Q1 2023 UFP Industries Inc Earnings Call
Speaker 1: Good day and welcome to the Q1, 2023, USP Industries earnings conference call and webcast. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone.
Speaker 2: Your line is open, sir.
Speaker 3: Welcome to the first quarter 2023 conference call for UFP Industries. Hosting the call today are CEO Matt Massad and CFO Mike Cole. Matt and Mike will offer prepared remarks and then the call will be open for questions. This conference call is available simultaneously in its entirety to all interested investors and news media through our webcast at ufpi.com.
Speaker 4: A replay will also be available at that website. Before I turn the call over to Matt Massad, let me remind you that today's press release and presentation include forward-looking statements as defined in the Private Securities Mitigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from the company's expectations and projections.
Speaker 5: Thank you for joining the first quarter 2023 COPPA's call.
Speaker 6: Alright.
Speaker 7: to hit another party. You think unpredictable would happen, but in the end, we think OK.
Speaker 8: All right.
Speaker 9: chaperoning through a tricky quarter and we were able to report earnings per share of $1.98 which exceeded our analyst consensus estimate.
Speaker 10: The first quarter results were generally in line with our expectations, although some unanticipated things happened.
Speaker 11: As an example, January was in line with expectations, February was below, and March was above.
Speaker 12: We will review the results by segment, but the overarching theme is that challenges will continue as the economy is affected by interest rate changes, reactions to unsustainable federal debt levels, and the resiliency of consumers.
Speaker 13: We plan to anticipate and meet the challenges head on.
Speaker 14: As we discussed in February , the year 2023 will not likely be smooth, but we expect it to be more in line with pre-COVID economies plus normal growth.
Speaker 15: Our team is focused on executing our plans and taking advantage of opportunities if others stumble.
Speaker 16: We have accumulated a significant amount of capital and will stay operationally aggressive and fiscally conservative using our balance sheet to support our growth and value creation.
Speaker 17: Our unique business model allows decisions on cost containment, staffing, and inventory levels to be handled by those closest to the action. We don't wait for events to make decisions.
Speaker 18: Our growth hasn't affected our agility and we intend to keep it that way.
Speaker 19: Now, let's review segment performance in Outlook.
Speaker 20: In Retail Solutions, as a value-added manufacturer, seller, and self-distributor, our products provide solutions for the DIY consumer as well as the professional contractor.
Speaker 21: Our strategy in this segment is simple. We've got innovative new products and solutions.
Speaker 22: Find, harness, and expand opportunities.
Speaker 23: Select and build the right brand.
Speaker 24: and utilize our national reach, purchasing expertise, and distribution network to provide the best customer value.
Speaker 25: Overall, retail unit sales were only down 2% versus 2022, a better than expected result.
Speaker 26: The leading indicators of remodeling activity published by the Joint Center for Housing predict a modest 2.8% decline in remodeling activity over the period ending in Q1 of 2024.
Speaker 27: Our big box customers are executing their strategies to capture business from the professional contractor and they appear to be taking share.
Speaker 28: We too will work hard to make sure we can capture additional market share while enhancing our return on investment.
Speaker 29: In the first quarter, Pro-Wood and Sunbelt unit sales were up double digits from 2022.
Speaker 30: The growth can be attributed to favorable market where prices are comparable to pre-pandemic levels.
Speaker 31: Outdoor projects using lumber are much more affordable now than in the previous few years.
Speaker 32: Most of the total revenue shortfall was due to a lower level of lumber market.
As we predicted, margins were lower in Q1 of 2022, but the buying opportunities did not materialize in 2023 like they did a year ago.
On a positive note, you may recall in Q2 the declining market hurt margins in Prowood and Sunbelt.
Thankfully, we don't expect a similar lumber market decline in 2023, and I am encouraged by the words of Paul who said, you cannot fall off the floor.
Decorators had a solid first quarter.
They have invested in more innovation capacity and will be driving new products to markets using our patented mineral-based technology
which has considerable opportunities for growth.
Its durability, ease of use, and enhanced strength to weight ratio make it a contractor's favorite.
