Q3 2023 Boise Cascade Co Earnings Call
Good morning, My name is Chris and I will be.
Facilitator today.
At this time I would like to welcome everyone to Boise Cascades third quarter 2023 earnings conference call.
All lines have been placed on mute to prevent any background noise.
The Speakers' remarks, there will be a question and answer period it.
It is now my pleasure to introduce you to Kelly <unk>.
Senior Vice President CFO, and treasurer of Boise Cascade.
You may begin your conference.
Thank you, Chris and good morning, everyone I would like to welcome you to Boise Cascades third quarter 2023 earnings call and business update joining me on today's call are Nate Jorgensen, our CEO, Mike Brown head of our wood products operations and Jeff strong head of our building materials distribution operations.
Turning to slide two this call will contain forward looking statements. Please review the warning statements in our press release on the presentation slides and in our filings with the SEC regarding the risks associated with these forward looking statements also please note that the appendix includes reconciliations from our GAAP net income.
EBITDA and adjusted EBITDA and segment income to segment EBITDA I will now turn the call over to Nate.
Thanks, Kelly and good morning, everyone and thank you for joining us on our earnings call today I'm on slide number three.
Our consolidated third quarter sales of $1 8 billion were down 15% from third quarter 2022.
Our net income was $143 1 million or $3 58 per share compared to net income of $219 6 million or $5 52 per share in the year ago quarter.
Total U S housing starts declined 6% driven by a decrease in multifamily housing comparative prior year quarter. However single family housing starts increased 7% compared to the same period in 2022.
Both of our businesses again delivered solid operating and financial results I want to thank our associates for their continued focus hard work and loyalty as we continue to navigate ongoing economic uncertainties.
As recently announced we completed the acquisition of Rasco and I'm pleased to welcome their outstanding team to Boise Cascade will provide additional details on this transaction following the discussion of our financial results.
Kelly will now walk through our segment financial results provide an update on our capital allocation and discuss the Bronco acquisition in more detail after which I'll provide our outlook before we take your questions.
Thank you Nate wood products sales in the third quarter, including sales to our distribution segment were $515 2 million compared to $595 3 million in third quarter 2022 Wood products reported segment EBITDA of $122 9 million down from EBITDA of $177 3 million reported.
In the year ago quarter.
The decrease in segment EBITDA was due primarily to lower AWP in plywood sales prices as well as lower LVL sales volumes. These decreases were offset partially by lower wood fiber costs and higher plywood sales volumes.
BMD sales in the quarter were $1 7 billion down 15% from third quarter 2022, lower pricing across product lines negatively impacted <unk> year over year revenue comparison, however, bmd's gross profit and EBITDA margins were again strong during the third quarter BMD reported segment EBITDA.
$104 9 million in the third quarter compared to segment EBITDA of $161 2 million in the prior year quarter.
The decline in segment EBITDA was driven by a gross margin decrease of $48 4 million. In addition, selling and distribution expenses increased $6 million.
Turning to slide five.
On a year over year basis third quarter volumes for I joists were flat while volumes for LVL were down 5% on a sequential basis volumes for LVL and I joists increased by 6% and 2%, respectively sequential pricing for LVL and I joists was down 4% and 3% respectively.
Our strong volumes in the third quarter and consistent lead times to our customer base are a great Testament to our wood products team and their ability to respond to stronger than expected demand in 2023.
Looking forward to the fourth quarter October volumes are modestly below third quarter monthly average levels with recent declines in our order files are indicative of the expected seasonal slowdown in construction activity as.
As such in fourth quarter, we would expect sequential volume declines, but meaningful year over year increases on AWP pricing. We currently expect modest single digit sequential price declines in the fourth quarter.
Turning to slide six.
Our third quarter plywood sales volumes in wood products was 390 million feet compared to 329 million feet in third quarter 2022, our plywood sales team was effective in finding market opportunities, including the sale of incremental volumes related to the acquisition of the Chapman and Havana Mills.
Prior year volumes were also negatively impacted by downtime taken to replace an existing driver at our Chester South Carolina plywood facility.
392 per thousand average plywood net sales price in third quarter was down 20% from third quarter, 2022, and up 5% sequentially. Thus.
Thus far in the fourth quarter plywood price realizations are modestly above our third quarter average.
Moving to slide seven and eight Bmd's third quarter sales were $1 7 billion down 15% from third quarter, 2022, Devon, driven by sales price and sales volume decreases of 14% and 1% respectively.
Byproduct line commodity sales decreased 20% General line product sales decreased 5% and sales of AWP decreased 21%.
Gross margin dollars decreased by $48 4 million in third quarter compared with the same quarter last year as expected lower margins on AWP were the principal driver of the decline in margin dollars with the impact of a declining instead of a rising price environment negatively impacting results. However, bmd's overall gross.
Margin percentage held strong at 15, 2% down only 20 basis points from the 15, 4% reported in third quarter 2022, as we avoided the negative impacts from a declining commodity pricing environment that we experienced during 2022.
Bmd's EBITDA margin was six 3% for the quarter down from the eight 2% reported in the year ago quarter, and down 20 basis points sequentially.
BMD sales pace, thus far in fourth quarter, 2023 is seasonally weaker or approximately 6% below daily sales averages in third quarter. However, with inventory management, a clear focus for the industry in 2023 and are restored supply chain, we view inventory in the channel as appropriately positioned across most product lines.
As such we would expect fourth quarter takeaways to generally align with market activity as opposed to the destocking events of last year and as we have indicated before reliance on two step distribution is expected to remain strong when customers look to manage inventory volume and price risk.
We anticipate lower EBITDA margins in the fourth quarter, resulting from deleveraging of fixed costs as sales decline rasco acquisition related costs and the potential of gross margin degradation from product price erosion.
Moving to slide nine and 10.
These slides show the generally stable pricing environment for lumber and panel pricing during third quarter 2023, compared with a downward trajectory during the prior year quarter.
While future price volatility is likely we will maintain our approach to having inventory on hand to support our customer base.
Yes.
I'm now on slide 11, we.
We had capital expenditures of $99 million during the nine months ended September 32023, with $31 million of spending in wood products and $68 million of spending in BMD and what products. We continued progress with our multi year capacity expansion projects in the southeast U S and BMD, our execution of our organic growth.
<unk>, including our Kansas City, and Denver door shops, and the purchase of a distribution center in West Palm Beach, Florida.
Our full year 2023 expected range for capital spending is now a $190 million to $210 million.
We have yet to finalize our capital spending plans for 2024, but would expect it to be.
We'd expect it to exceed $200 million as we work towards completion of previously announced growth projects and also have a good mix of maintenance resilience and additional growth projects ahead of us.
Speaking to shareholder returns, we paid $141 million in regular and special dividends to shareholders. During the nine months ended September 32023.
Last week, our board of directors approved a <unk> 20 per share quarterly dividend and a $5 per share special dividend, including the expected fourth quarter amounts full year 2023 dividends will be approximately $347 million. In addition share repurchases are another manner in which we can return cash to our shareholders.
And we have approximately 2 million shares available for repurchase under our share repurchase program in.
In summary, our balance sheet remains very strong and our approach to capital allocation is unchanged. We will continue to invest in our existing asset base and organic growth projects pursue M&A that aligns with our strategy remain committed to our fixed dividend through the business cycle and Opportunistically return additional capital to shareholders as appropriate we are spec.
Dividends or share repurchases.
Turning to slide 12, we are pleased to have completed the acquisition of <unk> on October 2nd for purchase price of $168 million, including estimated working capital at closing of $51 million. We funded the transaction with cash on hand, the acquisition price included the purchase of <unk> to full scale distribution centers in <unk>.
