Q4 2023 Builders FirstSource Inc Earnings Call

Operator: www.buildersfirstsource.com Please stand by; we're about to begin. Good day and welcome to the Builders FirstSource fourth quarter 2023 and full year earnings conference call. Today's call is scheduled to last about one hour, including remarks by management and the question and answer session. In order to ask a question, please press the star key followed by the number one on your phone at any time during the call.

Please standby we're about to begin.

Speaker Change: Good day and welcome to the builders first source fourth quarter 2023, and full year earnings conference call.

Speaker Change: Today's call is scheduled to last about one hour, including remarks by management and the question and answer session.

Speaker Change: In order to ask a question. Please press the star key followed by the number one on your phone at any time during the call.

Heather Kos: I'd now like to turn the call over to Heather Kos, Senior Vice President, Investor Relations, for Builders FirstSource. Please go ahead. Thank you. Good morning, and welcome to our fourth quarter and full year 2023 earnings call. With me on the call are Dave Rush, our CEO, and Peter Jackson, our CFO. The earnings press release and investor presentation are available on our website at investors.builder.com. We will refer to the investor presentation during our call. The results discussed today include gap and non-gap results adjusted for certain items. We provide these non-GAAP results for informational purposes only, and they should not be considered in isolation from the most directly comparable GAAP measures.

Speaker Change: I'd now like to turn the call over to Heather Kos Senior Vice President Investor Relations for builders first source. Please go ahead.

Heather Kos: Good morning, and welcome to our fourth quarter and full year 2023 earnings call with me on the call are Dave brush, our CEO and Peter Jackson, our CFO, earning.

Heather Kos: Our earnings press release, and Investor presentation are available on our website in investors Dot builder dotcom, we will refer to the investor presentation during our call.

Heather Kos: So <unk> discussed today include GAAP and non-GAAP results adjusted for certain items.

Heather Kos: These non-GAAP results for informational purposes, and they should not be considered in isolation from the most directly comparable GAAP measures you can find a reconciliation of these non-GAAP measures to the corresponding GAAP measures, where applicable and a discussion of why we believe they can be useful to investors in our earnings press release and SEC filings.

Heather Kos: You can find the reconciliation of these non-GAAP measures to the corresponding GAAP measures where applicable and a discussion of why we believe they can be useful to investors in our earnings press release, SEC filings, and presentation. Our remarks in the press release presentation and on this call contain forward-looking and cautionary statements within the meaning of the Private Securities Litigation Reform Act and projections of our future results. Please refer to the forward-looking statements section in today's press release and in our SEC filings for various factors that could cause our actual results to differ materially from forward-looking statements and projections. With that, I'll turn the call over to Dave. Thank you, Heather.

Heather Kos: <unk> presentation.

Heather Kos: Our remarks in the press release presentation and on this call contain forward looking and cautionary statements within the meaning of the private Securities Litigation Reform Act and projections of our future results. Please refer to the forward looking statements section in today's press release and in our SEC filings for various factors that could cause our actual results to differ materially.

Heather Kos: All forward looking statements and projections.

Heather Kos: With that I'll turn the call over to Dave.

Dave Brush: Thank you Heather good morning, everyone and thanks for joining our call.

Dave Rush: Good morning, everyone, and thanks for joining our call. I'm proud of our full-year results, which demonstrate the strength of our broad product portfolio and continued execution by our team members. Despite a challenging operating environment in 2023, which saw a significant reduction in single family starts, we delivered resilient results. As promised, we delivered a double-digit EBITDA margin in the high teens along with robust free cash flow. We accomplish this through operational rigor and by closely partnering with our customers to help address their pain points through the use of our value-added solutions.

Dave Brush: I am proud of our full year results, which demonstrate the strength of our broad product portfolio and continued execution by our team members.

Dave Brush: Despite a challenging operating environment in 2023, which saw significant reduction in single family starts we delivered resilient results.

Dave Brush: We delivered a double digit EBITDA margin in the high teens, along with robust free cash flow.

Dave Brush: We accomplish this through operational rigor and by closely partnering with our customers to help address their pain points through the use of our value added solutions.

Dave Rush: Our results in 2023 further validate our strategy to be the easiest to do business with across the industry. I also want to thank everyone who participated both in person and virtually at our Investor Day in December, where we laid out the next leg of our growth journey. We're grateful for your ongoing support.

Dave Brush: Our results in 2023 further validate our strategy to be the easiest to do business with across the industry.

Dave Brush: I also want to thank everyone, who participated both in person and virtually at our Investor day in December where we laid out the next leg of our growth journey, we're grateful for your ongoing support.

Dave Rush: As we begin 2024, we are excited about the opportunities in front of us. We remain focused on profitable growth by leading with our value-added solutions, deploying our digital platform, and expanding into desirable markets through our proven M&A strategy. These initiatives, along with our commitment to efficient operations and disciplined capital deployment, will continue to compound long-term shareholder value. Our investments in value-added and digital solutions are driving clear market differentiation, delivering greater efficiency, and empowering the next generation of home builders. By leveraging our scale in value-added products, we are able to help meet our customers' needs, such as reducing cycle times, addressing labor constraints, and improving home construction quality. As a proof point of our execution, I'm pleased that our service levels for on-time and in-full have continued to improve year-over-year. Our on-time delivery rate was 90% in 2020.

Dave Brush: As we begin 2024, we are excited about the opportunities in front of US we remain focused on profitable growth by leading with our value added solutions deploying our digital platform and expanding in desirable markets through our proven M&A strategy.

Dave Brush: These initiatives along with our commitment to efficient operations and disciplined capital deployment will continue to compound long term shareholder value.

Dave Brush: Our investments in value added and digital solutions are driving clear market differentiation, delivering greater efficiency and empowering the next generation of homebuilding.

Dave Brush: By leveraging our scale and value added products, we are able to help meet our customers' needs such as reducing cycle times addressing labor constraints and improving home construction quality.

Dave Brush: As a proof point of our execution I am pleased that our service levels for a long time and in full have continued to improve year over year.

Dave Brush: Our on time delivery was 90% in 'twenty two 'twenty three while our in full performance was 96% with our investments in technology and automation.

Dave Rush: While our in-full performance was 96.5%, with our investments in technology and automation, we will keep working to drive these metrics higher. We remain committed to operational excellence and innovation to increase efficiency and create value. We have a robust set of operational and productivity initiatives and are focused on leveraging our scale and fixed costs while delivering the highest quality products to our customers. Our continuous improvement mindset employs technology, including our digital solutions, and automation to improve the construction process and drive greater discipline in our operations. As an important pillar of our strategy, we are focused on maintaining a fortress balance.

Dave Brush: We will keep working to drive these metrics high we remain committed to operational excellence and innovation to increase efficiency and create value.

Dave Brush: We have a robust set of operational and productivity initiatives and are focused on leveraging our scale and fixed costs, while delivering the highest quality products to our customers.

Dave Brush: Our continuous improvement mindset employees technology, including our digital solutions and automation to improve the construction process and drive greater discipline in our operations.

Dave Brush: As an important pillar of our strategy, we are focused on maintaining a fortress balance sheet.

Dave Rush: Our strong free cash flow provides financial flexibility and multiple high-returning paths for capital deployment, enabling our clear set of priorities. We continued our robust buyback program in 2023, repurchasing nearly $1.8 billion of shares. I'm happy to announce that yesterday our board increased our share repurchase authorization to a total of $1 billion.

Dave Brush: Our strong free cash flow provides financial flexibility and multiple high returning pass for capital deployment, enabling our clear set of priorities. We continued our robust buyback program in 'twenty, two 'twenty three repurchasing nearly $1.8 billion of <unk>.

Speaker Change: Chairs I'm happy to announce that yesterday, our board increased our share repurchase authorization to a total of $1 billion.

Dave Rush: We remain disciplined in our approach to tuck-in acquisitions and still have a long runway of targets in a fragmented market. Our focus areas for M&A include increasing our market position in desirable geographies, extending our lead in value-added and specialty solutions, and enhancing customer stickiness. Let's turn to our full year highlights on slide four. We delivered strong margins in 2023, including a robust 17% adjusted EBITDA margin that underscores our differentiated product portfolio and scale. A resilient gross margin of more than 35% reflects a stronger mix of value-added products, notably in our multifamily business, and improved manufacturing efficiency. As we have communicated, we continue to see some normalization in core markets. We are also seeing multifamily normalize, and we expect it to continue over the course of this year. Looking at slide five, I want to highlight the over 30% improvement in our recordable incident rate in 2023, which is a remarkable achievement. At BFS, the safety of our team members is always our highest priority, and I am proud of the culture we have created to be a safer company every day.

Dave Brush: We remain disciplined in our approach to tuck in acquisitions and still have a long runway of targets in a fragmented market.

Dave Brush: Our focus areas for M&A include increasing our market position in desirable geographies, extending our lead in value added and specialty solutions and enhancing customer stickiness.

Dave Brush: Let's turn to our full year highlights on slide four we.

Dave Brush: We delivered strong margins in 'twenty, and 'twenty, three including a robust 17% adjusted EBITDA margin that underscores our differentiated product portfolio and scale.

Dave Brush: Our resilient gross margin of more than 35% reflects stronger mix and value added products, notably in our multi family business and improved manufacturing efficiencies.

Dave Brush: As we have communicated we continue to see some normalization in core margins. We are also seeing multifamily normalize and expected to continue over the course of this year.

Dave Brush: Looking at slide five I want to highlight the over 30% improvement in our recordable incident rate in 'twenty, two 'twenty, three which is a remarkable achievement.

Dave Brush: First the safety of our team members is always our highest priority and I am proud of the culture, we have created to be a safer company every day.

Dave Rush: I'm also excited to see the structural improvements we are making to remove excess cost and operate more efficiently. Our strong productivity savings of $175 million for 2023 reflect the hard work we are doing on targeted initiatives, and we expect another $100 million of productivity savings in 2024. Student SG&A expense management also remains a key focus area.

Dave Brush: I'm also excited to see the structural improvements, we're making to remove excess cost and operate more efficiently our strong productivity savings of $175 million for 2020 three reflect the hard work we are doing on targeted initiatives and we expect another one.

Dave Brush: <unk> million dollars of productivity savings in 2024.

Dave Brush: Prudent SG&A expense management also remains a key focus area.

