Q4 2023 BlueLinx Holdings Inc Earnings Call
Operator: Ladies and gentlemen, thank you for standing by, and welcome to the BlueLinx Holdings fourth quarter and full year 2023 earnings conference call. At this time, all participants are in a listen-only mode, and today's call is being recorded.
Ladies and gentlemen, thank you for standing by and welcome to the Bluelinx Holdings fourth quarter and full year 2023 earnings conference call. At this time all participants are in a listen only mode and today's call is being recorded we will begin with opening remarks and introductions at this time I would like to turn the conference over to your home.
Operator: We will begin with opening remarks and introductions. At this time, I would like to turn the conference over to your host, Investor Relations Officer Tom Morabito. Please go ahead.
<unk> Investor Relations Officer, Tom Morabito. Please go ahead.
Tom Morabito: Thank you, operator, and welcome to the BlueLinx fourth quarter and full year 2023 earnings call. Joining me on today's call is Shyam Reddy, our President and Chief Executive Officer, and Andy Wamser, our Chief Financial Officer. At the end of today's prepared remarks, we will take questions.
Thank you operator, and welcome to the Bluelinx fourth quarter and full year 2023 earnings call.
Joining me on today's call are Sham ready, our president and Chief Executive Officer, and Andy warm there, our chief Financial Officer.
At the end of today's prepared remarks, we will take questions.
Tom Morabito: Our fourth quarter and full year news release and Form 10-K were issued yesterday after the close of the market, along with our webcast presentation, and these items are available in the investor section of our website, BlueLinxCo.com. We encourage you to follow along with the detailed information on the slides during our webcast. Today's discussion contains forward-looking statements. However, actual results may differ significantly from those forward-looking statements due to various risks and uncertainties, including the risks described in our most recent SEC filing.
Our fourth quarter and full year news release and Form 10-K were issued yesterday after the close of the market along with our webcast presentation and these items are available in the investors section of our website Bluelinx co dotcom.
We encourage you to follow along with the detailed information on the slides during our webcast.
Today's discussion contains forward looking statements actual results may differ significantly from those forward looking statements due to various risks and uncertainties, including the risks described in our most recent SEC filings.
Tom Morabito: Today's presentation includes certain non-GAAP and adjusted financial measures that we believe provide helpful context for investors evaluating our business. Reconciliations to the Closest Gap financial measure can be found in the appendix of our presentation. Now I'll turn it over to Shyam.
Today's presentation includes certain non-GAAP and adjusted financial measures that we believe provide helpful context for investors evaluating our business.
Reconciliations to the closest GAAP financial measure can be found in the appendix of our presentation now.
Now I'll turn it over to Shane.
Shyam K. Reddy: Thanks, Tom. And good morning, everyone. We are pleased with both our fourth quarter and full year 2023 results, especially in a year when rising interest rates and macroeconomic uncertainty impacted demand in the housing and building products sector. Our margins remained strong in specialty products, which accounted for about 70 percent of our net sales for both the quarter and the full year. And we continue to generate solid margins in our structural products business. During the quarter, we also demonstrated our commitment to returning capital to shareholders by repurchasing shares under our new $100 million share repurchase authorization. For the year, we returned $42 million to shareholders, which included repurchases under our previous $100 million share repurchase authorization.
Thanks, Tom and good morning, everyone. We are pleased with both our fourth quarter and full year 2023 results, especially in a year when rising interest rates and macroeconomic uncertainty impacted demand in the housing and building products sector. Our margins remained strong in specialty products, which accounted for about 70% of our net.
For both the quarter and the full year and we continued to generate solid margins in our structural products business.
During the quarter, we also demonstrated our commitment to returning capital to shareholders by repurchasing shares under our new $100 million share repurchase authorization.
For the year, we returned $42 million to shareholders, which includes repurchases under our previous $100 million share repurchase authorization.
Shyam K. Reddy: Before I jump into the 2023 results, I want to share our vision, and that's to become the most technologically advanced two-step distributor of building products in the U.S. in the coming years. This will enable us to become the first option for suppliers to bring their products to market, and the first option for home retail stores, one-step distributors, pro-dealers, and independent lumberyards to deliver the right products where and when they need them. In so doing, we'll be able to optimize our brand mix in all markets, reduce our cost to serve, manage our business more cost effectively, reduce the number of touch points to meet our customers' and suppliers' demands, and accelerate our ordering times. And that's just to name a few.
Before I jump into the 2023 results I want to share our vision and that is to become the most technologically advanced two step distributor of building products in the U S in the coming years.
This will enable us to become the first option for suppliers to bring their products to market and the first option for home retail stores, one step distributors pro dealers and independent lumber yards to deliver the right products, where and when they need them and in so doing we will be able to optimize our brand mix in all markets reduce.
Our cost to serve manage our business more cost effectively reduce the number of touch points to meet our customers' and suppliers' demands and to accelerate our ordering times and that's just to name a few.
Shyam K. Reddy: In the meantime, we remain committed to our corporate growth strategy to get us there in 2024 and beyond. First, by focusing on our core business, specialty sales growth in five key categories. Second, by pursuing opportunistic M&A, and third, by developing opportunistic greenfields.
In the meantime, we remain committed to our corporate growth strategy to get US there in 2024 and beyond first by focusing on our core business specialty sales growth in five key categories second by pursuing opportunistic M&A and third by developing opportunistic greenfields.
Shyam K. Reddy: All of which will be supported by three strategic enablers, business, operational, and digital excellence. As it relates to the first prong, we are allocating a substantial share of time, resources, and capital to growing engineered wood, siding, millwork, industrial, and outdoor living products, our five key high-margin specialty product categories in the core business. These product categories and the strategic vendor partners we've aligned with enable us to be a necessary extension of our customers' business. There are also two-step distribution-friendly product categories sold at various points of the construction cycle rather than at just the front or back end of a single or multifamily housing project or remodeling job, for that matter.
All of which will be supported by three strategic enablers business operational and digital excellence.
As it relates to the first prong, we are allocating a substantial share of time resources and capital to growing engineered wood siding millwork industrial and outdoor living products, our five key high margin specialty product categories in the core business.
These product categories and the strategic vendor partners, we've aligned with enable us to be a necessary extension of our customers' business. There are also two step distribution friendly product categories sold at various points of the construction cycle rather than at just the front or back end of a single or multifamily housing project.
Or remodeling job for that matter.
Shyam K. Reddy: They also drive higher net sales and gross profit, which generates sustainable and durable operating cash flow that can be reinvested back into the business and used to fund opportunistic M&A and greenfield projects. Given our scale, geographic reach, selling capabilities, and product depth, we are committed to providing our customers with a total two-step distribution-friendly product solution that also includes structural products, which our customers want, and that we believe complements our specialty product and value-added services offering. From a channel perspective, we see additional opportunity by growing national accounts and multifamily sales while investing in builder pull-through capabilities to drive sales growth with our national accounts and traditional customer base. I continue to be excited about our strategic enablers, the fuel that supports our organic sales growth strategy and business operational digital excellence.