The launch of our rapid rail has exceeded our expectations, helping us achieve our goal of increasing share while achieving better sales attachments of railing to decking sales. In our UFPS business unit, we name the new leader.
Chris Aain will bring a renewed focus on driving efficiency and implementing the girl strategy set forth by Will Schwartz and the retail team.
While Edge was slow in the first quarter, market demand had started to pick up.
Edge sales were particularly affected by weather, including key markets on the West Coast.
Inventories in the channel are also better balanced, which will allow Edge to better manage demand with the ability to react quickly.
Sharegames are a critical piece of the Edge strategy.
As we analyze the next manufacturing location in the US for this great product lineup.
We will utilize our partnership with Cannelli Universal in Mexico to produce products in one of the best facilities in North America.
Moving to the construction segment.
Factory built is trending according to plan and is well below year-go levels.
The RV industry is down by as much as 80% in some areas, while the MH industry is down 29% based on February shipments. The current forecast for shipments of manufactured housing units in 2023 is 71,000.
We have adjusted our business accordingly and are investing in more technology to provide options for affordable homes.
Our sales into RV are a small percentage of total sales.
but there continue to be opportunities to innovate and create more value in that space.
Site built has been a pleasant surprise thus far, even with February actual new home sales being down from 2022.
March showed a rebound and current order files have improved as well. We are adding a second shift in many locations as we ramp up to shift customer orders. The outlook for our site-built business is more positive than it was two months ago as the annual star forecast ranges between 1.2 and 1.4 million for 2023.
At that level of activity, we have a good sustainable business unit for site build.
Commercial had a positive Q1. As we have seen in this business, when economic times are uncertain, there is a tendency to push back projects.
They eventually come through, but it creates a much greater cost for us to service.
While the order files are strong, our ability to hit plan for the year hinges on our customers moving forward on their remodeling and construction plans.
Our team has done a very good job of refocusing for profitability and return, and we will need to continue to drive that improvement in order to compete for capital with our other business units. Concrete Forming Solutions is making investments and growth by opening new facilities and adding sales talent in selected markets.
Our new locations in Long Island, New York and Colorado are up and running.
These will increase SG&A costs in the near term, but will serve as a catalyst for their target of $500 million in revenue and beyond.
UFP construction will rely on our experienced management team to guide the business through any uncertainty and to produce strong results for the balance of 2023.
The U.S.P. packaging continues to strengthen its structure to bring greater efficiency on the design and manufacturing sides of the business, while better serving the customers.
Our use of our investments in mixed materials allows us to make better solutions and better values.
We expect these improvements to yield greater market share in each of our runways. Packaging industry is fragmented in our modest market share of these tremendous opportunities for growth in packaging.
Palette won performed well in Q1 and has been using the combination with other USP facilities to serve national customers and grow their presence and importance with national, regional, and local customers.
Palette 1 continues to look for opportunities to expand its network to get closer to the customers nationwide.
In structural packaging, demand for this business unit was unexpectedly soft in Q1.
The purchasing managers index indicate the lack of strength with marshes indicator 46.3, a 19% drop from a year ago.
However, as lumber and other input costs have normalized, the value of our product remains relatively better due to our focus on capacity and solution-based designs.
We are growing capacity without adding additional facilities by consolidating production of certain items in key regional locations.
We need to convert customers to more value-added products and services, as well as increase our market share to reach our targets. Increasing our design, engineering, testing, and analytical capabilities will help this effort, as well as adding increased capacity in our steel and mixed materials solutions. Productive packaging is growing revenues and looking to...
The recently acquired online timber trading platform timber base is expected to drive sales growth and create efficiency in the supply chain for our foreign to foreign sales. Some other areas of interest are new product sales.
New product sales for the first quarter were 166.6 million.
Our annual target for 2023 is $795 million.
So we have work to do to achieve that target. We are building out the framework to support achieving the target.
Our Innovate Fund has a robust pipeline of new targets which we will select from to ensure the best results three to five years from the date of our investment in these companies.
Acquisition growth is another area of focus. We continue to drive our growth strategy, including acquisitions.
Currently, our acquisition team is reviewing several potential transactions.
