Q4 2023 UFP Industries Inc Earnings Call

Operator: www. UniversalForest.com Good day and welcome to the Q4 2023 USP Industries, Inc. Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode.

Okay.

Speaker Change: Good day and welcome to the Q4 2023 U S. P Industries, Inc earnings Conference call and webcast. At this time all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. Dick Gauthier, Vice President of Investor Relations. The floor is yours.

Ask a question during the session you will need to press star one one on your telephone you will then hear an automated message advising your hand is raised to withdraw your question Press Star. One again. Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker, Mr. <expletive> Gauthier, Vice President of Investor Relations.

Gauthier: <unk> the floor is yours Sir.

Gauthier: Welcome to the fourth quarter 2023 conference call for UFP industries hosting the call today are CEO, Matt Masada, and CFO, Mike Cole, Matt and Mike will offer prepared remarks, and then the call will be opened for questions. This conference call is available simultaneously in its entirety to all interested investors and news media through our webcast at <unk>.

Dick Gauthier: Welcome to the fourth quarter 2023 conference call for UFP Industries. Hosting the call today are CEO Matt Missad and CFO Mike Cole. Matt and Mike will offer prepared remarks, and then the call will be open for questions. This conference call is available simultaneously in its entirety to all interested investors and news media through our webcast at ufpi.com. A replay will also be available on that website.

Gauthier: Dot com.

Michael R. Cole: Replay will also be available at that website before I turn the call over to Matt <unk>, Let me remind you that today's press release and presentation include forward looking statements as defined in the private Securities Litigation Reform Act of $19 95.

Dick Gauthier: Before I turn the call over to Matt Missad, let me remind you that today's press release and presentation include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from the company's expectations and projections. These risks and uncertainties include, but are not limited to, those factors identified in the press release and in the filings with the Securities and Exchange Commission. I will now turn the call over to Matt Missad. Thank you, Dick, and good morning, everyone.

Matthew J. Missad: These statements are subject to risks and uncertainties that could cause actual results results to differ materially from the company's expectations and projections. These risks and uncertainties include but are not limited to those factors identified in the press release and in our filings with the Securities and Exchange Commission I will now turn the call over to Matt <unk>.

Matthew J. Missad: Thank you <expletive> and good morning, everyone.

Matthew J. Missad: Thank you for joining our fourth quarter and year-end 2023 earnings call. Like George Costanza, we stopped short of our goal for the year, but thanks to the efforts of our team, we posted the third best sales and profit year in our 69-year history. As we have described before, the best way to analyze our performance without the abnormal lumber market, supply constraints, and outsized demand from Q3 of 2020 through 2022 is to go back to 2019 and measure our progress. For 2019, we reported sales of $4.4 billion and EBITDA of $317.3 million, or a 7.2% EBITDA margin.

Matthew J. Missad: Thank you for joining our fourth quarter and year end 2023 earnings call.

Matthew J. Missad: Like George Cassandra, we stopped short of our goal for the year, but thanks to the efforts of our team we posted our third best sales and profit year in our 69 year history.

Matthew J. Missad: As we have described before the best way to analyze our performance without the abnormal lumber market supply constraints and outsized demand from Q3 of 2020 through 2022 is to go back to 2019 and measure our progress.

Matthew J. Missad: For 2019, we reported sales of $4 4 billion and EBITDA of $317 3 million or seven 2% EBITDA margin.

Matthew J. Missad: We just completed 2023 with sales of $7.2 billion, an EBITDA of $810 million, and an 11.2% EBITDA margin. We began our new structure in 2020, and if we had predicted then that we would improve EBITDA by 255%, EBITDA margins by 156%, and that we'd grow sales by 164% in four years, we would have said those were lofty goals. But that's exactly what our team achieved.

Matthew J. Missad: We just completed 2023 with sales of $7 2 billion and EBITDA of $810 million and an 11, 2% EBITDA margin.

Matthew J. Missad: We began our new structure in 2020, and if we hadn't predicted then that we would improve EBITDA by 255% EBITDA margins by 156% and that we'd grow sales by 164% in four years, we would've said those were lofty goals, but that's exactly what our team achieved.

Matthew J. Missad: Like the Detroit Lions, who performed well but were disappointed at the end we had a good year and we know there are better years ahead.

Matthew J. Missad: Like the Detroit Lions, who performed well but were disappointed at the end, we had a good year, and we know there are better years ahead. However, our forecasts for 2024 are based on data that is inconsistent and not well-aligned, which makes forecasting difficult. Nonetheless, our view for the year is as follows. We plan on a relatively flat demand environment overall with an expected range of aggregate unit sales from slightly down to slightly up. We plan for new home construction to be slightly up to slightly down in 2024. The overall market mix between single-family and multifamily is expected to be approximately two-thirds single-family.

Matthew J. Missad: Our forecast for 2024 based on data, which is inconsistent and not well aligned which makes forecasting difficult. Nonetheless, our view for the year is as follows we plan on a relatively flat demand environment overall with an expected range of aggregate unit sales from slightly down to slightly up.

Matthew J. Missad: We plan for new home construction to be slightly up to slightly down in 2020 for.

The overall market mix between single family and multifamily is expected to be approximately two third single family.

Matthew J. Missad: January 2020 for housing starts were at an annualized $1 $33 million and below expectations with weather being a commonly cited factor.

Matthew J. Missad: January 2024 housing starts were an annualized 1.33 million and below expectations, with weather being a commonly cited factor. We saw repair and remodel trends down over the fourth quarter of 2023, but it is expected to be up slightly to down slightly in 2024. In January 2024, we saw a decline in units from expected, with weather again cited as a factor. The Purchasing Managers Index trended down during Q4 of 2023 and is expected to be down from 1 to 3% in 2024.

Matthew J. Missad: We saw repair and remodel trend down over the fourth quarter of 2023, but it is expected to be up slightly to down slightly in 2024.

Matthew J. Missad: In January 2024, we saw a decline in units from expected with weather again cited as a factor.

Matthew J. Missad: The purchasing managers index trended down during Q4 of 2023 and is expected to be down from 1% to 3% in 2024.

Matthew J. Missad: January 2024, however, saw an uptick in the index, bringing it closer to neutral. Interest rates are projected to move down in 2024, and the current expectation is for three rate cuts at some point during the year. The federal deficit is expected to be $1.6 trillion in 2024, which will likely have an impact on capital markets. We can only acknowledge these economic forecasts and incorporate them into our plans and budgets for the next five years.

Matthew J. Missad: <unk> 2024, however saw an uptick in the index, bringing it closer to neutral.

Interest rates are projected to move down in 2024, and the current expectation is three rate cuts at some point during the year.

Matthew J. Missad: The federal deficit is expected to be one six trillion in 2024, which will likely have an impact on capital markets.

Speaker Change: We can only acknowledged these economic forecasts and incorporate them into our plans and budgets for the next five years.

Matthew J. Missad: While we are mindful of these macro factors, our focus remains on areas we can control. Regardless of market conditions, our attitude is to keep moving forward, to keep succeeding despite factors out of our control. Our goal in 2024 is to take the lessons from prior years and, as expressed in our internal theme, make them better. We had underperforming operations in 2023 that will improve or be replaced. We have opportunities to reduce costs or improve efficiencies in each area of our business. From purchasing and manufacturing to sales, marketing, and transportation, we will pursue actions that drive better bottom-line performance. As always, our goal is to create a stronger, more resilient company and build a strong team that can excel for many years to come. Providing long-term shareholder value is a requirement, and our teammates, who are also shareholders, are completely aligned with the mission.

While we are mindful of these macro factors our focus remains on areas, we can control rigor.

Speaker Change: Regardless of market conditions, our attitude is to keep moving forward to keep succeeding despite factors out of our control.

Speaker Change: Our goal in 2020 for us to take the lessons from prior years and as expressed in our internal theme make it better.

Speaker Change: We had underperforming operations in 2023 that will improve or be exited.

Speaker Change: We have opportunities to reduce costs or improve efficiencies in each area of our business from.

Speaker Change: From purchasing and manufacturing to sales marketing transportation, we will pursue actions that drive better bottom line performance.

As always our goal is to create a stronger more resilient company and build a strong team, which can excel for many years to come.

Speaker Change: Providing long term shareholder value as a requirement and our teammates who are also shareholders are completely aligned in the mission.

Speaker Change: Of course growth is central to our strategy, whether through M&A or organic growth, we will aggressively pursue our runways.

Speaker Change: Acquisitions remain a key component and we had several acquisition opportunities during 2023 or.

Speaker Change: Our International group completed an acquisition in Spain, but we were unable to close others, primarily due to valuation challenges based on the targets hockey stick view of anticipated future performance versus our more muted and realistic view.

Matthew J. Missad: Of course, growth is central to our strategy. Whether through M&A or organic growth, we will aggressively pursue our runways. Acquisitions remain a key component, and we had several acquisition opportunities during 2023. Our international group completed an acquisition in Spain, but we were unable to close others, primarily due to valuation challenges based on the target's hockey stick view of anticipated future performance versus our more muted and realistic view.

Speaker Change: On the organic growth side, we invested in several opportunities in 2023 and have several new projects planned for 2024 and new targeted geographic markets.

Speaker Change: The strong operations performance over the last three years has allowed us to build capital for growth and if we are unable to acquire reasonably priced acquisition targets in line with our model we will grow organically.

Speaker Change: Return on investment is the key to this decision.

Speaker Change: For example, our request for capital from our business units for 2024, total well over $350 million, which includes automation technology marketing and new product capacity as well as investments in markets, where we have been unable to acquire targets at a fair Roy.

Matthew J. Missad: On the organic growth side, we invested in several opportunities in 2023 and have several new projects planned for 2024 in new targeted geographic markets. The strong operational performance over the last three years has allowed us to build capital for growth. And if we are unable to acquire reasonably priced acquisition targets in line with our model, we will grow organically.

Speaker Change: We will stay operationally aggressive and fiscally conservative using our balance sheet to support our growth and value creation.

Speaker Change: Now, let's review segment performance and outlook we.

Speaker Change: I will start with UFP retail solutions.

Speaker Change: As a value added manufacturer seller and self distributor our products provide solutions for the DIY consumer as well as professional contractor or.

Matthew J. Missad: Return on investment is the key to this decision. For example, our request for capital from our business units for 2024 totaled well over 350 million, which includes automation, technology, marketing, and new product capacity, as well as investments in markets where we have been unable to acquire targets at a fair ROI. We will stay operationally aggressive and fiscally conservative, using our balance sheet to support our growth and value creation.

Speaker Change: Our president of retail solutions will Schwartz has worked well with his team to build on the success of the segment and outperform 2022 results.

Speaker Change: This is our largest segment by sales volume and it has significant opportunities for creating synergies and scaling new and existing products.

Speaker Change: Our decorators product line continues to gain recognition and trust in the marketplace. We.

Speaker Change: We are investing to grow capacity and to add additional manufacturing in the northeast.

Speaker Change: In addition to expanded marketing efforts.

Speaker Change: <unk> has sub branded as mineral based composite product offerings as sure stone to highlight the unique advantages of the patented technology.

Matthew J. Missad: Now let's review segment performance and outlook. We'll start with USP Retail Solutions. As a value-added manufacturer, seller, and self-distributor, our products provide solutions for the DIY consumer as well as professional contractors.

Speaker Change: We expect some exciting new marketing efforts behind this technology and product line.

Speaker Change: Recently added plus planned future capacity insurers don't manufacturing will allow us to launch additional products too.

Speaker Change: <unk> technology is quickly, becoming a favorite among installers and homeowners for its aesthetics durability and sustainability.

Matthew J. Missad: Our President of Retail Solutions, Will Schwartz, has worked well with his team to build on the success of the segment and outperform 2022 results. This is our largest segment by sales volume, and it has significant opportunities for creating synergies and scaling new and existing products. Our decorators product line continues to gain recognition and trust in the marketplace. We are investing to grow capacity and to add additional manufacturing in the Northeast. In addition to expanded marketing efforts, Deckorators has sub-branded its mineral-based composite product offerings as Surestone to highlight the unique advantages of the patented technology.

Speaker Change: The number of decorators certified professional installers has grown to over 900 and they continue to be great advocates for the products.

Speaker Change: While we grow our share stone technology, we also expect some consolidation in the wood plastic composite space.

Speaker Change: Moving to pro and Sunbelt.

Those units are creating more synergies with trading efficiencies and preservative utilization in development, our <unk> fr fire retardant treated lumber sales continue to grow.

Speaker Change: The PFS chemical development company is moving into our innovation group to drive more external sales as well as to accelerate the development of new formulations to preserve protect and strengthen wood products.

Speaker Change: UFP edge siding pattern and trim products struggled in 2023 as demand waned for the category overall and as we continue to transition to more value added products from basic commodity type products.

Matthew J. Missad: We expect some exciting new marketing efforts behind this technology and product line. Recently added, plus planned future capacity in Surestone Manufacturing will allow us to launch additional products too. The SureStone technology is quickly becoming a favorite among installers and homeowners for its aesthetics, durability, and sustainability.

Speaker Change: We have restructured management of this business unit and expect substantially better performance in 2024 and beyond.

Speaker Change: We also believe there are opportunities to deploy to deploy our <unk> technology in this product category.

Speaker Change: Our E Commerce platform continues to grow and serve our customers with direct fulfillment of many of our manufactured items we.

Matthew J. Missad: The number of Decorators Certified Professional Installers has grown to over 900, and they continue to be great advocates for the product. While we grow our SureStone technology, we also expect some consolidation in the wood-plastic-composite space. Moving to ProWood and Sunbelt, those units are creating more synergies with treating efficiencies and preservative utilization and development. Our ProWood FR fire retardant treated lumber sales continue to grow. The PFS Chemical Development Company is moving into our innovation group to drive more external sales as well as to accelerate the development of new formulations to preserve, protect, and strengthen wood products.