Dave Rush: This includes the ongoing optimization of our footprint and balancing the need for cost reductions against future capacity demand. We remain disciplined stewards of discretionary spending, and our team has responsibly managed costs in the short term while executing our strategy for the long term. As expected, we had a strong year for multifamily, as prior-year acquisitions were supercharged by a strong year. Multifamily remains to tell when in Q4 as we work through record backlog. For a single family, lower mortgage rates and low existing home inventories have helped us steady activity levels. National builder customers have done a good job of utilizing specifications in conjunction with interest rate buy-downs to provide homebuyers with affordable options to purchase new homes.

Dave Brush: This includes the ongoing optimization of our footprint and balancing the need for cost reductions against future capacity demands, we remain disciplined stewards of discretionary spending and our team has responsibly manage cost in the short term while executing our.

Dave Brush: <unk> for the long term.

Dave Brush: As expected we had a strong year in multifamily as prior year acquisitions were supercharged by a strong market.

Dave Brush: <unk> family remains a tailwind in Q4 as we worked through record backlogs.

Dave Brush: For single family lower mortgage rates and low existing home inventories have helped us steady activity levels now.

Dave Brush: National builder customers have done a good job of utilizing specs in conjunction with interest rate buy downs to provide homebuyers with affordable options to purchase new homes.

Dave Rush: Our focus this year is on being the best partner to our customers by providing the highest quality customer service, driving our robust value-added solutions, and launching our VFS digital tools to make the building process faster, more efficient, and more affordable. Turning to M&A on slide six, we continue to target attractive opportunities while remaining financially disciplined. In 2023, we completed seven deals with aggregate 2022 sales of roughly $540 million. Early in the fourth quarter, we acquired Standale Lumber, which gives us a strong presence in the growing Grand Rapids, Michigan, market. Then, in December, we acquired Encore Building Products, a leading building materials distributor that represents our entry into the Arkansas market and will serve as our platform for future growth in the state. And in early February, we acquired Quality Door & Millwork, a leading distributor of millwork, doors, and windows in southern Idaho.

Dave Brush: Our focus this year is on being the best partner to our customers by providing the highest quality customer service driving a robust value added solutions and launching our BFS digital tools to make the building process faster more efficient and more affordable.

Dave Brush: Turning to M&A on slide six we continue to target attractive opportunities, while remaining financially disciplined in 2020 three we completed seven deals with aggregate 2022 sales of roughly $540 million.

Dave Brush: Early in the fourth quarter, we acquired staying Dale lumber, which gives us a strong presence in the growing Grand Rapids, Michigan market. Then in December we acquired Oncor building products, a leading building materials distributor that represents our entry into the Arkansas market and will serve as our platform.

Dave Brush: Future growth in the state.

Dave Brush: And in early February we acquired quality doors, and millwork, a leading distributor of millwork doors and windows and southern Idaho. We're excited to welcome. These talented new team members to BFS family.

Dave Rush: We are excited to welcome these talented new team members to the BFS family. We also show how our M&A and organic investments increased value-added products as a percent of our overall mix by 700 basis points over the past two years. Our success with this strategy has been a core component of our improved margin profile through the site. On slide seven, we provide an update on capital allocation. During the fourth quarter, we made two tuck-in acquisitions and repurchased over $200 million of shares while maintaining a strong balance. And for all of 2023, we prudently deployed approximately $2.5 billion in line with our stated priority. We have cumulatively deployed approximately $6.1 billion from 2022 through 2023.

Dave Brush: We also show how our M&A and organic investments increased value added products as a percent of our overall mix by 700 basis points over the past two years. Our success with this strategy has been a core component of our improved margin profile.

Dave Brush: Now through at the site.

Dave Brush: On slide seven we provide an update on capital allocation during.

Dave Brush: During the fourth quarter, we made two tuck in acquisitions and repurchased over $200 million of shares while maintaining a strong balance sheet.

Dave Brush: For all of 'twenty to 'twenty, three we prudently deployed approximately $2 $5 billion in line with our stated priorities.

Dave Brush: We have cumulatively deployed approximately $6 $1 billion from 2022 through 2023 and we communicated a new goal at our Investor Day. This past December to deploy five 5 billion to $8 $5 billion of capital from 12.

Dave Rush: And we communicated a new goal at our investor day this past December to deploy $5.5 billion to $8.5 billion of capital from 2024 to 2026. Now, let's turn to slides 8 and 9 for an update on our digital strategy. We are establishing a differentiated position as the only provider of an end-to-end digital platform in our space. Combined with our leading operating model and strong relationships, we believe BFS Digital Tools will be a substantial driver of growth for us and transformative for the industry. Our easy-to-use MyBLDR.com portal will seamlessly deliver our full digital capabilities to our customers.

Dave Brush: 24 to 2026.

Dave Brush: Now, let's turn to slides eight and nine for an update on our digital strategy.

Dave Brush: We are establishing a differentiated position as the only provider of end to end digital platform in our space combined with our leading operating model and strong relationships. We believe BFS digital tools will be a substantial driver of growth for us and transform.

Dave Brush: <unk> for the industry.

Dave Brush: Our easy to use might be L. D. Our dot com portal will seamlessly deliver our full digital capabilities to our customers. It is designed to create efficiencies for our team members and improve service for our customers by offering increased transparency and engagement and the homebuilder.

Dave Rush: It is designed to create efficiencies for our team members and improve service for our customers by offering increased transparency and engagement in the home building process, combined with our proprietary estimating and configuration software. Our customers will have more control over the entire building process. This will save both time and money for both our customers and their clients, while making the home building process more personal.

Dave Brush: <unk> process combined with our proprietary estimating and configuration tools, our customers will have more control over the entire building process. This will save both time and money for both our customers and their clients, while making the homebuilding process more personal lives.

Dave Rush: We are excited to showcase the full digital product capabilities at the International Builders Show next week. To drive the adoption of these innovative solutions, we have focused on training our sales and operations teams to help our customers leverage these powerful new tools. We are confident in our ability to deliver value from our platform and meet our target of $200 million of incremental digital revenue by the end of this year and $1 billion by 2026 as we grow wallet share and attract new customers. Throughout the year, we acknowledge team members that go above and beyond.

Dave Brush: We are excited to showcase the full digital product capabilities at the International Builders' show next week to.

Dave Brush: To drive the adoption of these innovative solutions, we are focused on training our sales and operations teams to help our customers leverage these powerful new tools.

Dave Brush: We are confident in our ability to deliver value from our digital solutions and meet our target of $200 million of incremental digital revenue by the end of this year and $1 billion by 2026, as we grow wallet share and net new customers.

Dave Brush: Throughout the year, we acknowledged team members that go above and beyond rich Roku Z market manager in our Alaska market embodies these values like no other.

Dave Rush: Rich Rapuzzi, market manager in our Alaska market, embodies these values like no other. I had the pleasure of spending time with Rich recently and witnessed the positive impact he has made on his team during his remarkable 50-year career at BFS and Legacy Companies. Rich's journey started as a customer service rep in 1974 and is rooted in hands-on experience and continuous learning. Throughout his career, he established vital departments and assumed multiple leadership roles.

Dave Brush: Had the pleasure of spending time with rich recently and witnessed the positive impact. He has made on his team during his remarkable 50 year career at BFS and legacy companies rich.

Dave Brush: Richest journey started as a customer service Rep and 1974.

Dave Brush: And is rooted and hands on experience and continuous learning.

Dave Brush: <unk> career rich established vital departments and assumed multiple leadership roles what truly sets rich apart is his passion for his community and mentoring others. His colleagues will tell you that he deeply cares about helping people reach their potential.

Dave Rush: What truly sets Rich apart is his passion for his community and mentoring others. His colleagues will tell you that he deeply cares about helping people reach their potential. As Rich prepares for retirement later this year, his impact will endure through the lives he has touched. While he'll be greatly missed, his legacy will resonate within our organization forever. I'll now turn the call over to Peter to discuss our financial results in greater detail. Thank you, Dave, and good morning, everyone. Our results throughout the year demonstrate the effectiveness of our operating model, regardless of the macro environment. Our Fortress balance sheet, strong cash flow generation, and ability to prudently deploy capital to the highest return opportunities, including acquisitions and share repurchases, continue to deliver value and position us for the long term. We are leveraging our sustainable competitive advantages and strong financial position to drive future growth and create value for our shareholders. I will cover three topics with you this morning.

Dave Brush: As rich prepares for retirement later this year his impact will endure through the lives. He has touched while he will be greatly missed his legacy will resonate within our organization for years to come.

Dave Brush: I'll now turn the call over to Peter to discuss.

Peter Jackson: Our financial results in greater detail.

Peter Jackson: Thank you David and good morning, everyone.

Peter Jackson: Our results throughout the year demonstrate the effectiveness of our operating model regardless of the macro environment.

Peter Jackson: Our fortress balance sheet strong cash flow generation and ability to prudently deploy capital to the highest return opportunities, including acquisitions and share repurchases continues to deliver value and positions us for long term success.

Peter Jackson: We are leveraging our sustainable competitive advantages and strong financial position to drive future growth and create value for our shareholders.

Peter Jackson: I will cover three topics with you this morning.

Peter Jackson: First, I'll recap our fourth quarter and full year results. Then, I'll provide an update on capital deployment. And finally, I'll discuss our full year 2024 guidance and related assumptions. Let's begin by reviewing our fourth quarter performance on slides 10 and 11. We delivered $4.2 billion in net sales, driven by a 1% decline in core organic sales and commodity deflation of 5%, although partially offset by growth from acquisitions of roughly 2%. For organic sales, organic sales were driven by a single family decline of 4% amid a weak housing market and share and supply chain normalization.

Peter Jackson: First I'll recap, our fourth quarter and full year results second I'll provide an update on capital deployment and finally I'll discuss our full year 2020 for guidance and related assumptions.

Peter Jackson: Let's begin by reviewing our fourth quarter performance on slides 10 and 11.

Peter Jackson: We delivered $4 $2 billion in net sales driven by a 1% decline in core organic sales and commodity deflation of 5%.

Peter Jackson: Partially offset by growth from acquisitions of roughly 2%.

Peter Jackson: Organic sales were driven by a single family decline of 4% amid a weak housing market share in supply chain normalization.

