Q4 2023 Boise Cascade Co Earnings Call - Q&A

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Lisa: Good morning. My name is Lisa, and I will be your conference facilitator today. At this time, I would like to welcome everyone to Boise Cascade's fourth quarter and full year 2023 earnings conference call. All lines have been placed on mute to prevent any background noise.

Lisa: Good morning, My name is Lisa and I'll be your conference facilitator today.

Lisa: At this time I would like to welcome everyone to Boise Cascade fourth quarter and full year 2023 earnings conference call.

Lisa: All lines have been placed on mute to prevent any background noise.

Lisa: After the speaker's remarks, there will be a question and answer period. It is now my pleasure to introduce you to Kelly Hibbs, Senior Vice President, CFO, and Treasurer of Boise Cascade. Mr. Hibbs, you may begin your presentation. Thank you, Lisa. And good morning, everyone.

Lisa: After the Speakers' remarks, there will be a question and answer period.

Lisa: It is now my pleasure to introduce you to Kelly hit.

Kelly: Our vice President CFO and Treasurer Boise Cascade.

Kelly: You may begin your conference.

Kelly: Thank you Lisa and good morning, everyone I would like to welcome you to Boise Cascade's fourth quarter 2023 earnings call and business update joining.

Kelly Hibbs: I would like to welcome you to Boise Cascade's fourth quarter 2023 earnings call and business update. Joining me on today's call are Nate Jorgensen, our CEO, Jeff Strum, head of our Building Materials Distributions operations, and Mike Brown, head of our Wood Products operations, who will be retiring May 1st after an outstanding 25 years of service to Boise Cascade. Turn to slide 2.

Joining me on today's call are Nate Jorgensen, our CEO, Jeff strong head of our building materials distribution operations and Mike Brown head of our wood products operations, who will be retiring they first after an outstanding 25 years of service to Boise Cascade.

Kelly: Turning to slide two this call will contain forward looking statements. Please review the warning statements in our press release on the presentation slides and in our filings with the SEC regarding the risks associated with these forward looking statements also please note that the appendix includes reconciliations from our GAAP net income to EBITDA and adjusted EBITDA.

Kelly Hibbs: This call will contain forward-looking statements. Please review the warning statements in our press release, on the presentation slides, and in our filings with the SEC regarding the risks associated with these forward-looking statements. Also, please note that the appendix includes reconciliations from our gap net income to EBITDA and adjusted EBITDA, and segment income to segment EBITDA. I will now turn the call over to Nate. Thanks, Kelly. Good morning, everyone.

Kelly: And segment income to segment EBITDA I will now turn the call over to Nate.

Nate Jorgensen: Thank you for joining us for Ernie's call today. I'm on slide number three. A few highlights as I reflect on our 2023 results. We reported full-year net income of $483.7 million, or $12.12 per diluted share, on sales of $6.8 billion. We further executed our growth strategies through organic and acquisition initiatives, and we also provided meaningful returns to our shareholders through share price gains and dividends. I want to thank our associates across the company who continue to execute our strategy that positions us to serve and support our vendor and customer partners. Let me now turn to our fourth quarter results. Total US housing starts increased by a modest 4%.

Nate: Thanks, Kelly and good morning, everyone. Thank you for joining us for our earnings call today I'm on slide number three.

Nate: A few highlights as I reflect on our 2023 results we reported full year net income of $483 7 billion.

Nate: $12 12 per diluted share on sales of $6 8 billion. We further executed our growth strategy through organic and acquisition initiatives.

Nate: So providing meaningful returns to our shareholders through share price gains and dividends.

Nate: Our associates across the company will continue to execute our strategy that position us to serve and support our vendor and customer partners.

Nate: Let me now turn to fourth quarter results total U S housing starts increased a modest 4%. However, the revamp rebound in single family housing starts was evident reflecting a 23% increase compared to the prior year quarter.

Nate Jorgensen: However, the rebound in single-family housing starts was evident, reflecting a 23% increase compared to the prior quarter. Both of our businesses again delivered strong operating and financial results. Our consolidated 4th quarter sales of $1.6 billion were up 1% from the 4th quarter of 2022. Our net income was $97.5 million, or $2.44 per share, compared to that income of $117.4 million, or $2.95 per share, in the year-

Nate: Both of our businesses again delivered strong operating and financial results.

Validated fourth quarter sales of $1 6 billion were up 1% from fourth quarter 2022, our.

Nate: Net income was $97 5 million or $2 44 per share compared to net income of $117 4 million or $2 95 per share in the year ago quarter.

Nate Jorgensen: Fourth quarter 2023 results included $6.2 million of pre-tax accelerated depreciation related to the curtailment of lumber production in Chapman, Alabama, and approximately $3 million of transaction expenses related to the Frosco acquisition. I'm pleased with the status of our BROSCO integration efforts and the financial results thus far delivered by our new teammates. As we start 2024, our balance sheet remains very strong, and we remain committed to our balanced approach to capital allocation. We look forward to executing our reinvestment and growth projects included in our expanded capital. Kelly will now walk through our segment financial results and provide an update on capital allocation in more detail, after which I'll provide an outlook before we take your questions.

Nate: Fourth quarter 2023 results included $6 2 million of pretax accelerated depreciation related to the curtailment of lumber production in Chapman, Alabama, and approximately $3 million of transaction expenses related to the Bronco acquisition.

Nate: I am pleased with the status of our Roscoe integration efforts through the financial results. Thus far are delivered by our new teammates as we start 2024, our balance sheet remains very strong and we remain committed to our balanced approach to capital allocation. We look forward to executing on our reinvestment in growth projects included in our expanded capital plan.

Nate: Kelly will now walk through our segment financial results.

Nate: I had an update on our capital allocation in more detail after which I'll provide an outlook before we take your questions Kelly. Thanks.

Nate: Wood product sales in the fourth quarter, including sales to our distribution segment were $449 7 million compared to $425 6 million in the fourth quarter of 2022 Wood products reported segment EBITDA of $92 7 million down from EBITDA of $99 7 million reported in the year ago quarter.

Kelly Hibbs: Thank you, Nate. Wood Products sales in the fourth quarter, including sales to our distribution segment, were $449.7 million, compared to $425.6 million in the fourth quarter of 2022. Wood Products reported segment EBITDA of $92.7 million, down from $99.7 million reported in the year-ago quarter. The decrease in segment EBITDA was due primarily to lower EWP and plywood sales prices and an increase in other manufacturing costs.

Nate: The decrease in segment EBITDA was due primarily to lower AWP in plywood sales prices and an increase in other manufacturing costs. These decreases were offset partially by higher AWP sales volumes and lower wood fiber costs. The previously mentioned $6 2 million of pretax accelerated depreciation from our Chapman lumber curtailments.

Nate: Not affect our EBITDA, but did negatively impact our earnings per share in the quarter by approximately <unk> 12 per share.

Nate: BMD sales in the quarter were $1 5 billion up 3% from fourth quarter 2022, BMD reported segment EBITDA of $80 6 million in the fourth quarter compared to segment EBITDA of $99 4 million in the prior year quarter.

Kelly Hibbs: These decreases were offset partially by higher EWP sales volumes and lower wood fiber costs. The previously mentioned $6.2 million of pre-tax decelerated depreciation from our Chapman Lumber curtailment did not affect our EBITDA, but did negatively impact our earnings per share in the quarter by approximately $0.12 per share. BMD sales in the quarter were $1.5 billion, up 3% from the fourth quarter of 2022. BMD reported Segment EBITDA of $80.6 million in the fourth quarter, compared to Segment EBITDA of $99.4 million in the prior year quarter. The decline in segment EBITDA was driven by increased selling and distribution expenses of $12.9 million compared to the same quarter in the prior year. In addition, general administrative expenses increased $5.7 million, approximately $3 million of which were BROSCO acquisition-related costs, which had a negative impact on our reported earnings per share of approximately $0.06 per share.

Nate: The decline in segment EBITDA was driven by increased selling and distribution expenses of $12 9 million compared to the same quarter in the prior year. In addition, general and administrative expenses increased $5 7 million approximately $3 million of which were <unk> acquisition related costs, which had a negative impact on our reported earnings per share of approximately <unk>.

Nate: Per share.

Nate: We expect total company depreciation and amortization in 2024 to be approximately $140 million. This includes the incremental depreciation and amortization from the assets acquired in our recent brasco transaction. In addition, our anticipated effective tax rate remains at 25%.

Speaker Change: Turning to slide five.

Speaker Change: On a year over year basis fourth quarter volumes for I, joist, and LVL were up 79% and 29% respectively, driven by the sharp improvement in single family housing starts sequential pricing for both I joist and LVL was up 3% due to better than expected market conditions and fourth quarter rebate adjustments that had a positive impact on net price.

