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Coffee Conversations - Roofing CEOs’ Industry Outlook - PODCAST TRANSCRIPTION

Coffee Conversations - CEOs
April 2, 2021 at 9:22 A.M.

Editor's note: The following is the transcript of a live interview with Adam Oaks of Estimating Edge, Deryl Kratzer from National Roofing Partners and Will Lorenz of General Coatings. You can read the interview below or listen to the podcast here.

Heidi Ellsworth:
Good morning, welcome to Coffee Conversations. My name is Heidi Ellsworth, with RoofersCoffeeShop. I am so happy to invite all of you to this great Coffee Conversations, where we're going to be talking about what happened first quarter of 2021, and what are we looking at for the rest of the year? 
I have to tell you, when we were putting this Coffee Conversations together, I was like, "Who should we talk to?" I want to know some people out there who really have their hands in it, they know what's happening. 
So I am so excited to introduce you to this amazing panel of industry experts. First of all, Deryl Kratzer, with National Roofing Partners. Good morning, Deryl.

Deryl Kratzer:
Good morning, Heidi. Great to be here.

Heidi Ellsworth:
I love it. Will Lorenz, with General Coatings, and also the president of the Roof Coating Manufacturers Association. Good morning, Will, good morning.

Will Lorenz:
Good morning, Heidi. [crosstalk 00:01:05].

Heidi Ellsworth:
Will, you're back for a repeat performance, so thank you. We love having you on the show. It's awesome. 

Will Lorenz:
Thank you.

Heidi Ellsworth:
Then I'd like to introduce also, Adam Oaks, the CEO of Estimating Edge. Adam, this is great. I'm so excited to have this technology side of the conversation and what you're seeing working with contractors out there so far. 

Adam oaks:
Thanks, Heidi. Welcome. 

Heidi Ellsworth:
Thank you. Just as a reminder to everybody who's out there, this is a Q&A. We want your questions. These gentlemen are ready to answer them, to give you their insights, their wisdom on what they're seeing happening in the industry.
And so please chat Megan, as Megan Ellsworth is in the background, as you all know, and she's ready to visit with you to bring you online video, audio, or we'll ask the questions, whatever you would like to do. So just roll over in your control box. Very easy, ask us the questions, Megan, we'll get you on. 
I also want to remind everybody that this is being recorded. And so we're going to be able to share this afterwards, and we'll be able to look back on this and see how well we do with our predictions, how this new year is going to shape up. 
So let's get started. Before, as I mentioned, we have some amazing panelists here today. And so I'd like to start out with Deryl. Deryl, can you share a little bit about you, about National Roofing Partners, just so everybody knows you a little bit better?

Deryl Kratzer:
Absolutely. Heidi, it's amazing how good you look this morning being six o'clock out on the West Coast. So I appreciate that you're so committed to this that you're operating hours that a lot of us haven't been able to see.
Anyway, I'm really honored to be here. I love the roofing industry. I've been at it over 35 years. I was with a manufacturer for 30 years, a company called Tremco. And so I got the side of the business through the manufacturer's perspective. Now that I've joined NRP, I'm having even more fun because I think the contractor side of the business is a whole lot more fun than the manufacturing side of the business.
National Roofing Partners is a organization of tier one contractors, we have an excess of 200 right now, and that's what we're doing is providing unparalleled service nationwide. Our goal in life is to deliver innovative single source class solutions on a national basis. 
With these type of partners that we have, and with our sales reps out talking on major accounts, we've been very successful in the first quarter. So we're pretty excited about the path that we developed and in the journey that we're on. We feel very confident in the market right now, and we're excited to be here. So thanks for having me, Heidi.

Heidi Ellsworth:
Deryl, I have a very warm spot in my heart for National Roofing Partners. Of course, I worked with all of you before you started, but we just crossed right there in the middle. I have to tell you the network of roofing contractors that are a part of your organization are just the best. They are top notch. 
So I just think as we talk about 2021, what happened first quarter and where we're going, the information that you're going to bring from your network of contractors, everybody who's watching get ready to ask some questions because it's the cream of the crop as far as the contractors out there. So Deryl, thank you so much. 
I would next like to introduce Adam Oaks. Adam, can you please share a little bit about you and about Estimating Edge? Because I'm so excited for everybody to hear more about this.

Adam oaks:
Well, I'm excited that you're excited. Thanks, Heidi. I've been around the construction industry for my whole career. I was a pilot in the US Army, a very young age, got out and joined a company called CMD, which provides construction data and plan rooms to contractors. 
And so back then that's when our customers would walk into the plan room and do an actual takeoff on a real blueprint. 

Heidi Ellsworth:
I remember those days.

Adam oaks:
Pre-internet, aging myself a bit. But of course I'm with Estimating Edge now. We're over 30 years old with combined takeoff and estimating solution for specialty trade contractors, and specifically we're very deep in the roofing industry. 
We'll talk about some data in a second, but that data will be very strong because probably 70, 80% of the top 100 commercial roofers use Estimating Edge along with many other roofing customers as well. So we're happy to be here today.

Heidi Ellsworth:
I have to tell you, Estimating Edge is one of the longest. I've known about Estimating Edge, worked with all of you for so long. You have such history, you really brought the industry to that next level.
We are going to get back to the data, and so that will be next after we meet our final panelist. Will, can you share a little bit about yourself and General Coatings, also a little bit about RCMA?