Peter Jackson: That said, there are signs that the single-family market is starting to pick up. Our early cycle products are beginning to show growth, including high single-digit growth in lumber and mid-single-digit growth in trusses. Multifamily grew by more than 4%, driven by our prior year acquisitions, as well as favorable margins. R&R & Other also grew by over 4% due to an increased sales focus and capacity versus 2022. Importantly, value-added products represented 52% of our net sales during the fourth quarter, reflecting our position as the supplier of choice for these higher-margin products. During the fourth quarter, gross profit was $1.5 billion, a decrease of approximately 1% compared to the prior year period.

Peter Jackson: That said there are signs that the single family market is starting to pick up our early cycle products are beginning to show growth, including high single digits growth in lumber and mid single digits growth in trust.

Peter Jackson: Multifamily grew by more than 4% driven by our prior year acquisitions as well as favorable margins.

Peter Jackson: R&R and other also grew by over 4% due to increased sales focus and capacity versus 2022.

Peter Jackson: Importantly value added products represented 52% of our net sales during the fourth quarter, reflecting our position as the supplier of choice for these higher margin products.

Peter Jackson: During the fourth quarter gross profit was $1 5 billion a decrease.

Peter Jackson: <unk> of approximately 1% compared to the prior year period.

Peter Jackson: Gross margins were 35.3%, increasing 120 basis points, mainly due to productivity and a tailwind from multifamily, partially offset by core organic margin normalization. SG&A increased by $16 million to $974 million. mainly due to higher variable compensation, acquired operations, and inflation, partially offset by lower customer reserve expenses. As a percentage of net sales, total SG&A increased by 150... 23.5%, primarily attributable to decreased fixed cost leverage from lower sales. Adjusted EBITDA was $686 million, down approximately 2%, primarily driven by lower net sales due to a weak housing market and commodity deflation. The adjusted EBITDA margin was 16.5%, up 50 basis points from the prior year, as we continue to execute and drive improved productivity across the business. Adjusted net income was $439 million, down $32 million from the prior year due to lower net sales. Justed Earnings per diluted share was $3.55, an increase of 11% compared to the prior year. On a year-over-year basis, share repurchases added roughly $0.55 per share for the fourth quarter.

Peter Jackson: Gross margins were 35, 3%, increasing 120 basis points, mainly due to productivity and a tailwind from multifamily partially offset by core organic margin normalization.

Peter Jackson: SG&A increased by $16 million to $974 million mainly.

Peter Jackson: Mainly due to higher variable compensation acquired operations and inflation, partially offset by lower customer reserve expenses.

Peter Jackson: As a percentage of net sales total SG&A increased 150 basis points to 23, 5%.

Peter Jackson: Primarily attributable to decreased fixed cost leverage from lower sales.

Peter Jackson: Adjusted EBITDA was $686 million down approximately 2%, primarily driven by lower net sales due to a weak housing market and commodity deflation.

Peter Jackson: Adjusted EBITDA margin was 16, 5% up 50 basis points from the prior year as we continued to execute and drive improved productivity across the business.

Peter Jackson: Adjusted net income of $439 million was down $32 million from the prior year due to lower net sales.

Peter Jackson: Adjusted earnings per diluted share was $3 and 55.

Peter Jackson: An increase of 11% compared to the prior year on.

Peter Jackson: On a year over year basis share repurchases added roughly 55 per share for the fourth quarter.

Peter Jackson: Now let's turn to our cash flow, balance sheet, and liquidity on slide 12. Our 2023 operating cash flow was approximately $2.3 billion, down $1.3 billion compared to the prior year period, mainly attributable to commodities and the Shrinking Housing Market. Capital expenditures for the year were $430 million.

Peter Jackson: Now, let's turn to our cash flow balance sheet and liquidity on slide 12.

Peter Jackson: Our 2023 operating cash flow was approximately $2 3 billion down.

Peter Jackson: Down $1 3 billion compared to the prior year period, mainly attributable to commodity deflation and a shrinking housing market.

Peter Jackson: Capital expenditures for the year were $430 million.

Peter Jackson: All in, we delivered healthy free cash flow of approximately $1.9 billion. For the year, our free cash flow yield was approximately 13, while operating cash flow return on invested capital was $0.28. Our net debt to adjusted EBITDA ratio was approximately 1.1 times, while base business leverage was 1.4 times. Excluding our ADL, we have no long-term debt maturities until 2030, www.buildersfirstsource.com, and $70 million of capital. Moving to Capital Deployment. During the fourth quarter, we repurchased approximately 1.6 million shares for $209 million at an average stock price of $131.70 per share. For the full year of 2023, we repurchased nearly $1.8 billion at an average price of $100.49 per share.

Peter Jackson: All in we delivered healthy free cash flow of approximately $1 9 billion.

Peter Jackson: For the year, our free cash flow yield was approximately 13%.

Peter Jackson: Operating cash flow return on invested capital was 28%.

Peter Jackson: Our net debt to adjusted EBITDA ratio was approximately one one times, while these business leverage was one four times.

Peter Jackson: Excluding our ABL, we have no long term debt maturities until 2030.

Peter Jackson: At quarter end, our total liquidity was approximately $1 $3 billion consisting.

Peter Jackson: Consisting of one point to $7 billion of net borrowing availability under the revolving credit facility and $70 million of cash on hand.

Peter Jackson: Moving to capital deployment.

Peter Jackson: During the fourth quarter, we repurchased approximately one 6 million shares for $209 million at an average stock price of $131 74 per share.

Peter Jackson: For the full year of 2023, we repurchased nearly $1 $8 billion of shares at an average price of $100 49 per share.

Peter Jackson: As Dave mentioned, the board approved the repurchase of up to $1 billion of common stock, inclusive of the approximately $200 million remaining on the prior share repurchase plan authorized in April. We remain disciplined stewards of capital and have multiple paths for value. Proven Ability to Deploy Capital and Deliver High-Return. Now, let's turn to our outlook on the slide. For full year 2024, we expect total company net sales to be $17.5 to $18.5 billion. We expect adjusted EBITDA to be $2.4 to $2.8 billion.

Peter Jackson: As Dave mentioned, the board approved the repurchase of up to $1 billion of common stock inclusive of the approximately $200 million remaining on the prior share repurchase plan authorized in April of 2023.

Peter Jackson: We remain disciplined stewards of capital and have multiple paths for value creation through a proven ability to deploy capital and deliver high returns.

Peter Jackson: Now, let's turn to our outlook on slide 13.

Peter Jackson: For full year 2024, we expect total company net sales to be 17.5 to $18 5 billion.

Peter Jackson: We expect adjusted EBITDA to be 2.4 to $2 8 billion.

Peter Jackson: We suggest that even a margin is forecasted to be 14-15%, and we are guiding gross margins to a range of 30-33%. Our recent above-normal margins reflect a greater mix of value-added products along with the disciplined pricing required to offset increased operating costs. As we move through the year, we expect both our gross margins and the multi-family... to continue to normal. We expect full year 2024 free cash flow of 1 to $1.2 billion. The change from 2023 is primarily due to an expected $500 million year-over-year decrease due to working capital as we move from shrinking to growing sales. The free cash flow forecast assumes average commodity prices in the range of $400 to $440 per 1,000 portfolios.

Peter Jackson: Adjusted EBITDA margin is forecasted to be 14% to 15%.

Peter Jackson: And we are guiding gross margins to a range of 30% to 33%.

Peter Jackson: Our recent above normal margins reflect a greater mix of value added products, along with the disciplined pricing required to offset increased operating costs.

Peter Jackson: As we move through the year, we expect both our gross margins and the multifamily business to continue to normalize.

Peter Jackson: We expect full year 2020 forecast free cash flow.

Peter Jackson: One to one 2 billion.

Peter Jackson: The change from 2023 is primarily due to an expected 500 million dollar year over year decrease due to working capital as we move from shrinking to growing sales.

Peter Jackson: The free cash flow forecast assumes average commodity prices in the range of 400 to 400.

Peter Jackson: $40 per thousand board foot.

Peter Jackson: Our 2024 outlook is based on several assumptions. Please refer to our earnings release in slide 14 of the investor presentation for a list of these key assumptions. As you all know, we do not typically give quarterly guidance, but we wanted to provide directional color for Q1. On a year-over-year basis, we expect Q1 net sales to be flat to down-low single digits, as we lost roughly two days of sales due to inclement weather conditions at the start of the year. Year-over-year adjusted EBITDA is expected to be down high teens to low 20s in Cuba, given the impact We expect our sales to rebound as the severe weather conditions subside. Regardless, we remain optimistic about a healthy housing market in 2020. Turning to slides 15 and 16.

Peter Jackson: Our 2024 outlook is based on several assumptions.

Peter Jackson: Please refer to our earnings release, and slide 14 of the Investor presentation for a list of these key assumptions.

Peter Jackson: As you all know we do not typically give quarterly guidance, but we wanted to provide directional color for Q1.

Peter Jackson: On a year over year basis, we expect Q1 net sales to be flat to down low single digits. As we have lost roughly two days of sales due to inclement weather conditions at the start of the year.

Peter Jackson: Year over year, adjusted EBITDA is expected to be down high teens to low twenties in Q1, given the impact of extreme weather and continued margin and share normalization.

Peter Jackson: We expect our sales to rebound as the severe weather conditions subside, regardless, we remain optimistic for a healthy housing market in 2024.

Peter Jackson: Turning to slides 15, and 16 as a reminder, our base business approach showcases the underlying strength and profitability of our company by normalizing sales and margins for commodity volatility.

Peter Jackson: As a reminder, our base business approach showcases the underlying strength and profitability of our company by normalizing sales and margins for commodity volatility. This helps to clearly assess the core aspects of the business, where we have focused our attention to drive sustainable outperformance. Our base business guide on net sales for 2024 is approximately 17, and our base business adjusted EBITDA guide is approximately $2.4 billion at a margin of $13.5. As I wrap up, I want to reiterate that we are confident in the near-term outlook, our exceptional positioning to execute our strategic goals, and our ability to create shareholder value in any environment to support profitable growth. With that, I will turn the call back over to Dave for some final thoughts. Thanks, Peter.

Peter Jackson: It's to clearly assess the core aspects of the business, where we have focused our attention to drive sustainable outperformance.