<unk>, Massachusetts, and Portland, Maine, and provides us immediate scale in the northeast with LTM September revenue and EBITDA of approximately $191 million and $19 million respectively.
Along with interior and exterior doors. These facilities also offer moldings railings windows stair parts and other general line products. The addition of these products are a nice enhancement to <unk> legacy General line product mix and we are excited to be able to offer an expanded product offering to our customer base in the northeast I will turn it.
Back over to Nate to discuss our business outlook.
Thanks, Kelly I'm on slide number 13.
Current estimates for 2023 U S housing starts are $1 4 million units compared with actual housing starts of $155 million in 2022 as reported by the U S Census Bureau.
Throughout 2023 home affordability has been a challenge for consumers given higher mortgage rates and limited home price decreases however, given a resilient economy and low levels of existing home inventory for sale demand for new residential construction has been stronger than anticipated.
Homebuilders have also addressed affordability challenges facing home homebuyers in various ways, including smaller home sizes fewer amenities price incentives and mortgage rate buy downs.
Economic uncertainties escalating mortgage rates and home affordability are expected to continue to influence the near term demand environment.
Census forecast for 2020 for single and multifamily housing starts in the U S. Generally range from $1 $3 million to $1 4 million units, which is comparable to 2023.
Regarding home improvement spending industry forecast project continued moderation in year over year growth in Renova renovation spending and economic uncertainty may also negatively impact homeowners further investment into residences.
Despite these near term uncertainties, we believe the long term demand drivers for new residential construction and repair remodeling activity continued to be favorable supported by strong demographic trends.
Home inventory in the age of U S housing stock as such we will remain clearly focused on the execution of our strategies and have great conviction around our investments to grow the company.
Lastly, I'm very pleased with the early integration efforts related to the newly acquired Rasco facilities I want to express my gratitude to all of our associates throughout the organization, including our newest associates at Rasco, we're keeping a sharp focus on our customers and working safely and effectively.
Thank you for joining us today.
Today for your continued support and interest in Boise Cascade, We would welcome any questions at this time, Chris would you. Please open the formats.
Yes.
To ask a question. Please press star one on your phone and wait for your name to be announced.
Your question. Please press star one again.
Standby as we compile the Q&A roster.
One moment please for all first question.
Yes.
Okay.
Our first question will come from Susan Carey of GFS. Your line is open.
Thank you good morning, everyone.
Good morning Sue.
Hi, guys.
His question is talking a bit about the demand environment I. Appreciate the color that you gave in your prepared remarks, but can you talk a little bit about.
The divergence that I think we are seeing in terms of the R&R end markets, while the new home construction stays fairly resilient and I guess, how are you thinking about the current pace of starts flowing through your business and the ability to capture that reacceleration that we saw in starts as we move through this year.
Yes, so maybe just.
The repair and remodel activity I think.
Then also new home sales.
Today, we still see good pace.
Our repair and remodel business and so I think that activity remains steady and I think it's to me it speaks to a couple of things including.
Really the importance of two step distribution.
Abuse, you're in in terms of supporting that marketplace. So.
We feel good about kind of the pace of that business. Obviously the relationships that we have on the supply side in support of that business.
And then again the alignment we have with that with that marketplace.
So to me that would be probably the probably the key item is again.
Consistency on repair remodel remains remains pretty good I would say.
Terms of the.
Preparing for new home construction in the kind of maybe the resiliency that the team demonstrated.
Wood products and distribution team.
<unk> in 2023, I think we were.
We had really thoughtful plans that both teams put together.
We were working closely with our customer base and making sure we have great clarity in terms of what their inventory positions are what they are.
The pace of business was and we were we made some early and I think an important and effective decisions on putting our production capacity at levels to support our marketplace that frankly surprised to the upside.
As we think about 2020 for Sue will have that same kind of planning and work and diligence to make sure that we're.
Being close to the marketplace and prepare to serve the marketplace should there be an upside surprise or downside risk associated with that.
Kelly anything you would add just in terms of the.
The backdrop on housing and the recliner remodels.
Yeah happy to Nate So, yes, I guess, maybe starting with single first and I know youre very close to the builders and it seems like the national Homebuilders are still.
Relatively bullish and there continue to want to incur.
Increase their land position and build out new single family. So.
That seems to be that that could be.
Flat to actually somewhat up year over year 23 to 24, we will see how that plays out on multifamily there does seem to be a bit of a pause more concerns there around financing and potentially oversupplied.
As you know new single family as it.
As a bigger driver for us in terms of R&R.
We all typically think of R&R spending as it relates to sales of existing homes and as we know those are down a fair bit this year, but yet R&R has held up a fair bit which I think speaks to the fact that people.
Yes, I think they have a good amount of equity in their homes and maybe they.
Purchase a home, but a year or two ago that maybe you didn't quite have the amenities. They want it and so there we're seeing maybe a little bit more R&R spending because of that dynamic.
That's encouraging to hear that.
And maybe turning the conversation a bit any thoughts.
And how we should think about the margins in BMD.
Consider a world where wood product prices could be moving lower and I guess with that to any implications to those BMD margins.
From the <unk> acquisition.
Yes, and so I guess as we alluded to on our and our speaking points.
Certainly seasonally.
Third to fourth quarter here, we expect to see some compression there as our sales.
Chris Forrey: Good morning, my name is Chris, and I will be your conference facilitator today. After this time, I would like to welcome everyone to Boise Cascade's third quarter, 2023 earnings conference call. All lines have been placed on mute to prevent any background noise.
Come down and we're not able to leverage.
Those fixed costs. So we will have some deleveraging there, but we feel really good about what <unk> been able to do in what's been a quite volatile last couple of years in terms of their margin margin profile and we're executing upon what we've said our strategy is which is to make that that product mix richer to have a higher margin profile.
Chris Forrey: After the speakers remarks, there will be a question and answer period.
Kelly Hibbs: It is not my pleasure to introduce you to Kelly Hibbs, Senior Vice President, CFO and Treasurer of Boise Cascade. Mr. Hibbs, you may begin your conference. Thank you, Chris, and good morning, everyone. I would like to welcome you to Boise Cascade's third quarter, 2023 earnings call and business update. Joining me on today's call are Nate Jorgensen, our CEO, Mike Brown, Head of our Wood Products Operations, and Jeff Strum, Head of our Building Materials Distribution Operations.
And that would include things like the <unk> acquisition.
Okay.
I'll squeeze one more in which is you mentioned the ongoing investments.
What are your strategic initiatives the door shops in Kansas City Denver.
The acquisition of Florida that you closed just any update on how those are progressing and any further details there.
Yes, so we have a pretty good amount of spending ahead of us in the balance of this year and then we expect to have again, a pretty sizable capital plan in 2024, but we're still working a number of things. So I won't speak to 2024 in any detail at this point.
Kelly Hibbs: Turning to slide two, this call will contain four looking statements. Please review the warning statements on our press release on the presentation slides, and in our filings with the SEC regarding the risks associated with these forward-looking statements. Also, please note that the appendix includes reconciliations from our gap net income to EBITDA, and adjusted EBITDA, and segment income to segment EBITDA.
But yes in BMD for for example in the fourth quarter we.
We did announce that we got the West Palm Beach, we bought a new distribution center, there, which expands our presence in that market, which is great.
Nate Jorgensen: I will now turn the call over to Nate. Thanks, Kelly.
