from Phil Ng with Jefferies.

I guess flat gross margins perhaps answers this question. But last quarter, Peter, you were talking about still a pretty competitive pricing environment where particularly the specialty category saw some price compression. So I'm just curious, what are you seeing in the marketplace? Some of the regional competitors, as you kind of alluded earlier, was super aggressive and maybe they have regrets now, but are you seeing any stabilization or it's still a little touch and go, especially as you kind of wind down later in the year when seasonally things slow down?

Yes. Thanks, Phil. So yes, generally speaking, I would say the trend is towards stabilization. There are certain categories or markets that occasionally will show volatility. That's the way to say it, right? Someone will get aggressive, there will be back and forth fight, someone will back off and say, no, this doesn't make sense for us and stabilize and we'll get to status quo is in that market. Our discipline internally is really around assuring that you're getting a breakeven or better or an appropriate margin in the market or some aspect of that, that we maintain the core discipline of running our business and maintaining it in a way that we like over the long run, right? We sometimes fall victim to the commentary from certain builders who -- well, you need to take losses because this is a hard market. And my response to that is, no, this is a win-win relationship, and we're both going to do this for profit because that's why we're here. And so we're going to say no to things that don't make sense. I don't think everybody in this space has as fine a pencil as we do. So I think you see behaviors for windows of time that get a little sideways. So therein lies this whole share versus margin conversation that we kind of have with regularity. Given our scale, it's pretty detailed, it's pretty broad, and you can sort of see it in different markets and the dynamic playing out, but we -- at the end of all this and looking at it in consolidation, see a trend towards it stabilizing, getting to numbers that we think are defensible given where we are. As volumes continue to sort of hopefully stabilize and turn. We have a good sense of what that means for margins and where.

Okay. Very helpful perspective, Peter. From an M&A perspective, it seems like you still have a fair amount of appetite. In terms of what you're seeing out there, is there a lot of assets coming to market, just given where we are in the cycle? Do you have reluctant sellers? How are multiples kind of moving around? And then how are you kind of looking through all this, just given still a lot of uncertainty in earnings, right? What kind of multiple you're willing to pay? Or do you kind of view it as, this is great. We get to buy some assets on the cheap at the bottom cycle. Just kind of help us think through that and then certainly put that in perspective with buybacks just given where your stock price is at as well.

Yes. No, that's a good question. I mean it's a modest market. I wouldn't say that it's red hot. It's not ice cold. There's a fair number of assets where people have raised their hands. You're right about valuations, right? You've got to be very thoughtful about what you're buying. Every seller wants to use a 5-year run rate, you're right, a 5-year average, which is lunacy. But you also, I think, could be a little bit forward looking when you think about current year numbers. I think that's also an appropriate way to think about the business. Geographies matter, product categories matter. Those have always been true, but I would say especially so now. So the way we look at it is buying a really nice business with a good fit for us. This is a nice time to do it. We still have cash flows. We're still generating cash on a regular basis. I think the overlay on this entire story is the numbers are just smaller than they have. The cash flows are smaller, the M&As are smaller. Any conversations even what we've done already so far this year around share buybacks are smaller. So that's -- I think that by virtue of our business being smaller, that's probably the way to think about what we're up to, and we'll continue to execute the strategy. I think the core of it is very consistent. It still works for us. We still like it.

Our next question will come from Sam Reid with Wells Fargo.

I wanted to circle back on guidance here and drill down a little bit on the fourth quarter. So when you look at the implied Q4 EBITDA range, it does imply a fairly wide spectrum of outcomes. Could you just talk to what you need to see to hit the high end of that range? Because I believe it would imply a sequential step-up in EBITDA dollars. So just walk me through the building blocks there.

Yes. I'd probably back you up. We continue to be consistent the way that we narrow guide as we go through the year, consistent with the prior years. So as we get to Q3, we'll tighten it up a bit more. I know you're trying to look for the exit rate and the possibility of what Q4 would be. I would tell you, we try to go down the middle. We give obviously a range because there's uncertainty and unknowns that continue to present themselves. But if you go down the middle, that's probably more in line with where the thinking would be at this current time. And we're not in a position where we're going to give actual exit rate information or guidance, which I know is not helpful for you as you start to look forward to 2027 and putting numbers together there.