Speaker Change: <unk>.

Speaker Change: Looking forward to the first quarter good momentum in single family starts is a nice setup for AWP sales volumes, where we expect high single digit growth in LVL volumes and modestly higher I joists volumes on a sequential basis on pricing, we expect to experience mid single digit sequential declines.

Kelly Hibbs: We expect total company depreciation and amortization in 2024 to be approximately $140 million. This includes the incremental depreciation and amortization from the assets acquired in our recent BROSCO transaction. In addition, our anticipated effective tax rate remains at 25%.

Speaker Change: Turning to slide six our fourth quarter plywood sales volumes in wood products was 363 million feet compared to 393 million feet in fourth quarter 2022 plywood volumes decreased during the current quarter as we shifted a higher proportion of our internally produced veneer into AWP production given the change in demand for AWP.

Speaker Change: The $375 per thousand average plywood net sales price in fourth quarter was down 5% from fourth quarter, 2022, and down 2% sequentially. Thus far in the first quarter of 2020 for plywood price realizations were consistent with our fourth quarter average.

Kelly Hibbs: Turning to slide 5, on a year-over-year basis, fourth quarter volumes for I-Joyce and LVL were up 79% and 29%, respectively, driven by the sharp improvement in single-family housing. Sequential pricing for both IJOYS and LVL was up 3% due to better-than-expected market conditions and fourth quarter rebate adjustments that had a positive impact on net price realization. Looking forward to the first quarter, good momentum in single family starts is a nice setup for EWP sales volumes, where we expect high single-digit growth in LVL volumes and modestly higher IJOYS volumes on a sequential basis. On pricing, we expect to experience mid-single-digit sequential declines. Turn to slide six, our fourth quarter plywood sales volumes and wood products were 363 million feet compared to 393 million feet in the fourth quarter of 2022. Plywood volumes decreased during the current quarter as we shifted a higher proportion of our internally produced veneer into EWP production given the change in demand for EWP. The $375 per thousand average plywood net sales price in the fourth quarter was down 5% from the fourth quarter of 2022 and down 2% sequentially.

Speaker Change: Moving to slide seven and eight.

Speaker Change: Bmd's fourth quarter sales were $1 5 billion up 3% from fourth quarter 2022, driven by sales volume increases of 13% offset partially by sales price decreases of 10% excluding the impact of the <unk> acquisition BMD sales were flat.

Speaker Change: By product line commodity sales decreased 8% General line product sales increased 13% in sales the DWP increased 10%.

Speaker Change: Gross margin dollars were flat when compared to the same quarter last year as lower margin dollars on AWP were offset by higher margin dollars generated on general line products. In addition, Bmd's overall gross margin percentage was 15, 2% down 60 basis points from the 15, 8% reported in fourth quarter 2022.

Speaker Change: Sure.

Speaker Change: Bmd's EBITDA margin, including the previously mentioned acquisition related costs was five six excuse me five 4% for the quarter down from the six 9% reported in the year ago quarter, and down 90 basis points sequentially. As we typically do we have grown our inventory since year end and are well positioned to support.

Speaker Change: The upcoming spring building season broadly speaking, we view inventory in the channel is lean for most product lines, providing a good backdrop for two step distribution.

Speaker Change: <unk> sales pace, thus far in first quarter 2024 is approximately 10% below fourth quarter daily sales averages with extreme weather across most of the country in January delaying many shipments to job sites, we anticipate our daily sales pace will accelerate as we move through the quarter and I expect our first quarter 2020 for EBITDA margins to be around 5%.

Kelly Hibbs: Thus far in the first quarter of 2024, plywood price realizations are consistent with our fourth quarter average. Moving to slides 7 and 8, BMD's fourth quarter sales were $1.5 billion, up 3% from the fourth quarter of 2022, driven by sales volume increases of 13% offset partially by sales price decreases of 10%. Excluding the impact of the Brasco acquisition, BMD sales were flat.

Speaker Change: <unk>.

Speaker Change: Moving to slides nine and 10.

Speaker Change: These slides show the generally stable pricing environment for lumber and panel pricing during the fourth quarter 2023, compared with the downward trajectory during the prior year quarter.

Kelly Hibbs: By product line, commodity sales decreased 8%, general line product sales increased 13%, and sales of EWP increased 10%. Gross margin dollars were flat when compared to the same quarter last year, as lower margin dollars on EWP were offset by higher margin dollars generated on general line products. In addition, BMD's overall gross margin percentage was 15.2%, down 60 basis points from the 15.8% reported in the fourth quarter of 2022. The EBITDA margin, including the previously mentioned acquisition-related costs, was 5.4% for the quarter, down from the 6.9% reported in the year-ago quarter and down 90 basis points sequentially.

Speaker Change: As we enter 2020 for commodity lumber pricing has remained stable while future commodity pricing volatility is always a possibility we will maintain our approach to having inventory on hand to support our customer base.

Speaker Change: I'm now on slide 11.

Speaker Change: We had capital expenditures of $215 million in 2023 was $59 million of spending in wood products and $156 million of spending in BMD in wood products. Our capital spending included veneer related projects at mills that support AWP production in BMD, our capital spending included nor new doors and millwork facilities in <unk>.

Speaker Change: Kansas City, and Denver to build out and startup of a new distribution center in Maryland, Ohio, and the purchase of distribution centers in West Palm Beach, Florida in Modesto, California.

Speaker Change: We are excited about our expanded capital expenditure plan in 2024, and what products are 2024 capital plan includes spending on previously announced projects to add I joist production capabilities at our stores, the Alabama, <unk> mill and convert a layup line to a parallel laminated veneer line in our Chapman, Alabama plywood facility.

Kelly Hibbs: As we typically do, we have grown our inventory since year-end and are well-positioned to support the upcoming spring building season. Broadly speaking, we view inventory in the channel as lean for most product lines, providing a good backdrop for two-step distribution. BMD's sales pace thus far in first quarter 2024 is approximately 10% below fourth quarter daily sales averages, with extreme weather across most of the country in January delaying many shipments to job sites. We anticipate our daily sales pace will accelerate as we move through the quarter and expect our first quarter 2024 EBITDA margins to be around 5%. Moving to slides 9 and 10, these slides show the generally stable pricing environment for lumber and panel pricing during the fourth quarter 2023 compared with the downward trajectory during the prior year quarter. As we enter 2024, commodity and lumber pricing has remained stable. While future commodity pricing volatility is always a possibility, we will maintain our approach to having inventory on hand to support our customer base. I'm now on slide 11.

Speaker Change: And our wholesale Louisiana facility multiple investment projects are planned over the next two years, which will include upgraded and redesign of the log utilization center, a new veneer dryer and press and modification of an existing veneer dryers.

Speaker Change: In BMD.

Speaker Change: Our 2024 capital expenditure plan includes additional spending on the new West Palm Beach and Modesto locations.

Speaker Change: Progress on permits site work and design for a greenfield distribution centers in Texas, and South Carolina has been slow, but we expect spending to gain notable momentum in 2024, as we work towards anticipated startup of those locations and 25% and 26, respectively as.

Speaker Change: As we've noted before the availability of engineering and construction resources in the timing and availability of equipment purchases will influence our ability to execute execute upon our plan for $250 million to $270 million of capital expenditures in 2024.

Kelly Hibbs: We had capital expenditures of $215 million in 2023, with $59 million of spending on wood products and $156 million of spending in BMD. For wood products, our capital spending included veneer-related projects at mills that support EWP production. In BMD, our capital spending included new door and millwork facilities in Kansas City and Denver, the build-out and start-up of a new distribution center in Marion, Ohio, and the purchase of distribution centers in West Palm Beach, Florida, and Modesto, California. We are excited about our Expanded Capital Expenditure Plan for 2024. In Wood Products, our 2024 capital plan includes spending on previously announced projects to add iJoy's production capabilities at our Thorsby, Alabama EWP mill and convert a layup line to a parallel laminated veneer line at our Chapman, Alabama plywood facility. At our Oakdale, Louisiana facility, multiple investment projects are planned over the next two years, which will include an upgrade and redesign of the log utilization center, a new veneer dryer and And BND, our 2024 capital expenditure plan, includes additional spending on the new West Palm Beach and Modesto locations.

Speaker Change: Speaking of shareholder returns in 2023, we paid $346 million or a combined $8 70 per share in regular and special dividends and also completed $6 $4 million of share repurchases. We have approximately one 9 million shares still available for repurchase under our share repurchase program. In addition.