Peter Jackson: Our base business guide on net sales for 2024 is approximately $17 6 billion.

Peter Jackson: Our base business adjusted EBITDA Guide is approximately $2 4 billion.

Peter Jackson: At a margin of 13, 5%.

Peter Jackson: As I wrap up I want to reiterate that we are confident in the near term outlook, our exceptional positioning to execute our strategic goals.

Peter Jackson: Our ability to create shareholder value in any environment to support profitable growth.

Peter Jackson: With that let me turn the call back over to Dave for some final thoughts.

Dave Brush: Thanks, Peter let me close by saying that we are focused on executing our strategic pillars. This focus along with our close partnership with our customers to address their pain points is a competitive differentiator in our industry.

Dave Rush: Let me close by saying that we're focused on executing our strategic plan. This focus, along with our close partnership with our customers to address their pain points, is a competitive differentiator in our industry. We are the unquestioned leader in value-added solutions, which we believe are the most effective way to address labor and cycle time challenges. Our industry-leading digital innovations are bringing greater efficiency to home building and will win us new customers and grow WalletShare along the way. Our robust free cash flow generation is funding a disciplined capital deployment strategy that will compound long-term shareholder value. While 2023 was an exciting year, we are just getting started. Thank you again for joining us today.

Dave Brush: We are the unquestioned leader in value added solutions, which we believe are the most effective way to address labor and cycle time challenges our industry, leading digital innovations are bringing greater efficiency, the homebuilding and will win us new customers and grow wallet share along the way or.

Dave Brush: <unk> free cash flow generation is funding a disciplined capital deployment strategy that will compound long term shareholder value. While 2023 was an exciting year, we're just getting started.

Speaker Change: You again for joining us today operator, let's please open the call now for questions.

Operator: Operator, please open the call now for questions. Thank you. At this time, if you would like to ask a question, please press star 1 on your telephone keypad. You may remove yourself from the queue at any time by pressing star 2.

Speaker Change: Thank you at this time, if you would like to ask a question. Please press star one on your telephone keypad.

Dave Brush: You may remove yourself from the queue at any time by pressing star to once again that is star one to ask a question and start to move yourself due to time constraints. We ask that you. Please limit yourself to one question.

Matthew Bouley: Once again, that is star 1 to ask a question and star 2 to remove yourself. Due to time constraints, we ask that you please limit yourself to one question. We'll go first to Matthew Bouley with Barclays. Morning Dave, Peter.

Dave Brush: We'll go first to Matthew Bouley with Barclays.

Matthew Bouley: Good morning, Dave Peter Thanks for taking the questions.

Matthew Bouley: Thanks for taking the questions. So, to start off with on the gross margin, of course, exiting 23 over 35 percent. I hear you.

Matthew Bouley: So to start off with on the gross margin of course exiting 'twenty three over 35%.

Peter Jackson: There is still some multifamily normalizing to come, but it looks like you're guiding to volume growth, of course, in your single-family businesses here, and I assume there's some operating leverage there in your manufacturing. I think I heard Dave say that there are another 100 million in productivity this year, and I don't know if you're assuming the value-add mix will continue to rise, and that's on top of everything you've done around automation and consolidating the industry and so forth in recent years. So, my point is, it seems like you've got a lot of tailwinds this year. I guess where I am being too optimistic and what's the kind of cadence timing of gross margins normalizing that back to below 33 percent? Thank you. Yeah, thanks, Matt. You know, you, your points are all accurate.

Matthew Bouley: Hear you there is still some multifamily normalizing to come but it looks like youre guiding to volume growth of course in your single family business. This year and I assume there is some operating leverage there and your manufacturing I think I heard Dave say that theres, another $100 million in productivity this year.

Matthew Bouley: And I I don't know if you're if you're assuming value add mix wood would continue to rise and that's on top of everything you've done around automation and consolidating the industry and so forth in recent years. So.

Speaker Change: My point is it seems like you've got a lot of tailwind this year, I guess, where I am I being too optimistic and whats kind of the cadence timing of gross margins normalizing back to below 33%. Thank you.

Speaker Change: Yes, Thanks, Matt.

Speaker Change: Your points are all accurate I think that we've done a really nice job in the value add sector. I think we've managed pricing in a disciplined way, we certainly have done a good job on productivity and continuing to execute in that category and certainly a portion of that hits gross margins not all of it.

Peter Jackson: I think that we've done a really nice job in the value-added sector. I think we've managed pricing in a disciplined way. We certainly have done a good job on productivity and are continuing to execute in that category. And certainly, a portion of that hits gross margins, not all of it. What I think is continuing to happen, and I know this is a consistent theme from us, but we want to continue to be candid with investors. There is a normalization that we're seeing in the poor, and there's a normalization or maybe a recognition of a cycle in multi-stakeholders.

Speaker Change: What I think is is continuing to happen and I know this is a consistent theme from us, but we want to continue to be candid with investors. There is a normalization that we're seeing.

Speaker Change: In the core and there is a normalization or maybe a recognition of a cycle in multifamily those are the two really big components driving the ongoing normalization that we expect.

Peter Jackson: Those are the two really big components driving the ongoing normalization that we expect in 2020. So, you know, multifamily, as we look at it, certainly a dynamic market, but there has been a pullback, right? A lot of multifamily units have been put in the ground over the last few years.

Speaker Change: In 2020.

Speaker Change: So multifamily as we look at it certainly a dynamic market, but there is a bit of blowback right a lot of.

Speaker Change: A lot of multifamily units were put in the ground there over the last few years. The backlog has been very full very healthy and we've done very very well there are clear signals both in the broader market and in our numbers that multifamily is normalizing its pulling back in and it's going to pull back pretty aggressively. We expect we will start seeing that in sort of Q1.

Peter Jackson: The backlog has been very full, very healthy, and we've done very, very well. There are clear signals, both in the broader market and in our numbers, that multifamily is normalizing. It's pulling back, and it's gonna pull back pretty aggressively.

Speaker Change: Based on the latest information and it will hit US all year. So certainly multifamily is a good business, but there's a headwind there associated with that business shrinking.

Peter Jackson: We expect we'll start seeing that in sort of Q1, based on the latest information, and it will hit us all year. So certainly, multifamily is a good business, but there's a headwind there associated with that. And we continue to see in pockets around the country the normalization of margins in a competitive environment, right? We're well below what we would consider to be normal starts, normal single-family starts in this industry.

Speaker Change: We continue to see in pockets around the country the normalization of margins in a competitive environment right. We're well below what we would consider to be normal starts single family starts in this industry. So it's competitive out there and there are certain markets, where we've had to get aggressive and will continue to do that to protect our position.

Speaker Change: To win in the market and to be the customer of choice. We don't think it's.

Peter Jackson: So it's competitive out there, and there are certain markets where, you know, we've had to get aggressive, and we'll continue to do that to protect our position and to win in the market and to be the customer of choice. We don't think it's, you know, putting us outside of that communicated range for gross margin, but certainly expect that to continue to erode as the year goes on. Okay, that's clear.

Speaker Change: Putting us outside of that communicated range for gross margin, but certainly expect that to continue to erode as the year progresses.

Speaker Change: Okay. That's clear thanks, thanks for that Peter.

Speaker Change: Second one I guess sticking with the guidance I think your your end market growth.

Speaker Change: Blends to may be very low single digits.

Speaker Change: And you're speaking to base business growth of I think 7% this year and I know Theres a couple of extra selling days in the second half, but my.

Speaker Change: My question is on your growth compared to the market. It sounds like you should start to get some of the digital sales to kick in later this year, but just can you kind of bridge us from where the market is expected this year to year.

Peter Jackson: Thanks for that, Peter. Second one, I guess, sticking with the guidance, I think your end market growth kind of blends to maybe very low single digits, you know, and you're speaking to base business growth of, I think, 7% this year. And I know there are a couple extra selling days in the second half, but, you know, my questions on your growth compared to the market sound like, you know, you should start to get some of the digital sales to kick in later this year. But could you kind of bridge us from where the market is expected this year to, you know, the sort of several hundred basis points of market outgrowth? And, obviously, of course, how does the value add growth kind of play into that? Thank you. Yeah, thanks, Matt. You're right.

Speaker Change: Several hundred basis points of market outgrowth, and obviously of course, how does the value add growth kind of play into that thank you.

Speaker Change: Yeah. Thanks, Matt Youre right, we are anticipating a fairly modest market tailwind this year, which obviously is appreciated and we will put to good use but we are challenging ourselves as an organization a couple of key areas.

Speaker Change: A big one that we talk a lot about digital we're really excited about what this product is going to do for us in terms of attracting and enhancing our relationships with customers. We think there's real value. There. So we're putting that in our number. We also are continuing to invest if you as you seen in valley.

Peter Jackson: We are anticipating a fairly modest market tailwind this year, which obviously is appreciated and used, but we are challenging ourselves as an organization in a couple of key areas. A big one that we talk a lot about is digital. We're really excited about what this product is going to do for us in terms of attracting and enhancing our relationships with customers. We think there's real value there, so we're putting that on our number. We are also continuing to invest, as you've seen, in value-add. So we've got new capacity in the ground. We've got new equipment. We've got a new ability this year that we didn't have last year to provide those types of high-value, impactful products to our customers, so we expect growth from that. And we're certainly confident in our team.

Speaker Change: So we've got new capacity in the ground, we've got new equipment, we've got new a new ability. This year that we didn't have last year to provide those types of high value impactful products to our customers. So we expect growth from that.

Speaker Change: And we're certainly confident in our team we've got we believe to be the best team in the industry and we think we can win in the market. So those three things really kind of combined to give us the confidence to put out a number there that really represents share growth ultimately yeah, I would just add Matt that conversations with customers are almost uniformly optimist.

Speaker Change: For the year there are differences in when they believe that timing of that.

Speaker Change: That rebound will start and that's all obviously driven by the macro environment to a degree.

Speaker Change: And the digital.

Speaker Change: The digital AD that will experience during the year will be more like a hockey stick it will be weighted to the back half of the year as we continue to drive adoption and training throughout the organization and with our customers.