Nate Jorgensen: Good morning, everyone. Thank you for joining us on our earnings call today. I'm on slide number three. Our consolidated third quarter sales of $1.8 billion were down 15% from third quarter 2022. Our net income was $143.1 million, or $3.58 per share, compared to net income of $219.6 million, or $5.52 per share in the year ago quarter. Total U.S, housing starts to climb 6% driven by decrease in multifamily housing compared to prior year quarter.
We continue to build out the Denver door shop, it's not quite up and running yet, but it will be here. Soon we're close on completing the Marion, Ohio relocation that we started a year or two ago and then.
Ever chasing rolling stock that we hope to get landed here in the fourth quarter in terms of the other.
A couple of other big projects in BMD.
As being <unk>.
Hondo, Texas and Walter barrels South Carolina.
Those were Greenfields, we bought bare pieces of ground and it takes a fair bit of time to get those sites prepared so we still have a fair bit of spending ahead of us on those and those will be a while yet yet to come up.
Nate Jorgensen: However, single-family housing starts increased 7% compared to the same period in 2022. Both of our businesses, again, delivered solid, operated into financial results. I want to thank our associates for their continued focus, hard work, and loyalty as we continue to navigate ongoing economic uncertainties. As recently announced, we completed the acquisition of Roscoe, and I'm pleased to welcome their outstanding team to poison cascade.
In terms of what products.
Again, a fairly hefty spend here in the balance and the balance of this year and that's not uncommon right. When we have some seasonally slower periods. Some holiday periods. We take advantage of those times to complete some capital projects and we expect to do that again. This this fourth quarter and I would say that's pretty normal.
Nate Jorgensen: We will provide additional details on this transaction following the discussion of our financial results.
Kelly Hibbs: Kelly will now walk through our segment financial results, provide an update on our capital location, and discuss the brokeral acquisition in more detail, after which I'll provide our output before we take your questions. Kelly. Thank you, Nate. Wood product sales in the third quarter, including sales to our distribution segment, were 515.2 million compared to 595.3 million in third quarter 2022. Wood products reported segment EBITDAW of 122.9 million, down from EBITDAW of 177.3 million reported in the year ago quarter.
Core stuff in terms of like some random staffers in the west.
For veneer.
Chapman Pov line, which is great. That's again, that's part of our capacity expansion in terms of being able to capture that veneer and put it into AWP.
Got a.
A little bit of spending on.
Relatively small mass timber project in White City, Oregon, and then just some a lot of a fair bit of maintenance to do here in the fourth quarter. So I'll stop there.
Kelly Hibbs: The decrease in segment EBITDAW was due primarily to lower EWP and plywood sales prices, as well as lower LVL sales volumes. These decreases were offset partially by lower wood fiber costs and higher plywood sales volumes. BMD sales in the quarter were 1.7 billion, down 15% from third quarter 2022. Lower pricing across product lines negatively impacted BMD's year-over-year revenue comparison. However, BMD's gross profit and EBITDA margins were again strong during the third quarter.
Okay. Thank you for all that color was helpful. I'll turn it over now and good luck with everything.
Thank you. Thank you.
You.
Okay.
And one moment please for our next question.
The next question.
<unk> will come from Kurt Yinger of D. A Davidson your line is open.
Alright, thanks, and good morning, everyone.
Good morning, Kurt.
I just wanted to follow up on.
Susan's question on DMD margins, I mean commodity prices have largely normalized DWP prices come off a decent amount of volume.
Kelly Hibbs: BMD reported segment EBITDAW of 104.9 million in the third quarter, compared to segment EBITDAW of 161.2 million in the prior year quarter. The decline in segment EBITDA was driven by a gross margin decrease of 48.4 million, in addition, selling and distribution expenses increased 6 million. On the slide 5, on a year-over-year basis, third quarter volumes for Ijoists were flat, while volumes for LVL were down 5%. On a sequential basis, volumes for LVL and Ijoists increased by 6% and 2% respectively.
Segment, EBITDA margins still nicely above 6% I guess as you look to 2024 absent the potential for a softer demand environment and maybe some fixed cost deleveraging is.
Are there any things that you see today is kind of a material risk to that margin profile.
Yes.
I think you hit on the material risks, Kurt and your comments around.
Kelly Hibbs: Sequential pricing for LVL and Ijoists was down 4% and 3% respectively. Our strong volumes in the third quarter and consistent lead times to our customer base are a great testament to our wood products team and their ability to respond to stronger than expected demand in 2023. Looking forward to the fourth quarter, October volumes are modestly below third quarter monthly average levels, with recent declines in our order files indicative of the expected seasonal slowdown in construction activity.
Volumes and demand in good flow through there and then and there.
There is always price risk.
Across commodities across general line, and we're seeing some some modest price risk here in AWP, So I guess.
It has an additional comment here, yes Kurt.
And maybe the other thing to think about is as we described in our <unk>.
Opening remarks is that right.
As a channel in the marketplace continues to work its way through the year end and into early next year I think the importance and the dependents on auto warehouse support.
Kelly Hibbs: As such, in fourth quarter we would expect sequential volume declines, but meaningful year-over-year increases. On EBITP pricing, we currently expect modest single-digit sequential price declines in the fourth quarter. Turning to slide 6, our third quarter plywood sales volumes in wood products was 390 million feet compared to 329 million feet in third quarter 2022. Our plywood sales team was effective in finding market opportunities, including the sale of incremental volumes related to the acquisition of the Chapman and Havana Mills.
It continues to be high so unit business job packs in pieces. So as you think about margin profile and EBITDA margin for that segment for those services are generally a little bit higher as compared to the direct so I think thats probably the other component to think about is that mix of direct versus out of warehouse, we like both obviously in.
And obviously given where we're at this time of year seasonality that auto warehouse component strengthens and we're well positioned to support that.
Kelly Hibbs: Prior year volumes were also negatively impacted by downtime taken to replace an existing drier at our Chester South Carolina plywood facility. 392 per thousand average plywood net sales price in third quarter was down 20% from third quarter 2022 and up 5% sequentially. Thus far in the fourth quarter, plywood price realizations are modestly above our third quarter average. Moving to slide 7 and 8, B&B third quarter sales were 1.7 billion down 15% from third quarter 2022 driven by sales price and sales volume decreases of 14% and 1% respectively.
Got it and is that out of warehouse next do you all think that's kind of counter cyclical to wear.
In a weaker environment people are more closely managing those inventories and more reliant on you guys versus <unk>.
Great about the end markets.
Yes.
That's that's lots of vertical requirement so.
Softer demand backdrop, that's actually kind of a maybe a tail continues to be a tailwind on the margin side.
Yes, I think so I think I think you said it well I think.
People will say look at risk reward of on demand.
As well as on realizations pricing, yes, I think that.
Kelly Hibbs: By product line, commodity sales decreased 20%, general line product sales decreased 5% and sales of EWP decreased 21%. Gross margin dollars decreased by 48.4 million in third quarter compared with the same quarter last year. As expected, lower margins on EWP were the principal driver of the decline in margin dollars with the impact of a declining instead of a rising price environment negatively impacting results. However, B&B's overall gross margin percentage held strong at 15.2% down only 20 basis points from the 15.4% reported in third quarter 2022.
The dependents and importance of two step distribution remains very high probably the other component that we're I think we're excited about as we think about.
Especially from some of our general line partners as they introduce new products and services generally there is that as a bit of a transition.
Are people getting new Skus.
And I think in terms of the growth opportunity.
That represents I think a margin opportunity for us largely based upon customers wanting to again be serving supported on units and job acts of pieces versus on a truckload kind of direct basis.
Got it okay. Thanks for that.
