And then eventually, what you see as that commercial construction and residential continues to grow is the enhancement and expansion of water treatment and wastewater treatment plants as well.
Brian Biros: Thank you.
Operator: Our next question comes from Mike Dahl from RBC Capital. Mike, your line is now open. Please go ahead.
Mike Dahl: Good morning. Thanks for taking my questions. I’m going to stick with non-res. So I think just to clarify, Steve, based on those prior comments, I think a lot of the concerns out there around non-res are kind of in the broader core non-res, commercial construction verticals. It seems like you’re potentially just calling out that the weakness is in multifamily, which some people may categorize kind of separate from non-res. So if you think about kind of stripping out multifamily, is your expectation that non-res ex-multifamily would still be flatter for the year? Or how would you characterize that?
Steve LeClair: Yeah. Flatter, but we would also see that warehousing is another area that I think we’ve seen a decline as well, too. That’s been really strong over the last 12 to 18 months, for sure, for fire protection products. So that 1 has been an area that we’ve seen in decline as well.
Mike Dahl: Okay. Got it. And then as a follow-up, down low single-digits for the year in non-res. It seems like the first half. I know 2Q was stable. I think 1Q might have even been up a little or stable. So it probably implies that the second half is down mid-single digits-ish. When we think about the cadence, are you already starting to see that hit in 3Q or should we expect that 3Q is kind of somewhat weaker and then kind of a sharper decline as some of this manifests in 4Q? Any comments on kind of cadence to the second half on that non-res piece specifically, please.
Mark Witkowski: Yeah, Mike, I think as you think about non-resi, also keep in mind, I mean, we’re fairly balanced between starts and completions. So we’re I’d say we’re still seeing strength on the completion side. That shows up a lot in our fire protection business. What we’re seeing is the beginnings of softness on the start side, in particular, in multifamily, little bit in commercial. And as Steve mentioned, the warehousing. So I would expect from a cadence standpoint, in Q3, we’ll still see some volume pressure. But overall, I think that’s still a relatively stable end market for us just given the overall mix. So we’ll see how the starts plays out, could be temporary, but it was definitely something we started seeing here recently that we wanted to call out.
I’d say from a — the other factor there is as we get into the second half of the year, we do start to run into much easier comps on the residential side, still expect a little pressure in Q3, but we really saw that start to drop-off through the second half of last year. So we think the residential optimism and then just the year-over-year trends there provide some offset to some of that volume pressure. So we should see, I’d say, probably more of the pressure in Q3 and then given some of those offsets should be in a little better position from a volume perspective in Q4.
Mike Dahl: Okay. That’s very helpful. Thanks, Mark. Thanks, Steve.
Mark Witkowski: Yeah. Thanks.
Operator: Our next question comes from Joe Ritchie from Goldman Sachs. Joe, your line is now open. Please go ahead.
Vivek Srivastava: Hi, this is Vivek Srivastava on for Joe Ritchie. My first question is on just the fire protection sales decline this quarter and basically the pricing dynamics at play between the different product segments. Fire protection sales was down 9%. I think pricing was an attribute there. But in the other product segments, pricing was actually up. So can you provide some color on what’s happening between the different pricing across these products and how to think about it in second half and next year?
Mark Witkowski: Yeah, sure, Vivek. Thanks for the question. I guess, first on the fire protection side. That’s a product line that we do carry steel pipe products that are used for that particular product line. That is one of the more, I’d say, commodity type products that we have, smaller diameter, steel pipe, that’s used across various industries. And we’ve seen, I’d say, pretty significant pricing declines on that particular product line. So that’s really a majority of what you’re seeing with the fire protection product line being down 9% to 10% quarter-over-quarter. The other product categories, I’d say, price has either been stable or up as a whole and been pretty consistent there. So really, the big difference with the fire protection is that steel pipe category that makes up a lot of that revenue.
Vivek Srivastava: Thanks. And maybe just shifting gear a bit more longer term, the $55 billion water bill, I think previously you guys highlighted about $13 billion to $14 billion opportunity from this bill. And just doing some back-of-the-envelope math on it, you have about 17% market share, suggests around over $2 billion opportunity for you guys specifically from a sales perspective. Is that a fair way to think about this $13 billion, $14 billion opportunity. And just could we start seeing some of this as early as next year or maybe this will take a bit longer?
Steve LeClair: Well, we would anticipate that we’re going to start seeing those funds flow here. Up to this point, it has been hard to get it in through the state revolving funds. Most of that has been distributed, and now the municipalities are starting to draw down on that or we’ll be scoping projects for that. So our anticipation is that this should have a good tailwind effect for us, certainly in 2024 and ’25 and beyond.
Vivek Srivastava: Great. Thanks.
Steve LeClair: Thank you.
Operator: Our next question comes from Patrick Baumann from JPMorgan. Patrick, your line is now open. Please go ahead.
Patrick Baumann: Hi, good morning. First one on operating costs, SG&A. Could you just talk about your ability to manage those expenses in the current environment? And I imagine you’re still seeing some inflation with respect to people costs as well as facility costs. I’m just curious how you think about that bucket of cost. Maybe if you want to talk about fixed versus variable or however you think is relevant, the performance in the quarter as well as your expectation to be able to manage it over the next — for the rest of the year, I guess?
Mark Witkowski: Yeah. Thanks, Patrick, for the question. Operating costs for us is highly variable. But we — as you mentioned, we have experienced labor cost inflation, definitely inflation across a lot of our other facility and distribution costs. And some of that has even lagged our ability to get some of that price into the market. So we’re seeing more of that pressure show up. But we’ve also invested and continue to invest in a lot of our growth initiatives, greenfields. As an example, we highlighted for the quarter, and we continue to find new opportunities there to invest in growth. I’d say as we experience some of the margin normalization that we’re anticipating in the back half. We have a lot of cost that comes out relatively quickly given our variable cost structure with our incentive comp plans.
So that cost comes out very quickly as we experience some of that normalization. So that becomes a way to get that operating cost in line fairly quickly. So that’s — those are some of the easy levers. Obviously, we’ll continue to look market by market and see where some of the softness materializes. And if we need to make adjustments there, we typically do that on a market-by-market basis.