Will Lorenz:
Sure, absolutely. Well, thank you for inviting me again. I thought maybe it was just a once trip, but glad to be back on RoofersCoffeeShop. I work for General Coatings. We're manufacturer of spray foam and roof coatings. So we're involved in a lot of recover business supplying, distributors, and contractors across the country. 
My other job is very important as president of RCMA. We represent about 55 manufacturers of roof coatings across the country, and they do a terrific job. We've got people from Sika, to Simon roofing, to Tremco, and Karnak, and all the big players that are part of the organization. 
They represent from the roofing industry, people doing things from the standpoint of maintenance and repair coatings all the way up to fully adhered systems that are done with coatings and additional materials. 
So we represent acrylic, silicones, urethanes, bituminous coatings, all the way across. It's a great organization. Dan Quinonez is our executive director and he does a fine job.

Heidi Ellsworth:
I know that, just for everybody out there, I know that with RCMA, they are really looking for more contractor input. From our last Coffee Conversation, we had really talking about that. It's good just for everybody to know they're there, they're a huge resource, and so, Will, I'm really happy you're going to be able to bring that perspective along with what everything is happening on the spray foam coatings. I mean, there's just so much happening out there.
Let's get started. What I'd like to do is just so everyone knows again, please ask questions. Please put your comments. What ever you want to say, Megan's back there and she's keeping it all going. 
We do have a couple of reports that we're going to reference today. One of them is the US Chamber of Commerce Commercial Construction Index. Deryl's going to have some great information from the American Building Contractors on builders and contractors. 
We also have some information here that I think I'd love Adam to start us out with, is really looking at some data that is coming from all of you into the industry through Estimating Edge. Adam, maybe, can you start us off with this slide?

Adam oaks:
Sure, happy to. What we did is we've got an analytics tool in the background of our system that we're going to let others use one day, but right now we just see it. But I ran roofing bids for 2019, 2020, and Q1 of 2021. You can see the data there. 
Of course, we saw everybody knew the economy was going great. Q1 2020 just before COVID had good strong growth over 2019. But where it became surprising, even though we saw a little bit of a dip when COVID came out and still stayed above 2019 and 2020 for bids. So bids continued to be above and flat, but as you roll into 2021, that Q1, you can really start to see a move and just looking at March, it eclipsed '19, and '20.
So the day-to-day with the bidding is pretty remarkable, talking to customers and seeing the kind of data behind the scenes. I think you're going to start to see, or already are, probably more competitive bids, maybe more people bidding on the same project. That's the kind of trend that we're seeing. However, we know that everybody's really busy. So I think it's wide open as we start rolling into the rest of the year. 
But the other piece that we saw is certain types of projects like data centers, healthcare pharma obviously, big box type projects, we're really starting to see those. So even though there may be a consistent run of type of projects, the projects are certainly getting bigger from what we see.
Now, this is just bids, it's not start. So I think the other guys can talk a little bit more about what's actually happening as the jobs start, or when they start, or how fast that's happening.

Heidi Ellsworth:
Well, Deryl let's take it that to you. What are you hearing from your contractors out there for the first quarter and kind of the jobs, just following up on what Adam talked about?

Deryl Kratzer:
One of the things, Heidi that I was able to do in the first quarter was to get out both on the West Coast, in the Midwest, and on the East Coast and talked to some of our bigger partners, and without exception, all of their backlogs is bigger than it's ever been. 
So the confidence is just really roaring right now. There's lots of activity going on, or as you're starting to see some of the big boxes actually come out with more opportunities, probably because they made so much money during the COVID shutdown that they need to spend it. 
But the overall attitude and the excitement in the air for 2021 is very exciting, and we feel that same way with our own team that's up knocking on doors.

Heidi Ellsworth:
Well, and one of the things, Deryl that everybody was talking about is, how are we going to deal with this commercial real estate? With the remote working and people working at home, are your contractors seeing anything along that lines? Is it just kind of other segments with the big boxes are taking up from some of the other work? What are you seeing there?

Deryl Kratzer:
Well, it's interesting with couple of companies that we work with that manage properties across the country. They've actually increased their re-roofing budget for 2021, what they did last year. And so even though, as you all are well aware with the lockdown, there wasn't a whole lot of activity, they still recognize they better take care of their buildings. And so they're out doing the preventative maintenance, they're out doing any kind of restoration they need and they're doing replacement.
Right now we're not seeing a whole lot of difference. We feel pretty confident that going forward they're going to continue on that path.

Heidi Ellsworth:
One of the things that we keep hearing too, or I keep hearing from contractors and in the news and articles and everything that's coming out of RoofersCoffeeShop, is this little push to between maintenance and re-roof. And so, Will, what are you seeing on that level? Because a lot of times the coatings are being used for that maintenance or for more temporary along with obviously long-term roofing solutions.

Will Lorenz:
If you divide the low slope and and the steep slope differently, I think the steep slope has been rapidly here with regard to shingles and tiles. It's gotten very strong from the fourth quarter on. The low slope business generally has a lag behind it, meaning that people are planning that work and getting bids out there.
And so most people are really working off of what they got established in '20. And so the low slope business has been strong, I would say in the fourth quarter and also in the first quarter. 
The biggest deterrent in many cases has been availability of a lot of labor and of materials. That's been some of the challenges that the roofing industry has been working through and I think we're all optimistic that it's going to continue to improve, and as we get to the third quarter it's going to normalize and hopefully the market itself will find an equilibrium that can support better growth for the construction trade. 
But as a whole, roof coatings are able to go on new construction as well as maintenance. Right now people have been busy still with new construction and there's also a lot of people doing maintenance, particularly residential. And so it's a good balance for the coating industry.

Heidi Ellsworth:
Adam, as you're looking at what the contractors are really working on in first quarter, we know that the bids are out there, but what are you hearing from them? Is it new construction, re-roof, is it just overall demand? What are you hearing?