One of the challenges is determining the new normal for financial results after a few years of outsized performance.
Again, we look for companies with a good cultural set who bring clear new product capabilities or expansion of existing product lines which we can scale to our network.
purchasing. The lumber market has been trading in a relatively narrow band thus far in 2023. For example, with Southern Yellow Pine in week one of 2023, random lengths was $459 per thousand board fee.
And at quarter end in week 13 the market was $533 for $1,000 for fee.
Contrast that with week one of 2022 at $922 for 1000 board fee and week 13 of 2022 at $1,235 for 1000 board fee.
We expect that as new production comes online, Mills will detail other production to manage against excess supply.
And unless there is unexpectedly high demand, we don't anticipate the same price levels of the lumber market we saw in 2022 or 2021, which may result in lower revenues per unit.
Transportation, the availability of drivers was improving while the cost of labor, equipment, fuel and insurance are elevated.
We are implementing our new transportation management system in the second quarter, which will serve as a springboard to improve transportation management overall.
Human capital. While the typical unemployment numbers remain low, the UCU6 index was 6.7% in March.
The workforce participation rate was 62.6%, still well below historical averages.
We are receiving more applicants that finding those motivated to grow a career is still a challenge.
We have enhanced our training programs so while more of our internal candidates to obtain the skills and training they need to move up in the organization.
And we have implemented our new human capital management software in most of our facilities.
and we'll be integrating the most recent acquisitions over the next year. In an uncertain economy, our goal is to retain our key employees and to help them grow with our company.
We will also try to bring outside skills and talents to our organization when other companies falter.
Since our growth will be fueled by the talent of our team, we will keep training, recruiting, and making ourselves better for the future.
All who want to work hard to create a better life for themselves and their families are welcome and encourage that UFP and the best performers will win.
Capital allocation, as you know, we are focused on prudently and profitably investing capital in our business.
Growth capital is a priority via greenfield and technology investments, as well as targeted acquisitions that expand our product offerings or our reach for both. We also will provide capital for replacement and maintenance needs.
In Q1, we return capital shareholders through share repurchases buying back $151,000 shares.
and our board declared a 25 cent for share dividend for payment in June . And for the forward outlook, as I try to predict what will happen over the next three quarters, I am reminded of MGK's lyrics. All I know is I don't know nothing.
People talk and they don't say nothing.
Although lyrics may disappoint an English teacher, they create a simple reminder that there are hundreds of forecasts published and equally as many predictions as to what the Fed might do or whether Congress will rein in spending or increase the debt.
From what we can glean today, we are still on track to our annual targets and the current market indicators support us achieving those targets.
Only time will tell if, quote, I don't know nothing at all. Now I'd like to turn it over to Mike Cole to review the financial information.
Thank you, Matt.
Our results this quarter were in line with our overall expectations and included a 27% drop in sales to 1.8 billion, consisting of a 20% reduction in selling prices, primarily due to the decline in lumber prices we passed on for our customers, and a 7% decrease in units.
A 37.5% drop in operating profits to 162.9% in, resulting in a decriminal operating margin of 14.6%. It's slightly better than the 15-20% range we estimated for the year.
A $208 million improvement in operating cash flow compared to last year, as soft units sales and low-lumber prices reduced our seasonal increase in networking capital.
And a balance sheet that continues to gain strength with a net cast surplus of 145 million this year compared to net data 410 million last year. High segment sales in our retail segment dropped 25% to 750 million consisting of a 23% decline in selling prices and percent decrease in units.
Given market conditions, our unit sales held up well this quarter.
by our Pro Wood and Decker Readers business units.
Our unit sales to big box customers also held up well, with a 6% increase for the quarter while our business with independent retailers, which is more closely correlated with new housing starts, dropped by 17%.
Also, our big box customers continue to pursue a greater share of professional contractor business.
Our retail operating profit strapped to 41 million this year, a 42% decrease from last year resulting in a 12.5% Decremental Operating Market. As we mentioned last quarter, we expected a difficult comparison in Q1 this year for retail.
Last year retail, which has a sales mix heavily weighted toward variable priced, treated lumber.
greatly benefited from a rising lumber market that reached over $1,300 per thousand compared to only $400 per thousand this year.