They also drive higher net sales and gross profit, which generate sustainable and durable operating cash flow that can be reinvested back into the business and used to fund opportunistic M&A and greenfield projects.
Given our scale geographic reach selling capabilities and product depth, we are committed to providing our customers with a total two step distribution friendly product solution that also includes structural products, which our customers want and that we believe compliments, our specialty products and value added services offerings from.
The channel perspective, we see additional opportunity by growing national accounts in multifamily sales, while investing in builder pull through capabilities to drive sales growth with our national account and traditional customer base.
I continue to be excited about our strategic enablers the fuel that supports our organic sales growth strategy business operational digital excellence. These efforts have continued to support our customer experience maintained solid margin levels in both specialty and structural products and provide a flexible cost structure.
Shyam K. Reddy: These efforts have continued to support our customer experience, maintain solid margin levels in both specialty and structural products, and provide a flexible cost structure that can fluctuate based on seasonal levels of demand. We are also effectively managing our costs, resulting in a solid 2023 adjusted EBITDA margin of nearly 6%, despite wage, benefits, and other inflation on top of challenging market conditions. Now back to the vision of becoming the most technologically advanced two-step distributor of building products in the United States, which I believe will transform BlueLinx and make us the provider of choice for both suppliers and customers. These technological improvements are designed to enable us to rapidly grow our business at scale with both customers and suppliers by providing an exceptional customer experience in a more efficient and effective manner than today. I would like to offer a few more details.
That can fluctuate based on seasonal levels of demand.
We are also effectively managing our costs, resulting in a solid 2023, adjusted EBITDA margin of nearly 6% despite wage benefits and other inflation on top of challenging market conditions now.
Now back to the vision, becoming the most technologically advanced two step distributor of building products in the United States, which I believe will transform bluelinx and make us the provider of choice for both suppliers and customers.
These technology improvements are designed to enable us to rapidly grow our business at scale with both customers and suppliers by providing an exceptional customer experience and a more efficient and effective manner than today.
I would like to offer a few more details.
Shyam K. Reddy: Over the past couple of years, we have taken some preliminary and foundational steps designed to improve our data warehouse and analytical capabilities, upgrade some of our back-office tools, expand our EDI capabilities, and enhance our general technology hardware and infrastructure. Beginning in 2024, we are embarking on a multi-year digital transformation journey that starts with architecting our data so that it better supports and advances our strategy, enhancing our transportation management capabilities, and launching e-commerce functionality. As a result, we will be optimizing our management of freight costs, shipment routing, truck load build, and logistics, which is expected to reduce our cost to serve, implementing more scalable supplier and customer EDI capabilities, enhancing our governance and management of product, customer, and supplier master data, and Piloting an E-Commerce Platform.
Over the past couple of years, we have taken some preliminary and foundational steps designed to improve our data warehouse and analytical capabilities upgrade some of our back office tools expand our edr capabilities and enhance our general technology hardware and infrastructure.
Beginning in 2024, we are embarking on a multiyear digital transformation journey that starts with architects are data so that it better supports and advances our strategy enhancing our transportation management capabilities and launching E. Commerce functionality as a result, we will be optimizing our management of freight cost.
Shipment routing truckload build and logistics, which is expected to reduce our cost to serve implementing more scalable supplier and customer Adi capabilities, enhancing our governance and management of product customer and supplier Master data.
And piloting an e-commerce platform.
Shyam K. Reddy: We also believe that these digital improvements will further enhance our existing sales, operational, pricing, and procurement excellence initiatives. While our digital transformation journey will result in an initial increase in both OPEX and CapEx, which Andy will expand on in a moment, we believe these investments are critical to reducing our operating costs, realizing our vision, and enabling us to become the provider of choice for both customers and suppliers, thereby allowing us to execute successfully on our long-term profitable sales growth strategy. The second and third prongs of our growth strategy reflect our commitment to opportunistic M&A and greenfields. We are strategically targeting acquisition opportunities that are designed to expand our geographic reach and support our specialty product sales growth strategy. We remain committed to buying only companies at valuations that make sense for us, that support our strategy, and that are in the best interest of our stockholders. Hence the opportunistic and measured nature of our approach. On the Greenfield front, we have identified several markets that are potentially great opportunities for new market development.
We also believe that these digital improvements will further enhance our existing sales operational pricing of procurement excellence initiatives.
While our digital transformation journey will result in an initial increase in both Opex and Capex, which Andy will expand on in a moment. We believe these investments are critical to reducing our operating costs, realizing our vision and enabling us to become the provider of choice for both customers and suppliers, thereby allowing us to <unk>.
<unk> successfully on our long term profitable sales growth strategy.
The second and third progress of our growth strategy reflect our commitment to opportunistic M&A and Greenfield. We are strategically targeting acquisition opportunities that are designed to expand our geographic reach and support our specialty product sales growth strategy, we remain committed to buying only companies at valuations that make sense for us that support our strategy.
And that are in the best interest of our stockholders, hence the opportunistic and measured nature of our approach.
On the Greenfield front, we have identified several markets that are potentially great opportunities for new market development.
Shyam K. Reddy: Our financial position remains strong with liquidity of $868 million at the end of the year, including a record $522 million of cash on hand. This strength gives us the flexibility to reinvest in business initiatives that allow us to grow sales, improve productivity, expand our geographic reach, and provide better customer and vendor service, an example of which would be our digital transformation. And, of course, having the ability to return capital to shareholders remains very important, as demonstrated by our share repurchase program. Next, I'd like to offer a few highlights from 2023.
Our financial position remains strong with liquidity of $868 million at the end of the year, including a record $522 million of cash on hand.
This strength gives us the flexibility to reinvest in business initiatives that allow us to grow sales improve productivity expand our geographic reach and provide better customer and vendor service. An example of which would be our digital transformation and of course, having the ability to return capital to shareholders remains very important.
As demonstrated by our share repurchase programs.
Next I'd like to offer a few highlights from 2023 first we delivered solid full year 2023 results, particularly in light of the challenging macro environment. As you know during the year higher interest rates and lingering recession risk slowed the rate of housing starts and repair and remodel activity, making the business environment very.
Shyam K. Reddy: First, we delivered solid full-year 2023 results, particularly in light of the challenging macro environment. As you know, during the year, higher interest rates and lingering recession risk slowed the rate of housing starts and repair and remodel activity, making the business environment very difficult. However, our teams and supplier partners, combined with the confidence our customers have in BlueLinx, helped us to compete effectively in our markets, resulting in our strong financial performance. Second, our fourth quarter 2023 results were also solid. As expected, our revenues declined year over year, largely due to the impact of market price deflation.
However, our teams and supplier partners combined with the confidence our customers have in Bluelinx helped us to compete effectively in our markets, resulting in our strong financial performance.