Adam oaks:
I'm hearing overall. I'm hearing both absolutely happening. I think there's probably, as we'll talk about a lot of madness going on, but I'm still seeing a lot of re-roofs and a lot of new construction that is at least being bid. 
That's what I was saying, sometimes my visibility is where the estimates are happening, but not when they're doing the work, although that's picking up. But when I speak to my customers, they're saying it's consistent, that it's not really changing. The work's consistent. 
I want to talk a lot about commercial, but I saw something on Wall Street Journal this morning, there are four million less homes than there is demand for homes right now in the US. I don't see any slowdown in residential construction and that ties back to the economy, which creates more demand on the commercial construction. So as Deryl was saying, I think there's a lot of excitement, a lot of things happening.

Heidi Ellsworth:
Well, and we're still at that space where we have this whole new generation coming up of Millennials who now have money and they want to buy homes, they want to get out. It's just creating that whole demand scenario again, plus the pent-up from COVID.
Deryl, along that lines, as you were looking, I know that NRP does a lot with national accounts, and there's a whole different animal again, but what are you seeing on that level with the national accounts out there? How did that go in first quarter and where do you see it going for the rest of the year?

Deryl Kratzer:
Well, it was kind of like I said earlier, Heidi, we are seeing business as usual relative to their spending the time and money to do the housekeeping, to do the preventative maintenance. In fact to follow up on Will, I'm seeing a real increase in coatings because they're taking the time to, in essence, "I put a coating on that can extend the life of the roof versus replacing it."
I'm seeing general upside in all areas from maintenance, to coatings, to actually replacing roofs, as I think I'd mentioned earlier. Just as an example, Walmart first of the year came out with 150-something batch that they were going to re-roof. And then here about two weeks ago, we got another 53 now that we're going to put together. 
That's clearly speaking to me that their business was very solid during the shutdown and they're continuing to spend money to take care of their buildings, and I'm pretty much seeing that everywhere.

Heidi Ellsworth:
Speaking of confidence, which dam was just talking about too, why don't you share some of the things from ABC. I know you're very tied into it. Tony Rader with NRP was the past president or current president, somewhere in there? Past president. What are you hearing from that side of the world?

Deryl Kratzer:
We're fortunate to have Tony on our team, so we're excited about the connection that he brings to the ABC. He was a past president, but he's also still on the board, so he stayed pretty plugged in on that. 
The confidence in the overall Construction Index is just through the roof. Just over an example, if you look at March 21, the questions were asked, was it up big? 14%, yes. Up small, 56% said, yeah. No change, 14%, and less than 4% saying no that it was down just a little bit. 
The overall confidence is just to continue to be strong. Even though March did have a little lag, a very small one. I think it was down 0.7% overall, the confidence level is just through the roof.

Will Lorenz:
I know, Deryl you also have a strong presence down in Texas, and we've got a facility in Texas and that's rolling in the Dallas-Fort Worth area. They're building roads, and buildings, and re-roofing and doing everything there. It's a hotbed. I think Florida too, Adam, I think that's also a strong market segment for construction. Everybody's leaving some of the parts of the North and trying to get down to your wonderful weather. 

Adam oaks:
What a surprising thing here, watching them build hotels in the middle of the pandemic.

Deryl Kratzer:
Will, it's interesting you talk about housing. Out in California for years, it's been, you put your house up on the market and you get 20 offers and all 20 of them are going to be more than what the asking price is. We're starting to see that in the Dallas-Fort Worth area now. It's like, I guess so many California people have moved here that [inaudible 00:19:37] the same reactions.

Will Lorenz:
Well, housing prices are still strong here. I had a neighbor of mine and he got a full bid plus. And so it was on the market for three days or something record amount of time. So it's still strong here, and I think that's going to be a big indicator where the economy is going to go. 
Until really we see the housing situation level off, I think demand for construction is still going to be extremely strong. 

Adam oaks:
I do have a question for Deryl, if you don't mind, we're seeing material pricing and the bids really jump, I mean, wood, metal doubling probably since last fall. How is that affecting your owners or your customers?

Deryl Kratzer:
Most of the major manufacturers just implemented April 1st, a substantial price increase anywhere from five to almost 10% in some cases. And so we're going to find out. I mean, we were out with everybody, we have proposals out saying, "You know what? You better get this thing done because pricing is fixing to go up." So we're going to start dealing with it now. 
They're holding the pricing if you've got it that was in the system. So you've got about probably another two weeks. But even looking at the ABC and the price increase, some of the numbers are staggering. Just for example, lumber. Lumber is up to 80% just in a 12-month rolling average, according to the ABC statistics. 
It's mind boggling what we're starting to see. Natural gas up 77% on the 12-month period. Overall, we're looking anywhere from eight to 10% in all products in construction and all increase on a 12-month rolling average.

Adam oaks:
I talked to a general contractor customer said that even owners are starting to redesign their projects based on some of the material pricing. So I think we'll see a lot of activity, a lot of change as we move forward for sure.

Heidi Ellsworth:
I think we're seeing all these confidence levels, what we're seeing with numbers and the contractors and everything that is happening is so great. But I think this is where we need to go on, start talking about some of the pain points that the contractors need to be aware of and roofing companies of where we may be headed. 
We actually have a question from Andrea Fisher. Thank you, Andrea. She's with Duro-Last, and she wanted to know, what do you see in terms of increased lead times on such products as metal and polyiso? Maybe, Will, why don't you start with that?