Peter Jackson: We believe to be the best team in the industry, and we think we can win in the market. So those three things really kind of combine to give us the confidence to put out a number there that really represents share growth, ultimately. Yeah, I would just add, Matt, that conversations with customers are almost uniformly optimistic for the year. There are differences in when they believe the timing of that rebound will start, and that's all obviously driven by the macro environment, to a degree. And the digital ad that we'll experience during the year will be more like a hockey stick.

Speaker Change: But we're excited about the year as a whole it's a little more difficult to pinpoint the exact point in time, when we start seeing it in real time, but the long term demand still is very very encouraging.

Speaker Change: Got it well thank you Dave Thanks, Peter see you guys next week.

Speaker Change: Thanks, Matt So I will say.

We'll turn now to Mike Dahl with RBC capital.

Mike Dahl: Good morning, Thanks for taking my question.

Speaker Change: Okay.

Mike Dahl: Just a question on free cash flow I appreciate.

Peter Jackson: It will be weighted towards the back half of the year as we continue to drive adoption and training throughout the organization and with our customers. But we're excited about the year as a whole. It's a little more difficult to pinpoint the exact point in time when we start seeing it in real time. But the long-term demand is still very, very important.

Dave Rush: <unk>.

Your articulation of kind of some of those timing differences.

Mike Dahl: The swings in working cap and so I think as we move beyond two.

Peter Jackson: 2024 does this represent kind of a lower than normal conversion for you. So.

Speaker Change: Yes can you just talk to that is it kind of timing through the year.

Peter Jackson: Of how working cap.

Matthew Bouley: Well, thank you, Dave. Thanks, Peter. See you guys next week.

Mike Dahl: The ramp as growth ramps and then once we get to 'twenty five.

Mike Dahl: Thanks Matt, travel safe. We'll turn now to Mike Dahl with RBC Capital. Morning, thanks for taking my question. Where am I?

Speaker Change: Do you still expect to get back to a higher and more normal conversion rate.

Speaker Change: Or any other moving pieces, there I think would be helpful.

Mike Dahl: Just a question on free cash flow, appreciate, www.buildersfirstsource.com of how we're PCAPP. www.buildersfirstsource.com Yeah, absolutely. So you're right, Mike, this is a light year for us. The way that the numbers show, you know, the comp looked pretty dramatic on a year over year basis. We're down a little bit on the EBITDA number due to that step down, but the change going from a business that's shrinking, and as you know, we spent a tremendous amount of cash, to turn to an increasing sales environment. And we use working capital when we grow. That sort of turn for us showed large in the number. But that headwind that we would expect to see related to growth is generally going to be a little bit smaller in a normal growth year than in a turn year, because the turn year is always a big number when it goes.

Yeah, absolutely so youre right. Mike This is a light year for us.

Speaker Change: The way that the numbers show the comp looked obviously pretty dramatic on a year over year basis, we're down a little bit on the EBIT number due to that multifamily.

Speaker Change: Stepped down but that that change going from a business that's shrinking and as you know we spin off a tremendous amount of cash as the business shrinks.

Speaker Change: To turn to an increasing sales environment and.

Mike Dahl: And we use working capital when we grow.

Mike Dahl: That that sort of turn for us showed large in the numbers, but that headwind that we would expect to see related to growth in generally going to be a little bit smaller than an app in a normal growth year than in a turn year turn year is always a big number when he goes from one to the other so.

Peter Jackson: So we do anticipate it to be a little bit higher in a normal year. And as we laid out in our investor day, there's a cumulative benefit that we expect to deliver on and that commitment. Okay, good to hear. Thank you. We'll turn now to Jill Ollersmeyer with Deutsche Bank.

Speaker Change: We do anticipate it to be a little bit higher than a normal year.

Speaker Change: And as we laid out in our Investor day, there is accumulative benefit that we expect to deliver on that commitment hasnt changed.

Jill Ollersmeyer: Okay. Good to hear thank you.

Jill Ollersmeyer: We'll turn now to Joe <unk> with Deutsche Bank.

Jill Ollersmeyer: Hey, good morning, guys congrats on the results.

Jill Ollersmeyer: Thanks, Joe. So is it right to think that if we've got the headwind from weather in one cue, we're probably going to be pushing those sales more in? I'm just trying to think about the phases, sales for the. I think that's a fair assessment, Joe.

Jill Ollersmeyer: Good morning, Joe Thanks, Jeff.

Jill Ollersmeyer: So is it right to think that.

Jill Ollersmeyer: If we've got the headwind from weather in one queue, we're going to be probably pushing those sales more into <unk> I'm just trying to think about the phasing of sales.

Jill Ollersmeyer: Sales for the remainder of the year.

Jill Ollersmeyer: I think Thats, a fair assessment Joe typically.

Peter Jackson: Typically, what we see is it's not an immediate snapback, but a gradual snapback in the future quarters as they catch up. They don't catch up all at once, but at the end of the day, we actually do feel like what we lost in the first quarter due to weather will ultimately pick up in the back three quarters of the year. Thanks for that. And then looking at your guidance for the all-in business and the base business, is it right to think about www.buildersfirstsource.com in these 24 numbers, and then maybe if you could just talk about www.buildersfirstsource.com Yeah, that's right, Joe, the Beast Business Reconciliation or the Last of the Multis? Wow.

Jill Ollersmeyer: What we see is it's not an immediate snapback, but a gradual snap back in the future quarters as.

Peter Jackson: They catch up they don't catch up all at once but at the end of the day, we actually do feel like what.

Peter Jackson: What we lost in the first quarter due to weather will ultimately pick up in the back.

Peter Jackson: Three quarters of the year.

Peter Jackson: Okay got it thanks for that and then looking at your guidance for the all in business in the base business is it right to think about the commodity element of this as a full normalization of the multifamily are we getting sort of all of both the commodity normalization and market normalization.

Peter Jackson: In these 24 numbers and then maybe if you could just talk about going forward.

Peter Jackson: The opportunity within multifamily kind of between the five and below units versus the much larger projects.

Speaker Change: Yes, that's right Joe.

Peter Jackson: These business reconciliation or those two components you mentioned as the last of the multifamily and the last of a little bit of a core not much left which is nice.

Peter Jackson: Not much left, which is nice, but that's certain. And I would tell you that you're exactly right. Our sales teams have focused on the larger projects, partly because their customers are also looking for opportunities in the smaller projects that still qualify technically as multifamily or light commercial. We're all focused on those opportunities, and those will help us bridge that headwind a little easier for the rest of the year. But it still takes a little bit of time for those projects to get out of the ground, and the timing of that makes it a little difficult, but we're there. www.buildersfirstsource.com. Thanks a lot. We'll turn now to Trey Grooms with Stephen.

Trey Grooms: But that's certainly a piece of it and I would tell you you're exactly right. Our sales teams have focused on the larger projects.

Trey Grooms: Partly because their customers are also looking for opportunities in the smaller projects that still qualified technically is multifamily or light commercial we're all focused on those opportunities and those will help us bridge that.

Trey Grooms: That headwind a little easier through the rest of the year, but it still takes a little bit of time for those projects to get out of the ground and the timing of that makes it a little difficult but were down.

Trey Grooms: Only focus on that opportunity.

Trey Grooms: Thanks, a lot good luck guys.

Peter Jackson: Okay.

Trey Grooms: We'll turn now to Trey grooms with Stephens.

Trey Grooms: Hey, good morning, Dave and Peter. Peter, you mentioned that there's, you know, you're seeing some evidence of residential construction starting to turn around, and I think you noted seeing high single-digit growth in lumber and low single-digit growth in trusses. I guess, what's the timing you're referring to there? Is that, you know, since January or, you know, just some color on the time frame there? And then secondly, is there any reason why trusses would be trending slower than lumber? I mean, I didn't know if there would be anything going on there from a mixed standpoint or something.

Trey Grooms: Hey, good morning, David and Peter.

Trey Grooms: Peter You mentioned that there is you're seeing some evidence of residential is starting to turn around and I think you noted seeing high single digit growth in lumber and low single digit growth in trust.

Trey Grooms: I guess, what's the timing you're referring to there is that since January or just some color on the timeframe. There and then secondly is there any.

Trey Grooms: The reason why trusts would be trending slower than lumber and I didn't know if there would be anything going on there from a mix standpoint or something up.

Peter Jackson: I would just assume, you know, value add would at least stay in pace with lumber or maybe outpace, just any color there. Yeah, no. Thanks for the question, Trey. So the timeframe we're talking about was 4Q. So it was a fourth quarter. I think the storyline here, and we've talked about it a bit in the past, but for those maybe who haven't heard it, what we sell goes into a start at a wide range of timelines, right? So lumber is generally very, very early. It's not unusual to frame the first floor and then have maybe the trusses delivered.

Trey Grooms: Just assumed.

Speaker Change: You add would at least stay on pace with lumber or maybe outpace just any color there.

Speaker Change: Yeah no. Thanks for the question Trey So the timeframe were talking about was for Q. So it was a fourth quarter dynamic I think the storyline here and we've talked about it a bit in the past, but for those maybe you haven't heard it.

Speaker Change: What we sell goes into a start.

Peter Jackson: At a wide range of timelines right. So lumber is generally very very early.

Peter Jackson: It's not unusual to frame the first floor and then have maybe the trusses delivered there is a very close correlation between framing and trusts no no argument there.

Peter Jackson: There is a very close correlation between framing and truss, no argument there. I think that, in general, it's indicative of the beginning of the turn. What's also true is some of the later products, you go through windows, and you get out the doors and trim, That's later in the process. And those are the products that you noticed we didn't talk about as being a deterrent. It's very reflective of last year. At the end of 22, you saw lumber and trusses go down, lumber down a lot more than trusses.

Peter Jackson: I think that in general it's indicative of the beginning of the term what's also true is.

Peter Jackson: Some of the later products you go through Windows, and you got out to doors and trim. That's later in the build process and those are the products that you noticed we didn't talk about as being a deterrent.

Peter Jackson: Position, it's very reflective of last year.

Peter Jackson: At the end of 'twenty two you saw.

Lumber and trust go down really hard lumber down a lot more than trust. So on a comparison basis. That's part of the answer as well that lumber was down aggressively if you go back to the numbers for the fourth quarter of last year. So on a comp basis, it's up a little bit more but really because it was down a little bit.