Speaker Change: We recorded online sales of more than $400 million in 2024 and will continue to grow out this capacity.

Speaker Change: Our retail solution strategy is simple provide innovative new products and solutions.

Speaker Change: Find expanded harness opportunities.

Speaker Change: Select and build the right brands and to utilize our national reach purchasing expertise and distribution network to provide the best customer value.

Speaker Change: The outlook for retail in 2024 ranges from up slightly to down slightly for the year.

Speaker Change: A rebound is expected in 2025 and 2026.

Speaker Change: The big box retailers expect to gain market share as they focus more on small professional contractors.

Speaker Change: In January our retail solutions performance was down versus a year ago due in part to tougher weather conditions in many parts of the country.

Matthew J. Missad: USP Edge Siding Pattern and Trim Products struggled in 2023, as demand waned for the category overall and as we continue to transition to more value-added products from basic commodity type products. We have restructured management of this business unit and expect substantially better performance in 2024 and beyond. We also believe there are opportunities to deploy our SureStone technology in this product category. Our e-commerce platform continues to grow and serve our customers with direct fulfillment of many of our manufactured items. We recorded online sales of more than $400 million in 2024 and will continue to grow this capacity. Our retail solution strategy is simple: provide innovative new products and solutions.

Speaker Change: Moving on to the construction segment led by Patrick Benton.

Speaker Change: Site built business unit remained resilient with a good mix of single family and multifamily projects.

Speaker Change: While starts in 2024 are projected to be slightly up to slightly down from the 141 3 million actual starts in 2023. There is optimism for rate cuts later this year and a rebound in 'twenty five and 'twenty six.

Speaker Change: Our balanced approach serving multifamily as well as single family helps position us well in the markets, we serve which tend to be the more resilient markets in the country and that continue to benefit from in migration.

Speaker Change: We are well positioned to meet anticipated market needs and will continue to adjust to the actual market conditions going forward.

Speaker Change: We also note that the build to rent market is growing.

Matthew J. Missad: Find, expand, and harness opportunity, select and build the right brands, and utilize our national reach, purchasing expertise, and distribution network to provide the best customer value. The outlook for retail in 2024 ranges from up slightly to down slightly for the year. A rebound is expected in 2025 and 2026. The big box retailers expect to gain market share as they focus more on small, professional contractors.

Speaker Change: And when multifamily units are included over 40% of all new construction is in rental units.

Speaker Change: We expect that higher interest rates, coupled with a Ford class forecasted decline in rates and six to nine months may cause some multifamily developers to wait until later in the year to begin construction on their new projects.

Speaker Change: Moving to factory built the business unit is expecting a trend line similar to site built we remain bullish on factory built housing over the long term as it remains the most affordable housing option.

Speaker Change: Recreational vehicles have been very slow, but have worked through inventory in their dealer network and are expecting to see a modest upswing later this year.

Matthew J. Missad: In January, our retail solutions performance was down versus a year ago, due in part to tougher weather conditions in many parts of the country. Moving on to the construction segment led by Patrick Benton. The site-built business unit remained resilient with a good mix of single-family and multifamily projects. While starts in 2024 are projected to be slightly up to slightly down from the 1.413 million actual starts in 2023, there's optimism for rate cuts later this year and a rebound in 2025 and 2026. Our balanced approach serving multifamily as well as single-family homes helps position us well in the markets we serve, which tend to be the more resilient markets in the country and that continue to benefit from in-migration. We are well positioned to meet anticipated market needs and will continue to adjust to actual market conditions going forward. We also note that the build-to-rent market is growing, and when multifamily units are included, over 40% of all new construction is in rental units.

Speaker Change: While our view is a small portion of our business. We have several products in our recreate or recreate pipeline to help us gain share and grow within the market as industry recovers.

Speaker Change: We saw a considerable improvement in commercial construction in 2023, and we are forecasting a better bottom line results in 2024.

Speaker Change: This group has continued to balance manufacturing capacity and has consolidated manufacturing into four main locations domestically and one overseas.

Speaker Change: And in the concrete forming space, we added new locations in 2023 to serve new markets that have stronger growth prospects or to expand our capabilities in existing markets.

The results were impacted by the ramp up of these new operations, but in 2024, we expect significant improvement in bottom line results more growth towards value added products and less focus on distribution of stakes in panels.

Speaker Change: Overall, our expectation for construction in 2024 is slightly up to slightly down.

Speaker Change: January housing starts were lower than forecast so a back half of the year catch up will be important to hitting our annual target.

Speaker Change: In the packaging segment led by Scott Worthington, we've seen the biggest headwinds many.

Speaker Change: Many of our customers have seen lower market demand, which means less demand for packaging.

Speaker Change: These customers are also evaluating cost in all areas and looking for concessions as the economy is more difficult.

Speaker Change: While we believe our value proposition is strong we are not immune to these challenges and continue to seek less expensive yet still value added solutions for our customers.

Matthew J. Missad: We expect that higher interest rates, coupled with a forecasted decline in rates in six to nine months, may cause some multifamily developers to wait until later in the year to begin construction on their new projects. Moving to factory built, the business unit is expecting a trend line similar to site built. We remain bullish on factory-built housing over the long term as it remains the most affordable housing option. Recreational vehicles have been very slow, but they have worked through inventory in their dealer network and are expecting to see a modest upswing later this year. While RV is a small portion of our business, we have several products in our recreate or recreate pipeline to help us gain share and grow within the market as the industry recovers. We saw considerable improvement in commercial construction in 2023, and we are forecasting a better bottom line result in 2024. This group has continued to balance manufacturing capacity and has consolidated manufacturing into four main locations domestically and one overseas.

Speaker Change: The packaging team is evaluating its internal costs as well and conduct consolidating production in certain hubs, eliminating excess capacity and focusing on manufacturing efficiencies with a lower level of overall production.

Speaker Change: Longer term, we have a diverse and customer markets to pursue including appliances light and heavy equipment, agriculture, moving and storage automotive furnishings horticulture and glass.

Speaker Change: The packaging industry remains very fragmented and our modest market share leaves tremendous opportunity for growth.

Speaker Change: Increasing our design engineering testing and analytical capabilities has helped create more opportunities to bring solutions to customers, who value that level of expertise and creativity.

Speaker Change: Our new steel packaging facility has added excellent alternatives for packaging heavy items and reusable applications.

Speaker Change: And we continue to expand our mixed material offerings and specialty products, such as strip back to new geographies, both domestically and internationally.

Speaker Change: Pallet, one saw a decline in volume in 2023 as large pallet pool operators right size their inventories they are relying more on used pallets. However.

Matthew J. Missad: And in the concrete forming space, we added new locations in 2023 to serve new markets that have stronger growth prospects or to expand our capabilities in existing markets. The results were impacted by the ramp-up of these new operations, but in 2024, we expect a significant improvement in the bottom line results, more growth towards value-added products, and less focus on distribution of sticks and panels. Overall, our expectation for construction in 2024 is slightly up to slightly down. January housing starts were lower than forecast, so a back half of the year catch-up will be important to hitting our annual target. In the packaging segment, led by Scott Worthington, we have seen the biggest headwind.

Speaker Change: However, we expect a return to more normalized environment later this year.

Speaker Change: As a result, the second half of 2024 is projected to be stronger than the first half.

Speaker Change: This business unit is expanding its national footprint and is poised for strong growth growth in 2025 and 2026.

Speaker Change: While there will be economic challenges the long term outlook for UFP packaging remains strong.

Speaker Change: We will continue to invest in automation innovation and acquisition to advance our goal of becoming a global packaging solutions provider.

Speaker Change: And we will be combining our research development and state of the art testing capabilities into a central location in 2024.

Speaker Change: Overall, we expect unit sales to be down slightly in 2024 and to rebound in 2025 and 2026.

Speaker Change: On the international front, our team has focused heavily on extending our packaging solutions to multinational customers.

Matthew J. Missad: Many of our customers have seen lower market demand, which means less demand for packaging. These customers are also evaluating costs in all areas and looking for concessions as the economy is more difficult. While we believe our value proposition is strong, we are not immune to these challenges and continue to seek less expensive, yet still value-added solutions for our customers. The packaging team is evaluating its internal costs as well and consolidating production in certain hubs, eliminating excess capacity, and focusing on manufacturing efficiencies with a lower level of overall production. Longer term, we have diverse end customer markets to pursue, including appliances, light and heavy equipment, agriculture, moving and storage, automotive, furnishings, horticulture, and glass. The packaging industry remains very fragmented, and our modest market share leaves tremendous opportunity for growth.

Speaker Change: The corrugate capabilities in India and Australia.

Speaker Change: Strip Pak branded products in Asia, and other markets and pallets and structural packaging in Mexico, Europe and elsewhere enhance our total product offerings.

Speaker Change: Our international sourcing and sales efforts create worldwide capabilities for both our domestic and foreign customers, which we will be enhancing with new technology.

Speaker Change: Much like the timber based product that was launched earlier this year.

Speaker Change: Clearly the overall economic outlook is mixed.

Speaker Change: While it certainly doesn't inspire unbridled optimism like the Dcs Landers rocket ride to the Moon, we arent discouraged we've been here before and there is no team better prepared to create success.

Speaker Change: We can hear Jeff lend singing don't bring me down and we might add a twist you can't bring me down.

Speaker Change: Some other items of interest in our focus areas and departments are first of all new products new product sales for the fourth quarter were $142 million for the year were $716 million.

Speaker Change: Both numbers were below our targets for the year due in part to lower lumber market prices.

Matthew J. Missad: Increasing our design, engineering, testing, and analytical capabilities has helped create more opportunities to bring solutions to customers who value that level of expertise and creativity. Our new steel packaging facility has added excellent alternatives for packaging heavy items and reusable applications. We continue to expand our mixed material offerings and specialty products, such as strip pack, to new geographies, both domestically and internationally. However, Pallet One saw a decline in volume in 2023. As large pallet pool operators right-size their inventories, they are relying more on used pallets.

Speaker Change: For 2024, we have raised the bar on the definition of new products as we drive focus on more value added products and services for.

Speaker Change: For new products, we have increased the return on investment target.

Speaker Change: Place more emphasis on innovation and eliminated many products that were new to UFP, but did not have a competitive sustainable advantage.

Speaker Change: With the higher standard we are lowering our forecast for new product sales to $510 million for 2024.

Speaker Change: We will still be marketing and selling the products, which no longer qualify as new and estimate those items could sell up to $300 million in 2024.

Speaker Change: Our investments in the innovation accelerator assist speed to market for new product ideas by rapid iteration and faster scale and synergy.

Speaker Change: We have seen several new products developed in 2023 and tested which we expect we will bring to market during 2024.

Matthew J. Missad: However, we expect a return to a more normalized environment later this year. As a result, the second half of 2024 is projected to be stronger than the first half. This business unit is expanding its national footprint and is poised for strong growth in 2025 and 2026. While there will be economic challenges, the long-term outlook for UFP packaging remains strong.

Speaker Change: Our innovate fund has completed four or four investments in either late stage development or early stage commercialization projects.

Speaker Change: The team has several other opportunities in the pipeline as we fulfill our 2021 commitment of $100 million of investments for these types of projects over the next few years.

Speaker Change: Purchasing.

Speaker Change: In 2024 of the lumber market is expected to remain within the trading range more in line with historical levels.

Speaker Change: The mills are bringing on additional capacity of more than 1 billion board feet in 2024.

Matthew J. Missad: We will continue to invest in automation, innovation, and acquisition to advance our goal of becoming a global packaging solutions provider, and we will be combining our research, development, and state-of-the-art testing capabilities into a central location in 2024. Overall, we expect unit sales to be down slightly in 2024 and to rebound in 2025 and 2021. On the international front, our team is focused heavily on extending our packaging solutions to multinational customers, corrugated capabilities in India and Australia, our strip-packed branded products in Asia and other markets, and Pallets and Structural Packaging in Mexico, Europe, and elsewhere to enhance our total product offer.

Speaker Change: We expect that mills will manage a supply side by taking production offline at less efficient mills to match market demand rather than a road their market their margins.

Speaker Change: We would note that in January the lumber market has declined steadily.

Speaker Change: Transportation during 2023, we invested and improved technology and worked with centralized our transportation functions to gain efficiency and reduce our overall costs.

Speaker Change: As with most major changes the rollout of technology has come with some challenges which are being addressed and we have also uncovered areas, which will be improved by our new model.

Speaker Change: We expect to have the core system is fully implemented in 2024.

Speaker Change: On the human capital front, we note that the current usage unemployment rate at the end of January was 8% up from 7% at the end of December 2023.

Speaker Change: We note that many of the jobs being created are a nonprofit health care and government.

Speaker Change: These factors help explain the current lack of growth in the manufacturing space.

Speaker Change: Our facilities are consistently evaluating staffing levels and production schedules to optimize our teams.

Matthew J. Missad: Our international sourcing and sales efforts create worldwide capabilities for both our domestic and foreign customers, which we will be enhancing with new technology, much like the timber-based product that was launched earlier this year. Clearly, the overall economic outlook is mixed. While it certainly doesn't inspire unbridled optimism like the Odysseus lander's rocket ride to the moon, we aren't discouraged. We've been here before, and there's no team better prepared to create success. We can hear Jeff Lynne singing, Don't Bring Me Down, and we might add a twist.

Speaker Change: We also balance our workforce among segments to ensure easy transfers from area is seeking a slowdown to those that remained strong.

Speaker Change: We make sure that we keep our strong performers on our team while de emphasizing the need for temporary workers.

Speaker Change: We also continue to train recruit and hire to keep growing our skills and talent.

Speaker Change: We have a long history of promoting from within and we augment this practice by hiring outside outside expertise and talent to help us improve.