Will Lorenz:
The big picture is if I were to look back in the last year, was the market construction everything's slowed down through the pandemic. And then starting in the second quarter and really up in the third quarter, and the fourth quarter, the market had a V-shaped economy, it came back.
There was always the wonkiness around elections and so forth, but it was coming back. People wanted to go back to their jobs, and if you're in your home, you saw things that you wanted to fix and invest in. If you weren't traveling, you spent your money on construction. 
Unfortunately also what happened with demand taking off is that when we got to the first quarter, there was a big freeze down in Texas. Deryl, you probably shut down for a week down there. It was cold and unfortunately it had a big effect on the petrochemicals market. 
It went all the way down into Houston area and so forth and it froze from basically oil to all the derivatives that make up a lot of the roofing products, from the asphalt that's made into shingles, to all the polymers that are made into membranes and spray foam and polyiso, all those things were affected. Acrylic resins, all those things got affected. 
And so our economy is so interconnected so that it takes these bigger facilities to get up and running and they need all the components, and some roofing products probably have four or five steps from oil to a product that people use. 
And so we've got the circumstance where the recovery from the Texas freeze is still occurring and it's still likely to be challenging the roofing industry. [inaudible 00:24:08]. And so that's impacted the availability of polyiso and so forth.

Heidi Ellsworth:
I know, I think we had a little bit of a [crosstalk 00:24:30].

Will Lorenz:
... availability of a lot of roofing products and I think that's been one of the [inaudible 00:24:39]. [crosstalk 00:24:39]. I'll just say that that's the biggest thing that I see is in the [inaudible 00:24:42].

Heidi Ellsworth:
Sorry, Will. You're kind of going in and out. I'm hoping we're okay there so I didn't mean to interrupt you. But yes, I think the weather in Texas has really made such a difference. Deryl, maybe talk a little bit about that too and lead times you're seeing.

Deryl Kratzer:
Let's talk about the weather first of all. It got so cold in Dallas that I got on an airplane to [inaudible 00:25:08] to warm up. I never thought I'd hear the day I would say that. But obviously it's impacting everything, as Will just mentioned, relative to being able to get stuff in a timely fashion.
But for the most part, I think we're pretty much out of it. I think we're getting back to normal, and I feel pretty good about where things are at. Did I cut out as well?

Heidi Ellsworth:
We did. We're having some cut-outs here. Interesting. Let's go on.

Will Lorenz:
You can invest in Google or something.

Heidi Ellsworth:
I think we need to. Well, we do have, let's see if we can shake up this a little bit and see if we can get rid of these little glitches coming on because we do have a panelist, we have actually a panel. We have two people who want to come on with some questions. 
I just was talking to Megan in the background. This may be me. This may be my problem why I'm breaking up. So if I've interrupted you gentlemen, I apologize. We'll make it happen. Megan, when you're ready we can bring on, we have John Kenny, with Kourtney Attorneys & Consultants, and he has some questions that we're going to change a little bit, but he has some questions on technology. And so, John, are you there?

John Kenny:
I'm here trying to get same difficulties getting my webcam to come up. Let's see here.

Heidi Ellsworth:
Go ahead and ask your question and then you can work on that while we're answering.

John Kenny:
Yeah. Great group. You guys, fantastic job. Really enjoy listening so far. So my question, with the group we have here, we've seen technology really accelerate throughout the pandemic. I think there are a lot of things have happened that would have taken years that kind of got condensed into that 12 to 18-month line.
With that, I'm very curious to get your guys' opinion on how you may or may not see it going to the next level with the AR and VR technology that's starting to really come into our industry and how that might play a role. So that's my question to see what you guys think about that.

Heidi Ellsworth:
Adam, why don't we start with you on that?

Adam oaks:
Thanks, John, by the way. What I'm seeing in technology is exactly what you saw. Personally from our company we've moved to the cloud for most of our solution and we had a lot of customers that just were really scared of changing in technology. We know that happens in construction across the board.
But once the pandemic hit, everybody was calling us faster than we could call them to get on the cloud because they were working virtually and everything's happening. So we saw that movement, which is pretty simple technology, happen really quick. 
I think what's going to happen though is, as customers choose to either embrace technology or not, that differentiation and competitiveness is really going to start to stand out from how they actually estimate a project, how they tie all their systems together and move more quickly to all the way in the field using AR and VR technology.
I think big data and analytics, driving data-driven decisions could be one of the biggest things that people need to be considering as we move forward because it's going to get more and more competitive. 
As people see opportunity, they're going to jump in with new technologies, and those companies that are not using that data may make poor decisions and lose money on jobs or not win that job that they want to win.
For us, I'm starting to see the advent of 3D technology, which ties back into the AR world. If you're not using 3D or BIM technology through the process, it's going to be very difficult to tie any augmented reality back to the system. 
For Estimating Edge, we've actually got a new technology that's in stealth mode right now, but it's a way to use some of those technologies to move as much as 80% faster than maybe people are doing today on the pre-construction side, at least. I think there's a lot of opportunity and people need to jump on board or I think they'll be left behind.

Will Lorenz:
It's also going to help with training. I think people need to be able see things to be able to replicate it and do it faster. We think that the VR area is going to definitely help in training area for people in the future.

Heidi Ellsworth:
Do you think it will also help the workforce, Will? I mean, as we are aging out with our, and we have so much wisdom out there, the ability for people to train remotely through VR or through even what we're doing today, I think could really help on that level.

Will Lorenz:
Yeah. I think people are hands-on and they're visual and if you can replicate hands-on by visual then it'll work and it'll take off, because when you have to read a manual and decide what those words say, a schematic helps, but seeing a video or being able to do it with glasses on it and replicate it in the training, the skill set that you have to learn, I think that'll only make contractors and applicators better and faster. But I think it's necessary and it's going to provide a competitive edge for the people who can do that, I agree.