Peter Jackson: So on a comparison basis, that's part of the answer, that lumber was down aggressively if you go back to the numbers for the fourth quarter of last year. So on a comp basis, it's up a little bit more, but really because it was down. Yeah, I mean, lumber and trusses go hand in hand together, but value added. I think that's the thing, you guys. Are you adding this later?

Mean, Lumbered Trust go hand in hand, together, but value added is more than troughs I think that's the thing that mine. So you add it is later in the process.

Peter Jackson: Yep, got it. Thanks for clearing that up. Good luck. Thank you. Thanks, Trent. We'll turn now to Rafael Jarosic with Bank of America. Hey, good morning. It's Rafe.

Got it thanks for clearing that up good luck. Thank you.

Rafe Jason Jadrosich: Thanks Darren.

We'll turn now to Rafal <unk> with Bank of America.

Rafe Jason Jadrosich: Hey, good morning, it's Rafe thanks for taking my question.

Rafael Jarosic: Thanks for taking my question. Um, last quarter, you provided a scenario framework for 2024 based on different macro assumptions and then what that would mean for your earnings. Should we still be comfortable with that?

Rafe Jason Jadrosich: Last quarter, you provided a scenario framework for 2024 on.

On different macro assumptions.

And then but what that would mean for your earnings.

Are you.

Should we still sort of comfortable with that so it starts tracking that to 14% range in the single family side and Lumbers at 425 to $4 75 would you still be looking for $2 seven to $3 1 billion in EBITDA or has something else changed in the market, where we should be thinking about upside or.

Peter Jackson: So it starts tracking that 8 to 14% range on the single family side and lumbers at 425 to 475. But would you still be looking for 2.7 to 3.1 billion in EBITDA? Or has something else changed in the market where we should be thinking about upside or downside for those? I think it's fair to say that, directionally, those scenarios are still indicative of how we think of the business. There haven't been any real structural changes in any of the variables. It's always subjective to a degree because the ending point for 2023 was a little bit different. But generally, yeah, no, I think that's a fair way, www.buildersfirstsource.com. If you have years where the starts are below that target, do you think you'll be able to achieve gross margin above 30%? Or is there something unique to 24 that's keeping it higher? Or is that just because you still have some multifamily that's falling through? It's a really good question.

Downside scenarios.

I think it's fair to say that Directionally those scenarios are still indicative of how we think of the business there haven't been any real structural changes in there.

Any of the variables.

Always subjective to a degree because the ending point for 2023 was a little bit different but generally yes, no I think that's a fair way to look at it.

Okay.

Really helpful and then.

Just as you look at the.

Peter Jackson: The gross margin guidance for this year, the 30% to 33% in line with your long term target. Despite single family starts that are tracking below the long term assumptions of $1 1 million.

As we look forward here.

If you have years, where the starts are below that target do you think you'll be able to do gross margin above 30% or is there something unique to 'twenty for that that that's keeping it to higher.

Okay.

Is that just because you still have some multifamily.

That's long term.

Yeah.

It's a really good question I think comp.

Peter Jackson: Our confidence this year comes from that normal. We still have some above what we consider to be normal margins in multifamily and in a couple of product categories, pockets around the country. We're continuing to see that normalization. We're continuing to see some of that competition back to what we consider to be a likely normal. That said, obviously, very good. It's very strong.

Confidence our confidence this year comes from that normalization component, we still have some.

Above what we consider to be normal margins in multifamily and in a couple of product categories.

Pockets around the country.

We're continuing to see that normalization, we're continuing to see some of that compete back to what we consider to be a likely normal.

That said, we are obviously very good very strong and we're we're feeling very confident about our ability to manage it in the long term.

Peter Jackson: And we're feeling very confident about our ability to. At this stage, I think it's hard to say that it's an exact point of starts that correlates to an exact point in gross margins. I think we're most comfortable talking about it in sort of ranges around normal, which feels like a range around margins. But right now, a lot of confidence that we can hold in that normal range. Yeah, and what I would add is our belief in the resilience of that range and the fact that we can hold within that range. Our belief in our value-added product portfolio and solutions. Those are the products that are more valuable to our customers and, as a result, have a better margin opportunity for us. And as we continue to grow that as a percentage of our overall sales, it's always going to help that gross margin number be more resilient. Thank you, very helpful. We'll turn now to Keith Hughes with Truth.

At this stage I think it's hard to say that it's a an exact point of starts that correlates to an exact point in gross margins.

I think we're most comfortable talking about it in sort of ranges around normal feels like a range around margins.

But right now a lot of confidence that we can hold in that normal range based on everything we're seeing and what I would add is our belief and the resilience of that range and the fact that we can hold within that range is our belief in our value added product portfolio and solutions. Those are the those are the products that are more valuable.

To our customers and as a result, more have better margin opportunity for us.

As we continue to grow that as a percentage of our overall sales is always going to help that gross margin number would be more resilient.

Thank you very helpful.

We'll turn now to Keith Hughes with Trust.

Keith Hughes: Family, I don't think your projection here is out of line with what's thought in the market. Just specific to Builders FirstSource, when do you think this is going to really start impacting your business? If you talk about the unit loss versus margin loss that's been such a positive for 23, that'd be helpful. Yeah, I mean, timing is a tough thing to predict, as you know, Keith.

I don't think your projection here's a lot or whats the market just specific to builders for source. When do you think this is going to really start impacting your business.

Talk about the unit loss versus margin loss, that's been such a positive.

Be helpful.

Yes, I mean, timing's tough thing to predict as you know Keith.

Peter Jackson: I think based on what we're seeing and hearing, the market is healthy. We've certainly seen some positive signs early in the year. Well, it would be nice if the Fed helped, you know. Can't lie. Based on everything out there in the public markets, it feels like a second half dynamic. Um, you know, when we call out the numbers around... Core Organic, there's certainly a big component of it.

I think based on what we're seeing and hearing.

The market is healthy we've certainly seen some positive signs early in the year.

Well it would be nice if the fed helped.

Can't lie based on everything that's kind of out there in the public markets. It feels like a second half dynamic.

When we call out the <unk>.

The numbers around.

Core organic.

Certainly.

Big component of it.

Peter Jackson: It's primarily price volume mix driven, like we give you the days, we give you the commodities. In the price volume mix space, that normalization we are talking about in terms of margins is certainly an important part, driver, in terms of the normalization of gross margins. It has less of an impact on sales. So the driver this year really has to be unit volumes turning and starting to accelerate again. And, you know, that's our expectation and that's what we're starting to see. So there's certainly a lot of optimism, I would say, at this point. It really becomes a question.

It's primarily price volume mix driven like we give you the days we gave you the commodities.

The price volume mix space that normalization talking about in margins is certainly an important part.

Driver.

In terms of the normalization of gross margins, it's less of an impact on sales.

So that is the driver of this year really has to be unit volumes turning.

And starting to accelerate again, and that's our expectation and that's what we're starting to see so there is certainly a lot of.

Optimism I would say at this point it really becomes a question of timing.

Okay alright, thank you.

Peter Jackson: All right, thank you. We'll turn now to Colin Verone with Jefferies. Hi, good morning.

We'll turn now to Colin Browne with Jefferies.

Colin Verone: Thank you both for taking my question. I just wanted to dive into multifamily a little bit more and your assumption around that 20% to 30% decline in multifamily starts. I guess any help in thinking about your sales performance versus that start to decline for the full year, just given the backlog of projects that are still under construction according to the Census Bureau data and maybe the lag that you would normally see from a start to your sales? And then, second on that, can you just help us think about the cadence of the multifamily starts maybe on a quarterly basis throughout the year? To kind of get to that sales performance? Yeah, I mean, if you're thinking about our multifamily business, you do have to go back and turn around what we build, and this is the problem in terms of everybody being able to use the sort of publicly available information, a little bit more specific both to markets and what we're building. However, I think what we're seeing right now is the expected downturn throughout 2024. I kind of thought it might hit late in 2023. It didn't.

Hi, Good morning, Thank you for taking my question.

Just wanted to dive into the multifamily a little bit more in your assumption around that 20% to 30% decline in multifamily starts I guess any help in thinking about your sales performance versus that starts decline for the full year just given the backlog of project is still under construction. According to the census Bureau data and maybe the lag that you would normally see from a start here.

And then I guess second on that can you just help us thinking about the cadence of the multifamily starts maybe on a quarterly basis throughout the year.

To kind of get to that sales performance.

Yeah.

I'd say, if you're thinking about our multifamily business you do have to go back in the rearview mirror right and the turn around what we built and this is the problem in terms of everybody being able to use that sort of publicly available information, it's a little a little bit more specific both to markets and what we're building.

However, I think what we're seeing right now is that.

The expected downturn throughout 2024.

I thought it might hit late in 2023 didn't I think people were pretty aggressive at trying to get the multifamily projects completed so we actually saw.

Peter Jackson: I think people were pretty aggressive at trying to get the multifamily projects completed. So we actually saw a nice pull through, a little better than we thought of that business in the fourth quarter. But definitely seeing it turn down, starting in Q1, in every quarter during the year, you'll see, you know, for the multifamily. Meaningful declines in both sales and margins as the year progresses. Still a really good business. You know, it's just not sort of performing at those, you know, two standard deviations above the normal level.

Nice pull through a little better than we thought of that business in the fourth quarter, but definitely seeing it turned down starting in Q1 in every quarter during the year you'll see.

For the multifamily business.

Meaningful declines in both sales and margins as the year progresses still a really good business.

It's just not sort of performing at those.

Two standard deviations above normal levels anymore.

Peter Jackson: And I would just add, you know, remember, it's only 13% of our overall business. The other thing I would add is that we were at the Harvard Housing Conference, and there were multifamily players there. And it's a cost of capital challenge, in addition to all of the multifamily that has been constructed over the last 12 to 18 months coming to market all at the same time. So there's a little bit of a digestion of that, in addition to solving the capital cost equation. But again, just like in single-family homes, the long-term outlook for multifamily is very positive when you look at the demand curve and what people need housing and what multifamily satisfies for that population. So long-term, we're still very positive about the business, and we do know we'll have to manage some of the costs, the capital challenges that are there today. But again, 13% of our population.

I would just add remember, it's only 13% of our overall business.

The other thing I would add is we were at the Harvard housing Congress newer multifamily players there and it's a cost of capital Challenge in addition to.