Speaker Change: The UFP business school continues to add unique opportunities for current and prospective employees to enhance their skills and knowledge and move up in the organization.

Matthew J. Missad: You can't bring me down. Some other items of interest in our focus areas and departments are, first of all, new products. New product sales for the fourth quarter were $142 million, and for the year, they were $716 million. Both numbers were below our targets for the year due in part to lower lumber market prices. For 2024, we have raised the bar on the definition of new products as we drive focus on more value-added products and services. For new products, we have increased the return on investment target, placed more emphasis on innovation, and eliminated many products that were new to UFP but did not have a competitive or sustainable advantage. With the higher standard, we are lowering the forecast for new product sales to $510 million for 2024.

Speaker Change: And in our quest to be the employer of choice in the communities. We serve we are honored to share bonuses and extra compensation with our hourly employees.

Speaker Change: These bonuses totaled over $53 million in 2023, as we continue to share performance rewards with all of our fulltime teammates.

Speaker Change: In the marketing space as we continue to grow our value added product categories, we recognize the need to refine and enhance and measure the effectiveness and efficiency of our marketing spend to ensure that we are driving sales in the most efficient manner possible.

Speaker Change: We are creating a small central marketing team to provide a more robust process to provide data driven and timely results to our leadership teams and to better leverage costs with the marketing teams and our business units and segments.

Speaker Change: We have developed a five year strategic plan, which sets targets for sales of over 10 billion not including material acquisitions.

Speaker Change: It also charts, a path to higher EBITDA margins, where the stretch goal of 12, 5% EBITDA margin.

Matthew J. Missad: We will still be marketing and selling the products that no longer qualify as new and estimate those items could sell up to $300 million in 2021. Our investments in the Innovation Accelerator assist speed to market for new product ideas by rapid iteration and faster scale and synergy. We have seen several new products developed in 2023 and tested, which we expect we will bring to market during 2024. Our Innovate Fund has completed four investments in either late-stage development or early-stage commercialization projects. The team has several other opportunities in the pipeline as we fulfill our 2021 commitment of $100 million of investments for these types of projects over the next few years.

Speaker Change: Now I'd like to turn it over to Mike Cole to review the financial information.

Michael R. Cole: Thank you Matt.

Michael R. Cole: Our consolidated results. This quarter include a 20% drop in sales to $1 5 billion, consisting of a 10% reduction in selling prices and a 10% decrease in units sold.

Michael R. Cole: The decline in selling prices as a result of the drop in lumber.

Michael R. Cole: As a result of the drop in lumber and more competitive pricing in certain business units.

Michael R. Cole: The biggest factor impacting our drop in unit sales as our calendar it's.

Michael R. Cole: It is important to note that in the fourth quarter of 2022, we operated with one extra week of activity due to the way our fiscal year end works.

Michael R. Cole: One less week resulted in a 6% unit decline in the fourth quarter of 2023.

Michael R. Cole: Next well adjusted EBITDA dropped 22% to $166 million adjusted EBITDA margin remained well above historical levels at 10, 9%.

Michael R. Cole: We believe our team's commitment to grow our portfolio of value added products and our market focus management structure continued to contribute to the structural improvement in our margins.

Matthew J. Missad: In 2024, the lumber market is expected to remain within a trading range more in line with historical levels. The mills are bringing on additional capacity of more than 1 billion board feet in 2024. We expect that mills will manage the supply side by taking production offline at less efficient mills to match market demand, rather than erode their market and their margin. We note that in January, the lumber market has declined steadily.

Return on invested capital finished the year at almost 24% more than two times, our weighted average cost of capital.

Michael R. Cole: Operating cash flow improved by 128 million to $960 million for the year as lower volumes in lumber prices reduced our investment in networking capital.

Michael R. Cole: And finally, our balance sheet continues to gain strength within net cash surplus of $842 million this year compared to $281 million last year.

Matthew J. Missad: Transportation. During 2023, we invested in improved technology and worked to centralize our transportation functions to gain efficiency and reduce our overall cost. As with most major changes, the rollout of technology has come with some challenges which are being addressed, and we have also uncovered areas which will be improved by our new model. We expect to have the core system fully implemented in 2020. On the human capital front, we note that the current U6 unemployment rate at the end of January was 8%, up from 7% at the end of December 2023. We note that many of the jobs being created are in non-profits, health care, and government.

Adding us with flexibility to pursue financial and strategic objectives.

Moving on to our segments.

Michael R. Cole: Sales in our retail segment dropped 27% to $506 million, consisting of a 9% decline in selling prices and an 18% decline in unit sales.

Michael R. Cole: This unit decline was comprised of a 14% decline in volume with big box customers and a 23% decline in volume with independent retailers.

Michael R. Cole: We experienced the greatest unit declines in our edge business unit, which Matt discussed.

Michael R. Cole: And the outdoor essentials and building products categories of our pro with business unit.

Michael R. Cole: In spite of lower demand and sales volumes were pleased to report a $2 million increased in our gross profit for the quarter, which was driven by our pro would end decorators units as a result of pricing and operational improvements.

Matthew J. Missad: These factors help explain the current lack of growth in the manufacturing space. Our facilities are consistently evaluating staffing levels and production schedules to optimize our. We also balance our workforce among segments to ensure easy transfers from areas seeking a slowdown to those that remain strong. We make sure that we keep our strong performers on our team while de-emphasizing the need for temporary work.

Michael R. Cole: Higher SG&A expenses contributed to a $4 million decrease in Retail's operating profits for the quarter.

Michael R. Cole: The increase in SG&A was primarily comprised of an increase in incentive compensation expenses.

Michael R. Cole: Moving on to packaging.

Michael R. Cole: Sales in this segment dropped 21% to $414 million, consisting of a 10% decline in selling prices and an 11% decrease in units.

Matthew J. Missad: We also continue to train, recruit, and hire to keep growing our skills and talents. We have a long history of promoting from within, and we augment this practice by hiring outside expertise and talent to help us improve. The UFP Business School continues to add unique opportunities for current and prospective employees to enhance their skills and knowledge and move up in the organization. And in our quest to be the employer of choice in the communities we serve, we are honored to share bonuses and extra compensation with our hourly employees.

Michael R. Cole: As we mentioned last quarter customer demand continues to be soft and that's contributed to more competitive pricing.

Michael R. Cole: As a result of these factors gross profit dropped by almost $49 million.

Michael R. Cole: The decline in gross profit was offset by a $10 million decrease in SG&A due to a decline in incentive compensation expenses.

Michael R. Cole: Operating profits in the packaging segment declined more than 38 million to $43 million in total.

Michael R. Cole: Turning to construction sales in this segment dropped 16% to $511 million, consisting of a 13% decline in selling prices and a 3% decrease in units.

Matthew J. Missad: These bonuses totaled over $53 million in 2023 as we continue to share performance rewards with all of our full-time teammates. In the marketing space, as we continue to grow our value-added product categories, we recognize a need to refine, enhance, and measure the effectiveness and efficiency of our marketing spend to ensure that we are driving sales in the most efficient manner possible. We are creating a small central marketing team to provide a more robust process, to provide data-driven and timely results to our leadership teams, and to better leverage costs with the marketing teams in our business units and segments. We have developed a five-year strategic plan that sets targets for sales of over $10 billion, not including material acquisition.

Michael R. Cole: Unit decline was primarily due to our commercial and concrete forming business units the.

Michael R. Cole: The decline in selling prices was primarily experienced in our site built and concrete forming business units and resulted in the $18 million decrease in our overall gross profits and operating profits in the segment for the quarter.

Michael R. Cole: As we manage through this cycle. Each segment continues to focus on executing our strategies to grow our portfolio of value added products and we're pleased to report an improvement in our annual ratio of value added sales to total sales to 68% this year from 63% last year.

Michael R. Cole: Similarly, our annual ratio of new product sales to total sales improved to nine 7% this year from seven 7% last year.

Michael R. Cole: It also charts a path to higher EBITDA margins with a stretch goal of 12.5% EBITDA margins. Now, I'd like to turn it over to Mike Cole to review the financial information. Thank you, Matt.

Michael R. Cole: We're confident these factors will not only help us maintain the structural improvements in margins, we've realized to date, but enable further improvements in our EBITDA margins over time.

Michael R. Cole: We're also mindful of our cost structure in this environment as we ensure the company is appropriately sized relative to demand, while still providing resources needed to execute long term strategies and enhance our ability to offer value added solutions and drive innovation.

Michael R. Cole: Our consolidated results this quarter include a 20% drop in sales to $1.5 billion, consisting of a 10% reduction in selling prices and a 10% decrease in units sold. The decline in selling prices is a result of the drop in lumber prices and more competitive pricing in certain business units. The biggest factor impacting our drop in unit sales is our camel and It's important to note that in the fourth quarter of 2022, we operated with one extra week of activity due to the way our fiscal year-end worked. One last week resulted in a 6% unit decline in the fourth quarter of 2023. Next, while adjusted EBITDA dropped 22% to $166 million, adjusted EBITDA margins remained well above historical levels at 10.9%.

Michael R. Cole: Our SG&A expenses came in on plan for the quarter and were $17 million lower than last year, driven primarily by lower bonus and sales incentives for the quarter.

Michael R. Cole: Lower incentive expenses were also the primary reason SG&A expenses dropped $67 million for the year.

Michael R. Cole: Before we move on from the income statement, we think it is important to assess the impact of our strategies and structure on our overall profitability by looking at our performance in 2019 compared to 2023.

Michael R. Cole: The metrics, we focus on our gross profit margin SG&A as a percentage of gross profit.

Michael R. Cole: Adjusted EBITDA margin and adjusted EBITDA growth to unit sales growth.

Michael R. Cole: Gross profit margin improved from 15, 5% no 19 to 19, 7% in 2023.

Michael R. Cole: SG&A as a percentage of gross profit improved from 64% to 54% in 2023, adjusted EBITDA margin improved from seven 2% to 11, 2%.

Michael R. Cole: We believe our team's commitment to growing our portfolio of value-added products and our market-focused management structure continue to contribute to the structural improvement in our market. Return on invested capital finished the year at almost 24%, more than two times our weighted average cost. Operating cash flow improved by $128 million to $960 million for the year, as lower volumes and lumber prices reduced our investment in networking.

Michael R. Cole: And our adjusted EBITDA growth was four five times greater than our unit sales growth since 2019.

Michael R. Cole: This track record gives us confidence our strategies are working and that continued execution of them will help us reach the long term goals. We highlighted in the press release, and then I'll touch on at the end of my prepared remarks.

Moving onto our cash flow statement, our cash flow from operations was $960 million of $928 million improvement over last year as lower volumes in lumber prices reduced our investment in net working capital.

Michael R. Cole: And finally, our balance sheet continues to gain strength with a net cash surplus of $842 million this year compared to $281 million last year, providing us with flexibility to pursue financial and strategic. Moving on to our segment, sales in our retail segment dropped 27% to $506 million, consisting of a 9% decline in selling prices and an 18% decline in units.

Michael R. Cole: Our cash cycle for the year decreased to 63 days. This year from 64 days last year due to an improvement in our receivables cycle and our receivables we remain healthy at 91% current.

Michael R. Cole: Our investing activities included $180 million and capital expenditures are expansionary investments, which totaled about $70 million are primarily focused on four key areas.

Michael R. Cole: This unit decline was comprised of a 14% decline in volume with big box customers and a 23% decline in volume with independents. We experienced our greatest unit declines in our EDGE business unit, which Matt discussed, and the Outdoor Essentials and Building Products categories of our ProWood business. In spite of lower demand and sales volumes, we're pleased to report a $2 million increase in our gross profit for the quarter, which was driven by our ProWood and Decorators units as a result of pricing and operations. Higher SG&A expenses contributed to a $4 million decrease in retail's operating profits for the quarter.

Michael R. Cole: Expanding our capacity to manufacture new and value added products, primarily in our structural packaging protective packaging and decorators business units.

Michael R. Cole: Geographic expansion in core higher margin businesses.

Michael R. Cole: Achieving efficiencies through automation and increasing our transportation capacity.

Michael R. Cole: We also spent $52 million to acquire <unk>, a leading manufacturer of machine build pallets in Spain that gives us an attractive runway for growth geographically and in new verticals. So they don't currently serve.

Michael R. Cole: Finally, our financing activities included returning capital to our shareholders through almost $68 million of dividends and more than $82 million of share repurchases.

Michael R. Cole: Turning to our capital structure and resources.

Michael R. Cole: The increase in SG&A was primarily comprised of an increase in incentive compensation. Moving on to packages, sales in this segment dropped 21% to $414 million, consisting of a 10% decline in selling prices and an 11% decrease in units. As we mentioned last quarter, customer demand continues to be soft, and that's contributed to more competitive prices. As a result of these factors, gross profits dropped by almost $49 million.

Michael R. Cole: We continue to have a strong balance sheet with $842 million in surplus cash in excess of debt compared to $281 million last year.

Michael R. Cole: Our total liquidity was $2 4 billion, which includes cash of $1 1 billion and $1 3 billion in availability under certain long term lending agreements we have in place.

Michael R. Cole: The strength of our cash flow generation conservative approach to managing our capital structure and prudent return driven approach to capital allocation continues to provide us with an abundance of capital to grow our business and also return to shareholders through different cycles. We plan to continue to pursue a balanced and return driven approach between dividends share buybacks.

Michael R. Cole: <unk> capital investments and M&A, specifically, our board approved a quarterly dividend of <unk> 33, a share to be paid in March which represents a 10% increase from the most recent quarterly rate and a 32% increase from the rate paid last March.