Heidi Ellsworth:
Deryl, what are you seeing to John's question from the contractors?

Deryl Kratzer:
John, first of all, good to see you. I'm still waiting for my autographed copy of your book, so in case you lost my address I'll be glad to resend it to you. 

John Kenny:
They're all out. It's coming. Everybody's starting to get them now. You can see on the internet.

Deryl Kratzer:
I think technology is really keen on how we're going to make this thing go further. I can give you an example, in all of the national accounts that we deal with across the country, we're operating in more than 25 different portals. Without exception, almost every account is going electronic versus the old fashioned paper, which may be of a dinosaur and if I can learn it, hell anybody can learn it. 
I think the other thing that I'm really excited about is we developed a drone roof assessment program where you can actually fly a building and through AI or machine learning, if you will, we're able to not only pinpoint every penetration on the roof, categorize it, but we're also able to pinpoint deficiencies.
We bloated in 150 different deficiencies into it. So in essence, it's cutting down the roof inspection time, 80 to 90%, as well as improving the accuracy. I think that's just the start and I think that's where the industry is going.
Not to mention, think about you don't have anybody on the roof either. So the safety aspect of it as well too. I think technology is what we are trying to lead with to help us gather obviously more business because that's where the youth is going.
This report that we come up with is no longer a paper report, it's all housed on the cloud. So anybody that has access to the internet and to the password into it, they can go and view it. It's pretty exciting.

Heidi Ellsworth:
John, I love that question too because so much of what's happening with, if we're looking at revenue and profitability within first quarter and into the rest of the year, technology really is driving that. Just a quick question back to you, what are you hearing from the contractors out there around that?

John Kenney:
I'm glad to hear the entire group sees the revolution that's coming. That's what I like to call it. It's coming and it's coming quick and I think great point was brought up, you have to jump on board on this.
Unfortunately construction in general is always behind every other industry when it comes to technology. But I think the light is being expanded and seen. So I really have seen a lot of buzz with the contractors who are working for that, they know they're moving in this direction. I think it just needs to be more promoted, like we're doing here, get the word out and I think you're going to see them follow rather easily this time. 
You brought up a great point about the young coming in. I think that is an absolute key to getting the younger generation involved in our industry and excited about being there. So excellent points by all.

Adam oaks:
John, it's funny you say the youth. When I joined Estimating Edge several years ago, there was no one here under 40 years old. I said, "That is messed up." Within a year we had about seven or eight people under 30 and it's made a huge difference in our organization to bring in new ideas and technological thinking. Not that our existing team isn't great because they're mentoring those young people, and that tying that together has been really fantastic for us. 
And here we are technology, we're an older group, but it's got to happen across our whole industry.

Will Lorenz:
For us on the roof coating manufacturers we're coming out with a training set for various coating applications to educate people and we're going to use technologies to be able to educate people better and visuals and so forth. 
So we're really excited about launching that this year and getting it out there because, people need to see how to install products, whether it's roof coatings or other materials, and they need to have the tools to be able to do that. 
It's incumbent upon the industries to provide that benefit to contractors so it's installed properly and we're all satisfied with the work and we have happy building owners, because we're all part of the same food chain and everybody's got to have a performing roof when it's installed.

Heidi Ellsworth:
Exactly. Well, John, thank you. Thank you as always. Thank you so much for your question and I want to encourage everybody out there, please, you see John makes it look easy. Come on. You can come on and ask your questions or you can type them up in the question box. We'll put it there. 
I want to talk in the last part of our hour, I want to talk about some of the risk, the risk that we're seeing going into 2021, because we've talked about how great the backlogs are, the confidence index and everything. 
One of the things that we just talked about and that we've brought up is the labor shortage. So starting out, Deryl with you, how much is that affecting the confidence or the future going into the rest of 2021 from a labor shortage with your contractors and what are maybe some of the solutions or some of the good positives you're seeing to address that?

Deryl Kratzer:
Heidi, without exception, every partner that I talk to, that's their number one issue is the labor force. And so I hate to even say the government's got to do something because I can remember when Ronald Reagan used to say the worst thing you can hear is, "Hi, I'm here from the government and I'm here to help you." Because you know that's not going to be the case.
Hopefully we can get some immigration reform so that we can indeed be able to have the workforce that we need to be able to do all these projects. I think that's the number one issue that's staring at us. 
Number two, I think is a potential material shortage, just like we've been talking earlier and the continued increase in pricing. You'll get to a point to where in my mind the customer is going to say, "Well, you know what? I think I'm just going to try to hold it together for another year or two and we'll see what washes out once we maybe get a different political party in charge, if you will."

Will Lorenz:
I think, Deryl you bring about a great point there. I think that the activities of particularly NRCA with regard to immigration policies and some of the things that they're working on trying to get a Visa program put in place for all of us so we can get the workforce and get them here and get them trained. And then obviously what we're going to do with the existing people that are here in America that have been here a long time, DACA and so forth.
Not to get too political, but federal governments failed all of us and they need to get their act together and hear that the economy could roll if there's people out there to become trades people and do the tasks that are there and earn good money doing it. The economy can prosper and America can prosper.

Adam oaks:
I think we've missed a generation or two in that process with vocational schools in that vocation schooling and the high schools kind of drying up, everybody trying to go to college, I think it's changed how we can bring people through the process. 
I know here in Florida they're making some changes to put a lot of funding into vocational training for all laborers. I think that's going to help us, but it's going to take time obviously. 

Heidi Ellsworth:
It's going to take time and [inaudible 00:38:44] the risk.