All of the multi family that had been constructed over the last 12 months to 18 months is coming to market. All at the same time, so there's a little bit of a digestion of that in addition to solving the capital the capital cost equation, but again just like in single family the long term.

Outlook for multifamily as very positive when you look at the demand curve and what people need housing and what our multifamily satisfies for those populations. So long term, we're still very positive.

Positive on the business and we do know we will have to manage too.

Some of the cost the capital challenges that are there today, but again, 13% of our business.

Peter Jackson: Great, that's really helpful, Culler. And then I just wanted to touch on productivity, which continues to be a pretty meaningful tail end for you guys. Can you just talk about the projects you're looking to benefit from in 2024, and maybe the size of the project pipeline beyond 2024? Yeah, the productivity initiatives are in two camps. One is, how can we improve our productivity through automation and technology?

Great. That's really helpful color and then I wanted to touch on productivity, which continues to be a pretty meaningful tailwind for you guys can you just talk about the projects Youre looking to benefit from in 2024, and maybe the size of the project pipeline beyond 2024.

Yes, the productivity initiatives are in two camps. One is how can we improve our productivity through automation and technology and then how can we do with two best practices.

Peter Jackson: And then how can we do it through best practices? The benefit of our scale, our 570 plus locations, is the ability to take a best practice across the enterprise and get little chunks of productivity in every single location. So it falls between those two camps.

The benefit of.

Our scale, our 570 plus locations is the ability to take our best practices across the enterprise and get little chunks of productivity in every single location. So it falls in those two camps that a lot of the automation and technology is around improving customer service improving truck turnaround.

Peter Jackson: A lot of the automation and technology is around improving customer service, improving truck turnaround times, and also in the manufacturing environment, using automation to get more throughput per labor hour. But, you know, that would outline the things we're working on. Great. Thank you for the color and good luck.

Owned times also in the manufacturing environment.

Using automation to get more throughput per labor hour.

Got it.

That would outline the things we're working on for 2020.

Great. Thank you for the color and good luck.

Thank you.

Adam Michael Baumgarten: We'll go next to Adam Baumgarten with Zellman. Hey, good morning. If we look at the market for manufacturing products like trust, are you seeing your competitors ramp up capacity as well? There are a few, but I mean, scale wise, we're, 5, 10, 20x their size.

We'll go next to Adam Baumgarten with Zelman.

Hey, good morning.

If we look at the market for manufactured products I Trust are you seeing your competitors ramp up capacity as well.

Sure, a little but scale wise, where.

510, 20 X their size, so if they're adding one or two plants in certain markets.

Peter Jackson: So if they're adding one or two plants in certain markets, we've, I would tell you the other differentiation we have is not just adding locations; it's actually improving the throughput of the locations we already own. We've invested over $100 million in existing plants. Over 65% of our tables have some level of automation. Every plant has some level of automation, so there are a lot of different ways we can extend our lead without building a physical plant to do so, and we're focused on that. Okay, I got it.

Know how to deal with it.

I would tell you the other differentiation we have is not just adding locations is actually improving the throughput of the locations we already own.

We've invested over $100 million in existing plants.

Over 65% of our tables have some level of automation.

Every plant has some level of automation, so theres a lot of different ways. We can extend our lead without building physical plant to do so.

We're focused on that as well.

Peter Jackson: And then just thinking about the M&A environment, are you seeing more willingness by acquisition targets to sell at this point, given the improved outlook? Yeah, it's gotten a little better. You know, I think one of the things that were holding back the M&A environment was just uncertainty around the direction of the market and people not knowing where the bottom was and not having sort of a valuation to step off of, and that created disagreements between buyers and sellers. I think that's calmed down a bit. So we're a little bit more optimistic about this year, but deals are unique. Each one's like a unicorn.

Okay got it and then just thinking about the M&A environment are you seeing more willingness by acquisition targets to sell at this point given the improved outlook.

Yes, its gotten a little better.

I think one of the things that was.

Holding back the M&A environment, which is uncertainty around the direction of the market and people.

Knowing where where the bottom was and not having so on a kind of a valuation to step off oven that create disagreements between buyers and sellers I think that's calmed down a bit.

So we're a little bit more optimistic for this year, but deals are unique each one's a unicorn I would say the one thing. That's also improves the farther away we've gotten to the unusual commodity impact on numbers people are now even more easily <unk>.

Peter Jackson: I would say the one thing that's also improved, the farther away we've gotten from the unusual commodity impact on numbers, people are now more easily or readily accepting of a base business kind of valuation for what they have going forward, and that makes the conversation, OK. Good to hear. Best of luck, guys. Thank you. We'll go now to Ketan Mamtora with BMO Capital Markets.

Readily accepting of a base business kind of valuation for their.

They have going forward and that makes the conversations easier.

Okay.

Got it best of luck guys.

Thank you.

We will go now to keeping them tomorrow with BMO capital markets.

Ketan Mamtora: Thanks for taking my question. Yeah, I was curious if you could talk a little bit about, you know, what you're seeing in Q1. I mean, you talked about weather being a challenge, but, you know, sales are kind of flat to down, but EBITDA is down quite a bit more. Peter, is there any way to sort of think about how much of it is weather-driven versus margin normalization? Yeah, the weather is modest so far.

Thanks for taking my question I was curious if you can talk a little bit about what youre seeing in Q1, I mean, you talked about weather being a challenge but.

Sales, you're pointing to kind of flat to down, but EBITDA is down quite a bit more Peter is there any way to start off.

Think about how much of it is bad debt driven versus margin normalization.

Yes, whether it's modest I think.

Peter Jackson: You know, I think it's two or three days in terms of what we are anticipating in terms of a headwind. So that's not a huge deal, I think, in general. With the exception of that component, you've got pretty healthy business, both on a year-over-year basis and on a trending basis, so I think that's positive. What you are seeing, though, and I think it's fair to point it out, is the year-over-year lapping of what we've been talking about. You've heard me, Ketan, talk about that normalization of margins, and I've been pretty adamant that behind the scenes, regardless of this multi-family obscuring it, we have seen business getting back to normal in terms of... Supply chain normalization, and our negotiating, and the competitive environment, things just settling back down to a more normal level.

Two or three days in terms of what we are anticipating in terms of a heck of a headwind. So that's not a huge deal I think in general with the exception of of that component, you've got pretty healthy business, both on a year over year basis and on a trending basis. So I think that's a positive.

What you are seeing no and I think it's fair to point it out as the year over year lapping of what we've been talking about I think you've heard me.

Talk about that normalization of margins and I've been pretty adamant that behind the scenes regardless of this multifamily.

Securing yet we have seen business getting back to normal in terms of the supply chain normalizing and are negotiating in the competitive environment and things just settling back down to a more normal level and youre seeing a little bit of that in terms of the year over year again still a very good number it's still a very strong perform.

Peter Jackson: You're seeing a little bit of that in terms of the year over year. Again, still a very good number, still a very strong performance for the business, but more in line with what we would expect going forward. I would just add from a customer sentiment perspective, the national builder customers are seeing increased foot traffic, and more importantly, the foot traffic that they're seeing is more apt to actually buy a home. The percentage of closings to people looking, I feel like is gaining traction, and their ability to match up available inventory and monthly mortgage payment to demand is, they've done a great job with that. Where we need a little help from the Fed mortgage rates would be to get the non-national builder customer into an arena where the cost of a mortgage is helping to drive that demand for them.

<unk> for the business, but more in line with what we would expect going forward and I would just add from a customer sentiment perspective, the national builder customers are seeing increased foot traffic and more importantly, the foot traffic that they're seeing are more apt to actually buy a home.

The percentage of closings to people looking I feel like is gaining traction.

And their ability to match up available inventory in months.

Monthly mortgage payment to demand is.

They've done a great job with that now where we need a little help from the fed mortgage rates would be to get.

The non national builder customer into it.

An arena, where the cost of the mortgages.

Helping to drive that demand to them, so that less so, but we expect that to.

Peter Jackson: So that's less so, but we expect that to be what is the first off the sidelines when we get that movement. But the national builders have done a good job in the economy. Now, that's a helpful context.

No.

B what is the first off the sidelines when we get that movement, but the national builders have done a good job in the existing environment.

That's a helpful context, I'll turn it over good luck.

Ketan Mamtora: I'll turn it over to you. Good luck. Thank you. As a reminder, please limit yourself to one question due to time constraints. We'll move next to Dave Mantley with Baird. Hi, good morning, everyone.

Thanks, Susan.

As a reminder, please limit yourself to one question due to time constraints.

We'll move next to David Manthey with Baird.

Hi, good morning, everyone.

David John Manthey: I'm thinking broadly on a product basis. Is the margin differential between commodity and value-added products different than it was five to seven years ago? I assume both categories have moved up, but as we normalize out here and go forward the next three to five, can you just discuss the delta between those two? Yeah, that's fair to say. You're right.

Thinking broadly on a product basis.

Is the margin differential between commodity and value added product different than it was five to seven years ago I assumed both categories have moved up but as we normalize out here and go forward. The next three to five can you just discuss the delta between those two.

Yeah, that's fair to say you're right, we've seen improvements across the board in terms of margins some of that very simply to cover the inflation and the incremental cost, but we have certainly seen an increase.

Peter Jackson: We've seen improvements across the board in terms of margins, some of that very simply to cover inflation and the incremental costs, but we have certainly seen an increase. And I would also point to our productivity as a driver for why ValueAdded has extended its differentiation from Commodity. You know, they've referred to a hundred plus million dollars worth of investment in the effort we've put into our team to improve our internal board foot per man hour, our doors per man hour type of productivity metrics have contributed to a bigger differentiation, www.buildersfirstsource.com value add on average. Sounds good.

And I would also point to our productivity as a driver for why value add has extended its differentiation from commodity.

Those deemed preferred 200 plus million dollars' worth of investment in the effort, we put around our team to improve our internal board foot from an hour our doors per man hour type of productivity metrics has contributed to a bigger differential between.

Value add on average and commodity.

David John Manthey: Thank you. Thank you. We'll go next to Jay McCandless with Wedbush.

Sounds good thank you.

Thanks, Dave.

We'll go next to Jay Mccanless with Wedbush.

Jay McCandless: Hey, good morning, everyone. So my question is on the outlook for R&R. I think it's up low single digits, probably a little bit better, I'd say, than what some of the other national forecasters are expecting. Is that acquisitions driving that? Or do you feel like in those specific markets, you can actually see growth above what people are expecting? Hey, Jay.