Michael R. Cole: The decline in gross profits was offset by a $10 million decrease in SG&A due to a decline in incentive compensation. Operating profits in the packaging segment declined more than $38 million to $43 million in total. Turning to construction, sales in this segment dropped 16% to $511 million, consisting of a 13% decline in selling prices and a 3% decrease. The unit decline was primarily due to our commercial and concrete forming business. A decline in selling prices was primarily experienced in our site-built and concrete-forming business units and resulted in an $18 million decrease in our overall gross profits and operating profits in the segment for the quarter. As we manage through this cycle, each segment continues to focus on executing our strategies to grow our portfolio of value-added products, and we're pleased to report an improvement in our annual ratio of value-added sales to total sales, to 68% this year from 63% last. Similarly, our annual ratio of new product sales to total sales improved to 9.7% this year from 7.7%.

Michael R. Cole: We currently plan to continue to increase our dividend annually at a rate that is aligned with our targeted long term growth rate in earnings and cash flow.

Michael R. Cole: The share repurchase program. Our board approved in July provides us with authorization to repurchase up to $200 million worth of shares until the end of July 2024.

Michael R. Cole: Since the approval, we've repurchased more than 274000 shares at an average price of $97 22.

Michael R. Cole: Resulting in $173 million in remaining authorization.

Michael R. Cole: As a result of the growth and margin improvement opportunities. We see we plan to increase our total capital expenditures to an estimated range of $250 million to $300 million in 2024.

Michael R. Cole: Expansionary capital investments are expected to comprise of $150 million to $200 million of this total.

Michael R. Cole: We plan to continue to invest at this elevated level in the future to capitalize on the higher margin growth opportunities, we see in each of our segments.

Michael R. Cole: Finally, our strong balance sheet continues to allow us to continue to pursue a pipeline of M&A opportunities will continue to target companies that are strong strategic fit and enhance our capabilities and competitive position.

Michael R. Cole: We're confident these factors will not only help us maintain the structural improvements and margins we've realized today but enable further improvements in our EBITDA margins over time. We're also mindful of our cost structure in this environment as we ensure the company is appropriately sized relative to demand, while still providing resources needed to execute long-term strategies that enhance our ability to offer value-added solutions and drive innovation. Our SG&A expenses came in unplanned for the quarter and were $17 million lower than last year, driven primarily by lower bonus and sales incentives for the quarter. Lower incentive expenses were also the primary reason SG&A expenses dropped $67 million for the year.

Michael R. Cole: While providing higher margin return and growth potential.

Speaker Change: I'll finish up with comments about our outlook for the year and our long term goals.

Speaker Change: Looking into 2024, we believe the soft demand and more competitive pricing currently experiencing will continue into the first half of the year.

Speaker Change: But we are optimistic we will see improvements in the back half of the year based on the current economic forecasts, including the trajectory of interest rates.

Speaker Change: On a long term basis will continue to focus on executing our strategies to take advantage of the opportunities identified in our business units generally those opportunities consist of growing our portfolio of sales of new and value added products and investing in our brands.

Speaker Change: Expanding geographically in our higher margin core businesses.

Speaker Change: Investing in automation and process improvements to expand capacity and enhance productivity.

Michael R. Cole: Before we move on from the income statement, we think it's important to assess the impact of our strategies and structure on our overall profitability by looking at our performance in 2019 compared to 2023. The metrics we focus on are gross profit margin, SCNA as a percentage of gross profit, adjusted EBITDA margin, and adjusted EBITDA growth to units. Gross profit margin improved from 15.5% in 2019 to 19.7% in 2023. SCNA as a percentage of gross profit improved from 64% to 54% in 2021, and adjusted EBITDA margin improved from 7.2% to 11.2%. And our adjusted EBITDA growth has been four and a half times greater than our unit sales growth since 2000.

Speaker Change: Vertically integrating in certain businesses and gaining market share with large customers through more strategic sales efforts and our unique capabilities and geographic footprint.

Speaker Change: As we effectively execute our strategies, we believe we can achieve our new five year financial goals of 7% to 10% compounded annual growth rate in unit sales, a 12, 5% adjusted EBITDA margin and a return on invested capital exceeding our hurdle rate on new investments, while maintaining a conservative capital structure.

Speaker Change: So I have in financials Matt.

Matthew J. Missad: Thank you Mike now I'd like to open it up for any questions that you may have.

Speaker Change: Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question Press Star one again.

Speaker Change: Moment, while we compile the Q&A roster.

Speaker Change: Our first question will come from the line of Keith <unk> with BMO. Your line is now open.

Keith: Thank you good morning, Mike.

Michael R. Cole: This track record gives us confidence our strategies are working and that continued execution of them will help us reach the long-term goals we highlighted in the press release. And then I'll touch on that at the end of my prepared remarks. Moving on to our cash flow statement, our cash flow from operations was $960 million, a $928 million improvement over last year as lower volumes and lumber prices reduced our investment in networking. Our cash cycle for the year decreased to 63 days this year from 64 days last year due to an improvement in our receivable cycle, and our receivables remain healthy at 91 percent current. Our investing activities included $180 million in capital expenditures.

Keith: Morning, Keith question.

Keith: First question comes back to the retail side sounds like UFP edge in cohort.

Speaker Change: There is not some weakness right now.

Speaker Change: As you kind of see a current trends are you seeing signs.

Speaker Change: All stabilization or out of those.

Speaker Change: Volumes still under pressure and I know, you've kind of talked about recovery in the back half, but I'm just curious if activity's kind of stabilizing at these levels.

Speaker Change: Yes, I think Keith and it's kind of tough based on just January results as I looked at January it kind of gives you a little bit of a head fake in the sense that the whether there's some weather issues and that's what we're hearing from the customer base.

Speaker Change: I'd like to think that it's stabilized, but it's always difficult to predict at this point.

Michael R. Cole: Our expansionary investments, which totaled about $70 million, are primarily focused on four key areas. These include expanding our capacity to manufacture new and value-added products, primarily in our structural packaging, protective packaging, and decorators business. Geographic Expansion and Core Higher Margin Business, for achieving efficiencies through automation and increasing our transportation. We also spent $52 million to acquire Pallet Sous L'Air, a leading manufacturer of machine-built pallets in Spain that gives us an attractive runway for growth geographically and in new verticals they don't currently serve.

Speaker Change: Fair enough.

Speaker Change: And then looking at most of our longer term targets.

Speaker Change: Based both on the on the unit growth and also on the EBITDA margin.

Speaker Change: You sort of talk about where youll see the most opportunity within the three business lines, both on the top line and on the bottom line.

Speaker Change: Margin.

Speaker Change: And total revenue growth.

Speaker Change: Yes.

Speaker Change: I think each of the segments has good opportunities.

Speaker Change: I would say they are not uniform across all areas.

Speaker Change: As you look at the growth on Decorators for example, that's something we're excited about we think a rebound in edge is going to have a really good impact for us.

Michael R. Cole: Finally, our financing activities included returning capital to our shareholders through almost $68 million of dividends and more than $82 million of share returns. Turning to our capital structure and resources, we continue to have a strong balance sheet with $842 million in surplus cash in excess of debt compared to $281 million last year. Our total liquidity was $2.4 billion.

Speaker Change: If we move to packaging I think there is going to be parts of that that are going to be challenged as Mike mentioned simply because of the amount of manufacturing that's either not happening now or it hasnt needs to recover in the back half of the year.

Speaker Change: If you look at the protective packaging materials, we expect that to remain strong and to continue to grow so.

Kind of a mixed a mixture there and then if you move along into the construction space I would tell you that.

Michael R. Cole: This includes cash of $1.1 billion and $1.3 billion in availability under certain long-term lending agreements we have. The strength of our cash flow generation, conservative approach to managing our capital structure, and prudent return-driven approach to capital allocation continues to provide us with an abundance of capital to grow our business and also return to shareholders through different sites. We plan to continue to pursue a balanced and return-driven approach between dividends, share buybacks, capital investments, M&A, and others. Thank you. Thank you. Our board approved a quarterly dividend of 33 cents a share to be paid in March, which represents a 10% increase from the most recent quarterly rate and a 32% increase from the rate paid last March.

Speaker Change: We've outlined what we expect for site built either slightly up slightly down on housing and that's really going to help define what we're able to do there.

Speaker Change: The factory built we walked through again, I think thats kind of aligned with the housing market itself.

Speaker Change: And then the potential areas for growth commercial and concrete forming they both have room to improve so we would look to see that being better in 'twenty four there.

Speaker Change: Maybe adding on to that too.

Speaker Change: One area that spans really all of the segments and thats investing in automation and driving efficiencies in that I think the capital asking that area was nearly 100 million for next year.

Speaker Change: Got it now that's helpful I'll jump back in the queue. Good luck. Thanks.

Speaker Change: Thanks Keith.

Speaker Change: Thank you one moment our next question.

Speaker Change: And that will come from the line of Kurt Yinger with D. A Davidson your line is now open.

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

Kurt Yinger: Hey, Kurt.

Kurt Yinger: Good morning, it looks like the first sub 20% gross margin in packaging sense early 'twenty, one I am curious how you would kind of describe the pricing environment between pallets and maybe more structural packaging offerings.

Michael R. Cole: We currently plan to continue to increase our dividend annually at a rate that is aligned with our targeted long-term growth rate in earnings and cash flow. The share repurchase program our board approved in July provides us with authorization to repurchase up to $200 million worth of shares until the end of July 2024. Since the approval, we've repurchased more than 274,000 shares at an average price of $97.22, resulting in $173 million in remaining authorization.

Kurt Yinger: And how does that impact your view on <unk>.

Kurt Yinger: Essentially getting back to 20% plus gross margins over the next couple of quarters.

Speaker Change: Yes, I think Thats a really good question, Kurt what I would tell you is I think what we're seeing in the marketplace is.

Speaker Change: So a lot of pricing pressure as we alluded to it from the from the standpoint of when companies aren't as busy they tend to take a look at their purchasing and try to drive a little more value there.

Michael R. Cole: As a result of the growth and margin improvement opportunities we see, we plan to increase our total capital expenditures to an estimated range of $250 to $300 million in 2024. Expansionary capital investments are expected to comprise $150 to $200 million of this total. We plan to continue to invest at this elevated level in the future to capitalize on the higher margin growth opportunities we see in each of our sectors. Finally, our strong balance sheet allows us to continue to pursue a pipeline of M&A opportunities. We'll continue to target companies that are a strong strategic fit and enhance our capabilities and competitive position, while providing higher margin return and growth. I'll finish up with comments about our outlook for the year and our long-term goals.

Speaker Change: We still think long term, we can we can exceed that range.

Speaker Change: And as we predicted in the first half of the year is going to be a little bit more of a struggle in the second half will be more of a rebound. So that tends true then obviously that will help us and everyone else in that space.

Speaker Change: So that kind of hinging on what happens with the economy.

Speaker Change: Got it Okay, and then in and construction I mean, the total starts and then I guess a little bit next but single family has been pretty strong and I guess I'm curious if you've kind of seen that in your order flow and some of your site built facilities and then as we look at kind of the sequential.

Speaker Change: We'll tick down in gross margins is that primarily seasonal factors or perhaps some normalization in sight felt.

Speaker Change: Coming off the capacity constrained periods of 'twenty, one and 'twenty two.

Michael R. Cole: Looking into 2024, we believe the soft demand and more competitive pricing we're currently experiencing will continue into the first half of the year. We're optimistic we'll see improvements in the second half of the year based on the current economic forecast, including the trajectory of interest rates. On a long-term basis, we'll continue to focus on executing our strategies to take advantage of the opportunities identified in our business. Generally, those opportunities consist of growing our portfolio of sales of new and value-added products and investing in our brand, expanding geographically in our higher margin core business, investing in automation and process improvements to expand capacity and enhance productivity, vertically integrating in certain areas and gaining market share with large customers through more strategic sales efforts and our unique capabilities in geography.

Speaker Change: Yes.

Speaker Change: I would say, it's probably more of a cyclical as opposed to a seasonal.

Speaker Change: Effect.

Speaker Change: As you look at it and just to use January as kind of a data point.

Speaker Change: The market was a little slower that it drives those numbers differently a year ago.

Speaker Change: Selling prices were significantly higher.

Speaker Change: So I think youre going to just kind of see that trend through.

Speaker Change: Again going back to the first half of the year being somewhat sluggish and then picking up in the second half.

Speaker Change: Got it Okay, and then you talked about some consolidation in the wood plastic composite space.

Speaker Change: I was hoping maybe you could I.

Speaker Change: Yes.

Speaker Change: A little bit more about that comment and how that impacts your overall view of the growth opportunity and decorators kind of balancing out wood plastic composite versus.

Michael R. Cole: As we effectively execute our strategies, we believe we can achieve our new five-year financial goals of a 7-10% compounded annual growth rate in unit sales, a 12.5% adjusted EBITDA margin, and a return on invested capital exceeding our hurdle rate on new investments while maintaining a conservative capital. That's all I have on the financials. Thank you, Mike. Now, I'd like to open it up to any questions that you may have. Thank you. As a reminder, to ask a question, please press Star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, press star 1-1 again.

Speaker Change: The opportunities ensure stone going forward.

Speaker Change: Yes, that's a really good question I think what the way we look at it is we have the sheer stone technology, which we are very very high on and we see that as <unk>.

Speaker Change: A bright future wood plastic composite certainly has its place in the marketplace.

Speaker Change: And the.

Speaker Change: The comment that I'm, making it has more to do with the amount of capacity that all the wood plastic composite manufacturers have added over the years and Theres a number of smaller.

Speaker Change: Participants in the market that I think we will have to make some decisions.

Speaker Change: Obviously look at the whole market place and try to figure out what makes the most sense, we're comfortable with our position. It was just more of a market observation that I think there's probably too many people in the in the mix on the WPC side. So.

Operator: One moment while we compile the Q&A roster. Our first question will come from the line of Ketan Mamtora with BMO. Your line is open. Thank you. Good morning, Matt, Mike. Good morning, Steven.