Will Lorenz:
At least this administration at least seems to want to invest in training people that at least what I see at the bigger level. I think the NRCA and roofing organizations need to get a piece of that money and they got to be able to promote getting apprenticeship programs going and training programs so we're a sustainable industry, not having to rely on the 17 year olds that are making a decision. 
They know that this is a good career path for them, and there's a way that they can get educated and get into the workforce and earn a living. We got to be able to make that pathway easy for people.

Heidi Ellsworth:
Definitely. Deryl, you were going to say something on that?

Deryl Kratzer:
Yeah, and I might get in trouble for this, Heidi. So if I am, let me apologize in advance. We really need to get actively involved with the NRCA's ROOFPAC. I'm putting a plug-in for Duane Musser who leads that legislative branch.
At Washington Day, we had all kinds of different people from the organization that were talking to our legislators, to both our senators, as well as our House of representatives. 
The issues have been brought forward, immigration reform, the trade type organizations being funded, etc. So I ask you all to reach out, talk to Duane, talk to the ROOFPAC, get actively involved because if we don't it's just going to get better. So I just wanted to put that little plug-in. I apologize. 

Heidi Ellsworth:
Well, Deryl, you're 100% right. I know. I did all those virtual calls on Roofing Day. You did, Will did, I think Adam, the team, everybody, there's so many people who're watching this call, but if you haven't been involved, we have a whole directory on ROOFPAC. It is easy on RoofersCoffeeShop to get to ROOFPAC, to figure out how to donate, how to get involved. 
I'll tell you what, I'm a ROOFPAC member, and the thing I love about it, and I think where we're going is that it doesn't matter really where your politics are, what matters is the future of the roofing industry and really helping to bring in young people and solve some of these issues. I love that.
I want to get back real quick because I have to tell you, I think pretty much, at least 50% of my conversations in the last month have been about material shortages. I know, Will you shared some great things yesterday when we were prepping for this call about what you're seeing and how you're seeing the V of the recovery. 
Can you share some of that just for people out there who are like, "What can we do on material shortages?" Because this is really turning into a risk for the rest of the year.

Will Lorenz:
I would divide materials shortages into long-term and short-term. The long-term situations, I think are going to be positive because manufacturers like to put on capacity if there's demand. So if there's more demand for membranes or for roof coatings, the manufacturers are going to put in the capacity for it. So long-term, you can expect the curves to meet in a better circumstance.
In the short term, you have this Texas freeze. Now, I'll just tell you I think it's hitting the economy much more than people realized and its detrimental effect is putting brakes on things getting finished and also increasing costs. 
But I think it's temporary. Like I said, I think it's a quarter or two of challenge for the construction trade and for the automotive and the applying sectors. I mean, it's affecting all the way across manufacturing. But the good news is demand there's. People are still wanting things. 
My concerns are the longterm, not really what's going to happen in '21, but '22, or '23, when let's say the banks that are out there are used to people coming into there and they decide, "Well, we don't need all these branches, or we don't need all these employees coming into our corporate office. We're going to work virtually."
Then those housings or those commercial stocks are going to sit there and they may not invest in new roofs [inaudible 00:43:06] invest in maintenance systems, but they may not certainly build new commercial properties. That's the thing that's the concern out there at 2022, 2023 as to, what's the long-term effect of the economy of COVID and the changes in the workforce?

Heidi Ellsworth:
Great. I'm going to just throw in a question here and I'm going to take this actually to Deryl, just to see when things, but Julia from Riker Supply Company asked, other than the freeze in Texas, what else in your opinion is driving up cost of products? Which products do you expect to have shortages of and how are you adjusting to prepare for that?

Deryl Kratzer:
You cut out right in the middle, Heidi, I'm sorry I didn't-

Heidi Ellsworth:
No, it's no problem. She's asking, besides the freeze in Texas, what else is driving up the cost of products and which products do you expect to have shortages of and how are you adjusting? How are your contractors adjusting to prepare for that? 

Deryl Kratzer:
That's a great question. The thing that is probably the biggest benefit to our partners is they have such strong relationships with some of the major manufacturers. And so they kind of get first priority. 
But as far as overall right now, we're not seeing a shortage. We have no problem getting TPO, we have no problem getting the coatings, whatever it is that we need for our customers. We're just being told down the road. 
And so honestly, I don't know when it's going to happen, if it's going to happen. Will's probably got a better handle on that than I do, but we're [crosstalk 00:44:46].

Heidi Ellsworth:
You have seen letters on price increases coming. So we know that, that's happening too. Will? [crosstalk 00:45:00].

Will Lorenz:
If you look at steel and wood, things like that, you were talking earlier, Heidi, that we had burns up there that affected a lot of forest properties, COVID affecting the labor of people being able to harvest the wood and turn it into lumber. That's helped depress the ability of supply for lumber. 
And then when people are building new homes and new construction and houses, particularly down in Deryl's area is rapid, the demand is super high. And so the price of lumber is soared and many areas, I believe the price of lumber is three times what it was in '20. And so supply has to be increased or demand's going to have to slow down to equalize pricing. It's basic economics here.
Steel, that's a real global market for steel and it could only be that demand is super strong. Everybody's trying to get automobiles that there's a strong market for automobiles right now and steel is being used there too. But steel prices have soared too. 

Adam oaks:
All the economists told us that people were going to quit buying cars and quit building houses through the pandemic. So all the manufacturing slowed down, laid off people and they're ramping back up as we speak. So the experts aren't always expert in their advice.

Heidi Ellsworth:
Well, Adam, what do you see? I love this question about, how are contractors adjusting to both the increase in pricing and also to possible shortages? What are you seeing through Estimating Edge because you're getting to see the very beginning of it? Have you heard much back on how they're adjusting to this?