Speaker Change: <unk> our board of Directors recently approved a <unk> 20 per share quarterly dividend for shareholders of record as of February 23rd payable March 15.

Speaker Change: In summary, our balance sheet remains very strong and a principal capital allocation focus is to invest in our existing asset base and organic growth projects, while remaining committed to our fixed dividend through this business cycle. We will also evaluate M&A if it aligns with our strategy and Opportunistically return additional capital to shareholders as deemed appropriate.

Speaker Change: By our board of directors via special dividends and share repurchases I will turn it back over to Nate to discuss our business outlook.

Nate: Thanks, Kelly I'm on slide number 12 recent industry forecast for 2020 for U S. Housing starts are generally consistent with actual housing starts of 142 million in 2023 as reported by the U S Census Bureau, despite recent declines in mortgage rates and homebuilders responding with various mechanisms to attract buyers home affordability remains a challenge for consumers.

Nate: However, with a resilient economy and elevated mortgage rates, which limits existing home inventory for sale new residential construction is expected to remain an important source of supply for homebuyers.

Kelly Hibbs: Progress on permits, site work, and design for our greenfield distribution centers in Texas and South Carolina has been slow, but we expect spending to gain notable momentum in 2024 as we work towards the anticipated opening of those locations in 2025 and 2026. As we've noted before, the availability of engineering and construction resources and the timing and availability of equipment purchases will influence our ability to execute upon our plan for 250 to 270 million in capital expenditures in 2024. Speaking to shareholder returns, in 2023, we paid $346 million, or a combined $8.70 per share, in regular and special dividends and also completed $6.4 million in share refunds. We have approximately 1.9 million shares still available for repurchase under our share repurchase program.

Nate: With new residential construction.

Nate: Recent reduction in rates and potential for future rate reductions is created optimism that single family starts will reflect year over year growth.

However, theres reservation that multifamily starts may pull back from recent record highs due to capital cost for developers combined with cooling rents.

Nate: And elevated supply.

Nate: Regarding home improvement spending the app.

Nate: <unk> of U S housing stock and elevated levels of home homeowner equity I provided a favorable backdrop of repair and remodel spending while improvement improvement spending is expected to remain robust compared to history recent industry forecast project mid single declines in 2024.

Nate: As Kelly mentioned, we remain well positioned to invest in our existing asset base and organic growth opportunities in both businesses as reflected in our robust 2020 for our capital spending plans.

Nate: Our longer term view on housing fundamentals as favorable supported by demographic trends and under built housing stock.

Nate: Such we remain clearly focused on execution of our strategies and have great conviction around our investments to grow the company.

Speaker Change: Finally, I would like to take this opportunity to thank and congratulate three members of our leadership team on their upcoming retirements as.

Kelly Hibbs: In addition, our Board of Directors recently approved a 20 cents per share quarterly dividend for shareholders of record as of February 23, payable March 15. In summary, our balance sheet remains very strong, and our principal capital allocation focus is to invest in our existing asset base in organic growth projects while remaining committed to our fixed dividend through this business cycle. We will also evaluate M&A if it aligns with our strategy and opportunistically return additional capital to shareholders as deemed appropriate by our Board of Directors via special dividends and share repurchase. I will turn it back over to Nate to discuss our business outside. Thanks, Kelly. I'm on slide number 12.

Speaker Change: As communicated in January Tom Hoffman will retiring after 43 years of outstanding service and dedication to Boise Cascade.

Speaker Change: As we announced yesterday afternoon, Eric <unk>, our senior Vice President of Human resources were retired on May 3rd after 30 years of service and numerous accomplishments accomplishments across the company. We are excited that Angela Roche will be stepping into the role of vice president of human resources for the company.

Speaker Change: And finally, Mike Brown, who will be retiring from Boise Cascade. After 25 years of dedicated service, Mike We're grateful for your work and impact of Boise Cascade and those who we serve and support among a number of achievements delivered by Mike <unk> established the safety culture and systems that we benefit from today across our organization.

Speaker Change: Further his leadership was fundamental in building our conviction and passionate safety as an organization. Both in terms of what's expected and in what is possible, we are safer and better organization as a result.

Nate Jorgensen: Recent industry forecasts for 2024 U.S. housing starts are generally consistent with actual housing starts of 1.42 million in 2023, as reported by the U.S. Census Bureau. However, despite recent declines in mortgage rates and homebuilders responding with various mechanisms to attract buyers, home affordability remains a challenge for consumers. However, with a resilient economy and elevated mortgage rates, which limit existing home inventory for sale, new residential construction is expected to remain an important source of supply for homebuyers. With new residential construction, the recent reduction in rates and potential for future rate reductions have created optimism that single-family starts will reflect year-over-year growth. However, there's a concern that multifamily starts may pull back from recent record highs due to capital costs for developers combined with cooling rents and Elevated Supply.

And like I said, a very high bar bar for our wood products Division I have complete confidence Troy Little team will continue to build on that momentum and success. We move forward with great clarity on what has made the wood products division successful and we'll maintain that same approach and consistency as we move forward.

Speaker Change: Mike All the best to you as you move into your well deserved retirement.

Speaker Change: At this time, we would welcome any questions Lisa would you. Please open the phone lines.

Speaker Change: Yes.

Lisa: Thank you.

At this time I'd like to ask a question. Please press star one on your telephone.

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Lisa: We also ask that you wait for your name and company to be announced before you proceed with your question.

Lisa: One moment, while we compile the Q&A Ross.

Lisa: Okay.

Lisa: The first question today that we have is coming from Kurt Yinger D. A Davidson your line is open.

Kurt Yinger: Great. Thanks, and good morning, everyone.

Kurt Yinger: Good morning, Kurt I was hoping we could good morning, I was hoping we could just start on AWP capacity.

Kurt Yinger: Can you just level set us on how much capacity, you're kind of adding between what you've already outlined with coastal in some of the recent announcements.

Kurt Yinger: Second I mean outside of your own or we haven't really seen a whole lot of capacity added within the industry as a whole.

Kurt Yinger: How do you think that positions you from a competitive standpoint should we continue to see single family starts.

Nate Jorgensen: Regarding home improvement spending, the age of U.S. housing stock and elevated levels of homeowner equity have provided a favorable backdrop for repair and remodel spending. However, while improvement spending is expected to remain robust compared to history, recent industry forecasts project mid-single-digit declines in 2024. As Kelly mentioned, we remain well positioned to invest in our existing asset base and pursue organic growth opportunities in both businesses, as reflected in our robust 2024 capital spending plan. Our long-term view on housing fundamentals is favorable, supported by demographic trends and an under-built housing stock. As such, we remain clearly focused on the execution of our strategies and have great conviction around our investments to grow the economy. Finally, I would like to take this opportunity to thank and congratulate three members of our leadership team on their upcoming retirements. As communicated in January, Tom Hoffman will be retiring after 43 years of outstanding service and dedication to Boise Cascade.

Kurt Yinger: Momentum grow over the coming years.

Kurt Yinger: Yes. Thanks for the question Derek This is Kelly and I will let Mike jump in here as well I guess, let me start by yes. It's the right question around capacity and so what we spoke to when we did the <unk> acquisition was that that.

Kurt Yinger: It provided us relieve constraints, we had around veneer, so that we would have.

Kurt Yinger: Better opportunity to be able to run volumes that were closer to our nameplate capacity and youll see our nameplate capacity listen are shown in our 10-K that we filed yesterday and so we talked about 5% and 12% I believe by 23% and 25 was kind of the.

Kurt Yinger: Capacity numbers, we talked about so it's important to note that we're not talking increases specifically in nameplate, but our ability to run much closer to our nameplate capacity to be what we weren't able to before.

Kurt Yinger: And then some of the capacity additions we've talked about in terms of the I Joist line and somebody other things we've referenced in terms of growing our ability to produce more product.

Kurt Yinger: It certainly helps us.

Speaker Change: Through the cycle and very much helps us through the when you get into the peak building seasons that we see in the summertime and be able to meet demand for the seasonal demands there any anything you'd add Mike.

Mike Brown: Good good.

Nate Jorgensen: As we announced yesterday afternoon, Aaron Nuxill, our Senior Vice President of Human Resources, will retire on May 3rd after 30 years of service and numerous accomplishments across the company. We are excited that Angela Brosh will be stepping into the role of Vice President of Human Resources for the company. And finally, Mike Brown, who will be retiring from Boise Cascade after 25 years of dedicated service.

Mike Brown: The only point I'd, probably make relative to our position compared to say some of the other manufacturers as we've had this.

Mike Brown: Strategy for a long time to have a very high level of veneer self sufficiency.

