Scott Deakin: I’ll Just add too, Steven. We’ve got the overhead of the Bronx location in those margins as well. So that’s an exciting new opportunity to serve that borough of the city. And as those revenues grow, we’ll get a lot of air covers for revenues over those overhead costs that will help out the overall profitability of the business as well.
John Turner: Yes. I wouldn’t call out anybody on the call listening from Kamco as well. Visits that we’ve had up there, that is an exceptional greenfield facility. One of the best I’ve ever seen being open in a very, very short period of time.
Scott Deakin: Okay. Great. And then zooming out on Slide 8, the three-year cash usage over 50% to acquisition, 18% to repurchases, 15% to capex. I’m curious just you foresee over the next three years that the capital usage could be something similar to that? Or if you think that mix morphs a bit over time?
John Turner: Well, I would guess it probably means if it’s going to change, it’s going to lean more towards M&A than anything else. And the — we’ve got a strong backlog. We’ve got a good M&A engine. It’s a core competency for us. And I think with rates moderating and coming down, I’d expect to see the M&A market also accelerate a little bit. So probably more towards M&A.
Scott Deakin: It wouldn’t be a significant shift, maybe 5 points to 10 points of percentage, but directionally, that’s spot on.
Steven Ramsey: Excellent. That’s great color. Thank you.
Operator: Thank you. Next question comes from the line of Mike Dahl with RBC Capital Markets. Please go ahead.
Mike Dahl: H. Thanks for taking my questions. And I also wanted to ask about Kamco and my line just cut out for a minute. So apologies if even just asked this, but just in terms of their current mix of business, can you help us understand what the current mix is from a product category and an end market standpoint? And then on the recent trends, if the 2023 revenues are slightly down versus the prior kind of trailing 12-month numbers you had provided. And so a little more color on their organic trends currently and what you would expect organically for them in the upcoming quarters?
John Turner: They are more weighted towards, and again, we haven’t closed. So I think, I don’t have all the details sitting right in front of me, but they are more heavily weighted towards ceilings. They are an excellent ceilings distributor, probably the best from an independent perspective out there in an exceptionally strong market for ceilings. So they’re a little more weighted towards ceilings. And the balance there — and a little underweighted in complementary versus us and underweighted in wallboard versus us. And while we’ll close in the next couple of days and get a lot more information on their sales, it would be a guess to tell you, but I believe it’s the same steel conditions that we’re facing, primarily.
Mike Dahl: Okay. That makes sense. And then looking at the numbers. So again, this is kind of back of the envelope, but it seems like you’re suggesting their legacy EBITDA might have been around kind of mid-20s million. And if I look at your post-synergy multiple, it suggests you expect to get that up to around $40 million. And that’s not insignificant in terms of the magnitude of synergies when you don’t have current geographic overlap. So I know you articulated where they’re coming from at a high level. Can you give us a little more color on the relative contribution of costs synergies, sales synergies? And then if the greenfield location is included in that number, and should we expect the greenfield to be about as it ramps to be about the same size as their legacy branches?
John Turner: Yes is the answer to the last question. It’s a very large facility. Actually, it’s an outstanding facility of beautiful building, well stocked, great operational capability. And yes, we’ve given them credit to that and the growth expectation there is included in our synergy number. A lot of effort, you can imagine trying to get a facility up and running in the Bronx, the years of effort that it takes through permitting and investments, et cetera. So we feel really fortunate about that opportunity. So wallboard opportunity is another significant synergy, both on the selling side, but also on the costs side there, as well as several other product cost opportunities. So if you were to look at purchasing synergy, the Bronx, that’s the large majority of the synergy that we’ve got in there, as well as a little bit of overall growth in the market.
And the least contributive is the G&A piece, which, again, as things more like benefits and scale advantages we have in leases and interest expenses and things like that.
Scott Deakin: Keep in mind, too, that because it’s an asset transaction, we also get a significant tax amortization benefit from us, which is essentially locked in for the next 15 years. And so think about that as a more — almost a reduction in price versus an EBITDA enhancement.
Mike Dahl: Okay. That all makes sense. And if I could just sneak one last one in. In terms of timing, obviously, to your best point, the tax savings is an ongoing one, but timing of realization for the other synergies, how should we think about that ramp?
John Turner: Well, I mean, purchasing synergies are fairly quick, right? They’ll happen in the very near term over the course of the next quarter plus. We’ll be doing that. Adn growth in the Bronx is growth in the Bronx. It’s a startup operation. So that’s kind of the tail end of the 24 months to 36 months we talked about. So you have the tax benefit on a kind of immediate basis. You’ve got purchasing synergies more on an immediate basis, small G&A savings on an immediate basis and then the ramp up in the Bronx is the one that’s going to take the longer period of time.