Adam oaks:
Well, I think not so much on the material, I think they're trying to make sure they get the right prices when they bid a job, and getting into their contracts, that price increase is coming. So I think it's a struggle from what we're hearing.
But also I think there's another side of it too and that's the type of work. If somebody does a certain sort of work, they need to build a diversify because that work type is changing, as is Deryl talking about all those Walmarts and big box, and I'm seeing data centers and healthcare work. If you were doing office buildings, I don't think you're going to see a whole lot of office buildings right away. And that may even go backwards, as we talked about earlier. 
There's so much to this. There's so many pieces and parts and it's hard for all of us to keep our hands on exactly where the market's going. I was talking to another customer about property management and he said it's still lagging for doing the roofs on apartments and things like that too. But we're expecting to see that job. It's going to be interesting to see where it ends or goes.
It's always been curious as to whether or not people are going to, as Deryl said earlier, potentially extend their roofs and whether or not they're going to continue to re-roof.

Will Lorenz:
And some of that's going to be sort of the federal pictures as to how they incentivize with an infrastructure bill and so forth because the best way to save energy is conservation. And if you've got a roof that has not enough insulation on it it'd better to put more insulation on it and design it better. 
But I feel like the federal government's going to spend money on schools and other things. They may not spend money in the commercial sector, and that may be the area that needs it. So it's going to have to go with what private economy can support, and they're going to have to look at their revenue, "I've gotten my businesses strong. Everybody's in here. I can invest in my building or everybody's working remotely. Maybe I'm not going to invest in my commercial property until I've filled that lease space." 

Deryl Kratzer:
Heidi, one of the things that we also are involved in is solar and we are really seeing an uptake because of the incentives that are being laid out there by the government. So if you're putting an array on top of a roof, that roof's got to be able to last 20 years.
So there's some roofs that are going to be replaced simply because they're going to put a solar array on top of it and it mandates that even though that it probably wasn't at the end of its useful life. 
In some cases we can do coatings to get it through that 20 years as well too. So I think that's going to drive the commercial side of the business as well too. So we're really starting to see a nice uptake in that business.

Heidi Ellsworth:
I have to tell, I'm hearing that too.

Will Lorenz:
I have a question, how do you see residential? I mean, there's certainly a lot of building going on, but you're also going to see people or consumers are going to want to get out and travel when they get past this COVID and the money that they've invested in their house that they've maybe gone to Home Depot and Lowe's to go do, they might now want to spend at the hotels down in Adams area down in Florida. I think that's going to happen.

Deryl Kratzer:
It's interesting you should say that, Will, because I'm not going to say the name, but we've got one of our major customers who has a real push towards the residential solar market and anticipating any work in three to 4,000 a month. So it could be really huge. 
One of the things we're also seeing on the residential side, which we don't do residential per se, or our partners do, is the shortage of plywood. I don't know if you guys are seeing that as well too, but where you used to build a deck that was a half inch now we're seeing it's got to be the minimum they could find is three quarter inch. I mean, they can't even find any half inch plywood. Not only is the price high.

Heidi Ellsworth:
Wow. Well, what I'd like to do, we have one more person who's going to come on. We have them back there with a question and I'm super excited about this. It's Trent Courtney. Actually, all these things you've been talking about, Trent works with all the time. So Trent, welcome to the show. Thank you for being on.

Trent Cotney:
Heidi, how are you doing? I have my industrial strength coffee. It's funny the older I get, the larger my coffee mug gets. First when I saw this hit my email, I was like, "I got to make sure that I'm attending this," because you guys are the pillars of the industry. I respect each of you tremendously. I know each of you. 
I want to pivot a little bit and just ask the panel a question. We've talked about technology. We've talked about material shortage and material availability, that kind of thing. 
But I know there's probably a lot of listeners out there that are just getting started into roofing. Each of you are successful business people and each of you represent different segments. 
I'm curious to see what advice you would give someone that has maybe just started in the roofing industry or hasn't fully developed to where you guys are, which is at the very top. What advice would you give to somebody that I guess is watching this now about how to succeed in this great field that we're all in?

Heidi Ellsworth:
That's a great question. Deryl, why don't we start with you and we'll just work on to Will, and then Adam?

Deryl Kratzer:
Trent, good to see you. The first thing I would do is I would say they need to engage you so that you've got to be protecting them. We really enjoy working with you. You guys are spectacular. 
I think the main thing that I would tell them is be focused on customer service, taking care of the client and giving them what you promised you'd give them. Exceed their expectations. That's got to be the key because there's all kinds of new people out there that just want to get in and get out and make a buck and go down the road. 
When you're talking to somebody, you want to give them that respect and you want to them the quality that they expect because you want to build a lifetime customer. That would be mine, and that works in manufacturing, that works in roofing contracting, that works in any business. 

Heidi Ellsworth:
Well, that's great. 

Will Lorenz:
I might offer, I was asked by a person who was in the waterproofing business about five years ago, they wanted to get in the roofing trade. And I said, well, I gave them three pieces of advice. One, set up another company. Two, hire somebody that can estimate really well because you got to be able to know what you're investing in to make a profit on. And then three, you need a great supervisor who can run the crews and install whatever product you're going to install because your reputation is going to be how well you do it. That's been my advice to people in the roofing trade if they want to get in.

Heidi Ellsworth:
That's awesome. Adam.