Speaker Change: So we expect that to change.

Ketan Mamtora: First question: First question, coming back to the retail side, it sounds like, you know, USP Edge and ProWard are kind of where there is some weakness right now. As you kind of see your current trends, are you seeing signs of stabilization, or are those, you know, kind of volumes still under pressure? I know you kind of talked about recovery in the back half, but I'm just curious if activity is kind of stabilizing at these levels. Yeah, I think, Ketan, it's kind of tough based on just January results. As I looked at it, January kind of gives you a little bit of a head fake in the sense that the weather there's some weather issues.

Speaker Change: Okay Alright.

Speaker Change: Alright, Thanks, I appreciate the color I'll turn it over.

Speaker Change: Thank you.

Speaker Change: Thank you one moment our next question.

Speaker Change: That will come from the line of Stephen <unk> with Sidoti Your line is open.

Stephen: Alright, good morning, Mike.

Stephen: Good morning, everybody.

Stephen: One of my first question is.

Stephen: And the construction segment could you provide insight.

Stephen: And so the pricing trends across the four business units are there any deviations between these units, indicating AGA divergent price movement compared to the orders.

Stephen: Yes.

Speaker Change: I would tell you I don't think theres anything that jumps off the page at us to say that there is a difference or a divergence at least at this point just seems to be general market conditions.

Matthew J. Missad: And that's what we're hearing from the customer base. I'd like to think that it's stabilized, but it's always difficult to predict at this point. Fair enough.

Speaker Change: Okay.

Ketan Mamtora: And then looking at more sort of longer-term targets, you know, you kind of base them both on the unit growth and also on the EBITDA margin. Can you sort of talk about where you see the most opportunity within your three business lines, both on the top line and on the bottom line, you know, with margin and sort of revenue growth? Yeah, what I can tell you is I think each of the segments has good opportunities. I would say they're not uniform across all areas.

Speaker Change: You announced the launch of timber timber base, how should we think about it coming online and what it could mean for growth for USPI.

So the timber base, Mike can probably talk about the timber base product and what <unk> seen so far timber base for those of you that haven't heard of it's our online trading software we bought that last year. The team has been working on upgrading the software and enhancing.

Speaker Change: Functionality of it.

Speaker Change: Last year, our outside sales I think in that.

Speaker Change: Trading group, so so to external customers.

Matthew J. Missad: As you look at the growth in decorators, for example, that's something we're excited about. We think a rebound in edge is going to have a really good impact on us. If we move to packaging, I think there's going to be parts of that that are going to be challenged, as Mike mentioned, simply because of the amount of manufacturing that's either not happening now or needs to recover in the back half of the year. But if you look at protective packaging materials, we expect that to remain strong and continue to grow, so kind of a mixture there. And then, if you move along into the construction space, I would tell you that we've outlined what we expect for the site built. It's either slightly up or slightly down on housing, and that's really going to help define what we're able to do there.

Speaker Change: Not our domestic plants.

Speaker Change: It was about $60 million.

Speaker Change: Over the next five years, our plan is to grow that.

Speaker Change: Platform by $100 million.

Speaker Change: So to about $160 million in sales so have pretty robust.

Speaker Change: Growth opportunities, we feel like they're in the software is pretty key for Dennis there.

Speaker Change: Alright. Thank you so much for Dakota alright.

Speaker Change: Back in the queue. Thank you.

Speaker Change: Thank you one moment our next question.

Speaker Change: And that will come from the line of Stanley Elliott with Stifel. Your line is open.

Stanley Stoker Elliott: Hey, good morning, everybody. Thank you for your question.

Stanley Stoker Elliott: Could you all talk about.

Stanley Stoker Elliott: It sounds like most of the markets are kind of.

Stanley Stoker Elliott: Flattish up or down a little bit and it kind of seems to imply maybe a little bit of a pickup in the second half with with some of the residential market is improving is there anything you could share like from a seasonality perspective first half second half.

Matthew J. Missad: The factory built we walked through, again, I think that's kind of aligned with the housing market itself. And then the potential areas for growth, commercial, and concrete forming, they both have room to improve, so we would look to see that being better in 24 there. Maybe adding on to that too, there's one area that spans really all the segments, and that's investing in automation and driving efficiencies. And I think the capital ask for that area was nearly $100 million. Now that's helpful.

Stanley Stoker Elliott: Anything along those lines as we're trying to think about how 24 will unfold.

Speaker Change: Yes for sure.

Speaker Change: See the we see the first half of the year being being more difficult.

Speaker Change: You've seen us I think at the end of Q3, we talked about things softening up pricing, becoming more competitive and we saw that into Q4 like we said and we at the time. We said we saw that continuing on into into the early part of 2024, we still feel that way.

Ketan Mamtora: I'll jump back in the queue. Good luck. Thanks, Jeannie.

Speaker Change: So we think that the first half of the year is going to be a tougher comparisons with last year.

Operator: Thank you. One moment for our next question, and that will come from the line of Kurt Yanger with D. A. Davidson. Your line is open. Great. Thanks, and good morning, everyone. Morning, Captain Kirk. Morning, Captain Kirk. Hey Kirk.

Speaker Change: But we're optimistic that with.

Speaker Change: Rate reductions et cetera, the back half of the year could could could be easier comparisons and we performed a little better.

Speaker Change: And then in terms of kind of assure stone and the mineral base.

Kurt Yanger: Morning, it looked like kind of the first sub 20% gross margin and packaging since early 21. I'm curious how you would kind of describe the pricing environment between pallets and maybe more structural packaging offerings. And how does that impact your view on, you know, potentially getting back to 20% plus gross margins over the next couple quarters? Yeah, I think that's a really good question, Kurt.

Speaker Change: You've added some capacity here sounds like Youre, taking the technologies and putting into the newer products.

Speaker Change: How are you all right now.

Speaker Change: Sitting in terms of the capacity for that product category.

Speaker Change: We need to end up adding some additional capacity here in the very near future just given how it sounds like the ramp of the product has been going.

Matthew J. Missad: What I would tell you is that I think what we're seeing in the marketplace is just a lot of pricing pressure, as we alluded to it from the standpoint of when companies aren't as busy, they tend to take a look at their purchasing and try to drive a little more value there. But we still think long-term we can exceed that range. As we predicted, the first half of the year is going to be a little bit more of a struggle, and the second half will be more of a rebound. So if that holds true, then obviously that will help us and everyone else in that space. So that's kind of hinging on what happens with the economy. Okay.

Speaker Change: Yes, that's a great question Stanley. So what we're looking at we previously completed some capacity expansions in 2023 that we had announced prior.

Speaker Change: We're actually accelerating.

Some investments we mentioned a facility in the northeast and we're going to be doing that this year as opposed to it was originally a $25 26.

Speaker Change: Opportunity, we were pulling it forward because we have seen it.

Speaker Change: Ramp quicker, which is terrific and so we're going to while we have the capital we're going to deploy it and we expect to have that facility up and running by early 2025.

Matthew J. Missad: And then in construction, I mean, the total starts have been, I guess, a little bit mixed, but single family has been pretty strong. And I guess I'm curious if you've kind of seen that in your order flow at some of your site built facilities. And then as we look at kind of the sequential kick down in gross margins, is that primarily seasonal factors or perhaps some normalization and site build coming off the capacity constrained periods of 21 and 22. Yeah, I'm gonna say it's probably more of a cyclical effect as opposed to a seasonal effect.

Speaker Change: And then lastly for me just in terms of kind of lumber prices Youll mentioned kind of range bound here.

Speaker Change: And that sort of environment do you all get much pricing.

Youll for the individual businesses or is that kind of kind of more flattish.

Speaker Change: Aligned with how the end markets might underperforming.

Youll: Yes, I think we tend to look at it more as a pass through Stanley. So.

Youll: It's lower higher we're more concerned with how quickly it moves one direction or the other as opposed to the absolute level of it so.

Matthew J. Missad: I would, as you look at it, and just use January as kind of a data point where the market was a little slower, which drives those numbers differently. A year ago, the selling prices were significantly higher. So I think you're going to just kind of see that trend through, again, going back to the first half of the year being somewhat sluggish and then picking up in the second half. Okay, and then you talked about some consolidation in the wood plastic composite space. I was hoping maybe you could talk a little bit more about that comment and how that impacts your overall view of the growth opportunity in decorators kind of balancing out wood plastic composite versus the opportunities in SureStone going forward. Yeah, that's a really good question.

Youll: I think what.

Youll: The message to takeaway message ought to be as if the market remains low that probably the sales dollar line is going to be lower.

Speaker Change: Actually finding great question on lumber prices I am sorry, I was going to add onto that I find more interest in our lumber prices in terms of what it's telling us about demand.

Speaker Change: And so I think the <unk>.

Speaker Change: Prices, having dropped as far as they have and continue to drop in January.

Speaker Change: Indicates an overall soft demand environment.

Speaker Change: Thanks, So much guys I appreciate it best of luck. Thank you.

Speaker Change: Thank you one moment our next question.

Speaker Change: And that will come from the line of Jay Mccanless with Wedbush. Your line is open.

Jay Mccanless: Hey, good morning, guys. Thanks for taking my questions.

Jay Mccanless: Thanks.

Jay Mccanless: Good morning.

Jay Mccanless: First question I had just to thank you for the expanded disclosure in the new targets that you talked about in the release just to benchmark going forward, where do you think your cost of capital is now and maybe since you are wanting us to look back at 2019, maybe what was your cost of capital back to them.

Matthew J. Missad: I think the way we look at it is we have the Surestone technology, which we're very, very high on, and we see that as having a bright future. Wood plastic composite certainly has its place in the marketplace.

Matthew J. Missad: And the comment that I'm making has more to do with the amount of capacity that all the wood plastic composite manufacturers have added over the years, and there are a number of smaller players in the market that I think we'll have to make some decisions about. We obviously look at the whole marketplace and try to figure out what makes the most sense. We're comfortable with our position. It was just more of a market observation. Probably too many people are in the mix on the WPC side.

Jay Mccanless: Yes.

Speaker Change: Customers are taking a look at that every year and I would have said back in the 19 is probably 9% to nine 5% with interest rates being what they were back in those days.

Speaker Change: We were definitely sub 10% now I would say that more like 10, five to 11 11, 5% cost of capital again based more on what interest rates are down.

Speaker Change: Okay.

Speaker Change: And so when I think about the timing.

Speaker Change: Of increasing the targets in terms of unit volume in the EBITDA.

Kurt Yanger: So we expect that to change. All right. Thanks for that. Appreciate the color. I'll turn it over.

Speaker Change: Versus what looks like a soft first half of the year I guess, what was the motivation of the impetus to increase those targets now versus maybe waiting until later in the year. When you had a better sense of where 24 was going to go.

Operator: Thank you. Thank you. One moment for our next question, which will come from the line of Stephan Guillaume with Sidoti.

Operator: Your line is open. Hi. Good morning, Mike. Good morning, everybody.

Operator: Well, my first question is... In the construction segment, could you provide insight into the pricing trends for business units? Are there any deviations within these units indicating a divergent price movement compared to the others?

Speaker Change: That's a really fair question, Jay, but what I would tell you is.

Speaker Change: Got it goes with our philosophy of there's going to be certain economic challenges over the next five years.

Speaker Change: And I, certainly am not smart enough to predict when those are going to happen.

Matthew J. Missad: Yeah, I would tell you, I don't think there's anything that jumps off the page at us to say that there's a difference or a divergence, at least at this point, just seems to be a general market condition. Okay, you recently announced the launch of TimberBase. How should we think about it coming online and what it could mean for growth for your FBI? So the TimberBase, Mike can probably talk about the TimberBase product and what he's seen so far. Yeah, TimberBase, for those of you that haven't heard of it, it's our online trading software.

Speaker Change: So we look out ahead, and we say five years from now where do we want to be and we believe that those are very realistic goals for us there may be bumps on the road getting there over the next five years and I think the first six months of this year as part of it but.

Speaker Change: That's not going to deter us from the goal of getting to these targets.

Speaker Change: Okay. Thank you Matt.

Speaker Change: And then Mike last question for me.

Speaker Change: It sounds like the customer health is still pretty good sounded like dsos were improving.

Matthew J. Missad: We bought it last year, and the team's been working on upgrading the software and enhancing the functionality of it. Last year, our outside sales, I think, in that trading group, so the external customers and not our domestic plants, were about $60 million. Over the next five years, our plan is to grow that platform by $100 million, so to about 160 million in sales. So we have pretty robust growth opportunities, we feel like there, and this software is pretty key to getting there. Thank you so much for the call. I'll jump back in with you.

Speaker Change: Anything youre seeing on late pays or delinquencies just given some of the softer demand out there that we should be mindful of.

Michael R. Cole: Yes, I mean anytime you come into a slower cycle like this it's always something.

Be concerned about I think our teams do a really outstanding job of staying on top of the receivables.

Michael R. Cole: So when I look at our aging while they are there is always going to be something that's out there that can surprise you I think with the diligence we have on it in the current current state of how they look we're in really good shape and I don't see anything material in there.

Operator: Thank you. Thank you. One moment for our next question, and that will come from the line of Stanley Elliott with Stifel. Your line is open. Good morning, everybody.

Speaker Change: Okay. Thanks, guys I appreciate it.

Speaker Change: Thanks Sanjay.

Sanjay: Thank you.

Speaker Change: Our next question.

Speaker Change: And that comes from the line of Kurt Yinger with D. A Davidson your line is open.

Stanley Stoker Elliott: Thank you for the question. Could you all talk about, you know, it sounds like most of the markets are kind of flattish up or down a little bit, and it kind of seemed to imply maybe a little bit of a pickup in the second half with some of the residential markets improving? Is there anything you could share, like from a seasonality perspective, first half, second half? Anything along those lines, as we're trying to think about how 24 will unfold? Yeah, for sure.