This greatly enhanced cross-adability in Q1 last year.
because unfavorable results in Q2-Q4 when prices then dropped steadily until they reached the bottom of just under $400 a thousand at the end of 2022. As we mentioned last quarter, we continue to believe retail is well positioned to report an increase in operating profits for the year.
As Q1 results, we're in line with our expectations.
Moving on to packaging. Sales and mid-segment dropped 20% to 487 million, consisting of an 18% decline in selling prices and a 2% decrease in units.
which was in line with expectations. We were pleased to see that our team added approximately 28 million of sales to new accounts and 7 million of sales to new locations of existing accounts.
These increases were more than offset by a decline in prices and unit sales to existing accounts as market demand declined.
Our packaging operating profit dropped to 55 million. A 34% decrease from last year, resulting in a detrimental operating margin of 22%, which is within the 20-25% range we estimated for the year. Customer quoting activity accelerated during the quarter, resulting in a more competitive environment. But we believe this should also give us opportunities to gain market share.
whose units declined 22 percent and 19 percent respectively.
These declines were offset by units increases in our commercial and concrete forming units as these end markets remain resilient.
Operating profits in our construction segment dropped to 54 million. A 31% decrease from last year was something in a detrimental operating margin of 9%. Which was better than the 20 to 25% range we estimated for the full year.
Last year in Q2A-Q2-4, the construction segment benefited from the drop in lumber prices I mentioned earlier because it sales are more heavily weighted to products with selling prices that are fixed for a period of time.
Peak demand and capacity constraints also allowed the team to be more selected in the business we pursued last year.
As we manage through this down cycle, each segment continues to focus on executing our strategies to grow our portfolio of value-added products. And we're pleased to report an increase in our ratio of value-added sales to total sales to 68% issued from 58% last year. Similarly, our ratio of new products sales to total sales.
increased over 9% this year from 7.4% last year. For confidence, these efforts will continue to help us achieve our 10% minimum evid down margin target and help us continue to enhance our profitability over the longer term.
Please report any of the dam margins for the quarter that exceeded 11%.
We're also mindful of our cost structure in this environment, as we ensure the company is appropriately sized relative to demand, relative to demand, while still providing the resources needed to execute one-term strategies and enhance our ability to offer value at solutions and drive innovation. Our SGA expenses came in slightly under plan to finding nearly-
26 million this quarter or 12 percent, primarily due to lower bonus and sales and center bank expenses.
Moving on to our cash flow statement, our cash flow used in operations with $37 million, a $208 million improvement over last year due to lower seasonal working capital requirements resulting from soft union sales and number prices. However, our cash cycle for the quarter increased to 71 days this year, from 61 days last
due to a four-day increase in our receivable cycle and a seven-day increase in our inventory cycle, offset by a one-day increase in our payable cycle.
While we've experienced a slight delay in payments with certain customers, our overall receivables are in good shape with over 93% current. Our inventory cycle is above historical trend and is an area of focus as we reset our safety stock levels for the improvement in supply chain constraints and lower demand environment.
Our investing activities in Q1 included $38 million in capital expenditures. We continue to target cap-acts of $200 to $225 million for the year, but long and variable lead times may continue to impact timing. Our capital investments are primarily focused on expanding our capacity to manufacture new and value-added products.
primarily in our packaging segment and depth creators and pro with business units.
As she efficiencies through automation and enhanced working traditions in our plants in all seconds.
and increase our transportation capacity as we transform this once we form a cost to a profit center.
Finally, our financing activities for the year included 16 million of dividends and 33 million of cash pay for share-about-babs.
Turning to our capital structure and resources, we continue to have a strong balance sheet with 145 million surplus cash in excess of that time compared to 410.5.
Our total liquidity was $1.7 billion, consisting of surplus cash, affordable and $2.3 million, and availability of $1.41 million under our credit facility, and $535 million under a shelf agreement with certain long-term loveless.
The strength of our cash flow generation can serve in which managing our capital structure and prudent return of an approach to capital allocation continues to reverse within abundance capital to grow our business and also to return to their holders through up and down cycles.