Adam oaks:
Well, I was going to say exactly what Deryl said, so I'll move onto the next thing. I love that Will said estimating, so let's go there. Technology is my business and I would say the best time to get invest in technology is when you're small. 
When you're a big behemoth company it's very hard to change technology, it's hard to move people. It's hard to invest. It becomes more expensive. If you can get the right technologies in place, whether that's estimating or work you're doing in the field, like what Deryl was talking about, I mean, that was amazing what you were talking about with having that data, using machine learning to understand what were the deficiencies were in the roof.
But having that technology early can cost you so much less. And then as you grow that technology can grow with you. But always continue to look at how those technologies work together, whether it's APIs or other import, export type work. But technology is going to be key to differentiating yourself from someone that's doing it by field.

Heidi Ellsworth:
Wow. Trent, what an awesome question. I'm like, "I didn't have that question down here." That is a great question. Thank you so much. I know you have some estimating things going on over in your world too. Since that was one of the key ones, I would recommend everybody look over at Courtney also for some estimating training and help that's going to becoming that way. Trent, thank you. 
And then I just want to get through a few more questions here that we have that have come in. I want to mention Wendy Marvin, is on right now. Wendy is actually going to be our guest in two weeks and we're going be talking about out of the box recruiting. So it goes right into what we're talking about with all of us today. 
But she wanted to just say, "These are powerful comments about the ways to bring workers to our industry. This is an all of us problem and we need to be fighting for us." So she just was really confirming what you were saying, but she also wanted to say that they are seeing on the residential side, huge amounts of bids, 156 bids last month, and that's Vancouver, Washington. So huge. I mean, just exactly to what you're all saying. 
Finally, I just wanted to also say in here Gabrielle, just wants to say thank you all. There's a bunch here for all of you just on such a great panel and so much wisdom. But she says, "Thanks for a great program. I'm looking forward to watching the recording again. So it's on demand. A lot of construction is going off-site. What important innovations are you seeing for off-site roof building, for prefabs and regular roofs?" 
That's from Gabrielle, and I believe she's out in New York, Campagna. Let's start with Adam. Let's go the different direction. Sorry, you guys probably don't know. We're probably all different, but, Adam, have you seen much off-site building going on? 

Adam oaks:
I don't have really any visibility there. So hoping Deryl, or Will, would probably have more information on that.

Heidi Ellsworth:
Well, we'll go over to Will. Will, have you seen anything?

Will Lorenz:
Yeah. I think as you look at labor basically and efficiency, the most expensive part of labor is on the roof, I would have to say, and the highest risk for someone injuring themselves. So the more things like trusses that are manufactured off-site show up at the job site and then are installed, I think that's going to continue to be the trend. 
And so I think field applied products are going to be focused on what they have to do with field applied and things that can be built off-site are going to be just because they think they could do it cheaper and I think they can come up with a custom design. 
So I think that's how the roofing and total construction trade's going to evolve over the next five to 10 years. There's going to be more of that. It's just a better smarter way and it's like mass production on cars. It's the same philosophy. 

Heidi Ellsworth:
Things are changing. Deryl, what are you seeing?

Deryl Kratzer:
Well, I'm going to date myself, but back in the early '80s, we actually did a bunch of modular buildings off-site. And then they carried them to the job site and built hotels out of it. So the roof was installed off-site and brought in. I'm not even aware that, that's happening again. So I apologize, I can't bring anything [inaudible 00:58:36] on that.

Heidi Ellsworth:
Well, I think it might be a future topic for Coffee Conversations, so we may need to look into this and get some articles out there. So thank you. Thank you so much. Thank you all for all of your questions. 
Gentlemen, I can't believe it, but we're at the end of our hour. This has just been amazing. Any last thoughts and Deryl, I'll start with you, any last comments.

Deryl Kratzer:
Heidi, we appreciate you very much and what you do for the industry and putting these things together. I applaud your efforts and your team, and thanks a lot to your daughter, she does a spectacular job as well too. I'm just honored to be part of this. I'm wide open to anything that anyone would like to chat about. I'm easy to find. Give me a call, I'll be glad to talk to anybody. You guys have a great rest of the week.

Heidi Ellsworth:
Perfect. Deryl's easy to find, National Roofing Partners. If anybody out there needs contact information, we actually don't have it on the screen, but you saw the websites and we can always answer those questions here. Will, any last thoughts?

Will Lorenz:
Like Deryl, I'm just grateful to be on and get an opportunity to see if I can add value to the roofing business and help promote roof coatings and General Coatings. Thank you for the opportunity. 

Heidi Ellsworth:
Thank you. Adam?

Adam oaks:
Well, again, thank you for having myself and Estimating Edge be a part of this really strong group. It's a great, great hour. The thing I would leave is I just love the energy that we're hearing of the excitement about we're going into the next few years. It all sounds pretty positive and that's great to hear for all of us, I think.

Heidi Ellsworth:
I think it's great for all of us. I want to say to everyone out there, you can find all these gentlemen on RoofersCoffeeShop, on Estimating Edge directory, on the General Coatings directory and, Deryl, we'll get you on there too. We're going to have NRP there so everybody can find you. 
But I also want to thank everyone for taking the time to listening today, to being a part of the conversation, the great questions that came in from everyone. This is really how we're going to solve problems all together, sharing knowledge, sharing wisdom.
Next week or in two weeks on the 29th, Wendy Marvin, the lady who we were just talking about earlier, is going to be on along with a number of other special guests from around the industry. 
We're going to do a little problem solving. We're going on Coffee Conversations. We're going to do some problem solving around recruitment. How do we get more people? What are the programs out there that maybe you're not aware of? How can you get involved more? Like we talked about earlier, even with ROOFPAC?. How can we all work together on this? 
That will be Coffee Conversations in two weeks. I want to say thank you again to everyone, and to everyone have a great week.

Adam oaks:
Thank you.

Will Lorenz:
Thank you.



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