Second our fourth quarter 2023 results were also solid as expected our revenues declined year over year, largely given the impact of market price deflation. However, our specialty and structural gross margins came in at 19, 4% and 10, 6%, respectively, which highlights our team's.
Shyam K. Reddy: However, our specialty and structural gross margins came in at 19.4% and 10.6%, respectively, which highlights our team's ability to successfully manage margins despite the macro picture. Third, we continue to focus on expanding our specialty products business, which accounted for approximately 70% of net sales and 80% of gross profit for both the fourth quarter and full year 2023. For example, during the fourth quarter, we announced expanded distribution partnerships with Louisiana Pacific and Huber Engineered Woods. Both partnerships will broaden the geographic reach of our specialty product offerings, demonstrating our focus on specialty products growth.
To successfully manage margins despite the macro picture.
Third we continue to focus on expanding our specialty products business, which accounted for approximately 70% of net sales and 80% of gross profit for both the fourth quarter and full year 2023. For example, during the fourth quarter, we announced expanded distribution partnerships with Louisiana Pacific and Hubert engineered Woods.
Both partnerships will broaden the geographic reach of our specialty product offerings, demonstrating our focus on specialty products growth.
Shyam K. Reddy: Fourth, we continue to execute on our disciplined capital allocation strategy, which includes returning capital to shareholders. Overall, we repurchased nearly 6% of our outstanding shares for $42 million in 2023. Last quarter, we announced a new $100 million authorization after the prior $100 million share repurchase authorization was completed.
Fourth we continue to execute on our disciplined capital allocation strategy, which includes returning capital to shareholders overall, we repurchased nearly 6% of our outstanding shares for $42 million in 2023 last quarter, we announced a new $100 million authorization after the prior one.
$1 billion share repurchase authorization was completed.
Shyam K. Reddy: Of the $42 million of share repurchases in 2023, we bought back nearly $9 million worth of shares under the new program in Q4. Given our recent strong share price performance, the amount of repurchases in Q4 were admittedly less than originally anticipated. However, we will continue to be opportunistic in the market.
Of the $42 million of share repurchases in 2023, we bought back nearly $9 million worth of shares under the new program in Q4, given our recent strong share price performance the amount of repurchases in Q4 were admittedly less than originally anticipated. However.
However, we will continue to be opportunistic in the market.
Shyam K. Reddy: Fifth, our financial position continues to be strong as we prudently manage the business. With significant liquidity and very little net leverage, we are well positioned to invest in the business, to realize our vision, and to execute successfully on our corporate growth strategy, all while providing us with the flexibility to return capital to shareholders. Now, for a few more details on our full year results. We generated 2023 net sales of $3.1 billion and $183 million in adjusted EBITDA for a 5.8% adjusted EBITDA margin. Adjusted net income was $103 million, or $11.41 per share.
Our financial position continues to be strong as we prudently manage the business with significant liquidity and very little net leverage we are well positioned to invest in the business to realize our vision and to execute successfully on our corporate growth strategy, all while providing us with the flexibility to return capital to shareholders.
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Now for a few more details on our full year results.
We generated 2023 net sales of $3 $1 billion and $183 million and adjusted EBITDA for five 8% adjusted EBITDA margin adjusted net income was $103 million or $11 41 per share for the year, we delivered solid gross margin performance with <unk>.
Shyam K. Reddy: For the year, we delivered solid gross margin performance, with specialty products coming in at 19.3% and structural products at 11.2%. Our focus on business and operational excellence led to effective pricing, strong service levels, procurement opportunities, and cost management, contributing to these strong results. In addition, our continued focus on working capital has generated significant improvements in operating cash flow. In 2023, we reduced our inventory by over $140 million, with nearly all of the reduction coming from the specialty products category. We also generated free cash flow of $279 million during the year.
<unk> products coming in at 19, 3% and structural products at 11, 2%.
Our focus on business and operational excellence led to effective pricing strong service levels procurement opportunities and cost management contributing to these strong results. In addition, our continued focus on working capital has generated significant improvements in operating cash flow in 2023, we reduced.
Our inventory by over $140 million with nearly all of the a reduction coming from the specialty products category. We also generated free cash flow of $279 million during the year.
Shyam K. Reddy: Now turning to our perspective on the broader housing and building products market, while industry sources are suggesting a revised sense of optimism for the overall market, headwinds do remain. Builder sentiment has improved in recent months, and the industry saw meaningful improvements in housing starts during November and December. In addition, the financial markets are anticipating potential rate cuts in 2024. That said, mortgage rates are now around 7 percent, and while those are down from the 8 percent peak last year, they are still elevated. 90% of mortgages are still under 6%, and 80% of mortgages are under 5%. Overall, housing affordability remains an issue for many consumers, especially for first-time buyers as prices remain high.
Now turning to our perspective on the broader housing and building products market.
While industry sources are suggesting a revised sense of optimism for the overall market headwinds do remain bill.
Builder sentiment has improved in recent months and the industry saw meaningful improvements in housing starts during November and December. In addition, the financial markets are anticipating potential rate cuts in 2024 that said mortgage rates are now around 7% and while those are down from the 8% peak last year. They are still elevated.
90% of mortgages are still under 6% and 80% of mortgages are under 5% overall housing affordability remains an issue for many consumers, especially for first time buyers as prices remain high.
Shyam K. Reddy: Repair and remodel spending continues to be lower than the elevated levels of the past two years and is expected to decline further in 2024 due to low existing home sales that would otherwise drive repair and remodel activity on the way out of a home and on the way into a home. However, home equity levels do remain high, allowing owners to fund repair and remodel projects, albeit smaller. Through the first 7 weeks of Q1 2024, we have maintained solid margins for specialty and structural products, generally in line with Q4 2023. However, daily volumes have been impacted by the extreme weather patterns experienced in January and are down compared to our expectations and to what we saw during the recent quarter. In fact, nearly half of our locations were closed for between 1 and 5 days in January due to unusually cold weather and winter storms.
Repair remodel spending continues to be lower than the elevated levels of the past two years and is expected to decline further in 2024 due to low existing home sales that would otherwise drive repair and remodel activity on the way out of the home and on the way into a whole however home equity levels do remain high allowing owners to refund repair and remodel.
<unk>, albeit smaller ones.
Through the first seven weeks of Q1 2024, we have maintained solid margins for specialty and structural products generally in line with Q4 of 2023, However daily volumes have been impacted by the extreme weather patterns experienced in January and are down compared to our expectations and that what we saw during the recent quarter in fab.
<unk>, we had nearly half of our locations closed for between one and five days in January due to unusually cold weather and winter storms.