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

Kurt Yinger: You've talked a little bit about consolidated manufacturing in certain business units.

Kurt Yinger: Im curious, how youre thinking about balancing that versus the expectations for a rebound in some of your markets over call. It the second half of the year and into 2025 looking back at 'twenty, one and 'twenty two.

Kurt Yinger: Getting the labor was a challenge I think in certain.

Matthew J. Missad: We see the first half of the year being more difficult. You've seen us, I think at the end of Q3, we talked about things softening up, pricing becoming more competitive. We saw that in Q4, like we said, and at the time, we said we saw that continuing on into the early part of 2024. We still feel that way.

Kurt Yinger: Parts, you were challenged from a capacity standpoint and packaging. So just curious if you could talk about kind of the mindset of operating efficiently and making sure you're managing cost and a challenging at least first part of the year versus those growth expectations and some of the challenges we've seen over the last couple of years.

Matthew J. Missad: So we think that the first half of the year is going to be a tougher comparison with last year, but we're optimistic that with, you know, rate reductions, et cetera, the back half of the year could be, you know, easier comparisons, and we perform a little better. And then, in terms of kind of the surestone in the mineral base, you've added some capacity here. It sounds like you're taking the technologies and putting them into newer products. How are you all sitting right now in terms of capacity for that product category? Will we need to end up adding some additional capacity here in the very near future, just given how it sounds like the ramp-up of the product has been going? Yeah, that's a great question, Stanley.

Speaker Change: Yes, that's a really good connection Kurt and I think the way I would look at it as our teams have done a great job by bringing together automation.

Speaker Change: Increasing the capacity at existing facilities and in the packaging space in particular utilizing more of a hub and spoke model, where they're able to process a lot more product.

Speaker Change: In the same footprint.

Speaker Change: And that's due to a lot of different factors, but not the least of which has been the investment in automation and technology. So what we've actually done is increase the capacity over what it was in 'twenty, one 'twenty two without increasing the footprint. So we think we can do just as much volume in a smaller footprint and do it more efficiently.

Matthew J. Missad: So what we're looking at, we previously completed some capacity expansions in 2023 that we had announced prior, we're actually accelerating some investments. We mentioned a facility in the Northeast. And we're going to be doing that this year, as opposed to it being originally a 2526 kind of opportunity. We were pulling it forward because we have seen it ramp quicker, which is terrific.

Speaker Change: <unk> so.

Speaker Change: That's why we feel good about being able to say hey, we're going to take some things off line, because we don't need them and we will consolidate them.

Speaker Change: And that's still part of an ongoing process almost regardless of what the economy is doing we have to keep doing that with that technology and innovation spend.

Matthew J. Missad: And so we're going to, while we have the capital, we're going to deploy it, and we expect to have that facility up and running by early 2025. And then lastly for me, just in terms of lumber prices, you'll mention kind of range bound here. In that sort of environment, do you all get much pricing for the individual businesses, or is that kind of more flat-ish in line with how the end markets might end up performing? Yeah, I think we tend to look at it more as a pass through Stanley, so whether it's low or higher, we're more concerned with how quickly it moves one direction or the other, as opposed to the absolute level of it.

Speaker Change: And that will continue to help us be a low cost producer.

Speaker Change: Got it Okay, and then I guess, just specifically on the site built business, if we do see lower rates stimuli.

Speaker Change: Stimulate additional new construction activity how are you thinking about potential expansion in that business I mean, we've seen quite a bit of consolidation in recent years. It seems like there has been a structural improvement in the margin profile.

Speaker Change: I guess, we'd just love to hear your thoughts on organically expanding your presence there.

Speaker Change: Yeah. Our site built team has a pretty aggressive expansion plan. So we're going to again look to the markets, where we see in migration are we see growth as opposed to those areas where people are moving out of.

Matthew J. Missad: I think what the message, the takeaway message ought to be is if the market remains low, that probably the sales dollar line is going to be lower, actually find more interest in lumber prices. I find more interest in lumber prices, in terms of what it's telling us about the... So I think the price dropping as far as they have and will continue to drop in January indicates, you know, an overall soft spot. Thanks so much, guys. I appreciate it.

Speaker Change: So the mountain West area is an area that we're focusing on again theres more areas in the southeast if you kind of follow the map of housing starts and where they are growing the most.

Speaker Change: That's where the team is looking at expanding our presence.

So we expect to see more of that in 'twenty four and beyond.

Got it alright, great well good luck here in Q1 guys. Thank you.

Speaker Change: Thank you Sir.

Speaker Change: Thank you I'm showing no further questions in the queue. At this time I would now like to turn the call back over to Matt Massat for any closing remarks.

Stanley Stoker Elliott: Best of luck. Thank you. Thank you.

Operator: One moment for our next question, and that will come from the line of Jay McCandless with Wedbush. Your line is open. Hey, good morning, guys. Thanks for taking my question. Good morning, Jim.

Matthew J. Missad: Thank you again for spending time with us today.

Matthew J. Missad: 24, we know we're going to have to work smarter and harder to be successful.

Matthew J. Missad: We will continue to allocate capital wisely mixing current return to shareholders with growing longer term value.

Jay McCandless: Morning, so the first question I had just, and thank you for the expanded disclosure and the new targets that you talked about in the release, just a benchmark going forward, where do you think your cost of capital is now? And maybe, since you're wanting us to look back at 2019, maybe what was your cost of capital back then? Yeah, good question.

Matthew J. Missad: Whenever we have challenges I rely on our experienced leaders who have been through many economic cycles and.

Matthew J. Missad: And like the late Toby Keith I'd like to think that although I am not as good as I once was I am as good once as I ever was <unk>.

Matthew J. Missad: <unk> I am surrounded by a great team of leaders and teammates who with their incredible talent will continue to drive success and make it better in 2024.

Michael R. Cole: We take a look at that every year, and I would have said back in 2019, it was probably nine to nine and a half percent with interest rates being what they were back in those days. We were definitely sub 10%. Now I'd say that more like 10 and a half to 11, 11 and a half percent cost of capital again, based more on what interest rates are. And so when I think about the timing of increasing the targets in terms of unit volume and EBITDA versus, you know, what looks like a soft first half of the year. I guess what was the motivation or the impetus to increase those targets now versus maybe waiting till later in the year when you had a better sense of where 24 was going to go? That's a really fair question, Jay.

Speaker Change: Thanks, and have a great day.

Speaker Change: This concludes today's program. Thank you all for participating you may now disconnect.

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Matthew J. Missad: But what I would tell you kind of goes with our philosophy of there being certain economic challenges over the next five years, and I certainly am not smart enough to predict when those are going to happen. So we look out ahead, and we say, five years from now, where do we want to be? And we believe that those are very realistic goals for us. There may be bumps on the road to getting there over the next five years. And I think the first six months of this year are part of it. But that's not going to deter us from the goal of getting to these targets. Matt.

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Michael R. Cole: And then Mike, last question for me, it seems like. Customer health is still pretty good. Satellite DSOs, we're improving. Anything you're seeing on late pays or delinquencies, just given some of the softer demand out there that we should be mindful of. Yeah, I mean, anytime you come into a slower cycle like this, it's always something to be concerned about.

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Jay McCandless: I think our teams do a really outstanding job of staying on top of the receivables. So, when I look at our aging, you know, while there's always going to be something that's out there that can surprise you, I think with the diligence we have on it and the current state of how they look, we're in really good shape, and I don't see anything materializing. Thanks guys, appreciate it. Hey, thank you

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Operator: Thank you. One moment for our next question. And that comes from the line between Kurt Jinger and D.A. Davidson.

Speaker Change: Yes.

Kurt Yanger: Your line is open. Great, thanks for taking my follow-up questions. You talked a little bit about consolidated manufacturing and certain business units. And I guess I'm curious how you're thinking about balancing that versus the expectations for a rebound in some of your markets, you know, over, call it the second half of the year and into 2025. You know, looking back at 21, and 22, you know, getting the labor was a challenge.

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Matthew J. Missad: I think in certain parts you were challenged from a capacity standpoint and packaging. So just curious if you could talk about kind of the mindset of, you know, operating efficiently and making sure you're managing costs and what's challenging in the first part of the year versus those growth expectations and some of the challenges we've seen over the last couple years. Yeah, that's a really good connection, Kurt.

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Matthew J. Missad: And I think the way I would look at it is that our teams have done a great job of bringing together automation, increasing the capacity at existing facilities and, in the packaging space, in particular, utilizing more of a hub-and-spoke model where they're able to process a lot more product in the same footprint. And that's due to a lot of different factors, but not the least of which has been the investment in automation and technology. So, what we've actually done is increase the capacity over what it was in 21-22 without increasing the footprint. So, we think we can do just as much volume in a smaller footprint and do it more efficiently. So, that's why we feel good about being able to say, hey, we're going to take some things offline because we don't need them, and we'll consolidate them. And that's still part of an ongoing process, almost regardless of what the economy is doing.

Speaker Change: Sure.

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Matthew J. Missad: We have to keep doing that with that technology and innovation spend, and that will continue to help us be a low-cost product. Okay, and then I guess just specifically on the site built business, if we do see lower rates, stimulate additional new construction activity. How are you thinking about potential expansions in that business? I mean, we've seen quite a bit of consolidation in recent years. It seems like there's been a structural improvement in the margin profile, I guess. I would just love to hear your thoughts on organically expanding your presence there. Yeah, our site build team has a pretty aggressive expansion plan. So we're going to, again, look to the markets where we see migration or we see growth, as opposed to those areas where people are moving out of. So the Mountain West area is an area that we're focusing on. Again, there are more areas in the southeast.

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Kurt Yanger: If you kind of follow the map of housing starts and where they're growing the most, that's where the team is looking at expanding our presence. So we expect to see more of that in 24 and beyond. All right, great.

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Operator: Well, good luck here in Q1, guys. Thank you. Thank you, sir.

Speaker Change: Okay.

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Matthew J. Missad: Thank you. I'm showing no further questions in the queue at this time. I would now like to turn the call back over to Matt Missad for any closing remarks. Thank you again for spending the time with us today. In 2024, we know we're going to have to work smarter and harder to be successful. We will continue to allocate capital wisely, mixing current return to shareholders with growing longer-term value. Whenever we have challenges, I rely on our experienced leaders who have been through many economic cycles. And like the late Toby Keith, I like to think that although I am not as good as I once was, I am as good as I ever was.

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Operator: Fortunately, I'm surrounded by our great team of leaders and teammates who, with their incredible talent, will continue to drive success and make it better in 2024. Thanks and have a great day. This concludes today's program. Thank you all for participating. You may now disconnect.

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Operator: ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? www. UniversalForest.com www. UniversalForestProducts.com www. UniversalForestProducts.com www. UniversalForestProducts.com ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? Good day and welcome to the Q4 2023 USP Industries, Inc. Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode.

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Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising that your hand is raised.

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Operator: To withdraw your question, press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. Dick Gauthier, Vice President of Investor Relations, www.universalforestproducts.com. Welcome to the fourth quarter 2023 conference call for UFP Industries. Hosting the call today are CEO Matt Missad and CFO Mike Cole. Matt and Mike will offer prepared remarks, and then the call will be open to questions. This conference call is available simultaneously in its entirety to all interested investors and news media through our webcast at ufpi.com. A replay will also be available on that website.

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Operator: Before I turn the call over to Matt Missad, let me remind you that today's press release and presentation include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from the company's expectations and projections. These risks and uncertainties include, but are not limited to, those factors identified in the press release and in the filings with the Securities and Exchange Commission. I will now turn the call over to Matt Missad. Thank you, Dick, and good morning, everyone.

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Operator: Thank you for joining our fourth quarter and year-end 2023 earnings call. Like George Costanza, we stopped short of our goal for the year, but thanks to the efforts of our team, we posted the third best sales and profit year in our 69-year history. As we have described before, the best way to analyze our performance without the abnormal lumber market, supply constraints, and outsized demand from Q3 of 2020 through 2022 is to go back to 2019 and measure our progress. For 2019, we reported sales of $4.4 billion and EBITDA of $317.3 million, or a 7.2% EBITDA margin.

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Operator: We just completed 2023 with sales of $7.2 billion, an EBITDA of $810 million, and an 11.2% EBITDA margin. We began our new structure in 2020, and if we had predicted then that we would improve EBITDA by 255%, EBITDA margins by 156%, and that we'd grow sales by 164% in four years, we would have said those were lofty goals. But that's exactly what our team achieved.

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Operator: Like the Detroit Lions, who performed well but were disappointed at the end, we had a good year, and we know there are better years ahead. However, our forecasts for 2024 are based on data that is inconsistent and not well-aligned, which makes forecasting difficult. Nonetheless, our view for the year is as follows. We plan on a relatively flat demand environment overall with an expected range of aggregate unit sales from slightly down to slightly up. We plan for new home construction to be slightly up to slightly down in 2024. The overall market mix between single-family and multifamily is expected to be approximately two-thirds single-family.

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Operator: January 2024 housing starts were an annualized 1.33 million and below expectations, with weather being a commonly cited factor. We saw repair and remodel trends down over the fourth quarter of 2023, but it is expected to be up slightly to down slightly in 2024. In January 2024, we saw a decline in units from expected, with weather again cited as a factor. The Purchasing Managers Index trended down during Q4 of 2023 and is expected to be down from 1 to 3% in 2024.

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Operator: January 2024, however, saw an uptick in the index, bringing it closer to neutral. Interest rates are projected to move down in 2024, and the current expectation is for three rate cuts at some point during the year. The federal deficit is expected to be $1.6 trillion in 2024, which will likely have an impact on capital markets. We can only acknowledge these economic forecasts and incorporate them into our plans and budgets for the next five years.