Mike Brown: And to be prepared when the market requires product.

Mike Brown: And I think that puts us in a really strong position not only today, but for the future because as far as I'm aware, we have the highest level of veneer self sufficiency as it relates to AWP production. So shall we say and we sort of actually did say this during the pandemic. When we had an uptick in housing starts we are able to respond very very quickly.

Nate Jorgensen: Mike, we're grateful for your work and impact on Boise Cascade and those that we serve and support. Among a number of achievements delivered by Mike, he helped establish the safety culture and systems that we benefit from today across our organization. Further, his leadership was fundamental in building our conviction and passion for safety as an organization, both in terms of what's expected and in what is possible.

Mike Brown: To that demand and I think that's the point at which that Kelly is making about the seasonal nature of housing starts where we say obviously.

Mike Brown: The majority of the housing starts really at the summer spring and summer period.

Speaker Change: Got it okay.

Speaker Change: Thanks for that.

Nate Jorgensen: We are a safer and better organization as a result. Mike has set a very high bar for our Wood Products Division. I have complete confidence Troy Little and his team will continue to build on that momentum and success.

Our second sticking with DWP.

Speaker Change: <unk> seen some some choppiness the last couple of years in terms of volume, but if you were to take a step back how would you say share has shifted over the last couple of years between.

Lisa: We move forward with great clarity on what has made the Wood Products Division successful, and we'll maintain that same approach and consistency as we move forward. Mike, all the best to you as you move into your well-deserved retirement. At this time, we'd welcome any questions. Lisa, would you please open the phone?

Speaker Change: Hi, I joined solid sawn in open web floor trusses, and how big of a factor in substitution risk going forward as you think about pricing decisions.

Yes, okay. So I'll take a stab at that let them take it. So yes, I think so we saw some.

Lisa: Yes. Thank you. At this time, if you would like to ask a question, please press star 11 on your telephone. You will then hear an automated message advising your hand has been raised. If you would like to remove yourself from the queue, please press star 11 again.

Speaker Change: I'm sort of changes in the dynamic during the pandemic.

Speaker Change: Because of the I'll say, the relatively constrained supply of I joist, mainly due to the lack of people hyper web trusses gain some favor.

Kurt Younger: We also ask that you wait for your name and company to be announced before you proceed with your question. One moment while we compile the Q&A roster. The first question today that we have is coming from Kurt Younger of D.A. Davis, and your line is open.

Speaker Change: <unk>.

Speaker Change: I don't think Thats changed in terms of.

Speaker Change: Capacity of open web trusses in the marketplace.

Speaker Change: However, when you think about where we put ourselves relative to the product line, specifically I'll actually it is a very very favorable product line because of the ease of installation and the ability to transport it significantly longer distances.

Kelly Hibbs: Great, thanks, and good morning, everyone. Good morning. I was hoping we could just start on EWP capacity. Can you just give us an idea of how much capacity you're kind of adding between what you've already outlined with Coastal and some of the recent announcements? And second, outside of your own moves, we haven't really seen a whole lot of capacity added within the industry as a whole. How do you think that positions you from a competitive standpoint?

Speaker Change: And.

Speaker Change: When you think about what's been happening I'll say.

Speaker Change: Recent times.

Speaker Change: Starting to say.

Speaker Change: Al I joist demand improve not insignificantly at compared to as time has gone by so.

Speaker Change: If oil prices are not going to disappear, but we can make a lot more per unit time, particularly during the building season.

Kelly Hibbs: Should we continue to see single family start momentum grow over the coming years? Yeah, thanks for the question. This is Kelly, and I'll let Mike jump in here as well.

Speaker Change: Curtis, saying, maybe just one other data point on if you look at the.

Speaker Change: The competitive backdrop in terms of plate and floor trusses or dimensional lumber versus I joist.

Kelly Hibbs: I guess let me start by saying Yeah, it's the right question around capacity. And so what we spoke about when we did the coastal acquisition was that that provided us with relief constraints we had around veneer so that we would have a better opportunity to be able to run volumes that were closer to our nameplate capacity. And you'll see our nameplate capacity list shown in our 10K that we filed yesterday. And so we talked about 5 and 12%, I believe, by 23 and 25 were kind of the capacity numbers we talked about.

Speaker Change: The other theme, that's certainly out there with our builders as Theyre looking to reduce cycle times on the job site and so if you look at okay. What are the products and tools and solutions that help kind of drive lower cycle timer improved cycle time performance I joist are very much part of that answer. So as you think about what the expectations are and the needs are on the job side I think we are.

Speaker Change: Feel really good about I joist being an important answer two while reducing cycle times for the builder.

Speaker Change: Got it thanks for that Matt made and thanks, Mike Congrats on the retirement and good luck here in Q1 guys.

Speaker Change: Thank you.

Speaker Change: Thank you one moment for the next question.

Speaker Change: Yes.

Speaker Change: Our next question will be coming from Susan Macquarie.

Speaker Change: Yes.

Susan Marie Maklari: Goldman Sachs. Your line is open.

Susan Marie Maklari: Thank you good morning, everyone.

Kelly Hibbs: So it's important to note that we're not talking specifically about increases in nameplate capacity but our ability to run much closer to our nameplate capacity, which we weren't able to do before. And then some of the capacity additions we've talked about in terms of the iJoyce line and some of the other things we've referenced in terms of growing our ability to produce more product certainly helps us through the cycle and very much helps us through the times when we get into the peak building seasons that we see in the summertime and be able to meet demands, the seasonal demands there. Anything you'd add, Mike? G'day Kurt.

Susan Marie Maklari: Good morning, Sam.

My first question is I wanted.

Susan Marie Maklari: And kind of build on this discussion around you're increasing capacity.

Susan Marie Maklari: In AWP, which take about the builders increasingly using I joists.

Susan Marie Maklari: In order to realize the labor.

Susan Marie Maklari: Please that they're getting with those products.

Susan Marie Maklari: I mean at the absolute level of starts that the industry is operating at.

Susan Marie Maklari: Is perhaps not as impactful or do you think about that differently when you're considering the capacity that you're adding or the level of capacity that you want to achieve eventually.

Mike Brown: So the only point I'd probably make relative to our position compared to, say, some of the other manufacturers is that we've had this strategy for a long time to have a very high level of veneer self-sufficiency and to be prepared when the market requires product. And I think that puts us in a really strong position, not only today but for the future, because, as far as I'm aware, we have the highest level of veneer self-sufficiency as it relates to EWP production. So should we see, and we sort of actually did see this during the pandemic when we had an uptick in housing starts, we were able to respond very, very quickly to that demand. And I think that's the point Kelly's also making about the seasonal nature of housing starts, where we see, obviously, the majority of housing starts really in the summer, spring, and summer. OK. Thanks for that!

Susan Marie Maklari: Do you think about the tradeoff between the actual volume of starts on the actual level of starts relative to the mix shift that's coming through on the ground and build their preferences.

Speaker Change: So I guess to kind of rephrase. Your question make sure we understand it. So are you, saying I guess theres two components to your point. There is what is the absolute level of starts and then there is the penetration opportunity for whether it be LVL, our I joist into those starts.

Speaker Change: Yes, okay. Good so as we've talked before.

Speaker Change: It really depends on where that start.

Speaker Change: <unk> created.

Speaker Change: So if you're a slab on grade construction like you do in many parts of the southeast that's really not a floor opportunity for I joist.

Speaker Change: It's still very much a good opportunity for LVL, whereas in Denver for example, a lot of opportunity for our power systems, because you have Carl spaces. There. So.

Mike Brown: And then, you know, second, sticking with EWP, you know, we have seen some, some choppiness the last couple years in terms of volumes. But if you were to take a step back, how would you say market share has shifted over the last couple years between iJoy, SolidSign, and Open Web Board Trusts, and how big of a factor is substitution risk going forward as you think about pricing decisions? Yeah, okay, so I'll take a stab at that one too, Kurt. So, yes, I think you saw, or we saw some sort of changes in the dynamic during the pandemic, where, because of the, I'll say, the relatively constrained supply of iJoyce, mainly due to the lack of people, open web trusses gained some faith. And I don't think that's changed in terms of the capacity of open web trusts in the marketplace.

It may not be directly answering your question, but yes. There is two components and we feel really good about our position we feel good about the medium to long term around single family housing and gives us conviction around the projects, we're doing to make sure we have product available.

Speaker Change: So sue I might add this is Mike I might add just one other point.

Mike Brown: So kind of sort of thinking about your question.

Mike Brown: The the.

Mike Brown: The projects that we've announced recently really aim to do a couple of things.

Mike Brown: So as I sort of indicated in my one of my prior answers to could you have to have product available.