Shyam K. Reddy: The ramp-up to normal business also took time, as the ground needed to thaw in many markets for building activity to commence and sales to flow through our customers and, in turn, us. During the most recent three weeks, specialty and structural volumes have improved. In addition, it is important to note that industry-driven specialty products price deflation will continue to have an impact on both our top line and cost of goods during 2024. Therefore, even though margins are stable, gross profit dollars are lower. This adverse impact creates a near-term headwind, and we hope to see this improve as the year progresses. However, although the near-term outlook remains unpredictable, the industry is improving in many respects, and we clearly believe in the long-term prospects of the housing and building products sector, which underlines our strategic and investment focus. The shortage of homes, supportive demographic shifts, the aging housing stock, necessary repair and remodel activity, and high levels of home equity should continue to benefit the building products industry and BlueLinx.
The ramp up to normal business also took time as the ground needed defined many markets for building activity to commence and sales that flow through our customers and in turn us.
During the most recent three weeks specialty and structural volumes have improved.
In addition, it is important to note that industry driven specialty products price deflation continues to have an impact on both our topline and cost of goods. During 2024, even though margins are stable gross profit dollars are lower this adverse impact creates a near term headwind and we hope to see this improve as the year progresses.
Although the near term outlook remains unpredictable the industry is improving in many respects and we clearly believe in the long term prospects of the housing and building products sector, which underlines our strategic and investment focus the shortage of homes supported demographic shifts aging housing stock necessary repair and remodel activity.
<unk> and high levels of home equity should continue to benefit the building products industry and Bluelinx.
Shyam K. Reddy: In summary, we delivered solid results for both the fourth quarter and full year 2023, despite the challenging environment for housing and tough year-over-year comps. We're also delivering on our strategic priorities, as seen by our specialty product expansion efforts, margin performance driven by our pricing and cost discipline, strong cash generation, and capital allocation initiatives. I'd like to end by thanking my fellow BlueLinx associates for their continued perseverance and can-do attitude during last year's difficult housing market and for their selfless dedication to our customers and our suppliers. Our teams are committed to generating more profitable structural and specialty product sales while producing solid returns of working capital to ensure that we can position ourselves for long-term success in whatever market conditions we face. That grit gives me tremendous confidence in our ability to realize our vision of becoming the most technologically advanced two-step distributor of building products in the U.S. and executing on our three-pronged corporate growth strategy, specialty product sales growth, M&A, and green pay.
In summary, we delivered solid results for both the fourth quarter and full year 2023, despite the challenging environment for housing and tough year over year comps were also delivering on our strategic priorities as seen by our specialty product expansion efforts margin performance driven by our pricing and cost discipline strong cash.
Generation and capital allocation initiatives.
I'd like to end by thanking my fellow Bluelinx associates for their continued perseverance and can do attitude during last year's difficult housing market in <unk>.
For their selfless dedication to our customers and our suppliers.
Our teams are committed to generating more profitable structural and specialty product sales, while producing solid returns of working capital to ensure that we can position ourselves for long term success in whatever market conditions, we face.
That grid gives me tremendous confidence in our ability to realize our vision of becoming the most technologically advanced two step distributor of building products in the U S and executing on our three pronged corporate growth strategy specialty product sales growth M&A and Greenfield.
Shyam K. Reddy: We have the purpose to inspire us, the culture to succeed, and the values to guide us, along with the intestinal fortitude to make the investments in technology, people, infrastructure, working capital, and equipment to accelerate our prospects and position us for breakneck growth as our corporate strategy delivers and our digital transformation takes effect each step of the way. Now I'll turn it over to Andy, who will provide more details on our financial results and our capital structure. Thanks, Shyam, and good morning everyone.
We have the purpose to inspire us the culture to succeed and the values to guide us along with the intestinal fortitude to make the investments in technology people infrastructure, working capital and equipment to accelerate our prospects and position us for breakneck growth as our corporate strategy delivers and our digital transformation.
Makes affect each step of the way now.
Now I'll turn it over to Andy who will provide more details on our financial results and our capital structure.
Thanks, Sam and good morning, everyone.
Andy Wamser: Let's first go through the consolidated highlights for the quarter. Overall, we delivered solid fourth-quarter results, highlighted by strong margins in both our specialty and structural product categories. Net sales were $713 million, down 16% year over year. Specialty product sales were down 18% from the prior year due to a combination of deflation and lower volume. Structural product sales were also down 12% due to significant year-over-year declines in wood-based commodity prices and lower volumes.
Let's first go through the consolidated highlights for the quarter.
Overall, we delivered solid fourth quarter results highlighted by strong margins in both our specialty and structural product categories net sales were $713 million down 16% year over year.
Specialty products sales were down 18% from the prior year due to a combination of deflation and lower volumes.
Structural product sales were down 12% also due to significant year over year declines in wood based commodity prices and lower volumes.
Andy Wamser: Total gross profit was $118 million, and gross margin was 16.6%, down 120 basis points from the prior period. SG&A was $85 million, down 8% from the prior year period due to a decrease in variable compensation and delivery expenses. The net loss was $18 million, and the diluted loss per share was $2.08. In previous filings, we've mentioned that we plan to terminate a legacy-defined benefit pension plan. During December, we transferred all remaining financial responsibility for the plan to a highly rated insurance company under an annuity contract. We incurred a one-time charge of $31.4 million and made a final cash payment of $6.9 million. We are pleased to have this obligation behind us as it was a legacy pension plan that provided no benefit for most of our active employees and was complex to manage.
Total gross profit was $118 million and gross margin was 16, 6% down 120 basis points from the prior period.
SG&A was $85 million down 8% from the prior year period due to a decrease in variable compensation and delivery expenses net loss was $18 million and diluted loss per share was $2 and <unk>.
In previous filings, we've mentioned that we plan to terminate a legacy defined benefit pension plan. During December we transferred all remaining financial responsibility for the plan to a highly rated insurance company under an annuity contract we incurred a onetime charge of $31 4 million and made a final cash.
Payment of $6 $9 million. We are pleased to have this obligation behind us as it was a legacy pension plan was provided no benefit for most of our active employees and was complex to manage.
Andy Wamser: Adjusted net income was $26 million, and adjusted diluted EPS was $2.94 per share. Tax expense for the fourth quarter was $10.1 million. Due to our net loss in the quarter as a result of our pension settlement, the effective tax rate was not a meaningful calculation.
Adjusted net income was $26 million and adjusted diluted EPS was $2 94 per share.
Tax expense for the fourth quarter was $10 $1 million due to our net loss in the quarter as a result of our pension settlement the effective tax rate was not a meaningful calculation.
Andy Wamser: For the first quarter of 2024, we anticipate our tax rate to be in the 24 to 28% range. Adjusted EBITDA was $36 million, or 5.1% of net sales, following our normal seasonal pattern. As a reminder, we tend to have higher adjusted EBITDA margins in the second and third quarters but relatively lower margins in the first and fourth quarters of the year. Turning now to the fourth quarter results for specialty products. Net sales were $487 million, down 18% year-over-year. This decline was largely driven by price deflation across several specialty product categories.
For the first quarter of 2024, we anticipate our tax rate to be in the 24% to 28% range.