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Speaker Change: Good day and welcome to the Q4 2023, UFP Industries, Inc. Earnings Conference call and webcast. At this time all participants are in a listen only mode. After the speaker presentation. There will be a question and answer session to ask a question. During this session you will need to press star one on your.

Operator: While we are mindful of these macro factors, our focus remains on areas we can control. Regardless of market conditions, our attitude is to keep moving forward, to keep succeeding despite factors out of our control. Our goal in 2024 is to take the lessons from prior years and, as expressed in our internal theme, make them better. We had underperforming operations in 2023 that will improve or be replaced. We have opportunities to reduce costs or improve efficiencies in each area of our business. From purchasing and manufacturing to sales, marketing, and transportation, we will pursue actions that drive better bottom-line performance. As always, our goal is to create a stronger, more resilient company and build a strong team that can excel for many years to come. Providing long-term shareholder value is a requirement, and our teammates, who are also shareholders, are completely aligned with the mission.

Speaker Change: Telephone you will then hear an automated message advising your hand is right to win.

Speaker Change: Jay Your question Press Star one again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker, Mr. <expletive> Gauthier, Vice President of Investor Relations the floor is yours.

Gauthier: Welcome to the fourth quarter 2023 conference call for UFP industries hosting the call today are CEO, Matt <unk> and CFO, Mike Cole, Matt and Mike will offer prepared remarks, and then the call will be opened for questions. This conference call is available simultaneously in its entirety to all interested investors and news media through our webcast at <unk> <unk>.

Operator: Of course, growth is central to our strategy. Whether through M&A or organic growth, we will aggressively pursue our runways. Acquisitions remain a key component, and we had several acquisition opportunities during 2023. Our international group completed an acquisition in Spain, but we were unable to close others, primarily due to valuation challenges based on the target's hockey stick view of anticipated future performance versus our more muted and realistic view.

<unk> Dot com a replay will also be available at that website before I turn the call over to Matt <unk>, Let me remind you that today's press release and presentation include forward looking statements as defined in the private Securities Litigation Reform Act of 1095. These statements are subject to risks and uncertainties that could cause actual results or results to differ materially.

Gauthier: From the company's expectations and projections. These risks and uncertainties include but are not limited to those factors identified in the press release and in the filings with the Securities and Exchange Commission I will now turn the call over to Matt <unk>.

Operator: On the organic growth side, we invested in several opportunities in 2023 and have several new projects planned for 2024 in new targeted geographic markets. The strong operational performance over the last three years has allowed us to build capital for growth. And if we are unable to acquire reasonably priced acquisition targets in line with our model, we will grow organically.

Matt: Thank you <expletive> and good morning, everyone.

Matt: Thank you for joining our fourth quarter and year end 2023 earnings call like.

Matt: Mike George Cassandra, we stopped short of our goal for the year, but thanks to the efforts of our team we posted our third best sales and profit year in our 69 year history.

Operator: Return on investment is the key to this decision. For example, our request for capital from our business units for 2024 totaled well over 350 million, which includes automation, technology, marketing, and new product capacity, as well as investments in markets where we have been unable to acquire targets at a fair ROI. We will stay operationally aggressive and fiscally conservative, using our balance sheet to support our growth and value creation.

Matt: As we have described before the best way to analyze our performance without the abnormal lumber market and supply constraints and outsized demand from Q3 of 2020 through 2022 is to go back to 2019 and measure our progress.

Matt: For 2019, we reported sales of $4 4 billion and EBITDA of $317 3 million or a seven 2% EBITDA margin.

We just completed 2023 with sales of $7 2 billion and EBITDA of $810 million and an 11, 2% EBITDA margin.

Operator: Now let's review segment performance and outlook. We'll start with USP Retail Solutions. As a value-added manufacturer, seller, and self-distributor, our products provide solutions for the DIY consumer as well as professional contractors.

Matt: We began our new structure in 2020, and if we had predicted then that we would improve EBITDA by 255% EBITDA margins by 156% and that we'd grow sales by 164% in four years, we would've said those were lofty goals, but that's exactly what our team achieved.

Operator: Our President of Retail Solutions, Will Schwartz, has worked well with his team to build on the success of the segment and outperform 2022 results. This is our largest segment by sales volume, and it has significant opportunities for creating synergies and scaling new and existing products. Our decorators product line continues to gain recognition and trust in the marketplace. We are investing to grow capacity and to add additional manufacturing in the Northeast. In addition to expanded marketing efforts, Deckorators has sub-branded its mineral-based composite product offerings as Surestone to highlight the unique advantages of the patented technology.

Matt: Like the Detroit Lions, who performed well, but we are disappointed at the end we had a good year and we know there are better years ahead.

Matt: Our forecast for 2024 based on data, which is inconsistent and that well aligned which makes forecasting difficult. Nonetheless, our view for the year is as follows we plan on a relatively flat demand environment overall with an expected range of aggregate unit sales from slightly down to slightly up.

Matt: We plan for new home construction to be slightly up to slightly down in 2020 for.

Matt: The overall market mix between single family and multifamily is expected to be approximately two third single family.

Matt: January 2020 for housing starts were annualized $1 $33 million and below expectations with weather being a commonly cited factor.

Operator: Expect some exciting new marketing efforts behind this technology and product line. Recently added, plus planned future capacity in Surestone Manufacturing will allow us to launch additional products too. The SureStone technology is quickly becoming a favorite among installers and homeowners for its aesthetics, durability, and sustainability.

Matt: We saw a repair and remodel trend down over the fourth quarter of 2023, but it is expected to be up slightly to down slightly in 2024.

Matt: In January 2024, we saw a decline in units from expected with weather again cited as a factor.

Operator: The number of Deckorators Certified Professional Installers has grown to over 900, and they continue to be great advocates for the product. While we grow our SureStone technology, we also expect some consolidation in the wood-plastic composite space. Moving to ProWood and Sunbelt, those units are creating more synergies with treating efficiencies and preservative utilization and development. Our ProWood FR fire retardant treated lumber sales continue to grow. The PFS Chemical Development Company is moving into our innovation group to drive more external sales as well as to accelerate the development of new formulations to preserve, protect, and strengthen wood products.

Matt: The purchasing managers index trended down during Q4 of 2023 and is expected to be down from 1% to 3% in 2024.

Matt: January 2024, however saw an uptick in the index, bringing it closer to neutral.

Matt: Interest rates are projected to move down in 2024, and the current expectation is three rate cuts at some point during the year.

Matt: The federal deficit is expected to be one six trillion in 2024, which will likely have an impact on capital markets.

Speaker Change: We can only acknowledges economic forecasts and incorporate them into our plans and budgets for the next five years.

Speaker Change: While we are mindful of these macro factors our focus remains on areas, we can control rigs.

Speaker Change: Regardless of market conditions, our attitude is to keep moving forward to keep succeeding despite factors out of our control.

Operator: USP Edge Siding Pattern and Trim Products struggled in 2023, as demand waned for the category overall and as we continue to transition to more value-added products from basic commodity type products. We have restructured management of this business unit and expect substantially better performance in 2024 and beyond. We also believe there are opportunities to deploy our SureStone technology in this product category. Our e-commerce platform continues to grow and serve our customers with direct fulfillment of many of our manufactured items. We recorded online sales of more than $400 million in 2024 and will continue to grow this capacity. Our retail solution strategy is simple: provide innovative new products and solutions.

Speaker Change: Our goal in 2020 for us to take the lessons from prior years and as expressed in our internal theme make it better.

Speaker Change: We had underperforming operations in 2023 that will improve or be exited.

Speaker Change: We have opportunities to reduce costs or improve efficiencies in each area of our business from.

Speaker Change: From purchasing and manufacturing to sales marketing transportation, we will pursue actions that drive better bottom line performance.

Speaker Change: As always our goal is to create a stronger more resilient company and build a strong team, which can excel for many years to come.

Speaker Change: Providing long term shareholder value as a requirement and our teammates who are also shareholders are completely aligned in the mission.

Speaker Change: Of course growth is central to our strategy, whether through M&A or organic growth, we will aggressively pursue our runways.

Speaker Change: Acquisitions remain a key component and we had several acquisition opportunities during 2023 or.

Operator: Find, expand, and harness opportunity, select and build the right brands, and utilize our national reach, purchasing expertise, and distribution network to provide the best customer value. The outlook for retail in 2024 ranges from up slightly to down slightly for the year. A rebound is expected in 2025 and 2026. Big box retailers expect to gain market share as they focus more on small professional contracts.

Speaker Change: Our International group completed an acquisition in Spain, but we were unable to close others, primarily due to valuation challenges based on the targets hockey stick view of anticipated future performance versus our more muted and realistic view.

Speaker Change: On the organic growth side, we invested in several opportunities in 2023 and have several new projects planned for 2024 and new targeted geographic markets.

Speaker Change: The strong operations performance over the last three years has allowed us to build capital for growth and if we are unable to acquire reasonably priced acquisition targets in line with our model we will grow organically.

Operator: In January, our retail solutions performance was down versus a year ago, due in part to tougher weather conditions in many parts of the country. Moving on to the construction segment, led by Patrick Benton, the site-built business unit remained resilient with a good mix of single-family and multifamily projects.

Speaker Change: Return on investment is the key to this decision.

Speaker Change: For example, our request for capital from our business units for 2024, total well over $350 million, which includes automation technology marketing and new product capacity as well as investments in markets, where we have been unable to acquire targets at a fair Roy.

Operator: While starts in 2024 are projected to be slightly up to slightly down from the 1.413 million actual starts in 2023, there is optimism for rate cuts later this year and a rebound in 2025 and 2026. Our balanced approach serving multifamily as well as single-family homes helps position us well in the markets we serve, which tend to be the more resilient markets in the country and that continue to benefit from in-migration. We are well positioned to meet anticipated market needs and will continue to adjust to the actual market conditions going forward. We also note that the build-to-rent market is growing. And when multifamily units are included, over 40% of all new construction is in rental units.

Speaker Change: We will stay operationally aggressive and fiscally conservative using our balance sheet to support our growth and value creation.

Speaker Change: Now, let's review segment performance and outlook we.

I will start with UFP retail solutions.

Speaker Change: As a value added manufacturer seller and self distributor our products provide solutions for the DIY consumer as well as professional contractor or.

Speaker Change: Our president of retail solutions will forward has worked well with his team to build on the success of the segment and outperform 2022 results.

Speaker Change: This is our largest segment by sales volume and it has significant opportunities for creating synergies and scaling new and existing products.

Operator: We expect that higher interest rates coupled with a forecasted decline in rates in six to nine months may cause some multifamily developers to wait until later in the year to begin construction on their new projects. Moving to factory built, the business unit is expecting a trend line similar to site built. We remain bullish on factory-built housing over the long term as it remains the most affordable housing option. Recreational vehicles have been very slow, but they have worked through inventory in their dealer network and are expecting to see a modest upswing later this year. While RV is a small portion of our business, we have several products in our recreate or recreate pipeline to help us gain share and grow within the market as the industry recovers. We saw a considerable improvement in commercial construction in 2023, and we are forecasting a better bottom line result in 2024.

Speaker Change: Our decorators product line continues to gain recognition and trust in the marketplace. We.

We are investing to grow capacity and to add additional manufacturing in the northeast.

Speaker Change: In addition to expanded marketing efforts.

Speaker Change: <unk> has sub branded as mineral based composite product offerings as sure stone to highlight the unique advantages of the patented technology.

Speaker Change: We expect some exciting new marketing efforts behind this technology and product line.

Speaker Change: Recently added plus planned future capacity insurer stone manufacturing will allow us to launch additional products too.

Speaker Change: <unk> technology is quickly, becoming a favorite among installers and homeowners for its aesthetics durability and sustainability.

Speaker Change: The number of decorators certified professional installers has grown to over 900 and they continue to be great advocates for the products.

Speaker Change: While we grow our share stone technology, we also expect some consolidation in the wood plastic composite space.

Operator: This group has continued to balance manufacturing capacity and has consolidated manufacturing into four main locations domestically and one overseas. And in the concrete forming space, we added new locations in 2023 to serve new markets that have stronger growth prospects or to expand our capabilities in existing markets. The results were impacted by the ramp-up of these new operations, but in 2024, we expect a significant improvement in bottom-line results, more growth towards value-added products, and less focus on distribution of sticks and panels. Overall, our expectation for construction in 2024 is slightly up to slightly down. January housing starts were lower than forecast, so a back half of the year catch-up will be important to hitting our annual target. In the packaging segment, led by Scott Worthington, we have seen the biggest headwind.

Speaker Change: Moving to pro and Sunbelt.

Speaker Change: Those units are creating more synergies with trading efficiencies and preservative utilization in development, our <unk> fr fire retardant treated lumber sales continue to grow.

Speaker Change: The PFS chemical development company is moving into our innovation group to drive more external sales as well as to accelerate the development of new formulations to preserve protect and strengthen wood products.

Speaker Change: UFP edge siding pattern and trim products struggled in 2023 as demand waned for the category overall and as we continue to transition to more value added products from basic commodity type products.

Speaker Change: We have restructured management of this business unit and expect substantially better performance in 2024 and beyond.

Speaker Change: We also believe there are opportunities to deploy to deploy our <unk> technology in this product category.

Speaker Change: Our E Commerce platform continues to grow and serve our customers with direct fulfillment of many of our manufactured items we.

Speaker Change: We recorded online sales of more than $400 million in 2024, and we will continue to grow out this capacity.