All good. Never hurts to try. Maybe let me ask a more philosophical question here. We are obviously seeing the builders lean deeper into more build-to-order. It's coming up on builder earnings calls and showing up in builder numbers. So two implications for that. One, does that have any implication on your lag versus starts just given build-to-order homes, a little different from spec homes? And then also, as you see more build-to-order, is there potential for more take per start?

Well, that's a really good question. I think the answer is, it may extend the lag a little to order by its nature, has more likelihood of change orders or adaptations throughout this process. However, I want to be a little careful with that because most of the folks making the pivot are spec builders so they don't offer that much variability anyway. So I don't know that it will be meaningful, maybe a little. In terms of dollars that go in, same kind of general answer and say, yes, order -- build-to-order is generally going to have more dollars in it. But if you're just shifting a spec builder or a largely spec builder or first move-up type of home, the amount of incremental is fairly modest. So don't get me wrong, we'll take every penny or every stick, but I don't know that it's going to be meaningful.

Our next question will come from Trevor Allinson with Wolfe Research.

Maybe a question on what you're hearing from your private builder customers on a couple of fronts. The publics seem to be willing to trade some volume here to protect their gross margins. Are you seeing similar actions out of your private customers? And then the publics have also been very vocal about not taking on some of the price increases that the building products companies are pushing. Are you seeing more success getting those price increases passed along to your private customers versus the public?

Well, I don't think anyone is immune to the affordability pressures. I think it's fair to say that the higher up the food chain you are, the easier it is. The amount of pass-through on the private side, I would say, just by virtue of the way that they approach negotiations the larger builders are a sharper instrument. I would say that the smaller guys depends more on the individuals involved in the markets that they play in. That isn't to say that there's a meaningful difference, but there's a difference. That scale matters. I think that the words, I would not use different words if I was a large homebuilder. But the reality is nobody in this industry is doing this for charitable purposes. There are points where you have to just say no, and this is the price. And if you don't want it, that's fine, but you're not buying it from us for less than this price. And that's the battle, right? That's what we're all engaged in right now because it's gotten back to that point of knowing where your lines are. And I think in the conversations we have with vendors, we have a lot of great vendor partners. They're trying, they're scrapping. We all know we need to build more houses. I think all of us have been very intentional about tightening our belts and being good partners in a tough time in the industry, but there's a threshold where you just can't go past. It's -- now you're harming your company for the good of an industry, and that's not what we're here to do. So there is pass-through happening, there is a back and forth happening. It's challenging, but I think we all know how to do it, and we're all -- we're all representing our companies the best we can.

Okay. And then second question is maybe related to some of your commentary, and it's another one on gross margin. You've talked about your expectations here near term, but the full year guide still doesn't imply a pretty wide range for the second half. So I guess the question is, what gets you maybe to the high end of your 2026 gross margin range, and it seems like maybe a little bit of a slowing environment. And then related to that, you brought down the high end of your range, but you left the bottom end unchanged. So is that an indication of perhaps maybe a limit to how much margin you're willing to trade for market share gains in this environment?

Yes, that's a heavy question, man. So there's a couple different pieces to it. I think that the way that margins will shift, there's some mix components, there's some competitive dynamics depending on which markets are stronger than others. You've got different margin profiles. So there's a combination of events that I think could position us to do a little bit better than the median, right? And I think that we've outlined that. We certainly have seen it at certain points, and there's a possibility that could play out that way. The downside planning and scenario planning is something we do a ton of around here. So we laid out a worse a lower case scenario than where we have ended up so far this year. And I don't -- I still don't think we're going to get there, but we wanted to give you the lower bound. So I think that's why you're seeing us not move the lower end of it. It's not what we had hoped for, but it's not what we had feared either. So I think that there's your answer there in terms of why we weren't necessarily moving the bottom. Again, kind of back to my prior statement, there is a walkaway point with all of this. And I think we're confident in our ability to recognize where we're not doing -- we're unwilling to take business that doesn't contribute to what we're trying to accomplish and be able to walk away at that point is the right thing for this business regardless of what other players do. So that's the line, I think we've been able to understand and manage the business around. The good news is, we don't have to be down there all the time, right? We know how to continue to protect our margins. We're still profitable and cash flow positive and doing a lot of good things strategically at a time when the broader market is under a ton of pressure. So I think we feel good about our ability to execute and to continue to drive forward. But it's a challenge. It's a dogfight out there, and we're doing well. I think we're doing better than our competition, but it's tough.