Adjusted EBITDA was $36 million or five 1% of net sales following our normal seasonal patterns. As a reminder, we tend to have higher adjusted EBITDA margins in the second and third quarters, but relatively lower margins in the first and fourth quarters of the year.
Turning now to fourth quarter results for specialty products.
Net sales were $487 million down 18% year over year. This decline was largely driven by price deflation across several specialty product categories.
Andy Wamser: Gross profit from specialty product sales was $94 million, down 24% year-over-year. Specialty gross margin was 19.4%, a strong margin, but down 170 basis points from last year. Through the first seven weeks of 2024, specialty product gross margin was in the range of 18 to 19%, with daily sales volumes down 6% compared to the fourth quarter of 2023, given the impact of the January weather. Over the past three weeks, however, specialty volumes were about flat on a year-over-year basis. We are, however, seeing average specialty pricing down about 10% versus this time last year, and we expect this to be less of a headwind as we progress throughout the year. Now, moving on to structural products.
Gross profit from specialty products sales was $94 million down 24% year over year.
Specialty gross margin was 19, 4% a strong margin, but down 170 basis points from last year.
Through the first seven weeks of 2020 for specialty product gross margin was in the range of 18% to 19% with daily sales volumes down 6% compared to the fourth quarter of 2023, given the impact of the January weather.
Over the past three weeks, however, specialty volumes were about flat on a year over year basis.
We are however, seeing average specialty pricing down about 10% versus this time last year and we expect this to be less of a headwind as we progressed throughout the year.
Now moving on to structural products.
Andy Wamser: Net sales were $226 million, down 12% compared to the prior year period. This decrease was primarily due to price deflation within framing lumber, partially offset by slightly higher volume. Gross profit from structural products was $24 million, a decrease of 10% year-over-year, and the structural gross margin was 10.6%, a 20 basis points decrease from the same period last year. In the fourth quarter of 2023, average lumber prices were about $383 per 1,000 board feet, and panel prices were about $585 per 1,000 square feet, a 15% decrease and 11% increase, respectively, compared to the averages in the fourth quarter of 2022. sequentially, comparing the third and fourth quarters of 2023, these prices were down 12% and 8%, respectively. During the fourth quarter, lumber prices declined early, but rebounded in December, while panel prices increased during the quarter, and they finished the last week of December at $395 and $599, respectively.
Net sales were $226 million down 12% compared to the prior year period. This decrease was primarily due to price deflation within framing lumber, partially offset by slightly higher volumes.
Gross profit from structural products was $24 million.
A decrease of 10% year over year and structural gross margin was 10, 6% up 20 basis points from the same period last year.
In the fourth quarter of 2023 average lumber prices were about $383 per thousand board feet in panel prices were about $585 per thousand square feet, a 15% decrease and 11% increase respectively compared to the averages in the fourth quarter of 2000.
22.
Sequentially, comparing the third and fourth quarters of 2023, these prices were down 12% and 8% respectively.
During the fourth quarter lumber prices declined early but rebounded in December while panel prices increased during the quarter and they finished the last week of December at $395 and $599 respectively. These prices have declined further in the first seven weeks of Q1 2024.
Andy Wamser: These prices have declined further in the first seven weeks of Q1 2024 and are now $387 per 1,000 board feet and $589 per 1,000 square feet, respectively. [inaudible] Through the first seven weeks of Q1 2024, structural product gross margin was in the range of 10 to 11%, with daily sales volume down, mainly lumber, compared to the fourth quarter of 2023, given the impact of January weather. Similar to specialty, there has been some improvement in volumes over the past three weeks. For the year, net sales were $3.1 billion, down 30% from 2022. The 2023 results had very difficult comparisons when compared to the inflationary environment experienced in 2022.
And our now $387 per thousand board feet and $589 per thousand square feet respectively.
Our strong structural margin continues to reflect the excellent job our team does to manage commodity cost volatility risk through leveraging consignment and utilizing centralized purchasing and pricing to keep structural inventory levels low.
Through the first seven weeks of Q1 2020 for structural product gross margin was in the range of 10% to 11% with daily sales volume down mainly in lumber compared to the fourth quarter of 2023, given the impact of January weather.
Similar to specialty there has been some improvement in volumes over the past three weeks.
For the year net sales were $3 1 billion down 30% from 2022.
2023 results at a very difficult comparisons when in contrast to the inflationary environment experienced in 2022.
Andy Wamser: Specialty and structural product sales were down 24% and 40%, respectively, from the prior year due to a combination of deflation and lower volume. Total gross profit was $527 million, and gross margin was 16.8%, down 190 basis points from the prior year period. SG&A was $356 million, down 3% versus the prior year period. For 2024, we expect our SG&A levels to increase slightly as a percentage of sales due to the investments in technology that Shyam mentioned, as well as our growth initiatives. Net income was $49 million, and diluted EPS was $5.39 per share. Adjusted net income was $103 million, and adjusted diluted EPS was $11.41 per share. The full-year tax rate was 40.7%, once again impacted by the pension plan termination.
Specialty and structural product sales were down, 24% and 40% respectively from the prior year due to a combination of deflation and lower volumes.
Total gross profit was $527 million.
And gross margin was 16, 8% down 190 basis points from the prior year period.
SG&A was $356 million down 3% versus the prior year period for.
For 2024, we expect our SG&A levels to increase slightly as a percentage of sales due to the investments in technology, that's sham mentioned as well as our growth initiatives.
Net income was 49 million and diluted EPS was $5 39 per share.
Adjusted net income was $103 million and adjusted diluted EPS was $11 41 per share.
The full year tax rate was 47% once again impacted by the pension plan termination.
Andy Wamser: For full year 2024, we anticipate our tax rate to be in the 24 to 28% range. Adjusted EBITDA was $183 million, or 5.8% of net sales. Looking now at our balance sheet. Our liquidity remains excellent due to the strong execution of our strategic initiatives and effective management of working capital. At the end of the year, cash on hand reached a record level of $522 million, an increase of $52 million from Q3. When considering our cash on hand and undrawn revolver capacity of $346 million, available liquidity was $868 million at the end of the year, also a record. Total debt, including our financing leases, was $585 million, and net debt was $64 million. Our net leverage is now 0.3 times, and we have no material outstanding debt maturities until 2029. Under the terms of our credit agreement, which does not include real property financing leases, our net leverage ratio was a negative 1.0 times.
For full year 2024, we anticipate our tax rate to be in the 24% to 28% range.
Adjusted EBITDA was $183 million or five 8% of net sales.
Looking now at our balance sheet.
Our liquidity remains excellent due to the strong execution of our strategic initiatives and effective management of working capital at.
At the end of the year cash on hand reached a record level of $522 million, an increase of $52 million from Q3, when considering our cash on hand, and undrawn revolver capacity of $346 million.
Available liquidity was $868 million at the end of the year also a record.