We'll continue to pursue a balance and return driven to clean dividends, share by bass, ruined estimates and M&A. Specifically, our board approved the quarterly dividend to 25 cents a share to be paid in June .
We have a share repurchase program approved by our board of directors providing us with authorization to purchase up to 2 million shares until February of 2024.
Through April we've bought back 550,000 shares at an average price of 78,045 cents.
As I mentioned earlier, we're planning for total capital expenditures of 225 million this year, and we continue to pursue a healthy pipeline of M&A opportunities.
of companies that are a strong strategic fit and enhance our shape abilities and competitive position while providing higher margin return and growth potential.
That's all I have in the conventional smith. Thank you Mike. I'd like to open it up for questions.
Thank you. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. One moment while we compile the Q&A roster.
And today's first question will come from the line of Stanley Elliott with
Thank you everyone. Thank you guys for taking a question.
I guess I'll start off on the packaging business. I mean we've seen PMIs, you mentioned them being down kind of 46-ish, but we had five quarters or so, sub 50. They kind of rebounded here. You know, should your packaging business track that, but maybe on a lag, or do we think that or do we think that...
You have some of the outgrowth initiatives you will have in terms of gaining share and gaining customer wallet can actually help that part of the business perform better. Yeah, I will say it's the latter Stanley. I think you know it to me it's just the data point.
to consider and I think our team the market was soft in the first quarter no doubt about it. I expect it probably will be a little soft but we see signs of improvement and I think that's the important thing but most important is what you outlined at the end there which is our ability to...
gain market share and provide new way of data solutions. We expect that will help us kind of regardless of market size. And then kind of switching gears. You mentioned, I thought I heard positive commentary around the decorators product. If that's...
So I would love to hear a little bit more about that. And then more broadly, how are you all thinking about the retail business, the news that's constantly talking about the consumer getting stretched? And I do think the big box channels position the outgrow, other distribution networks. But if you could kind of elaborate on a little of those two would be great.
Sure, so on the decorator side obviously we're excited about the future then.
Certainly the mineral-based composite, which I talk about a lot, is something that we're excited about, a lot of potential new products for that technology.
And I think the rapid rail system, among other things that are being added to the extent that we can tie those together with our decking sales and get more of a share of the combined total, that's a big plus for the decorators and the decorators brand.
I think if I look at retail in general for your second part of your question.
There is a slight reduction, 2.8% I think over the next basically year is what's being predicted in the repair of model index. But I like the customers that we have and I like the approach we have. And I really think with the combination of both.
throw wood and sunbelt and the strategies that our retail group has that we should be able to take share and so I would expect getting growth from share and as long as the market holds reasonably well we should be very very good
I think the challenge for everything is what happens if the consumer loses confidence. Right. And I guess one last quick one, if I could. You mentioned comments around January , then February and March. Could you share or care to share anything around how April is looking thus far? No.
Great guys, thanks for the time, the best of luck.
time the best of luck. Thank you.
Thank you. One moment for our next question. And that will come from the line of Ruben Garner with the benchmark company. Your line is open.
Thank you. Good evening, everybody. Matt. Thank you for the NGK lyrics. I appreciate that. Maybe I think it started off with the follow up on the retail side. So Matt mentioned inventory in the channel. I think was better balanced. Can you can you go into more detail in that I we've heard you building product.
amount of accuracy to the comment about just generally carrying a little less inventory, not quite as heavy as they were.
So that makes it a lot easier for us to manage and is micro-looted to for us to be able to help manage our safety stock levels back to a more normalized kind of situation. So cautiously optimistic there.
Okay, and then kind of a broader question about pricing. You guys have sort of distanced yourself, I think increasingly so, in recent quarters from commodity price action. And I was wondering if you could talk about some of the value-added areas, maybe some areas where pricing is holding in.
that is in historically has or areas where there's more pressure than others anything that jumps out to you for some of the things that you know areas where you've moved into more value addresses the commodity piece that would be good.