Hey, good morning, everyone. So my question is on the outlook for R&R, I think up low single digits, probably a little bit better I would say than what some of the other national forecasters are expecting is that acquisitions driving that or do you feel like in those specific markets you could actually see growth above what people are expecting.

<unk>.

Hey, Jay Thanks for the question.

Dave Rush: Thanks for the question. You know, for us, R&R kind of folds into two camps. There's R&R DIY and retail, and then there's kind of pro-remodel R&R. And I think, you know, with us, too, it's market-specific. We don't do it everywhere, so that's why there's a little difference in what we believe is going to happen for us, possibly versus some of the national guys.

For us R&R kind of fall into two camps there is R&R.

Why in retail and then there is kind of pro remodel.

<unk>.

And I think.

With us to its market specific we don't do it everywhere.

So that's why there's a little difference in what we believe is going to happen for us, possibly versus some of the national guys and a lot of what I think is.

Jay McCandless: And a lot of what I think is a headwind for them are big-ticket items that we have never sold and don't sell, like appliances, etc. So the fact that we have kind of a different product offering to that group, a different kind of customer focus, and in different parts of the country is why we are why I believe we might have a little different expectation. Also, I think taking advantage of capacity availability should be lean into it as well. And that's a different component than others. That sounds great. We're such a small player in that overall market segment, so it's a little easier for us to kind of grow if we just focus on it a little bit, and we have the ability to do that in this current environment. Thanks. And just one other quick question.

And for them are big ticket items that we have never sold and don't sell like appliances et cetera. So the fact that we have kind of a different product offering to that group of different kind of customer focus and in different parts of the country.

Here's why.

Is why I believe we might have a little different expectation.

Well, so I think taken advantage of capacity availability lean into it as well and that's a different component than others might have.

That sounds great.

Player, we're such a small player in that overall market segment, it's a little easier for us to kind of grow that if we just focus on it a little bit and we have the ability to do that.

In this current environment.

Thanks, and just one other quick question I think the 200 million you called out Dave in terms of incremental digital sales. This year, maybe talk a little bit more about that what that's going to look like and why you all feel like.

Jay McCandless: I think the $200 million you called out, Dave, in terms of incremental digital sales this year, maybe talk a little bit more about that, what that's going to look like, and why you feel like, I think this is new guidance for you guys, just kind of why you wanted to talk about that now and what those incremental sales would look like. Perfect. Thank you for tying that up for me, Jay.

This new guidance for you guys just kind of why you wanted to talk about that now and what those incremental sales would look like please.

Perfect. Thank you for teeing that up for me Jay next week at the Ibs were doing approved full product launch.

Dave Rush: Next week at IBS, we're doing a full product launch, and then we'll be rolling our digital tools out market-by-market. There's a lot of preparation and training in our sales team to then know how to intelligently explain it to our customers and show the benefits to our customers. And that just takes time.

Then we'll be rolling.

Digital tools out market by market there is a lot of <unk>.

Preparation and training our sales team to.

Dan Knowhow.

Intelligently, explaining to our customers and show the benefits to our customers.

And that just takes time and we're doing it market by market, we're making sure we do it right. The first time and as we get momentum it will you'll see the efforts paying off in the later part of the year and that's why I said more like a hockey stick probably in 'twenty 'twenty four.

Dave Rush: We're doing it market-by-market. We're making sure we do it right the first time. And as we get momentum, you'll see the effort paying off in the latter part of the year. And that's why I said it would be more like a hockey stick in 2024.

Jay McCandless: But we're really excited about it, and it all starts next week with the IBS product. That's great. Thanks for taking my questions. We'll go next to Kurt Yinger with D.A.

But we're really excited about it and it all starts next week with the Ibs product launch.

Okay. That's great. Thanks for taking my questions.

Thanks Jay.

We'll go next to Kurt Yinger with D. A davidson.

Kurt Yinger: Davidson. Great, thanks, and good morning, everyone. I just wanted to stick with the digital tools and the role out there. I was hoping you could talk about maybe the cost impact in 2024 and, recognizing that, you know, the sales are back half-weighted, and it, um, kind of the first year that you're fully rolling these out, how should we think about kind of the incremental margins attached to those sales? Yeah, hey

Great. Thanks, and good morning, everyone.

Wanted to stick with the digital tools and the rollout there I was hoping you could talk about.

Maybe the cost impact in 2024, and recognizing that the sale of our back half weighted.

Kind of a first year that you are.

Fully rolling these out how should we think about kind of incremental margins attached to those sales.

Yeah, Hey, Kurt Thanks for the question. So the short answer is we expect the sales pull through to be pretty consistent with what we're already selling.

Peter Jackson: Thanks for the question. So the short answer is we expect the sales pull through to be pretty consistent with what we're already selling. The costs associated with... The digital tools, the development, the rollout, and even largely the support are included in the numbers. It's really been spent over the past few years.

The costs associated with.

Sort of the digital tools and the development of rollout.

And even largely to support is included in the numbers, it's really been expand over the past few years, So theres no.

Peter Jackson: There's another material that you're going to see in terms of Dell. The thing we're going to keep a close eye on is, what is the support infrastructure necessary to make sure we have the right level of customer experience? We think we have an eye on it, but that's probably the only one that could potentially increase if this really picks up quickly. Again, I don't think it'll be big enough to really hit the radar for anybody, even if that were to happen just based on the service model that we built out. It's really all about that incremental sales being pulled through from incremental share of wallet and new customers that really like being able to utilize these modern digital tools. OK, thanks for that, Peter. I'll turn it over. We'll move now to Stephen Ramsey with the Thompson Research Group. Good morning.

There's no there's nothing material that youre going to see in terms of deltas.

The thing we're going to keep a close eye on is what is the support infrastructure necessary to make sure we have the right level of customer experience.

We think we have an eye on it but thats, probably the only one that could potentially increase if this really picks up quickly.

Again, I don't think it'll be big enough to really hit the radar for anybody even if that were to happen just based on the service model that we built out its is really all about that incremental sales being pulled through from.

Incremental share of wallet and new customers that really like being able to utilize these modern digital tools.

Got it okay. Thanks for that Peter I'll turn it over.

Thank you.

Well move now to Steven Ramsey with Thompson Research group.

Good morning, I wanted to hone in on the installation sales, which at the Investor Day, you estimated at 15% of 2023 sales I guess first is that about where it landed last year and then thinking for 2024 is there an expectation that installation sales can grow on an app.

Stephen Ramsey: I wanted to hone in on the installation sales, which at Investor Day you estimated at 15% of 2023 sales. I guess first, is that about where it landed last year? And then, thinking for 2024, is there an expectation that installation sales can grow on an absolute basis, or where that lands as a percent of the total base business? Thank you.

Absolute basis.

Or where that lands as a percent of the total base business. Thank you.

Yes, thanks for the question.

Installation is definitely a.

Focus point for our strategy for 2024 as it fits very nicely into solving our customers' pain points.

We do it successfully in a lot of markets today, we did $2 $5 billion of material labor sales.

Dave Rush: Installation is definitely a focal point for our strategy for 2024, as it fits very nicely into solving our customers' pain points. We do it successfully in a lot of markets today. We did $2.5 billion in material and labor sales in related installation last year, so our focus is to grow it both organically and inorganically. The low-hanging fruit is the markets that we are already doing some level of installation, expanding the products that we install in those markets, but we're also looking at new markets that have not done installation in the past. To do that effectively, we've put our best people together, and we've developed an installation playbook that people can access and utilize to grow that business in their markets, and we're always looking for people who are already doing it well today that can fit into our profile through M&A.

Related installation last year.

Our focus is to grow both organically and inorganically.

Low hanging fruit is the markets that we are already doing some level of installation.

<unk> the products that we install in those markets, but we're also looking at new markets that have not done installation in the past.

To do that effectively we put our best people together and we developed an installation playbook.

That people can access and utilize.

To grow that business in their markets and we're always looking for people who are already doing it well today that can fit into our profile through M&A. So we're going to pull all of those levers during the year, but it will be.

Dave Rush: So, we're going to pull all of those levers during the year, but it will start in Q2 and then go from there for the most part, and it will be focused on the things we're already good at today. Thank you. We'll go next to Jeffrey Stephenson with Loop Capital. Hey, thanks for taking my question and congrats on the nice result. Are you expecting any price deflation this year in categories such as EWP and mill work, which have benefited from supply-driven pricing gains over the last several years? Well, we already saw that in the last part of the year for EWP. I don't know that we'll see too much more of that going forward. And, you know, I would call it more supply chain normalization than significant deflation.

Starting in Q2, and then go from there for the most part.

It will be focused on the things we're already good at today.

Perfect. Thank you.

Thank you.

Well go next to Jeffrey Stevenson with loop capital.

Hi, Thanks for taking my question and congrats on the nice results.

Are you expecting any price deflation this year in categories, such as AWP, and millwork, which benefited from supply driven pricing gains the last several years.

Well, we already saw that in the last part of the year for AWP I don't know that we'd see too much more of that going forward.

And you know.

I would call it more.

<unk> chain normalization and I would significant deflation I think they are still challenged with a lot of inflationary operating costs that we all are so I don't expect that they're going to be able to.

Dave Rush: And I think they're still challenged with a lot of inflationary operating costs that we all are, so I don't expect that they're going to be able to significantly reduce prices. I think it's more holding it where it is right now that we're expecting and hoping for. But quite frankly, it wouldn't surprise me if inflation causes price increases going into it.

<unk> significantly reduced price I think it's more holding it where it is right now that we're expecting and hoping for but but quite frankly, it wouldn't surprise me if inflation causes even price increases.

Jeffrey Stephenson: Got it, very helpful, thank you. And ladies and gentlemen, that will conclude today's question and answer session as well as today's event. We want to thank you for your participation. You may disconnect at this time. Have a wonderful day, www.buildersfirstsource.com, Title Microsoft Office Word Document MSWordDoc Word Document.8

Into the year.

Got it very helpful. Thank you.

Yeah.

And ladies and gentlemen that will conclude today's question and answer session as well as todays event, we want to thank you for your participation. You may disconnect at this time and have a wonderful day.

Yeah.

Yeah.

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