Kelly Hibbs: As we avoided the negative impacts from the declining commodity pricing environment that we experienced during 2022. B&B's EBITDA margin was 6.3% for the quarter down from the 8.2% reported in the year ago quarter and down 20 basis points sequentially. B&B sales face thus far in fourth quarter 2023 is seasonally weaker or approximately 6% below daily sales averages in third quarter. However, with inventory management of clear focus for the industry in 2023 and a restored supply chain, we view inventory in the channel as appropriately positioned across most product lines.
And then just on the wood products cost side I mean.
Web stock costs could be a bit of a headwind as higher OSB prices flow through but we've also seen a fair amount of pressure on western log prices.
How do you see those kind of items coming together in Q4, and where does that set you up at least at this stage going into next year.
Yes, good I could it's Mike So I think youre correct around whipstock costs and as I.
I think I've mentioned previously the way we cast out whipstock into the finished product is not on a spot basis.
We use a 13 week rolling average said as some buffering to the ups and downs that occur on the indices that you see every week.
Kelly Hibbs: As such, we'd expect fourth quarter takeaways to generally align with market activity as opposed to the destocking events of last year. And as we have indicated before, reliance on two-step distributions is expected to remain strong when customers look to manage inventory volume and price risk. We anticipate lower EBITDA margins in the fourth quarter, resulting from the leveraging of fixed costs as sales decline, brosco acquisition related costs, and the potential of gross margin degradation from product price erosion.
So clearly <unk>.
Over time, if that trend is up and there is a bit of an impact, but it's not a tremendous impact immediately.
As it relates to the log costs I think that's a geographical issue more than anything else.
Would tend to say that the low cost profile in the south eastern United States in general is sort of flat sort.
Sort of flat to flat.
And then in the Pacific Northwest, we've had some ups and downs of recent times, it's been on the way down and you can see that in our data.
Kelly Hibbs: Moving to slides 9 and 10, these slides show the generally stable pricing environment for lumber and panel pricing during third quarter 2023, compared with the downward trajectory during the prior year quarter. While future price volatility is likely, we will maintain our approach to having inventory on hand to support our customer base. I'm now on slide 11. We had capital expenditures of 99 million during the nine months ended September 30th, 2023, with 31 million of spending in wood products and 68 million of spending in BMD.
I would say that.
Generally speaking.
Between now and the end of the year, we're in a very good position in terms of availability of logs that were not concerned about that.
And at the same time, there has been a bit more and more pressure in general because of the lack of availability, particularly from federal lands and so as I will say the industry looks to put itself in a position to be able to have logs available and we've spent a few extra dollars.
<unk> loves it would be available over the longer term a bit higher than the average that you see on a quarterly basis, but.
Kelly Hibbs: In wood products, we continued progress with our multi-year capacity expansion projects in the southeast US. In BMD, our execution of organic growth continues, including our Kansas City and Denver door shops, and the purchase of a distribution center in West Palm Beach, Florida. Our full year 2023 expected range for capital spending is now 190 to 210 million. We have yet to finalize our capital spending plans for 2024, but would expect it to exceed 200 million as we work towards completion of previously announced growth projects, and also have a good mix of maintenance, resilience, and additional growth projects ahead of us.
At the moment.
Very well very well aware of that.
That low cost have come down and at least between now and the end of the year, we don't see any massive increases coming on low cost in the west.
Our pace I should remind remind.
Remind you I guess some of that low cost linked to finish finished product pricing.
Given given where that has gone particularly for plywood.
Certainly has assisted us and we'll continue to do so between now and the end of the year I suspect.
Got it okay. Thanks for the color, Mike and good luck here in Q4 guys.
Thank you thanks Kurt.
Thank you.
Yes.
And one moment for our next question.
Kelly Hibbs: Speaking to shareholder returns, we paid 141 million in regular and special dividends to shareholders during the nine months ended September 30th, 2023. And last week, our Board of Directors approved a 20-cent per share quarterly dividend and a $5 per share special dividend, including the expected fourth quarter amounts, full year 2023 dividends will be approximately 347 million. In addition, share repurchases are another manner in which we can return cash to our shareholders, and we have approximately two million shares available for repurchase under our share repurchase program.
Our next question will come from Keybanc.
<unk> of BMO Your line is open.
Thank you and good morning.
First question.
Can you give us some sense of how your order books are on the AWP side.
Outside of the seasonal component, which we understand sort of slows in Q4.
But how do you kind of.
Noticed any change in terms of activity levels, and just see our order book.
Yes, I'll have I'll have a few.
Kelly Hibbs: In summary, our balance sheet remains very strong, and our approach to capital allocation is unchanged. We will continue to invest in our existing asset-based and organic growth projects, pursue M&A that aligns with our strategy, remain committed to our fixed dividend through the business cycle, and opportunistically return additional capital to shareholders as appropriate via special dividends for share repurchases.
Thanks for the question.
So yes, if I just forget about the seasonality, which is very important I'm sure everybody on the call realizes that as we get to the end of the calendar year, we normally see a decline in order files as that relates to generally speaking construction, particularly single family construction.
Al Order files have really been quite strong.
Think night referred to this earlier in his comments around how we put ourselves in a position to make demand both in terms of inventory on the ground and also manufacturing cluster in terms of having people in veneer available.
Kelly Hibbs: Turning to slide 12, we are pleased to have completed the acquisition of Brasco on October 2nd for a purchase price of 168 million, including estimated working capital at closing of 51 million. We funded the transaction with cash on hand. The acquisition price included the purchase of Brasco's two full-scale distribution centers in Hatfield, Massachusetts, and Portland, Maine, and provides us the immediate scale in the northeast with LTN September revenue and EBITDAB are approximately $191 million and $19 million respectively.
So while the order files are not as strong as they are now.
Not as strong today as they were perhaps three months ago, there is still quite strong.
The way, we manage that is we like to be able to ship.
Relatively speaking quite quickly to our customer base when the orders do come in.
So I think I'd summarize, saying that yes. The orders are not as strong as they were three months ago, but they're still all things considered quite good relative to some other times that are being much more challenging than they are today.
Kelly Hibbs: Along with interior and exterior doors, these facilities also offer moldings, railings, windows, stair parts, and other general line products. The addition of these products are a nice enhancement to B&D's legacy general line product mix, and we are excited to be able to offer an expanded product offering to our customer base in the northeast.
Understood.
Helpful and then.
Switching to <unk>.
BMD side and the <unk> acquisition.
Nate Jorgensen: I will turn it back over to Nate to discuss our business out- Thanks Kelly, I'm on slide number 13. Current estimates for 2023 U.S. Housey starts are 1.4 million units compared with actual Housey starts at 1.55 million, a 2022 is recorded by the U.S. Census Bureau. Throughout 2023, home affordability has been a challenge for consumers given higher mortgage rates and limited home price decreases. However, given a resilient economy and low levels of existing home inventory for sale demand for new residential construction has been stronger than anticipated.
You guys have made a lot of progress on growing.
The windows and the door that side of the millwork side of the business.
Im sorry.
Can you can you talk to kind of what trends and what you learned as you expanded on that.
Nate Jorgensen: Homebuilders have also addressed affordability challenges facing home buyers in various ways including smaller home sizes, fewer amenities, price incentives, and mortgage rate buy downs. Economic uncertainties escalating mortgage rates and home affordability are expected to continue to influence the near term-divine environment. Its Census forecast for 2024, single and multifamily Housey starts in the U.S. Generally range from 1.3 million to 1.4 million units which is comparable to 2023.
Part of the business.
And as you start.
Sort of further opportunity.
Is this sort of in any of any sort of expected demand growth over the next several years.
Keith This is Jeff I would say what did we learn.