Yeah, I think we talk a lot about converting customers from sticks and panels to more designed, engineered, and manufactured products. So, we see that both on the industrial side and on the concrete forming side as examples. So, those are those are areas where we can help drive that process. I would say the other key portion of this is to try to make sure that we
Value add sales.
with respect to some of the other commodity type business. We're trying to de-emphasize that where we can, but we also recognize that some of it is the bread and milk that we need in order to get the rest of the value added products to the customer. I know each of the business units and each of the segments is very, very focused.
I'm trying to maximize the value at developing new products as an area for us to help enforce that and to help that to grow as well. We're coming at it from a lot of different angles and we expect that to continue to improve. Understood. Congrats on the results in a choppy period and good luck going forward. Thank you, Ruben.
Thank you. One moment for our next question. And that will come from the line of Keaton, Mantoora with BMO Capital Markets. Your line is open.
Good afternoon. Can you talk a little bit about your comments on the prepared remarks? You said side belts were a bit of a pleasant surprise. Curious if you can provide some additional color in the context of the shop drop.
Try it.
make sure I understand the question well. So, basically if I looked at it and you can kind of tell what our expectations were with what I said, you know, January was...
sales have been less than, certainly they wanted, but they're in line with what our expectations were. And I think what we're talking about at this juncture is the way March rebounded from what the low was in February , it appears that there's more strengths in that market. So we feel much better about that today and feel very confident in our annual numbers where they also look like February , we would have been less confident.
I'm curious if the competitive dynamics have changed at all.
Yeah, I think there's a couple components to the competitive dynamics.
One is the situation which we were fortunate to have a little bit of over the last few years, which was the demand far outstrips supply, so there was actually a positive pricing element to our sales.
That premium, I'll call it, is gone. So that, by itself, creates competitive dynamic. And then, with pricing being lower, that's gonna create a competitive squeeze as well. I think if I look at some of the services we offer in our...
and making sure that our customers know we can deliver when we say we are. And I think that's a big benefit for us.
Now that's helpful. And then finally a question from an M&A standpoint, obviously the balance sheet is in very strong shape. Curious where you see kind of most opportunities, you talked about reviewing a number of opportunities, where would you stay?
future growth. And that's creating what I think is a terrific competition for capital trying to find the transactions that make the most sense that can bring the biggest impact over time.
So we've talked a lot about the industrial and packaging space which
for us is really total packaging now. I think we also would look at areas such as concrete forming where there's some opportunities to convert more value added sales. And I think on the retail side, there's some very good opportunities there for mixed materials and other things.
So I don't think there's a shortage of opportunities, Keaton. Our challenge is making sure that we maintain our fiscal conservatism as we evaluate these opportunities. And as I mentioned in my remarks, I think probably the bigger challenge is people thinking that the hockey stick that they are planning going forward is real when it may or may not be.
Now that's a very helpful color. I jumped back in the queue. Good luck for the rest of the year.
Got it. Now that's a very helpful color. I'll jump back in the queue. Good luck for the rest of the year. Thank you.
Thank you. One moment for our next question. That will come from the line of Kurt Yinger with DA Davidson. Your line is open. Great. Thanks, and good afternoon, Mike. Hi, Kurt.
Just look at the retail gross margin. I mean, absent any big changes in lumber pricing going forward is if the Q1 kind of 12.6% number, kind of a reasonable run rate, and then any kind of mixed impacts to be aware of in Q2, maybe like a little bit heavier on the pressure-treated side that could weigh that down or how do you think about that? Yeah, the biggest drivers within gross margin. If we get a market that stays pretty well deflated like it is now and we don't get a lot of sequential volatility, the big drive, so taking the lumber market, swings out of it.
because of the amount of variable price treated lumber, then it's really more mix changes. And I think you're going to see more treated lumber, like you said, in Q2, a little bit, you know, a little glut of that then in Q3. And so while volumes pick up tremendously in Q2, right, the mix...
Right, right. Okay, perfect. That makes sense. And then in the packaging business, I mean, we kind of finally saw pricing flip to a headwind. Is that all flow through from lower lumber prices, maybe on just a bit of a lag or any other areas of pressure from a pricing perspective with customers? Yeah, what I would tell you is I think most of the lumber market flow through has been built in at this point. I think the question about how slow are the customers going to be is that some different runways may be, you know, more of a longer term slowdown, others will bounce back. And that's the beauty of the balanced model of the customers that we have.