And you don't want to be running your machinery at attempting to run it at 100% of capacity.

Mike Brown: So when we think about what we're doing in our strategy.

Mike Brown: It is related to housing starts clearly because more housing starts is good for us and Kelly's point is correct.

Mike Brown: Particularly in the South Texas is a good example, maybe there's not as many lineal feet of I joist used per stock because of the nature of that construction time.

Nate Jorgensen: However, when you think about where we put ourselves relative to the product line, specifically iJoyce, it is a very, very favorable product line because of the ease of installation and the ability to transport it significantly over longer distances. And when you think about what's been happening, I'll say, in recent times, we are starting to see our I-choice demand improve, not insignificantly, compared to times gone by. So open web trusts are not going to disappear, but we can make a lot more per unit time, particularly during the peak building season. Hey, Curtis, Nate, maybe just one other data point: as you look at the competitive backdrop in terms of plated floor trusses or dimensional lumber versus I-Joyce, the other theme that's certainly out there with our builders is they're looking to reduce cycle times on the job And so as you look at, OK, what are the products and tools and solutions that help kind of drive lower cycle time or improve cycle time performance, I-Joyce is very much part of that answer.

Mike Brown: But our view is that if we have capacity available.

Mike Brown: And we make it as efficient as.

Mike Brown: Efficiently as we can.

Mike Brown: And we have the geographical footprint now with the projects, we're going to be doing in the foreseeable future.

Mike Brown: It always be.

We will be able to get the product to the market as fast or faster than anybody else at a very competitive pricing level.

Mike Brown: And I think that puts us in.

Mike Brown: A very good position because as I reiterated earlier in the middle of the building season, we need to get product to the site very quickly and I think that even though it may not be 100% correlated with housing starts I think there is still a very strong correlation that demand for I joist will go up as high.

Mike Brown: <unk> starts increase.

Yeah, Okay. So it just service level component to it and it sounds like from what you are saying that even if the level of starts is on a relative basis incrementally slightly lower let's say than where we currently are or where steady state is you can still see that benefit on the volume side, because you've got those higher <unk>.

Nate Jorgensen: So if you think about, again, what the expectations are and the needs are on the job site, I think we feel really good about I-Joyce being an important answer to reducing cycle times for the builder. Thanks for that, Nate, and thanks, Mike. Congratulations on the retirement, and good luck here in Q1, guys.

Mike Brown: Service levels, and Youre able to get the units out during that busy season.

Speaker Change: Yes, I think that's fair and I think thats part of the relationship that wood products is the manufacturer in BMD as the as the distributor has we have inventory at our manufacturing sites as well as our distribution sites and we can get it. They are very quickly we have a very high service level compared to I will say that the remainder of the industry.

Kurt Younger: Thank you. Thank you. One moment for the next question. Our next question will be coming from Susan Maklari of Goldman Sachs. Your line is open. Thank you. Good morning, everyone.

Susan Marie Maklari: Morning, Chip. My first question is, I want to kind of build on this discussion around your increase in capacity in EWP. When you think about the builders increasingly using iJoyce in order to realize the labor and the efficiencies that they're getting with those products, does that mean that the absolute level of starts that the industry is operating at is perhaps not as impactful, or do you think about that differently when you're considering the capacity that you're adding or the level of capacity that you want to achieve eventually? So, I guess, how do you think about the tradeoff between So I guess to kind of rephrase your question, make sure we understand it. So are you saying there are two components, to your point, there is what is the absolute level of start?

Speaker Change: And maybe one other thing to think about too is yes. The single is the big driver for AWP, but.

LT family also is certainly an opportunity for us to further attack for AWP as well.

Speaker Change: Yes, Okay, Alright, that's all helpful color and then I do want to shift to BMD as well. So when you think about the investments that youre, making on that side of the business with the doors and the distribution centers and those things how do you think about the upside in terms of volume there over time and I guess.

Speaker Change: Any thoughts on your existing capacity today and how much. This this these investments will support and how about the growth there over time.

Speaker Change: Yes, good question Sue and so as <unk> seen in over many years and particularly in recent years we have.

Speaker Change: We've made a lot of organic investment in the BMD and that is very purposeful as we look to grow the earnings and earnings stability of the company and so and included in our IR deck actually that will be published shortly after this call you'll see where we've.

Kelly Hibbs: And then there's the penetration opportunity for, whether it be LVL or IJOYS, into those starts. That's right. Yeah, okay, good. So, as we've talked before, it really depends on where that start is created. So, you know, if you have slab-on-grate construction like you do in many parts of the Southeast, that's really not a floor opportunity for I-Joyce, but it's still a good opportunity for LVL. Whereas in Denver, for example, there is a lot of opportunity for floor systems because you have crawl spaces there.

Speaker Change: Shown some sales per start over a period of time and Youll see that.

Speaker Change: We're growing across all of those product lines at pretty nicely. So that that's been very purposely.

Speaker Change: We said all along we really like the distribution business.

Speaker Change: We've been shifting the mix to rich in that product mix to be able to continue to grow that business. It looks like <unk> has a comment here as well. So it's not just maybe as you think about the context in the backdrop for for BMD in the marketplace.

Kelly Hibbs: I may not be directly answering your question, but yeah, there are two components, and we feel really good about our position. We feel good about the medium to long term around single-family housing, and that gives us conviction around the projects we're doing to make sure we have product available. So, Sue, I might add, this is Mike. I might add just one other point. So, sort of thinking about your question, you know, the projects that we've announced recently really aim to do a couple of things. So, as I sort of indicated in one of my prior answers to Kurt, you have to have product available, and you don't want to be running your machinery yet, attempting to run it at 100% of capacity. So when we think about what we're doing and our strategy, it is related to housing starts, clearly because more housing starts is good for us. And Kelly's point is correct. Particularly in the South, Texas is a good example.

Speaker Change: One of our really important responsibility is how do we serve and support all of our suppliers and as you think about.

Speaker Change: What they're focused on and what some of the things that there'll be working on have been working on and will continue to rollout new products and new services. So as you think about the importance of BMD to help execute our supplier strategy in terms of their new products New services. In many cases, there is the SKU intensity is probably getting bigger not smaller those are all really important opportunities for us.

Speaker Change: To support both our supply partners and obviously our customers downstream. So I think that narrative will still has been in place and we will continue to grow as we go through 2020 forward into next year.

Speaker Change: Okay. Okay.

Speaker Change: Squeeze one more question and I'm not trying to make this one on one for me I just wanted to get one more.

Speaker Change: Which is that the gross margin in the wood products came down in the fourth quarter, but the price held.

Speaker Change: Held across most of those products and so any thoughts on what drove that decreases at the volumes that were coming through did you take more more maintenance or downtime in there and then any thoughts on where that to go for the first quarter.

Mike Brown: Maybe there's not as many linear feet of iJoyce used per staff member because of the nature of that construction type, but our view is that if we have capacity available, and we use it as efficiently as we can. And we have the geographical footprint now with the projects we're going to be doing in the foreseeable future at Thorsby. We will be able to get the product to the market as fast or faster than anybody else at a very competitive price. And I think that puts us in a very good position because, as I reiterated earlier, in the middle of the building season, we need to get product to the site very quickly. And I think that, even though it may not be 100% correlated with housing starts, I think there is still a very strong correlation that demand for iJoyce will go up as housing starts. Yeah, okay.

Speaker Change: Yes, so in the fourth quarter. It is typical that we do take some some downtime for projects around the holidays and what not and so we did see that we did see that in the fourth quarter.

Speaker Change: As we go forward from here.

Speaker Change: We highlighted a couple of key things, which will be.

Speaker Change: Out of the spring building season play out in terms of what kind of volume growth do we expect to see in the first quarter and then there is continued competitive pressures around AWP pricing. So those probably would probably the key things I'd highlight.

Speaker Change: Okay Alright. Thank you for all the color I appreciate it I'll turn it over now good luck guys.

Speaker Change: Thank you.

Speaker Change: Thank you.

Speaker Change: As a reminder, if you would like to ask a question. Please press star one on your telephone.

Speaker Change: One moment for the next question.

Our next question will be coming from people.

Speaker Change: Core of BMO Your line is open.

Speaker Change: Thank you and good morning.

Mike Brown: So it's a service level component to it. And it sounds like from what you're saying, then even if the level of start is on a relative basis, incrementally slightly lower, let's say, than where we currently are or where steady state is, you could still see that benefit on the volume side because you've got those higher service levels, and you're able to get the units out during that busy period. Yeah, I think that's fair, and I think that's part of We have inventory at our manufacturing sites as well as at our distribution sites, and we can get it there very quickly.