We've learned a lot as we've gone in with each one we've done in each one we've opened it takes them a learning from our past and gotten a lot better and improved what we're doing it's a good business for us it fits right with our customers. It's the same customers that we're currently serving now and so we're continuing to move forward with it with the <unk> acquisition I can just tell you in a short period of time, there is a lot of learnings from them they have been in the.
<unk> business for a long time, and we know we can take some of the processes that they have in place and roll them across our system and then the future, but what do we want to do I can tell you. This.
Nate Jorgensen: Regarding home improvement spending, industry forecast project continued moderation in year-over-year growth and renovation spending and economic uncertainty may also negatively impact homeowners further investment in their residences. Despite these near term uncertainties, we believe the long-term demand drivers for new residential construction and repair remodeling activity continue to be favorable. Supported by strong demographic trends, low home inventory, and the age of U.S, housing stock. As such, we remain clearly focused on the execution of our strategies and have great conviction around our investments that grow the company.
We're still actively looking at the good business, we enjoy it and we know there's more to go.
Got it and then when I just look at that.
<unk> performance.
Or do you consider that as more kind of normalized or what do you say that was helped by not elevated.
Activity, let's say the last three or four quarters, how would you characterize that.
Yes, I think thats, a pretty fair representation of what we think normalized it will be.
Nate Jorgensen: Lastly, I'm very pleased with the early integration efforts related to newly acquired brosco facilities. I want to express my gratitude to all of our associates throughout the organization, including our newest associates at brosco, for keeping a sharp focus on our customers and working safely and effectively. Thank you for joining us today for your senior support and interest in Boise Cascade.
Like us they would've experienced some some run up and then and more recently a little bit of run down in terms of pricing, but we feel like that.
Chris Forrey: We would welcome any questions at this time.
That is a reasonable run rate to start from and as Jeff said, we're pretty excited about.
Not just.
Ken can we can we offer more products to our existing customers through <unk>, but also at the same time, there is going to be some opportunity where some of their customers that we have not served previously we can offer them a more full line of products as well. So we're excited about that and the team at <unk> is really good. So we're excited there.
Chris Forrey: Chris, would you please open the phone box? Thank you. To ask for a question, please press stall 1-1 on your phone and wait for your name to be announced. To withdraw your question, please press stall 1-1 again. Stand by as we compile the Q&A roster. One moment please for our first question.
Got it that's very helpful I'll jump back in the queue. Good luck.
Thank you thanks Keith.
Thank you.
Okay.
Susan Maklari: How first question will come from Susan Malkari of G.S. Your line is open. Thank you.
One moment for our next question.
Our next question will come from Michael Rockland Trust Securities. Your line is open.
Nate Jorgensen: Good morning, everyone. I guess, you know, my first question is talking a bit about the demand environment. Appreciate the color that you gave in your prepared remarks. But can you talk a little bit about the divergence that I think we're seeing in terms of the R&R and markets while the new home construction stays fairly resilient. And I guess how are you thinking about the current pace of start that's flowing through your business and the ability to capture that re-acceleration that we saw in starts as we move through this year?
Thank you Nate selling Mike and Jeff for taking my questions and congrats on a good quarter.
Thank you Mike good morning.
Just on your last call you guys mentioned, maintaining good products margin was higher than you had historically and you referenced the number of upgrades and replacement that <unk> been that have been ongoing for more than a decade now so in turn.
<unk>.
The margin profile as you continue to deploy new dryers pressors et cetera.
What's the margin we are ultimately targeting for that business and over what timeframe.
Nate Jorgensen: So Susan, maybe just, you know, in terms of the repair and remodel activity. I think the, and then also new home sales. Today, you know, we still see good pace on our repair and remodel business. And so that, I think that activity remains steady. And I think it speaks to a couple of things, including, you know, the really the importance of a two-step distribution in terms of supporting that marketplace. So we feel good about, you know, kind of the pace in that business.
Yes. So yes that is the question said from last quarter and I would tell you.
We are targeting we're targeting mid double digit EBITDA margin in that business going forward and some of the spending you referenced.
Nate Jorgensen: Obviously, the relationships that we have on the supply side, the support of that business. And again, the alignment we have with that marketplace. So to me, that would be probably the key. You know, item is, again, the basic consistency on repair and remodel remains pretty good. I would say, you know, in terms of the, you know, kind of prepared for new home construction and the kind of maybe the resiliency that the team demonstrated.
Some of that is frankly maintenance rate dryers al Ucs presses those sorts of things those are.
Those don't necessarily increase your profile, but they certainly sustain your capabilities to support the customers and so we've we've we've really done a nice job of focusing that business over the last number of years and I think the strategy is playing out as we hoped.
Got it and just want to thank you for that can I just one quick one.
Mid double digits as you.
You talked about 20%, 25% type EBITDA margins on a go forward basis.
And if so is that.
Is that a 2020 for 2025, how to think about.
Nate Jorgensen: The wood product scheme and distribution team demonstrated in 2023. I think we were, we had really thoughtful plans that both teams put together. We were working closely with our customer base and making sure we have great clarity in terms of what their inventory positions are, what their, the pace of business was. And we were, we made some early and I think an important and effective decisions on putting our production capacity at levels to support a marketplace that frankly surprised at the upside.
The timeframe.
Nate Jorgensen: And I think as we think about 2024, Sue, we'll have that same kind of planning and work and diligence to make sure that we're staying close to the marketplace and prepare to serve the marketplace. Should there be an upside surprise or a downside risk associated with that?
No I wasn't speaking in the twenties, Mike I was thinking.
The mid teens mid teens okay.
And where and when.
When we are above we are above that today as you've seen.
Got it thank you for that.
One.
Quick question on AWP.
Expecting AWP penetration in single family home construction any any share shift back to London.
Given the weaker lumber prices gained regained any share given where those prices are trending today.
Mike This is Mike.
Okay.
Kelly Hibbs: Kelly, anything you would add, just in terms of the, you know, the backdrop on housing and every program model? Yeah, I'm happy to, Nate. So, yeah, I guess maybe starting with single first and I know Sue, you're very close to the builders and it seems like the National Home Builders are still a relatively bullish and they're continue to want to increase their land position and build out new single families. So, you know, that seems to be that that could be flat to actually somewhat up year over year 23 to 24.
Yes, so I'm not sure I would say this thing.
A shift.
One way or the other to be honest.
I think the building approach that.
AWP in general cages to is not necessarily the.
That saves a lot of shift one way or another.
Particular combination of lumber versus engineered wood products. It can have to do with availability as much as anything else. So as you would've seen or we all saw over the savings.
Preceding few years when AWP was on allocation.
Kelly Hibbs: We'll see how that plays out. On multifamily, there does seem to be a bit of a pause, more concerns there around financing and potentially oversupply. And as you know, you know, new single family as a bigger driver for us in terms of R&R. We all typically think of R&R spending as it relates to sales of existing homes and as we know those are down a fair bit this year, but yet R&R is held up a fair bit, which I think speaks to the fact that people, I think they have a good amount of equity in their homes, and maybe they purchase a home of a year or two ago that maybe they didn't quite have the amenities they wanted and so we're seeing maybe a little bit more R&R spending because of that dynamic. That's encouraging, good to hear that.
Yes, it was.
A little bit I think.
Slippage of.
AWP or movement of AWP.
And lumber.
I think generally speaking that's not something that happens to any great magnitude, but when there is nothing else available lumber can be used in place of AWP.
Our story for AWP is.
<unk> consistency and availability and speed of construction that it brings relative to buy the products and obviously the largest one is lumber.
And Mike maybe just to add to Mike's comment.
I think when you think about as a last point I just saw on the speed of construction.