Total debt, including our financing leases was $585 million and net debt was $64 million.
Our net leverage is now 0.3 times and we have no material outstanding debt maturities until 2029.
Per the terms of our credit agreement, which does that include real property financing leases, our net leverage ratio was a negative 1.0 times.
Andy Wamser: Our balance sheet is in great shape, and when combined with our solid EBITDA and strong cash generation, we are well positioned to support our strategic initiatives. These include investments in our highest return opportunities, such as organic and inorganic growth initiatives and share repurchase. Now moving on to working capital and free cash flow. During the fourth quarter, we generated operating cash flow of $76 million and free cash flow of $67 million. For the full year 2023, we generated operating cash flow of $306 million and free cash flow of $279 million.
Our balance sheet is in great shape, and when combined with our solid EBITDA and strong cash generation, we are well positioned to support our strategic initiatives. These include investments in our highest return opportunities such as organic and inorganic growth initiatives and share repurchases.
Now moving on to working capital and free cash flow during the fourth quarter, we generated operating cash flow of $76 million and free cash flow of $67 million for the full year 2023, we generated operating cash flow of $306 million and free cash flow of 279 million.
Andy Wamser: Our full-year cash generation was supported by earnings and a net benefit from working capital, primarily related to the reduction of more than $140 million of inventory from the beginning of 2023. Turning now to capital allocation. During the quarter, we spent approximately $9 million in CapEx, primarily to improve our distribution facilities and upgrade our fleet. For the year, CapEx was about $28 million. For 2024, we expect capital investments to increase to around $40 million, focusing on facility improvements, further upgrades to our fleet, and the technology improvements previously discussed. Our digital transformation will also have at least a $5 million impact on operating expenses in 2024 related to software license implementation, as well as increased headcount associated with this initiative.
Our full year cash generation was supported by earnings and a net benefit from working capital primarily related to the reduction of more than $140 million of inventory from the beginning of 2023.
Turning now to capital allocation during.
During the quarter, we spent approximately $9 million in capex, primarily to improve our distribution facilities and upgrade our fleet for the year Capex was about $28 million.
For 2024, we expect capital investments to increase to around $40 million.
Focusing on facility improvements further upgrades to our fleet and the technology improvements previously discussed.
Our digital transformation will also have at least a $5 million impact on operating expenses in 2024 related to software license implementation as well as increased head count associated with this initiative.
Andy Wamser: During the fourth quarter, we purchased approximately $12 million of our company's common stock through open market transactions under our repurchase programs, and we plan to continue to be opportunistic in the market. Our guiding principles for capital allocation remain consistent.
During the fourth quarter, we purchased approximately $12 million of our company's common stock through open market transactions under our repurchase programs and we plan to continue to be opportunistic in the market.
Our guiding principles for capital allocation remain consistent.
Andy Wamser: We intend to maintain a strong balance sheet that enables us to invest in our business through the economic cycle, pursue a disciplined M&A strategy and geographic expansion, as well as return capital to shareholders. We also plan to maintain a long-term target net leverage of two times or less. Overall, we are pleased with our fourth quarter and full year results, highlighted by our strong margins and free cash flows, especially when considering the difficult housing market. Our strong balance sheet positions us well to execute on our strategy and provide returns for our shareholders. Operator, we are now ready to take questions. At this time, if you'd like to ask a question, press the star followed by the number one on your telephone keypad. Our first question will come from the line of Greg Palm with Craig Hallam Capital Group. Please go ahead. Hey, good morning, everybody.
We intend to maintain a strong balance sheet, which enables us to invest in our business through economic cycles pursue a disciplined M&A strategy and geographic expansion as well as return capital to shareholders. We also plan to maintain our long term target net leverage of two times or less.
Overall, we are pleased with our fourth quarter and full year results highlighted by our strong margins and free cash flows, especially when considering the difficult housing markets are.
Our strong balance sheet positions us well to execute on our strategy and provide returns for our shareholders.
Operator, we are now ready to take questions.
At this time, if you'd like to ask a question press star followed by the number one on your telephone keypad. Our first question will come from the line of Greg Palm with Craig Hallum Capital Group. Please go ahead.
Hey, good morning, everybody I wanted to maybe start with a little bit more color on kind of price volume I'm not sure you gave a lot of sort of metrics.
Operator: I wanted to maybe start with a little bit more color on kind of price volume. I'm not sure you gave a lot of sort of metrics and was wondering if you could maybe quantify what the price headwind specifically was for full year 23. And I think it's still persisting in terms of that headwind in Q1. Is there any point at a time this year where you feel like that sort of normalizes? Or is it still sort of hard to know at this point? Hey Greg, it's Andy.
Wondering if you can maybe quantify what the.
Price headwinds specifically was for full year 'twenty three.
It's still persisting in terms of that headwind in Q1 is there a point.
At a time this year, where you feel like that sort of normalizes or is it still sort of hard to know at this point.
Hey, Greg It's Andy I'll take the first stab at that yes, when we look at the pricing headwinds, particularly in specialty I would say it was in the for the year. It was in the order of magnitude of the mid teens.
Andy Wamser: I'll take the first stab at that. When we look at the pricing headwinds, you know, specifically in specialty, I would say it was in the order of magnitude of the mid-teens for the year. You know, it was higher in Q2, Q3, and then, you know, I'd say it was high, you know, maybe a little bit higher than, you know, 10, 12 percent, maybe in Q4. What we see in Q1 is that it's getting, it's improving a little bit, and as I mentioned in my comments, you know, for the specialty pricing in particular, it was, you know, about a 10, we're still seeing about a 10 percent decrease. As we move throughout the year, we would expect that to, you know, improve, and so we're not going to give exact guidance in terms of, you know, what the exact cadence is if we go from Q1 to the end of the year, but by the end of the year, we think we should be, you know, lapping a lot of the specialty price. I got it. Okay, that's, that's helpful. And if I could shift gears a little bit and talk about this digital initiative and some of the investment.
It was higher in Q2, Q3, and then I would say is.
Maybe a little bit higher than 10%, 12% maybe in.
In Q4, what we see in Q1 is that it's getting it's improving a little bit and as I mentioned in my comments for the specialty pricing in particular it was about a 10th we're seeing about a 10% still.
Still decrease as we move throughout the year, we would expect that to.
Improve and so we're not going to give exact guidance in terms of what the exact cadence as we go from Q1 to the end of the year, but by the end of the year, we think we should be.
Lapping allowed us specialty pricing.
Got it okay.
That's helpful and if I could shift gears, a little bit and talk about this digital initiative and some of the investments behind that.
<unk> is the point of it.
Or the hope that it improves internal operations efficiencies is there any way that you.
I think that this maybe helps out the end customer as well and enables you to sort of maybe gain share and then specifically on the investments I think you said $5 million.
Increase but you also talked about in SG&A increase as well and I was curious if you were referring on a year over year basis or based on the levels that you saw specifically in Q4.