Speaker Change: Maybe to start with.

Speaker Change: On the BMD side.

BMO: Commodity prices have normalized and AWP prices have also come in for a bit.

BMO: The last four or five quarters, yet the margins have held up quite well.

Speaker Change: Part question here, one can you talk a little bit about performance.

BMO: General line category.

BMO: And we're sort of now you are seeing.

In our ability to get up higher margins than what you've done historically.

And the second part of it is kind of what you highlighted.

BMO: For Q1 target is that what you would consider now.

BMO: So this business mix that you have to be more normalized margins in the distribution business.

Speaker Change: Yes, let me have all have Achiness Kelly I'll have Jeff maybe take that question around kind of general line and kind of the mix there and then I'll come back and speak to the margin profile.

Mike Brown: We have a very high service level compared to, I'll say, the remainder of the industry. Yeah, and then maybe one other thing to think about, Sue, is, yeah, single-occupancy is the big driver for EWP, but multifamily is also certainly an opportunity for us to further attack EWP as well. Okay. All right. That's all helpful, Collar.

Jeff: Got it yes, okay on the general answer what I would say to you is every investment we made and if you go back to the previous question about our growth.

Intention of there has been to expand our general line products to get deeper and wider with everything along with our millwork items and so what youre seeing with that expansion there and those are higher margin profile the growth and it's working very well for us exactly what we're trying to do.

Kelly Hibbs: And then I do want to shift to BMD as well. So when you think about the investments that you're making on that side of the business with the doors and the distribution centers and those things, how do you think about the upside in terms of volume there over time? And I guess, you know, any thoughts on your existing capacity today and how much these investments will support and how to think about the growth there over time? Yeah, good question, Sue.

Speaker Change: Yes, and then so keyed in on your on your normalized margin question. It's a good question and so I guess I would I would start that conversation by probably having having us all exclude 2020 through 2022, because I think we would all recognize there was a number of very extraordinary events in search.

Kelly Hibbs: And so, as you've seen over many years, and particularly in recent years, we have made a lot of organic investment into BMD, and that is very purposeful as we look to grow the earnings and earnings stability of the company. And so, included in our IR deck, actually, that'll be published shortly after this call, you'll see where we've shown some sales per unit over a period of time, and you'll see that we're... We're growing across all those product lines pretty nicely. So that's been very purposefully that, you know, we said all along we really liked the distribution business. We've been shifting the mix, you know, to be richer in that product mix to be able to continue to grow that business. It looks like Nate has made a comment here as well. Hey Sue, it's Nate.

Speaker Change: <unk> stances.

Speaker Change: During those periods of time.

Speaker Change: But I think a more reasonable comparison would be if you look at <unk>.

2023 versus 2019.

Speaker Change: And in that period of time Youll see starts is only up call. It 10% in 2023 compared to 2019, and we've seen meaningful growth.

Speaker Change: Both our earnings and EBITDA margins in both of our business over that timeframe. So.

Speaker Change: How and why is that well we think it is because of the focus and execution of our strategy to grow earnings and groaning grow earnings stability and so while I'm not going to put a fine point on a margin and EBITDA margin percentage for either business. We do feel really good about our our strategy, our focus and our ability for our.

Speaker Change: It's a Canadian continue to look meaningfully better than they did in 2019.

Speaker Change: Okay.

Speaker Change: Understood. That's helpful. And then just one follow up on that but then the general line category.

Nate Jorgensen: Just maybe, as you think about, you know, the context and the backdrop for BMD and the marketplace, part of our really important responsibility is how do we serve and support all of our suppliers. And as you think about, you know, what they're focused on and what some of the things that they'll be working on, have been working on, and will continue to roll out as new products and new services. So as you think about the importance of BMD to help execute our supplier strategy in terms of their new products and new services, in many cases, the skew intensity is probably getting bigger, not smaller.

Speaker Change: Can you provide a little more color in terms of.

Speaker Change: How some of these categories are performing.

Speaker Change: Not all of the product categories, but maybe a couple of big ones for you in terms of what you are seeing.

Speaker Change: Activity levels as you move into 'twenty four.

Speaker Change: Yes. The general one is really doing well and is really holding up I can say that the one thing that we have seen this year, maybe a little bit different than last year. When we went through all the destocking on some things inventory in the channel I would tell you it's still lean, but we're seeing a willingness this year that we didn't see last year on some of these winter buys our price increases for people to.

Speaker Change: Buy into them, a little bit and put a little bit more on the graph below certain items and then just as a reflection of the confidence that of what's coming down the pike.

Nate Jorgensen: Those are all really important opportunities for us to support both our supply partners and, obviously, our customers downstream. So I think that narrative will still be in place and will continue to grow as we go through 2024 and into next year. Okay. Okay. I just want to squeeze one more question in. I'm not trying to make this a one on one for me, but I just want to get one more.

Speaker Change: Got it that's helpful. And then just one last one from me.

Speaker Change: You talked about.

Speaker Change: Mid single digit price erosion in AWP in Q1.

Speaker Change: Would you say.

Speaker Change: Coin that.

Speaker Change: Prices are stabilizing caused by the hope is to have kind of more incremental.

Susan Marie Maklari: Which is that the gross margin in the wood products came down in the fourth quarter, but pricing held across most of those products. And so any thoughts on what drove that decrease? Is it the volumes that were coming through? Did you take more maintenance or downtime in there? And then any thoughts on where that could go for the first quarter?

Speaker Change: Downward pressure as we move through 'twenty 'twenty four or is it too early to say at this point.

Speaker Change: So Peyton it's Mike Thanks for the question.

Peyton: I think maybe it's a bit too early in the year to have a definitive view of what's going to happen I can tell you that there are.

Mike Brown: Still pricing pressures in specific geographies.

Kelly Hibbs: Yeah, so in the fourth quarter, it is typical that we do take some downtime for projects around the holidays and whatnot. And so we did see that.

Mike Brown: I think the.

Mike Brown: The time that we will have a better idea of its clearly once we get into the start of the building season.

Mike Brown: So historically in February has not been the best months of the year for AWP demand just as a generalized statement, excluding last few years, which have been a bit crazy.

Kelly Hibbs: As we go forward from here, we highlighted a couple of the key things, which will be how the spring building season plays out in terms of what kind of volume growth we expect to see in the first quarter. And then there's continued competitive pressures around EWP pricing. So those are probably the key things I'd highlight.

Mike Brown: But generally speaking in times gone by we start to see an uptick in demand.

Mike Brown: Going from starting in March and further out into April and May.

Mike Brown: That comes to pass as it historically has been I would hope that some of the pricing pressure will be alleviated.

Mike Brown: But we really are not yet halfway through February is a bit early to say exactly what's going to happen.

Susan Marie Maklari: Okay. All right. Thank you for all the color.

Mike Brown: Big building season.

Speaker Change: Yes, that's totally fair perfect I'll jump back in the queue. Good luck.

Susan Marie Maklari: I appreciate it. I'll turn it over now. Good luck, guys. Thank you. Thank you. As a reminder, if you would like to ask a question, please press star 11 on your telephone.

Speaker Change: Thanks.

Speaker Change: Thank you.

Speaker Change: One moment for the next question.

Speaker Change: And our next question will be coming from.

Speaker Change: Reuben Garner of benchmark your line is open.

Reuben Garner: Thank you good morning, everybody.

Lisa: One moment for the next question. Our next question will be coming from Ketan Mamtora of BMO. Your line is open. Thank you and good morning.

Reuben Garner: Morning, everyone.

Reuben Garner: Congrats Mike on your retirement, it's been.

Great hearing from the last few years, so I appreciate youre.

Reuben Garner: Support over time.

Thank you.

Reuben Garner: So I guess.

Reuben Garner: Kelly This is kind of a follow up to your comment about comparing today 2019.

Ketan Mamtora: Maybe to start with, you know, on the BMD side, commodity prices have normalized, and EWP prices have also come down a fair bit in the last, you know, four or five quarters, yet the margins have held up quite well. So, a two-part question here. One, can you talk a little bit about performance in the general line category and where you are seeing, you know, the ability to get sort of higher margins and what you've done historically? And the second part to it is kind of what you highlighted as your Q1 target. Is that what you would consider now in sort of this business mix that you have to be more normalized margins in the distribution business? Yeah, let me have a key miss Kelly, and I'll have Jeff maybe take the question around kind of the general line and kind of the mix there.

Reuben Garner: One of the biggest thing Thats changed since then I think the price.

Reuben Garner: <unk> power that you've shown especially in some of the DWP.

Reuben Garner: The two AWP categories.