The homebuilders are really pushing for cycle time reduction on the job site and so <unk> is very much part of the answer there in terms of taking time out of the construction cycle and as Mike described we feel good about that.
Nate Jorgensen: And maybe turning the conversation a bit, any thoughts on how we should think about the margins in BMD as we kind of consider a world where would product prices could be moving lower? And I guess with that too, any implications to those BMD margins from the Brasco acquisition? Yeah, and so I guess as we alluded to in our speaking points, certainly seasonally, third to fourth quarter here, we expect to see some compression as their sales come down and we're not able to leverage those fixed costs, so we'll have some deleveraging there, but we feel really good about what BMD's been able to do and what's been quite volatile last couple of years in terms of their margin. And we're executing upon what we said our strategy is, which is to make that product mix richer, to have a higher margin profile, and that would include things like the Brasco acquisition.
That trend and that opportunity continuing as we head into 2024 and <unk>.
We needed to play a really important role in that.
Got it very helpful. Good luck in <unk>.
Thank you.
Thank you.
And one moment for our next question.
Our next question will come from George Staphos of Bank of America Securities Inc.
Your line is open.
Thanks, Hi, gentlemen, how are you sorry, joining late so you may have covered some of this in your discussion I'll try to keep it quick.
One some of your peers had talked about extended lead times for their AWP business have you seen.
<unk> phenomenon.
And related point and I think you might have covered this already in terms of some of the price erosion that youre seeing in AWP.
At this juncture, Mike would you see that is just seasonal or is there something else that we need.
Nate Jorgensen: Okay, and I'm going to squeeze one more in, which is you mentioned the ongoing investments in a lot of your strategic initiatives, the door shops and Kansas City, Denver, the acquisition in Florida that you close. And just any update on how those are progressing and any further details there? Yeah, so we have a pretty good amount of spending ahead of us in the balance of this year. And then we expect to have again a pretty sizable capital plan in 2024, but we're still working a number of things so we won't speak to 2024 in any detail at this point.
B looking too and then last question for me just.
And perhaps you discussed this already.
What are you seeing momentum in terms of open web trusses versus <unk>, Joyce or for that matter.
Eliminated lumber and single family construction are you seeing any further share erosion there.
Your AWP gaining back share. Thank you guys. Good luck in the quarter.
Yes, thanks for the questions George Let me Havent established maybe there'll be additional commence film for my colleagues here.
So.
Lead times.
Nate Jorgensen: But yeah, in BMD, for example, in the fourth quarter, we did announce that we got the West Palm Beach. We bought a new distribution center there, which expands our presence in that market, which is great. We continue to build out the Denver door shop. It's not quite up and running yet, but it will be here soon. We're close on completing the Marion Ohio relocation that we started a year or two ago.
Moved up.
Just a relatively small amount over the lot.
However, the building season.
And that was.
Primarily due to the way, we positioned ourselves coming into the building season.
So we had a lot of inventory on the ground and we kept people employed.
And we had good operating rates and so we were able to make the upswing in demand I'll say as well or better than anybody else in this particular sector.
Nate Jorgensen: And then, you know, we're forever chasing rolling stock that we hope to get landed here in the fourth quarter. In terms of the other, the couple other big projects in BMD, those being Honda, Texas, and Walter Burle, South Carolina, those were green fields. We bought bare pieces of ground and it takes a fair bit of time to get those sites prepared. So we still have a fair bit of spending ahead of us on those. And those will be a while yet to come up.
So we didn't see the extension that maybe you are referring to from other manufacturers.
We're still in a good position so I think overall, our strategy work quite well and continues to work very well.
You had a question around price erosion in the seasonality a lot of this.
So I don't really think its a seasonal issue per se I think it's more like specific locations require attention at certain times when there is.
Nate Jorgensen: In terms of wood products, again, a fairly hefty spend here in the balance in the balance of this year. And that's not uncommon, right? When we have some seasonally slower periods, some holiday periods, we take advantage of those times to complete some capital projects. And we expect to do that again this fourth quarter. And I would say that's pretty normal course stuff in terms of like some random stackers in the west for veneer, Chapman PLV line, which is great.
Opportunity.
That presents itself and we have discussions in specific markets around what market related pricing is but as im sure Youre aware AWP doesn't really have the seasonality.
The commodity does AWP certainly doesn't follow that.
The cyclic nature.
I think to Kelly's point, if we might see very very modest.
Nate Jorgensen: That's again, that's part of our capacity expansion in terms of able to capture that veneer and put it into EWP. We've got a little bit of spending on a relatively small mass timber project in white city Oregon. And then just some a lot of a fair bit of maintenance to do here in the fourth quarter.
Low single digit movement.
Going forward, but we certainly don't see that as of yet.
Anything more than that.
The open web question.
So.
I think it would be fair to say that some of the momentum that open web trusts.
Nate Jorgensen: So I'll stop there too.
<unk> was due to a lack of availability of AWP, specifically I joists.
Susan Maklari: Okay, thank you for all that color. It was helpful. Turn it over now and good luck with everyone. Thank you.
Chris Forrey: And one more may please for our next question.
And so.
Again Im sure Youre aware, we added.
Three large producer of I joist and we.
We continued to produce large quantities and we have it available. So if anything I think the opportunity for us to two.
Kurt Yinger: The next question will come from Kurt Yinger of D.A. Davidson. Your line is open. Great. Thanks and good morning, everyone. I just wanted to follow up on Susan's question on DMD margins. I mean, commodity prices have largely normalized. EWP prices come off a decent amount. But I'm going to need that margin still nicely above 6%. I guess as you look to 2024, absent the potential for a softer demand environment and maybe some fixed cost, leveraging.
Garner additional sales is actually quite closely but at the moment, because we have the availability with nationally oriented in terms of our capacity and so I don't see open web trusses being any more of a if you will.
A threat than they were.
Six months ago.
Maybe might be less when I think about it.
Hey, Mike one last one quickly and I'll turn it over did you comment on the calling on when you expect.
The pricing in AWP to start inflicting higher and if you havent no worries, but just wanted to make sure we got that on the record.
Kurt Yinger: Is there anything that you see today as kind of a material risk to that margin profile? Yeah, I mean, I think you hit on the material risks, Kurt, in your comments around volumes and demands that could flow through there. And then there's always price risk across commodities across general line and we're seeing some modest price risk here in EWP. So I guess Nate has an additional comment here. Yeah, Kurt, it's just maybe the other thing to think about as we described in our opening remarks is that I think it's a channel.
Yes, we didn't comment to comment forward beyond what we expect sequentially in the fourth quarter, George which is modest price erosion.
Okay. Thank you guys. Thanks, Kelly talking about.
Thanks Mark.
Thank you.
One moment. Please next question.
And we have a follow up from Kurt <unk> of D. A Davidson.
Your line is open.
Great. Thanks, just two quick ones on on capital allocation.
The first Kelly could you remind us what kind of go forward maintenance Capex is at this stage versus the.
Kurt Yinger: The marketplace continues to work its way through the year in and it's early next year. I think the importance of the dependence on out of warehouse support, you know, continues to be high. So, you know, unit business, job packs and pieces. So as you think about, you know, margin profile, EBITDA, margin for that segment for those services are generally a little bit higher as compared to the direct. So I think that's probably the other component to think about is, you know, that mix of direct versus a lot of warehouse.
The more distressed discretionary component within the $200 million guide for this year.
Yes, sure Kurt So I think we think in terms of a normalized spend we're probably in the range given our growth of kind of $125 million.
Give or take but it's going to be a few years, probably before we expect to moderate down to that level given given some good opportunities that we have ahead of us.