Hey, Greg Great to hear from me, let me take the first part of that question and I'll turn it over to Andy to dive into the SG&A aspect. So so first of all the answer to your question is yes in the context of both reducing our operating costs, while also improving the customer experience ultimately.
The primary goal is to provide the most <unk>.
The best customer and supplier experience and the two step distribution space for building products and the first phase of this which we're embarking on in 2024 includes transportation, which will absolutely reduce our logistics costs as it relates to delivering.
And to the customer where and when they need the products. So it could be to the actual lumberyard home center or it could actually be a multifamily or or or job site delivery, but in any event, which we which we do today, but in a more efficient and cost effective manner and secondly, we're moving forward on the customer the direct <unk>.
Customer enhancement piece as well with the E Commerce platform our plan is to <unk>.
Started dedicated launch in the coming months with a pilot program with a few customers and a few branches and once we've built that out and feel good about is the idea would be to scale. It across the entire enterprise and as I said earlier reduced the number of touch points between our customer and us give them better visibility ultimately into inventory.
The ability to order.
Multiple locations for multiple branches and so on and so forth. So.
Ultimately the idea is to provide an outstanding or exceptional customer experience.
And so this is Andy as it relates to SG&A.
Let me give you some color on that so okay.
We thought about Q4 in Q4 did have some one time benefits in terms of actuarial true ups related to like workers comp we had some.
True ups related to our health care burden rate and so when I think about the SG&A run rate its more in line with what we saw in Q1 through Q3.
But in addition to that we will have about.
This $5 million in Opex that I mentioned in my comments related to the technology investments.
That being said.
We are always very focused on SG&A and to the degree that we see markets deteriorate, We will act on that SG&A levers, but as we think about the plan that we have for this year I think those are the right assumptions in terms of for 2024 in terms of taking the Q1 through Q3 sort of run rate and then add again.
The technology investments.
Understood, Okay, I will leave it there thanks.
Your first question comes from the line of Jefferies Stevenson with loop capital. Please go ahead.
Hey, Thanks for taking my questions today, and congrats on a nice quarter.
So I wanted to ask about daily sales volumes being down 10% over the first seven weeks of the year due to the adverse weather in January.
How large of a first quarter sales concentration as March from a historical perspective, and do you believe you can make up for the slow start of the year.
Cooperates here over the coming months or so.
Thanks, Jeff good to hear from you.
So.
Look as the as the quarter progresses, and we've seen it over the last few weeks.
That there is improvement that's flowing through the P&L as we move into March in the season.
We do expect.
We expect the seasonality to positive seasonality aspects to kick in and provide us with opportunities.
To improve on the on the challenging headwinds we faced in January.
I can't give you specifics, obviously from a number standpoint, but but but the trend has started and we expect things to continue to normalize as we head into the season.
Little additional color of what I would say is it will be difficult for us to make up some volume.
Just due to the weather in January.
As we mentioned that there was an improvement in structural it's still down a little bit year over year. The specialty though is in the last three weeks has been let's say more in line with the previous year. So I think it's difficult to make up and then structural still has a little bit to go in terms of making up some of that volume.
Got it no that makes sense.
I'm just wondering if you could talk more about.
About R&R demand trends right now and what you've been hearing from your suppliers and channel partners because large ticket R&R has been challenged due to the high cost of credit and lack of housing turnover and wondering if you're hearing any positive signs of a potential inflection in demand as we move.
Into 2024 here.
No I would say that what we're hearing directly from our customers and our suppliers for that matter is consistent with what we're all hearing publicly.
On the R&R front, yes, I think if you look at sort of just sort of consensus numbers in terms of R&R is generally going to be down mid single digits. When you sort of look at it.
Cetera, So I think thats.
But right now hopefully things improve as we go move throughout the year, but thats the general view right now.
Okay got it and one last one you've had several partnership expansion announcements with leading suppliers of last several months in Shanghai was just wanted to discuss the opportunity for additional supplier partnership expansion over the mid term and its potential impact on organic growth moving forward.
Sure, Yes, so basically we've got a great group of strategic suppliers, we're working with to expand our geographic reach a number of conversations that yet have to be made public where we're looking to expand there.
Their product offerings and in new markets some of which.
Would be opportunities for them, where they're not otherwise located or Alternatively result in the displacement of someone else who might already be there, hence, hence why I can't get into too much detail, but the fact is I feel like we've got really really good.
Partnerships that are collaborative with our key suppliers that are allowing us to expand our geographic reach with them, which again gives us the ability to provide a scalable.
Solution for all of our customers, including the National accounts that are located in multiple regions.
They would be the one step distributors or the the home centers.
Great. Thank you.
Your next comes from the line of Reuben Garner with the benchmark company. Please go ahead.
Thank you and good morning, everybody.
So.
I know you guys have a little bit more exposure to the smaller builders I was curious what you're hearing.
Recent weeks with a little bit of the rate we're pleased that we've gotten.
What the outlook might be for this year versus maybe what were hearing from the bigger builders and earning season.
Yes, I would say that that their views are are generally consistent with what what what.
We are hearing in the marketplace and the builder sentiment did tick up then again the weather hit.
Really dramatically and fiercely in January which caused housing starts.
To be a lot lower than expected so it's a little.
Hit or Miss I think quite frankly, we will get a much better read next week, where we're at the international Builders' show, where we will actually have an opportunity to truly see how people are feeling.
Most inclement weather in January but generally speaking everyone.
The smaller regional builders, who are building more custom homes, where folks may not be as rate sensitive feel good not as good as they have in the past.
But at the same time their sentiment.
Is is very much tempered in the near term, but but it is consistently viewed across the board no matter, who we talked to that the second half will be better.
Okay, and then a clarification on the specialty pricing pressure that youre seeing is the vast majority or all of that in sort of our engineered wood products piece of it or are you seeing pricing pressure.
Some of the other products like diving dumping anywhere else.
You participate.
Sure, Yes, great question I would say when we think that those specialty pricing deflation its really in predominantly in AWP and millwork, but we are seeing some pressure on industrial side.
Siding and outdoor.
Materials as well, so but predominantly it's EW PMO work.
Yes.
Okay, and then last one for me the technology.
Our digital transformation effort.
How will you guys sort of track.
The false here and longer term I know, you mentioned or referenced a $5 million investment now.
For the coming few years, what does that number look like and what kind of return metrics are you using the kind of gauge the benefits of the program.
Yes, so with respect.
To the logistics rated.
Just sticks oriented.
Improvements such as for example, the Tms related work, we're doing now.
It's very straightforward in terms of getting better pricing on our freight.
Making sure that will reduce we're able to identify those opportunities.
Do you have route optimization as well and so there are very specific metrics, we have that will allow us to to generate the savings over the next few years and reduce our cost to serve so that's pretty straightforward as it relates to E Commerce obviously.