So what I would tell you is I think there's probably an increase in quoting activity right now as people who are not as busy as they were before starting to take a look and trying to squeeze where they can. So again, I think the benefits that we bring allow us to provide more value for the customer, but there certainly will be that kind of normal pressure.
in the marketplace that hadn't existed in 21 or 22. Got it. Yep, that makes sense. Okay. Then, just on detrimental margins, Mike, forgive me because I missed this. What was the outlook for that within the retail segment for the year? We didn't provide one.
We guided you, I guess, last time we spoke for Q1 results that would be well below last year. So we knew that was going to happen given the dynamics with the lumber market. And, but we said that we felt like.
you know, once we get past Q1, I mean, we look at full year in Q2, 3 and 4. We would more than make up for whatever shortfall we had in Q1 because whatever we made in Q1 last year, we gave back and then some in Q2 and Q3. So...
with a market with a lumber market where it's at today, we still feel like we definitely feel like that's the case. So the shortfall that we have so far for the year, we're going to more make up for the next nine months. Got it. Okay. And then, you know, last quarter you talked about...
I think, the incremental operating margins 15 to 20 percent for the year. I guess, you said that Q1 was pretty much in line with expectations, but anything from a market or performance perspective here early in the year that makes you feel like you can do a little bit better or come in at the low end of that range. Any thoughts around that?
I think, you know, we feel good about where we sit today. But the guidance that we gave is for a full year. And I think the guidance has to reflect some uncertainty about, still, about, you know, severity and iteration of any recession, where we're already in one today. So...
You know, I think we still want to be conservative in how we look at that. And so. You know, those ranges, I think, are ones that we're still going to still still look to.
And I'd probably, I'd heard that there are some opportunities for improvement. I know each one of the business units and segments see some different things that we can do to improve. But Mike, right, there's other external factors that we can't control. So we're going to continue to work on the things that we can improve and hope the external factors take care of themselves.
Right. Yep, still early in the year, makes sense. And then just last one for me, Mike, what was bonus expense here in Q1? You know, the bonus rate was about, we accrued to about 20% of pre-bonus operating profits. So with that number, you can...
next question.
And that will come from the line of Julio Romero with Cidodian Co. Your line is open. Hi, this is Stefan Guillaume. Hello?
Hi, can you hear me? Yes. Hi, this is Tifangium on For all your power.
Good, how are you? Good, thank you. I guess my first question is, can you talk about your execution in retail and the progress the new segment president is making on creating energies and scaling your products? Sure, I guess so. Nations vaccinated Absolutely.
We will short to just got into the role on January 1 is doing an excellent job.
He's working with his team and helping to drive the business and I think we're very optimistic about where that business is headed.
market pricing and probably any premium from
The demand far outstripping supply, those are already out of what I would say is pricing in Q1.
So, for us, it really becomes what's the demand look like going forward, and as long as the demand is in the range that we estimate it is, then the pricing, we think, will be somewhere in the range that it is. Thank you. I guess the last one for me, can you speak to the potential impact on the regional banking crisis, whether through FBI or through your customers, suppliers, etc.?
from our standpoint we're just looking to see what the next moves that the Fed makes are.
But at this point, very difficult to predict if it's a broader base issue or just specific to a small number of things.
Thank you so much for 30 more questions. Thank you.
And I'm showing no further questions in the queue at this time. I would now like to turn the call back over to Mr. Matt Massad for any closing remarks. Well, thank you again for joining us today.
2023 will be a challenging year and as we all know with what might be the world's largest toddler birthday party in DC.
will be a challenging year and as we all know with what might be the world's largest toddler birthday party in DC we'll still keep our eyes open.
I know our team provides on a good challenge. So while it's known in Michigan this week, let's hope for sunshine in Q2 and throughout 2023. 2023.
And I know that no matter what the obstacles we face, our team plans to roll with the changes and come out ahead. That's a great thing. Thank you all for participating. This concludes today's program. You may now disconnect.
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