Our next question comes from Reuben Garner with The Benchmark Company.

Peter, the cost actions that you've taken, you mentioned the incremental being fixed on the SG&A side. What about kind of in your -- any of your manufacturing assets? Can you update us on anything you've done within that $115 million and if there isn't much there, I guess, what it would take for you guys to move towards taking some of that out? And I guess, secondarily, as a part of that, have you seen any smaller competitors pull or take assets down?

Yes. Yes. No, that's a good question. Let me clarify. So when we talk about the facilities that is a mix between what shows up in SG&A and what shows up in COGS. So you're talking about the manufacturing facilities a meaningful portion of that is up in COGS by virtue of what they do. We have absolutely taken down facilities as part of the 91 that we've closed over the past couple of years. That is inclusive in that number. The way we think about it is, it's your variable right -- it's your variable cost. So as sales come down, you have to take down those variable costs, at least the ones that show up that way. And then a component of that will show up down in the below -- in the SG&A portion of the P&L. The fixed stuff, right? The line items identified as fixed, the cost categories identified as fixed, that aren't necessarily tied to specific sales volumes, that's what we're really leaning into with those other conversations. I won't call you -- I won't tell you it's super rigid in terms of exactly every dollar coming from where, but the vast majority of the focus on those cost cuts that we've talked about, that $115 million is SG&A related.

Got it. And then you guys have a pretty national footprint, but you still have some differences versus kind of broader starts numbers. Can you talk geographically about any areas of -- in particular of strength or weakness within your portfolio?

Yes. Definitely. And I actually forgot to answer the second half of your first question. Yes, we've absolutely seen competitors closing facilities around us in similar ways. So I think that broadly speaking, everyone is trying to figure out how they can adapt. I think one advantage that we have is the multiple locations per market allow us to be more flexible while still retaining the customer base and maintaining on time and in full ratios and keeping the customers happy. So I think that's been to our advantage in that regard. Others have to exit more dramatically from either chunks of the market or markets entirely. The second half of the question, so where we're seeing some weakness still persist a little bit in Texas and Colorado. Those are pretty important markets for us. Where we're seeing strength is really in the entire Northeast is performing well. But obviously, there's just a different starts exposure in the Northeast versus some of the other markets. In your point about where we service versus where we don't, we see that, too. We're in most of the large MSAs, but I'd say we're probably covering 80-ish percent of starts nationally. There are certain parts of the country we're not in Chicago, we're not in South Florida. We're not -- we're not heavily into chunks of Illinois and Indiana, we've got pockets where we're doing great in Indiana, but we don't cover the entire market. So there's examples like that, where we have seen strength in some of the headlines where we just don't participate. So it's part of it. It's not a major part of the story, but it's there.

Our last question for today is Jeffrey Stevenson with Loop Capital.

Can you talk about the size, value and complexity of single-family housing starts this year given builders' increased focus on build-to-order homes and whether you've seen any change in mix as the year progressed?

Yes. Thanks for your question. We really haven't seen change year-over-year or sequentially in the size of home. The size has been pretty stable. As far as the complexity, there's still the value engineering that's been taking place, and we continue to see some cost out year-over-year or opportunity out on the sales versus start. It's pretty modest, maybe in the 1% to 2% range. So it's not a big factor at this point. But it's still there as we see more townhomes or shifts to the type of dwelling space that is being delivered to the market.

Okay. Great, Pete. And I was wondering if you could provide any more color on the $50 million reduction in CapEx guidance and specifically areas you're able to cut or delay this year in a more conservative residential demand environment?

Yes. It's part of the cost actions as we think about conserving capital in a shrinking market or a tightening market, we don't need to invest as much in some of the replacement of our rolling stock, our fleet and equipment. We have the ability to redeploy and move that equipment around and make sure that our operations are taken care of and they have what they need. And so it's just an approach to tighten that up as well as not needing to invest as much for growth, especially in markets that we already have a density and a footprint that we can service very well. We don't need to continue to expand at this time. We continue to evaluate every market by market, and they have different needs and they have different capabilities. So we're -- we do that on a regular basis. We just felt for this year, it was more prudent to pull back on some of the capital expenditures and conserve that capital.

Thank you. That does conclude our allotted time for question and answers. I'll now turn the call back over to our presenters for any final or closing remarks.

Thank you for your time today. And if you have any questions, you can follow up with the Investor Relations team.

Thank you. That brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.