That that will be measured in the context of how much incremental volume we can pick up in greater share of wallet that we can grab from any given customer by making it easier to do business with us as opposed to anywhere anyone else ultimately.
No.
The idea is to get to the point where the.
The value is all about the customer experience.
And so if the customer experience is is top notch then it makes it a lot easier for folks to do business with us and ultimately run more transactional volume through us and that is the goal and so we will have a number of measures around.
Gross margin enhancement.
Mix shift.
And that's how we'll track it over time.
And then Brian just one point of clarification.
When we talk about the technology investments that lease for $24 5 million in Opex and then at least $5 million in Capex. So that the spend will be a little bit more than $10 million.
And as we think about what the benefits related to the Tms or transportation management system.
We expect that to have.
A really strong IRR that that would start to pay off.
I would say in the beginning of the 25 timeframe.
25 26.
Great. That's very helpful. One quick clarification.
Any of your business transacted via E Commerce today.
And are there targets on where that could be over a certain period of time.
No we're not doing any many e-commerce today everything is done.
Done via directly with our sales teams.
Okay, great. Thank you guys and good luck.
Thanks, David.
Our final question will come from the line of Kurt Yinger with D. A Davidson. Please go ahead.
Great. Thanks, and good morning, everyone.
Just wanted to follow up on.
E. Commerce question is that primarily business to business dealers home center customers that you would envision ordering through that or is there actually a direct to consumer angle.
Within that.
Yes.
By the way just in.
In response to the last question that Jeff asked let me give a point of clarification, we actually do via the e-commerce platforms of our home centers are national accounts.
There are there through their special order and other programs. There are orders done on their end that get processed through.
Through their portals that get fulfilled by us. So there is some iteration.
Of e-commerce that we that we participate in but as it relates to Bluelinx itself. This would be our foray into developing ecommerce platform for any customer to order through through us.
So in that context, the idea would be its business to business.
We havent thought about.
Our current plans there arent any any plans for an end user to be able to order through us and to the extent that does become part of the solution those orders would still flow through our primary customers because we don't I mean, we care about our primary business customers. So to the extent one of their customers.
Has an opportunity to order it would be for the benefit of our of our primary customer, but right now the E. Commerce pilot, we're exploring would be for our customers to order very efficiently through the platform and then it gets booked in the order get fulfilled by the branch.
In that market.
Right, Okay that makes.
A lot of sense are continuing with your customers.
And then you talked more about greenfields than we've heard in the past and I guess I'm curious what do you think are the most important factors to get right.
In assessing a greenfield location for that to be successful.
And how should we think about I guess at least in 2024.
<unk> tight to break ground on some of these facilities or purchase.
The site to kind of ramp that up.
Yes, so the appetite is there it's an important part of our strategy.
We're going to be very thoughtful and measured in our approach to make sure. We're we're doing it the right way and the right market as we think about the markets. There's a lot of great space for us out.
West right. So if you look at.
West of Denver, or whether it's the southwest the west.
There are a number of msas that we don't have a presence in that said, we do service all 50 states either through long drives from certain facilities, where the sale makes sense or alternatively through.
Direct sales or reload. So we do service all 50 states, but there are obviously more cost effective and efficient ways to do that and some of these msas and as we think about the opportunity and why we might greenfield in one location over another you just were very focused on housing starts single family housing starts.
As well as what the repair and remodel activity looks like and then we take a look at whether or not the market is two step distribution friendly and in particular with respect to the products we carry.
And then we make decisions based on on that opportunity and then and then at the same time, we have a very strong set of private label products, both AWP and Millwork for example, as well as which are complemented by an incredibly strong structural products business. So between the two we feel like we have the ability to ramp up at <unk>.
<unk>, probably more so than than others maybe.
And at the same time again, just being very thoughtful about where we start and how we progress over time.
And is that a situation where.
I guess when you go to a new geography, even if you're servicing it maybe from a further location already where you would need to.
Displace a competitor with an existing vendor for the most part or given that you are already servicing at is there not a whole lot of discussion that's required with your vendor partners in evaluating that type of expansion no. There would absolutely be discussion because because the way that the.
The way that it typically works your vendor part our vendor partner relationships are tied to specific markets and so most of the markets. We're looking at if theyre going to be two step distribution friendly and have.
Strong housing starts for instance that most likely in fact in every market there will be competitors. There. The good thing is unlike others, we actually have our own private label brands and a strong structural business that we can start with and then with our existing suppliers.
Very strong partnerships.
Where we believe they would be supportive.
Not out of the gate and over time I've actually already had a few conversations with a couple who said they would be very excited about supporting greenfield opportunities. So as the opportunities further ripe in those conversations will become more serious but even if they take time.
I am very excited about the fact that we can we can start those projects with our private label brands as well as our structural business.
Got it okay. That's good to hear and then.
Lastly, I mean M&A is also important part of the strategy could you just talk a little bit about what youre seeing from evaluation perspective, and how that stacks up against.
Your appetite to perhaps be more aggressive buying back your stock at these levels.
Yes, I'll leave it there.
Sure. So let me take the M&A part and then I'll, let Andy comment on the capital allocation.
But as it relates to capital allocation at a high level, we clearly take a very.
Seriously and are disciplined in our approach with returning capital to shareholders being one of the core elements of that strategy as it relates to M&A.
We still believe the outlook is good which is why it's part of our growth strategy and it's in a very very efficient way of developing new markets that said, we are pursuing a roll up strategy, that's rinse and repeat given the dynamics of the two step distribution space. So our M&A March has historically been slow and we will continue to be slow and steady and disciplined on the types of <unk>.
Business. It was we're targeting and ultimately acquiring.
And keeping an eye on on the specialty product mix and geography as two of the primary drivers now with the 2023 numbers in as you might expect the bid ask spreads bid ask spreads are continuing to compress so from a valuation standpoint, the multiples should be based on 2023, EBITDA, which will I think bring.
A sense of conformity logic and rationale back.
Back to valuations. So again it remains an important part of our strategy, we're starting to see opportunities.
Be more realistic over time without again without compromising our desire to be to be opportunistic and buy companies at a level that makes sense for our business.
And then as it relates to share repurchase I don't think it's an either or situation I think given where the balance sheet is I think we have the opportunity to do both.
We said that we'd be opportunistic on the on the new current plan that was.
Our new $100 million plan for the additional $100 million plan that we did in Q4.
In total we did more than $12 million in total share repurchases in.
In the fourth quarter, we have $91 million left on the current authorization that won't be opportunistic, but I don't think it's an either or in terms of.
Share repurchase or M&A.
Got it okay, well I appreciate the color guys and good luck here in Q1.
Thanks Kurt.
With that I'll hand, the call back to Tom Morabito for any closing remarks.
Thanks, Regina and thank you again for joining us today, and we look forward to speaking with you in may as we share our first quarter 2024 results.
And that concludes our call for today. Thank you all for joining and you may now disconnect.
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Okay.
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Yeah.