Kurt Yinger: We like both, obviously, and obviously, you know, given where we're at this time of year seasonality, that out of warehouse component strengthens and we're well positioned to support that. God, and is that out of warehouse mix, you almost think that's kind of counter cyclical to where, you know, in a weaker environment, people are more closely managing those inventories and more relying on you guys versus, you know, great about the end markets and, you know, that's that's less of a requirement.
Got it and is that pretty evenly split between wood products and BMD.
No I'd say, it's probably a little bit heavier to wood products than it is BMD once we kind of normalize.
Got it okay, great and then just lastly, I mean, the stock has pulled back here a little bit does that change your appetite at all around share repurchase activity.
What would you need to see for that to maybe move up in terms of capital allocation priorities.
Kurt Yinger: So, you know, in a softer demand backdrop, that's actually kind of a maybe a tail continues to be tail in on the market side. Yeah, I think so. I think you said it well. I think it's, you know, people say look at risk reward, both on demand and as well as on realizations pricing. Yeah, I think that, you know, the dependence and importance of two step distribution remains very high. Probably the other component that we're I think excited about is we think about, especially from some of our general line partners as they introduce new products and services.
Yes, no good good good question so.
I'll hit it like this Curt which is stock repurchases are still very much in our toolkit for capital allocation options.
And as I think you all know.
There is many times, where you have restrictions on stock repurchases, if you're evaluating transactions. Unfortunately, we've been able to.
Do several nice transactions in the last couple of years. So are our opportunity set has been somewhat restricted at times and so I guess at this point and assuming there's no restrictions we will buy shares if doing so we view that as being an attractive use of cash at that time.
Kurt Yinger: Generally, there's, you know, that is a bit of a transition, you know, in terms of people getting new skews. And I think in terms of the growth opportunity, you know, that represents, again, I think a margin opportunity for us, largely based upon, you know, customers wanting to again be served and supported on units and job acts and pieces versus on a, you know, truckload kind of direct base. Thank you. Thanks for that, Nate.
Relative to our other capital allocation opportunities.
Got it okay. Thanks for the color Kelly I appreciate it.
Thank you Kurt Thanks, Kurt.
Kurt Yinger: And then just on the wood products cost side, I mean, I imagine Webst.coffs could be a bit of a headwind as high-ROSB prices flowed through, but we've also seen a fair amount of pressure on Western mom prices. So how do you see those kind of items coming together in Q4 and where's that set you up, at least at this stage going into next year? Yeah, good day, Kurt, it's my, so I think you're correct around Webst.coffs, and as I think I've mentioned previously, the way we cost our Webst.coffs into the finished product is not on a spike basis.
Thank you.
And I see no further questions in the queue I would now like to turn the conference back to Nate Jorgensen for closing remarks.
Thanks, Chris we appreciate everyone joining us on the call. This morning for their update and thank you for your continued interest and support of Boise Cascade.
With that please be safe and be well. Thank you.
This concludes today's conference call. Thank you all for participating you may now disconnect and have a pleasant day.
Kurt Yinger: We use a 13-week rolling average, so there's some buffering to the ups and downs of the curve on the indices that you see every week. So clearly, over time, if the trend is up, then there is a bit of an impact, but it's not a tremendous impact immediately. As it relates to log costs, I think that's a geographical issue more than anything else. I would tend to say that the log cost profile in the South East and the United States and general is sort of flat, sort of flat to flat.
Okay.
[music].
Okay.
Okay.
[music].
Okay.
[music].
Thanks.
Okay.
[music].
Okay.
Kurt Yinger: And then in the Pacific Northwest, we've had some ups and downs of recent times. It's been on the way down, and you can see that in our data. I would say that generally speaking, between now and the end of the year, we're in a very good position in terms of availability of logs, so we're not concerned about that. But at the same time, there has been a bit more pressure in general, because the lack of availability, particularly from federal lands, and so I'll say the industry looks to put itself in a position to be able to have logs available.
[music].
Thank you.
[music].
Okay.
Okay.
[music].
Yeah.
[music].
Okay.
Okay.
[music].
Kurt Yinger: We've spent a few extra dollars for buying logs. It would be available longer to a bit higher than the average that you see on a quarterly basis. But at the moment, I think you're very well aware that log costs have come down, and at least between now and the end of the year, we don't see any massive increases coming on log costs in the West. And in our case, I should remind you, I guess, some of our log costs are linked to finish product pricing.
Yeah.
So.
Okay.
[music].
Okay.
[music].
Kurt Yinger: And so, given where that has gone, particularly for I would, that certainly has assisted us, and we'll continue to do so between now and the end of the year, I suspect. Got it. Okay, thanks for the color, Mike, and good luck here in T-Borgas. Thank you. And one moment for our next question.
Okay.
Kurt Yinger: Next question, we'll kind of find Keaton, Memtora of BMO. Your line is open. Thank you, and good morning. First question, can you give us some sense of how your order books are on the EWP side, outside of the seasonal components, which we understand sort of flows in Q4. But have you kind of noticed any change in terms of the activity levels and just your order books? Yeah, Keaton, I'll have a few words about that.
Kurt Yinger: Thanks for the question. So, yes, so I just forget about the seasonality, which is very important. I'm sure everybody on the call realizes that as we get to the end of the calendar year, we normally see a decline in order what it files is that relates to generally speaking constructions. Action, Dickie Single Family Construction. Our order files have really been quite strong and I think Nate referred to this earlier in his comments around how we put ourselves in a position to meet demand both in terms of inventory on the ground and also manufacturing cluster in terms of having people and been air available.
Kurt Yinger: So while our order files are not as strong as they are, are not as strong today as they were perhaps like three months ago, they're still quite strong and the way we manage that is we like to be able to ship relatively speaking quite quickly to our customer base when the orders do come in.
Jeff Strom: So I think I summarise as saying that yes the orders are not as strong as they were three months ago but they're still all things considered quite good relative to some other times that have been much more challenging than they are today. Now that's helpful and then you know switching to the DMD side and the PROSQA acquisition you guys have made a lot of progress on going you know sort of the windows and the door that side of the mill work side of the business I'm sorry.
Jeff Strom: Can you talk to kind of what trends you know what and as you look at sort of further opportunity is this sort of an area where we should expect you know quote over the next several years. Chief, this Jeff I would say what did we learn? We've learned a lot as we've gone and with each one we've done each one we've opened we take some learning from the past and gotten a lot better and improved what we're doing.
Jeff Strom: It's a good business for us if it's right with our customers it's the same customers that we're currently serving now and so we're continuing to move forward with it. With the PROSQA acquisition I can just tell you in the short period of time there's a lot of learning from them they've been in the mill work business for a long time and we know we can take some of the processes that they have in place and roll them across our system and then the future of it what do we want to do I can I can tell you this we're still actively looking at the good business we enjoy it and we know there's more to go.
Jeff Strom: And then when I just look at the the LTM performance would you consider that as more kind of normalize or would you say that was still helped by not elevated you know activity let's say the last three or four quarters how would you characterize that?
Jeff Strom: Yeah I think that's a that's a pretty fair representation of what we think normalized will be like us they would have experienced some some run up and then and more recently a little bit of run down in terms of pricing but we feel like that's a that's a reasonable run rate to start from and as Jeff said we're pretty excited about you know not just can we can we offer more products to our existing customers through Brasco but also at the same time there's going to be some opportunity where some of their customers that we have not served previously we can offer them a more full line of products as well so we're excited about that and and the team at Brasco is is really good so we're excited there God it that's very helpful I'll jump back in the queue good luck thank you thank you One moment for our next question. Our next question will come from Michael Roxland of Truth Securities.