Kelly: Can you talk about what's kind of changed today versus four or five years ago that gives you confidence that these these levels will hold whether it's from a competitive standpoint or things you guys have done internally to adjust your pricing.

Kelly: Methodology I think.

Kelly: <unk> were up 10% I think pricing is obviously up a lot more of a matter of that timeframe. So any kind of color on how you. How confident you are and what's changed internally to kind of make that happen.

Speaker Change: Yes. Good question Reuben So yes, my 2019 to 2023 framework, so let's break that into a few buckets. If you think about commodities.

Speaker Change: Look a lot like today looks a lot 23 looks a lot like 19 data. If you go back and look at the composite averages. So the pricing there is similar.

Jeff Strum: And then I'll come back and speak to the margin profile. Okay, on the general line stuff, what I would say to you is, every investment we made, and if you go back to the previous question about our growth, the intention there has been to expand our general line products, to get deeper and wider with everything, along with the millwork items. And so what you're seeing with that expansion there, those are higher-margin profile items of growth, and it's working very well for us, exactly what we're trying to do. Yeah. And then, so Ketan, on your normalized margin question, it's a good question. And so I guess I would start that conversation by probably having us all exclude 2020 through 2022, because I think we would all recognize there were a number of very extraordinary events and circumstances during those periods of time. But I think a more reasonable comparison would be if you look at 2023 versus 2019.

Speaker Change: Have we seen.

Speaker Change: In EWC pricing, yes, we've seen growth in general line pricing, yes. Today General line pricing is pretty sticky and holding up we are seeing some pricing pressures that you alluded to in AWP, but if you if.

Speaker Change: If you bundle that all together I think it really comes back to that so the strategy in BMD in terms of looking to rich in that product mix I E.

Speaker Change: Zero AWP grow general line, but very much stay in commodities and we've done all of that and we've also just continue to scale the business and so we think.

Speaker Change: Capture market share over time as well so I think it's been a combination of all those things Rubin that makes that makes us pretty confident that we think we have set a higher bar you have room in its name maybe just.

Certainly I think Kelly outlined the BD strategy in our plan and again, we feel good about.

Speaker Change: How does that show up in the marketplace, each and everyday both for our customers and our suppliers.

Kelly Hibbs: And in that period of time, you'll see starts are only up, call it 10% in 2023 compared to 2019. And we've seen meaningful growth in both our earnings and EBITDA margins in both of our businesses over that timeframe. So how and why is that?

Speaker Change: Just on the wood products.

Speaker Change: Correct.

Speaker Change: Reinforce that obviously the AWP franchise in the veneer that supports that and plywood.

Speaker Change: <unk> continues to be the focal point for us. So as you think about that earnings performance stability, maybe as compared to where we were five plus years ago.

Kelly Hibbs: Well, we think it's because of the focus and execution of our strategy to grow earnings and grow earnings stability. And so while I'm not going to put a fine point on a margin, an EBITDA margin percentage for either business, we do feel, you know, really good about our strategy, our focus, and our ability for our earnings to continue to look meaningfully better than they did in 2019.

Speaker Change: We've strengthened our AWP franchise in terms of our our capabilities our overall footprint in terms of our volume.

Speaker Change: And also in some cases, we've taken out some.

Speaker Change: Products that we simply don't know wanted to produce so I think that clarity and that folks in wood products has been added.

Speaker Change: Part of the answer as well and we feel good about obviously, where we're going and given our investments that'll be taking place.

Ketan Mamtora: And just one follow up on that. Within the general line category, could you provide a little more color in terms of, you know, how some of these categories are performing? Not, obviously, all of the product categories, but maybe a couple of big ones for you in terms of what you are seeing in terms of activity levels as you move into 24. Yeah, the general one is really doing well and is really holding up.

Speaker Change: In Alabama, and Louisiana here over the next couple of years.

Speaker Change: Okay, Great and since you took all my questions I'm going to jump more capital allocation one.

Speaker Change: I'm just kidding.

Speaker Change: Yes.

Speaker Change: The last few years you guys have obviously built a bit of a fortress balance sheet I'm just curious if there's been any change or.

Jeff Strum: Like I said, the one thing that we have seen this year, maybe a little bit different than last year when we went through all the stocking on some things, inventory in the channel, I tell you, still lean, but we're seeing a willingness this year that we didn't see last year on some of these winter buys or price increases for people to buy into them a little bit and put a little bit more on the ground for those certain items And it's just a reflection of the confidence they have in what's coming down the pike. I got it. That's helpful. And then just one last one from me.

Speaker Change: If you anticipate.

Speaker Change: We anticipate any change in maybe the philosophy and returning cash to shareholders whether it's.

Speaker Change: Ramping.

Speaker Change: Share repurchases versus the way you guys have paid out a dividend in the past or if you think.

Speaker Change: Stick to a similar philosophy going forward, assuming that you don't have places to put it.

Speaker Change: To work for.

Speaker Change: Organic growth or M&A.

Speaker Change: Yes, sure. Thanks, Ruben and good question, so the overarching capital allocation strategy.

Speaker Change: Is unchanged, we're going to focus on reinvestment in growth.

Ketan Mamtora: You talked about single-digit price erosion in EWP and Q1. Would you say at this point that prices are stabilizing post that, or is there kind of more incremental downward pressure as we move through 2024, or is it too early to say at this point? So, Ketan, it's Mike.

Speaker Change: And via organic or M&A opportunities and obviously you have a big gift.

Speaker Change: Big capital.

Speaker Change: The spend ahead of us here in 'twenty, four and 'twenty five and so I guess in terms of.

Speaker Change: And then returned to shareholders, we will look to continue to grow the regular dividend overtime.

Speaker Change: As I look forward here into 2024, a little bit in absence of M&A.

Mike Brown: Thanks for the question. Well, I think maybe it's a bit too early in the year to have a definitive view of what's going to happen. I can tell you that there are still pricing pressures in specific geographies. And I think the time that we'll have a better idea is clearly once we get into the start of the building season.

Speaker Change: My expectation would be that we will be speaking to further shareholder returns as we work our way through 2024 and those could be in the form of special dividends or stock repurchases or frankly, a combination of the two.

Mike Brown: So, you know, historically, February has not been the best month of the year for EWP demand, just as a generalized statement, excluding the last few years which have been a bit crazy. But generally speaking, in times gone by, we start to see an uptick in demand, going from, you know, starting in March and further out into April and May. If that comes to pass as it historically has, then I would hope that some of the pricing pressure will be alleviated. But we really don't know yet. You know, halfway through February is a bit early to say exactly what's going to happen in the peak building season. Yep, that's totally fair. Perfect. I'll jump back in the queue.

Speaker Change: I don't want to get ahead of my board on that topic in terms of the puts and takes and how we think about it but thats our expectation sitting here today.

Speaker Change: Got it. Thank you guys and good luck going forward.

Speaker Change: Thanks Richard.

Speaker Change: Thank you one moment.

Speaker Change: Could you have followed we have a follow up question coming from Kurt Yinger.

Speaker Change: D. A Davidson your line is open.

Kurt Yinger: Great. Thanks for taking my follow up.

Kurt Yinger: Not to beat a dead horse on AWP, but Mike I wanted to go back to your comment around pockets of pricing pressure kind of persisting in certain geographies is that primarily competitors buying pick up some share and secure a bit more volume out of the building season general pushback from builders or dealers.

Ketan Mamtora: Good luck. Thanks. Thank you. One moment for the next question. And our next question will be coming from Reuben Garner of Benchmark. Your line is open. Thank you. Good morning, everybody.

Kurt Yinger: Essentially some import competition I mean, what would you say are kind of the biggest.

Kurt Yinger: Underlying drivers on kind of this.

Kurt Yinger: This trickle down in <unk>.

Kurt Yinger: Slow discounting that we've seen.

Kurt Yinger: I guess late into 2023, and maybe even here to start 2024.

Reuben Garner: Thanks for joining us. Hey Reuben. And congratulations, Mike, on your retirement. It's been great hearing from you in the last few years, so I appreciate your support over that time. Thank you. So, I guess... Kelly, this is kind of a follow-up to your comment about comparing today to 2019. You know, one of the biggest things that's changed has been, I think, the pricing power that you've shown, especially in some of the EWP categories. Can you talk about what's changed today versus, you know, four or five years ago that gives you confidence that these levels will hold, whether it's from a competitive standpoint or things you guys have done internally to adjust your pricing methodology? I think, you know, you said starts are up 10%. I think pricing is obviously up a lot more as a matter of that timeframe. So any kind of color on how confident you are and what's changed internally to kind of make that happen?