Jeff Strom: Your line is open. Thank you Nate, Kelly Mike, and Jeff are taking my questions and congrats on the other quarter. Thank you. Good morning. Just on your last call, guys mentioned maintaining the products margin higher than you had historically. Your reference to number of upgrades and placements that have been ongoing for more than a decade now. So in terms of the margin profile, as you continue to deploy new dryers, pressors, etc.
Jeff Strom: What's the margin you're ultimately targeting for that business and over what time frame? Yes, so yeah, that is the question set from last quarter. And I would tell you word targeting, you know, we're targeting mid double digit EBITDA margin that in that business going forward. And and some of the spending you reference, you know, some of that is frankly maintenance, right? The dryers, LUCs, presses, those sorts of things. Those aren't those don't necessarily increase your profile, but they certainly sustain your capabilities to support the customers.
Jeff Strom: And so, you know, we've, we've, we've, we've, we've really done a nice job of focusing that business over the last number of years. And I think the strategy is, is, is playing out as we hope. Guy, I just want to thank you back. I just want to recall, you know, we see mid double digit. You know, you saw my 20, 25% EBITDA margin on a go forward basis. Or, you know, and if so, that, you know, now 2024, 2025, how to think about the time.
Jeff Strom: No, I wasn't speaking in the 20s. Mike, I was, I was thinking the mid, the mid teens. Okay. And we're, and we're, when we're above, we're above that today as you've seen. Got it. Thank you for that. I'm just one quick question on, on EWP. You know, expect to EWP penetration and single family home construction. Any, any share shift back from lumber. I'll give you a week or longer places, you know, I want to gain and regain any share given where, where those places are trending today.
Jeff Strom: So Mike, this is Mike. Yeah. So I'm not sure I would say there's been, you know, a shift. One way on the other, to be honest, I think, you know, the building approach that that EWP in general cages to is not necessarily that. That sees a lot of shift one way or another to, to that particular combination of lumber versus engine wood products. It can have to do with availability as much as anything else.
Jeff Strom: So you would have seen or we all saw over the. Preceding few years when EWP was on allocation. Yes, there was, there was a little bit I think of slippage of EWP or movement of EWP. And lumber. But I think generally speaking, that's not something that happens, you know, to any great magnitude. But when there's nothing else available, lumber can be used in place of EWP. Fee. Our story for EWP is the quality, consistency, and availability and speed of construction that it brings relative to one of the products, and obviously the largest one is lumber.
Jeff Strom: It might be just add to Mike's comment, I think when you think about his last point, I just understand the speed of construction. The home builders are really pushing for cycle time reduction on the job site, and so EWP is very much part of the answer there in terms of taking time out of the construction cycle, and as Mike described we feel good about that trend and that opportunity continues as we head into 2024, and EDWP will continue to play a really important role in that. Got it. Very helpful. Good luck in 4Q. Thank you. And one moment for our next question.
George Staphos: We'll come from George Staffel's of Thinkable American Securities Inc. Your line is open. Thanks. Hi, gentlemen. How are you? Sorry, joining late, so you may have covered some of this in your discussion. I'll try to keep it quick. One, you know, some of your peers have talked about extend the lead times for their EWP business. Have you seen a similar phenomenon and related point, and I think you might have covered this already, in terms of some of the price erosion that you're seeing in EWP, at this juncture, Mike, would you see that it's just seasonal or is there something else that we need to be looking to?
George Staphos: And then last question for me, just, you know, and perhaps you've discussed this already, where you're seeing momentum in terms of open web trust versus eye joists, or for that matter, laminated lumber, and single-family construction, are you seeing any further share erosion there, or is your EWP gaining back share? Thank you, guys. Good luck in the quarter. Yeah, thanks for the questions there, George.
Mike Brown: Let me have a stab at these. Maybe there'll be additional comments from my colleagues here. So, early times, I'd say, moved out just a relatively small amount over the building season. And that was primarily due to the way we positioned ourselves coming into the building season. And so, we had a lot of inventory on the ground, and we kept people employed, and we had good operating rates. And so, we were able to meet the upswing in demand, I'll say, as well or better than anybody else in this particular sector.
Mike Brown: So, we didn't see the extensions that maybe you are referring to from other manufacturers, and we're still in a good position. So, I think all in all our strategy worked quite well and continues to work very well. You had a question around price erosion and the seasonality or not of this. So, I don't really think it's a seasonal issue, per se. I think it's more like specific locations require attention at certain times when there is an opportunity that presents itself.
Mike Brown: And we have discussions in specific markets around what market-related pricing is. But, as I'm sure you're aware, EWP doesn't really have the seasonality, and a commodity dose because BWB certainly doesn't follow that sort of cyclic nature. So I think to Kelly's point, we might see very, very modest, like low single digit movement going forward, but we certainly don't see that as sort of anything more than that. The open web trust question, so I think it would be fair to say that some of the momentum that open web trust saw was due to a lack of availability of EWP, you know, specifically eye joists.
Mike Brown: And so as again I'm sure you're aware, we are a very large producer of eye joists and we continue to produce large quantities and we think the opportunity for us to Garner additional sales is actually quite positive at the moment because we have the availability, we're nationally orientated in terms of our capacity. And so I don't see open web trust as being any more of a if you were a threat than they were six months ago.
Mike Brown: In fact, maybe less when I think about it. Hey Mike, one last one quickly and I'll turn it over. Did you comment on the call it on when you expect the pricing and EWP to start inflecting higher? And if you have it, no worries, but just want to make sure we got that on the record. Yeah, we didn't comment forward beyond what we expect sequentially in the fourth quarter, George, which is modest price erosion. Okay. Thank you, guys. Thanks Kelly. Talking a bit. Thanks George. Thank you. One moment, please.
George Staphos: Well, next question.
Kurt Yinger: And we have a follow up from Kurt Eanger of D.A. Davidson. Your line is open. Great. Thanks. Just two quick ones on on capital allocation. Hey, first Kelly, could you remind us what kind of go forward maintenance cap acts is at this stage versus the more discretionary component within the 200 million guy position? Yeah, sure. So I think we think in terms of a normalized spin, we're probably in the range given our growth of kind of 125 million give or take, but it's going to be a few years probably before we expect to moderate down to that level, given given some good opportunities that we have ahead of us.
Kurt Yinger: Got it. And is that pretty evenly split between wood products and BMD? No, I'd say it's probably a little bit heavier to wood products than it is BMD once we kind of normalize. Got it. Okay, great. And then just last year, I mean, the stock has pulled back here a little bit. Does that change your appetite at all around share repurchase activity? And, you know, what would you need to see for that maybe move up in terms of capital allocation priorities?
Kurt Yinger: Yeah, no good good good question. So I'll hit it like this, which is stock market purchases are still very much in our toolkit for capital allocation options. And as I think you all know, we, you know, there's there's many times where you have restrictions on stock repurchases. If you're evaluating transactions, and fortunately we've been able to do several nice transactions the last couple of years. So our opportunity set has been somewhat restricted at times.
Kurt Yinger: And so I guess at this point in assuming, you know, there's no restrictions, you know, we will buy shares if doing so, we view that as being an attractive use of cash at that time relative to our other capital allocation opportunity. Thank you, Kurt. Thank you.
Nathan Jorgensen: I would now like to turn the conference back to Nathan Jorgensen for closing remarks. Thanks, Chris. We appreciate everyone joining us on the call this morning for their update and thank you for your continued interest in support of Boise Cascade. Would that please be safe and be well. Thank you. This concludes today's conference call. Thank you all for participating. You may now disconnect and have a pleasant day. .