Speaker Change: Yes, yes sure okay. So.

Speaker Change: Maybe part of the answer you asked around imports that is really not much of a thing. Okay. Thanks show up and disappear there a little bit of an annoyance in certain geographies at certain times, but that tends to be very spasmodic.

Speaker Change: The kind of sort of the overarching issue is the manufacturing.

Speaker Change: And so in certain geographies and I won't go into obviously specifics.

Speaker Change: There are some folks that think the answer is lead with price.

Speaker Change: As a result, we respond accordingly.

Speaker Change: It's not in one one particular producer necessarily in one fit in.

Speaker Change: All geographies.

Speaker Change: A combination of things.

And we have as I know you know this but we have a particular way of going to market, where we bring a variety of.

Speaker Change: All items in the package that we supply so theres the product as a service or we say that BMD provides we have obviously software as well as our solar systems.

Speaker Change: We look at it that yes.

Speaker Change: Longer term the value that we bring is different to others.

Speaker Change: And haynesville pricing structure is different to others.

Speaker Change: But in the intermediary times, sometimes we just have to react because thats, what we need to do because we have product that we would like to sell into those geographies and we have very good partners that are in those geographies that we wished to support.

Kelly Hibbs: Yeah, good question, Reuben. So yeah, my 2019 to 2023 framework, let's break that into a few buckets. If you think about commodities, they look a lot like today, 23 looks a lot like 19 did if you go back and look at the composite averages. So the pricing there is similar.

Speaker Change: Hey, Curtis Nate maybe just to add to Mike's comments I think.

Nate Jorgensen: If you look at kind of a pricing pricing conversation on AWP. This time of year. This is not unusual when you kind of go back through time. So the fact, we hadn't had that maybe during the Covid period was represented something maybe that was different.

Kelly Hibbs: Now, have we seen growth in EWP pricing? Yes. But have we seen growth in general line pricing?

Kelly Hibbs: Yes. Today, general line pricing is pretty sticky and holding up. We are seeing some price pressures we've alluded to in EWP. But if you bundle that all together, I think it really comes back to the strategy in BMD in terms of looking to be rich in that product mix, i.e. grow EWP, grow general line, but very much stay in commodities.

Nate Jorgensen: So this is I think.

Nate Jorgensen: Typical environment in terms of the some of the competitive conversations and as Mike described we will look at those case by case market by market I.

Nate Jorgensen: I think as we.

Nate Jorgensen: Transition to the building season, I think the conversation then.

Nate Jorgensen: It always has to be competitive, but it always comes down to can you serve and support the marketplace.

Kelly Hibbs: And we've done all that, and we've also just continued to scale the business. And so we think, you know, capture market share over time as well. So I think it's been a combination of all those things, Reuben.

Nate Jorgensen: And it's it's really critical obviously during the building season that you have that you can provide that great capability and experience for.

Nate Jorgensen: Both our view obviously.

Nate Jorgensen: Lumberyard side of things as well as the homebuilders and so that execution and making sure. Our team stays very focused on that is going to be can be front and center for us and to the extent, we do that well we feel that we will continue to earn.

Nate Jorgensen: That makes me feel pretty confident that we have set a higher bar. Yeah, Reuben, it's Nate. Maybe just to, you know, certainly, I think Kelly outlined the BMD strategy and our plan. And again, we feel good about, you know, how that's showing up in the marketplace each and every day, both for our customers and our suppliers. Maybe just on the wood products front, just to reinforce that, you know, obviously, the EWP franchise and the veneer that supports that, and plywood really continues to be the focal point for us. So if you think about that earnings, performance, and stability, maybe as compared to where we were five plus years ago, I think we've strengthened our EWP franchise in terms of our capabilities, our overall footprint in terms of our volume. And also, in some cases, we've taken out some products that we simply don't no longer produce. So I think that that clarity and that focus on wood products have been an important part of the answer as well.

Nate Jorgensen: The business that's out there we've got both from our dealer partners as well as our builder partners. So again not unusual that we are in this moment today, but as things kind of attention up the conversation will be who can serve and support my business and again as Mike described we feel good about how we're positioned to do that.

Speaker Change: Yep. Okay. Thanks, Thanks, guys I'll leave it there.

Speaker Change: Thanks Kurt.

Speaker Change: Thank you.

Speaker Change: Today's Q&A session I would now like to turn the call back over to Nick Robinson for closing remarks. Please go ahead.

Nick Stokes: Great. Thanks, Lisa we appreciate everyone joining us on the call. This morning for our update and we thank you for your continued interest and support of Boise Cascade would that be well be safe. Thank you.

Thank you all for joining today's conference call. This concludes today's conference you all may disconnect.

Nick Stokes: Okay.

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Reuben Garner: And we feel good about where we're going, given our investments that'll be taking place in Alabama and Louisiana here over the next couple of years. Okay, great. And since Sue answered all my questions, I'm going to jump to a capital allocation one. I'm just kidding, Sue.

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Kelly Hibbs: For the last few years, you guys have obviously built a bit of a fortress of a balance sheet. I'm just curious if there's been any change or if you anticipate any change in maybe the philosophy of returning cash to shareholders, whether it's via ramping up share repurchases versus the way you guys have paid out dividends in the past, or if you think you'll stick to a similar philosophy going forward, assuming that you don't have places to put it to work for organic growth or M&A. Yeah, sure. Thanks, Reuben. Good question. So the overarching capital allocation strategy is unchanged, you know; we're going to focus on reinvestment and growth via organic or M&A opportunities. And obviously, we have a big, big capital spend ahead of us here in 24 and 25.

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Kelly Hibbs: And so I guess in terms of the return to shareholders, you know, we'll look to continue to grow the regular dividends, you know, over time. But as I look forward a little bit into 2024, in the absence of M&A, my expectation would be that, you know, we will be speaking to further shareholder returns as we work our way through 2024, and those could be in the form of special dividends or stock repurchases or, frankly, a combination of the two. I don't want to get ahead of my board on that topic in terms of the puts and takes and how we think about it. But that's what our expectation is sitting here today.

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Reuben Garner: Got it. Thank you guys and good luck going forward. Thanks for everything. One moment. We have a follow-up question coming from Kurt Yanger of D.A. Davis, and your line is open.

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Kurt Yanger: Great, thanks for taking my follow up. Not to beat a dead horse on EWP. But Mike, I wanted to go back to your comment around, you know, pockets of pricing pressure kind of persisting in certain geographies. Is that primarily competitors buying to pick up some share and secure a bit more volume ahead of the building season? General pushback from builders or dealers, potentially some import competition? I mean, what would you say are kind of the biggest underlying drivers of this, this trickle down and, you know, slow discounting that we've seen, I guess, late into 2023 and maybe even here to start 2024. Yes, yes, sure, Kurt. So, maybe part of the answer you asked about imports is that that's really not much of a thing. They show up and disappear; they're a little bit of an annoyance in certain geographies at certain times, but that tends to be very spasmodic.

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Mike Brown: The kind of sort of the overarching issue is manufacturing. And so, in certain geographies, and I won't go into, obviously, specifics, there are some folks that think the answer is lead with price, and as a result, we respond accordingly. It's not necessarily one particular producer necessarily, in all geographies; it's sort of a combination of things.

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Nate Jorgensen: So this is, I think, in a typical environment in terms of the, you know, some of the competitive conversations and, as Mike described, we'll look at those, you know, case by case, market by market. I think as we move, transition to the building season, I think the conversation then, you know, it always has to be competitive, but it always comes down to, can you serve and support the marketplace? And it's really critical, obviously, during the building season that you have that, you know, provide that great capability and experience for both, you know, obviously the lumberyard side of things, as well as the home builders.

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Nate Jorgensen: And so, you know, execution and making sure our team stays, you know, very focused on that is going to be front and center for us. And to the extent we do that well, we feel that we'll continue to earn business that's out there again, both from our dealer partners as well as our builder partners. So, again, not unusual that we're in this moment today, but as things kind of tension up, the conversation will be about who can serve and support my business. And again, as Mike described, we feel good about how we're positioned to do that. Okay, thanks a lot of times.

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Kurt Yanger: Thanks, guys. I'll leave it there. Thanks, Kurt. Thanks, Kurt.

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Nate Jorgensen: Thank you. This concludes today's Q&A session. I would now like to turn the call back over to Nate Jorgensen for closing remarks. Please go ahead. Great, thanks Lisa.

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Nate Jorgensen: We appreciate everyone joining us on the call this morning for our update, and we thank you for your continued interest and support of Boise Cascade. With that, be well, and be safe. Thank you. Thank you all for joining today's conference call. This concludes today's conference. You may disconnect.

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