Operator: Many of our customers have seen lower market demand, which means less demand for packaging. These customers are also evaluating costs in all areas and looking for concessions as the economy is more difficult. While we believe our value proposition is strong, we are not immune to these challenges and continue to seek less expensive, yet still value-added solutions for our customers. The packaging team is evaluating its internal costs as well and consolidating production in certain hubs, eliminating excess capacity, and focusing on manufacturing efficiencies with a lower level of overall production. Longer term, we have diverse customer markets to pursue, including appliances, light and heavy equipment, agriculture, moving and storage, automotive, furnishings, horticulture, and glass. The packaging industry remains very fragmented, and our modest market share leaves tremendous opportunity for growth.

Speaker Change: Our retail solution strategy is simple provide innovative new products and solutions.

Speaker Change: Find expanded harness opportunities.

Speaker Change: Select and build the right brands and to utilize our national reach purchasing expertise and distribution network to provide the best customer value.

Speaker Change: The outlook for retail in 2024 ranges from up slightly to down slightly for the year.

Speaker Change: A rebound is expected in 2025 and 2026.

Speaker Change: The big box retailers expect to gain market share as they focus more on small professional contractors.

Speaker Change: In January our retail solutions performance was down versus a year ago due in part to tougher weather conditions in many parts of the country.

Speaker Change: Moving on to the construction segment led by Patrick Benton.

Speaker Change: Site built business unit remained resilient with a good mix of single family and multifamily projects.

Speaker Change: While starts in 2024 are projected to be slightly up to slightly down from the 141 3 million actual starts in 2023. There is optimism for rate cuts later this year and a rebound in 'twenty five and 'twenty six.

Operator: Increasing our design, engineering, testing, and analytical capabilities has helped create more opportunities to bring solutions to customers who value that level of expertise and creativity. Our new steel packaging facility has added excellent alternatives for packaging heavy items and reusable applications. We continue to expand our mixed material offerings and specialty products, such as StripPak, to new geographies, both domestically and internationally. However, Pallet One saw a decline in volume in 2023. As large pallet pool operators right-size their inventories, they are relying more on used pallets.

Speaker Change: Our balanced approach serving multifamily as well as single family helps position us well in the markets, we serve which tend to be the more resilient markets in the country and that continue to benefit from in migration.

Speaker Change: We are well positioned to meet anticipated market needs and will continue to adjust to the actual market conditions going forward.

Speaker Change: We also note that the build to rent market is growing.

Speaker Change: And when multifamily units are included over 40% of all new construction is in rental units.

Speaker Change: Okay.

Speaker Change: We expect that higher interest rates, coupled with a Ford class forecasted decline in rates and six to nine months may cause some multifamily developers to wait until later in the year to begin construction on their new projects.

Operator: However, we expect a return to a more normalized environment later this year, and as a result, the second half of 2024 is projected to be stronger than the first half. This business unit is expanding its national footprint and is poised for strong growth in 2025 and 2026. While there will be economic challenges, the long-term outlook for UFP packaging remains strong. We will continue to invest in automation, innovation, and acquisition to advance our goal of becoming a global packaging solutions provider, and we will be combining our research, development, and state-of-the-art testing capabilities into a central location in 2024. Overall, we expect unit sales to be down slightly in 2024 and to rebound in 2025 and 2020. On the international front, our team is focused heavily on extending our packaging solutions to multinational customers. Corrugate Capabilities in India and Australia, our StripPak branded products in Asia and other markets, and Pallets and Structural Packaging in Mexico, Europe, and elsewhere enhance our total product offer.

Speaker Change: Moving to factory built the business unit is expecting a trend line similar to site built we remain bullish on factory built housing over the long term as it remains the most affordable housing option.

Speaker Change: Recreational vehicles have been very slow, but have worked through inventory in their dealer network and are expecting to see a modest upswing later this year.

Speaker Change: While our view is a small portion of our business. We have several products in our recreate or recreate pipeline to help us gain share and grow within the market as industry recovers.

Speaker Change: We saw a considerable improvement in commercial construction in 2023, and we are forecasting a better bottom line results in 2020 for.

Speaker Change: This group has continued to balance manufacturing capacity and has consolidated manufacturing into four main locations domestically and one overseas.

Speaker Change: And in the concrete forming space, we added new locations in 2023 to serve new markets that have stronger growth prospects or to expand our capabilities in existing markets.

Speaker Change: The results were impacted by the ramp up of these new operations, but in 2024, we expect significant improvement in bottom line results more growth towards value added products and less focus on distribution of stakes in panels.

Overall, our expectation for construction in 2024 is slightly up to slightly down.

Speaker Change: January housing starts were lower than forecast so a back half of the year catch up will be important to hitting our annual target.

Operator: Our international sourcing and sales efforts create worldwide capabilities for both our domestic and foreign customers, which we will be enhancing with new technology, much like the timber-based product that was launched earlier this year. Clearly, the overall economic outlook is mixed. While it certainly doesn't inspire unbridled optimism, like the Odysseus Landers rocket ride to the moon, we aren't discouraged. We've been here before, and there's no team better prepared to create success. We can hear Jeff Lynne singing, Don't Bring Me Down, and we might add a twist.

Speaker Change: In the packaging segment led by Scott Worthington, we've seen the biggest headwinds.

Many of our customers have seen lower market demand, which means less demand for packaging.

Speaker Change: These customers are also evaluating cost in all areas and looking for concessions as the economy is more difficult.

Speaker Change: While we believe our value proposition is strong we are not immune to these challenges and continue to seek less expensive yet still value added solutions for our customers.

Speaker Change: The packaging team is evaluating its internal costs as well and conduct consolidating production in certain hubs, eliminating excess capacity and focusing on manufacturing efficiencies with a lower level of overall production.

Operator: You can't bring me down. Some other items of interest in our focus areas and departments are, first of all, new products. New product sales for the fourth quarter were $142 million, and for the year, they were $716 million. Both numbers were below our targets for the year due in part to lower lumber market prices.

Speaker Change: Longer term, we have a diverse and customer markets to pursue including appliances light and heavy equipment, agriculture, moving and storage automotive furnishings horticulture and glass.

Speaker Change: The packaging industry remains very fragmented and our modest market share leaves tremendous opportunity for growth.

Operator: For 2024, we have raised the bar on the definition of new products as we drive the focus on more value-added products and services. For new products, we have increased the return on investment target, placed more emphasis on innovation, and eliminated many products that were new to UFP but did not have a competitive or sustainable advantage. With the higher standard, we are lowering the forecast for new product sales to $510 million in 2024.

Speaker Change: Increasing our design engineering testing and analytical capabilities has helped create more opportunities to bring solutions to customers, who value that level of expertise and creativity.

Speaker Change: Our new steel packaging facility has added excellent alternatives for packaging heavy items and reusable applications.

Speaker Change: And we continue to expand our mixed material offerings and specialty products, such as strip pack to new geographies, both domestically and internationally.

Speaker Change: Pallet, one saw a decline in volume in 2023 as large pallet pool operators right size their inventories they are relying more on used pallets power.

Operator: We will still be marketing and selling the products that no longer qualify as new and estimate those items could sell up to $300 million in 2021. Our investments in the Innovation Accelerator assist speed to market for new product ideas by rapid iteration and faster scale and synergy. We have seen several new products developed in 2023 and tested, which we expect we will bring to market during 2024. Our Innovate Fund has completed four investments in either late-stage development or early-stage commercialization projects. The team has several other opportunities in the pipeline as we fulfill our 2021 commitment of $100 million of investments for these types of projects over the next few years. In 2024, the lumber market is expected to remain within a trading range more in line with historical levels. The mills are bringing on additional capacity of more than 1 billion board feet in 2024. We expect that mills will manage the supply side by taking production offline at less efficient mills to match market demand, rather than erode their market and their margin. We note that in January, the lumber market declined steadily.

Speaker Change: However, we expect a return to more normalized environment later this year.

Speaker Change: As a result, the second half of 2024 is projected to be stronger than the first half.

Speaker Change: This business unit is expanding its national footprint as an and is poised for strong growth growth in 2025 and 2026.

Speaker Change: While there will be economic challenges the long term outlook for UFP packaging remains strong.

Speaker Change: We will continue to invest in automation innovation and acquisition to advance our goal of becoming a global packaging solutions provider.

Speaker Change: And we will be combining our research development and state of the art testing capabilities into a central location in 2024.

Speaker Change: Overall, we expect unit sales to be down slightly in 2024 and to rebound in 2025 and 2026.

Speaker Change: On the international front, our team has focused heavily on extending our packaging solutions to multinational customers.

Speaker Change: Corrugate capabilities in India and Australia.

Speaker Change: Strip Pak branded products in Asia, and other markets and pallets and structural packaging in Mexico, Europe and elsewhere enhance our total product offerings are.

Speaker Change: Our international sourcing and sales efforts create worldwide capabilities for both our domestic and foreign customers, which we will be enhancing with new technology.

Operator: Transportation. During 2023, we invested in improved technology and worked to centralize our transportation functions to gain efficiency and reduce our overall cost. As with most major changes, the rollout of technology has come with some challenges which are being addressed, and we have also uncovered areas which will be improved by our new model. We expect to have the core systems fully implemented in 2020. On the human capital front, we note that the current U6 unemployment rate at the end of January was 8%, up from 7% at the end of December 2023. We note that many of the jobs being created are in nonprofits, healthcare, and government.

Speaker Change: Much like the timber based product that was launched earlier this year.

Speaker Change: Clearly the overall economic outlook is mixed while it certainly doesn't inspire unbridled optimism like the Dcs Landers rocket ride to the Moon, we are discouraged.

Speaker Change: Been here before and there is no team better prepared to create success.

Speaker Change: We can hear Jeff lend singing don't bring me down and we might add a twist you can't bring me down.

Speaker Change: Some other items of interest in our focus areas and departments are first of all new products new product sales for the fourth quarter were $142 million for the year were $716 million.

Operator: These factors help explain the current lack of growth in the manufacturing space. Our facilities are consistently evaluating staffing levels and production schedules to optimize our. We also balance our workforce among segments to ensure easy transfers from areas seeking a slowdown to those that remain strong. We make sure that we keep our strong performers on our team while de-emphasizing the need for temporary work.

Speaker Change: Both numbers were below our targets for the year due in part to lower lumber market prices.

Speaker Change: For 2024, we have raised the bar on the definition of new products as we drive focus on more value added products and services for.

Speaker Change: For new products, we have increased the return on investment target.

Speaker Change: Place more emphasis on innovation and eliminated many products that were new to <unk>, but did not have a competitive sustainable advantage.

Operator: We also continue to train, recruit, and hire to keep growing our skills and talent. We have a long history of promoting from within, and we augment this practice by hiring outside expertise and talent to help us improve. The UFP Business School continues to add unique opportunities for current and prospective employees to enhance their skills and knowledge and move up in the organization. And in our quest to be the employer of choice in the communities we serve, we are honored to share bonuses and extra compensation with our hourly employees.

Speaker Change: With the higher standard we are lowering the forecast for new product sales to $510 million for 2024, we.

Speaker Change: We will still be marketing and selling the products, which no longer qualify as new and estimate those items could sell up to $300 million in 2024.

Speaker Change: Our investments in the innovation accelerator assist speed to market for new product ideas by rapid iteration and faster scale and synergy.

Speaker Change: We have seen several new products developed in 2023 and tested which we expect we will bring to market during 2024.

Speaker Change: Our innovate fund has completed four or four investments in either late stage development or early stage commercialization projects.

Operator: These bonuses totaled over $53 million in 2023 as we continue to share performance rewards with all of our full-time teammates. In the marketing space, as we continue to grow our value-added product categories, we recognize a need to refine, enhance, and measure the effectiveness and efficiency of our marketing spend to ensure that we are driving sales in the most efficient manner possible. We are creating a small central marketing team to provide a more robust process, to provide data-driven and timely results to our leadership teams, and to better leverage costs with the marketing teams in our business units and segments. We have developed a five-year strategic plan that sets targets for sales of over $10 billion, not including material acquisition.

Speaker Change: The team has several other opportunities in the pipeline as we fulfill our 2021 commitment of $100 million of investments for these types of projects over the next few years.

Speaker Change: Purchasing in.

Speaker Change: In 2024 of the lumber market is expected to remain within a trading range more in line with historical levels.

Speaker Change: The mills are bringing on additional capacity of more than 1 billion board feet in 2024.

Speaker Change: We expect that mills will manage a supply side by taking production offline at less efficient mills to match market demand rather than a road their market their margins.

Speaker Change: We would note that in January the lumber market has declined steadily.

Speaker Change: Transportation during 2023, we invested and improved technology and worked with centralized our transportation functions to gain efficiency and reduce our overall cost.

Speaker Change: As with most major changes the rollout of technology has come with some challenges which are being addressed and we have also uncovered areas, which will be improved by our new model.

Operator: It also charts a path to higher EBITDA margins with a stretch goal of 12.5% EBITDA margins. Now I'd like to turn it over to Mike Cole to review the financials. Thank you, Matt.

Speaker Change: We expect to have the core systems fully implemented in 2024.

Operator: Our consolidated results this quarter include a 20% drop in sales to $1.5 billion, consisting of a 10% reduction in selling prices and a 10% decrease in units sold. The decline in selling prices is a result of the drop in lumber prices and more competitive pricing in certain business units. The biggest factor impacting our drop in unit sales is our camel and It's important to note that in the fourth quarter of 2022, we operated with one extra week of activity due to the way our fiscal year-end worked. One last week resulted in a 6% unit decline in the fourth quarter of 2023. Next, while adjusted EBITDA dropped 22% to $166 million, adjusted EBITDA margins remained well above historical levels at 10.9%.

Speaker Change: On the human capital front, we note that the current usage unemployment rate at the end of January was 8% up from 7% at the end of December 2023.

Speaker Change: We note that many of the jobs being created are a nonprofit health care and government.

Speaker Change: These factors help explain the current lack of growth in the manufacturing space.

Speaker Change: Our facilities are consistently evaluating staffing levels and production schedules to optimize our teams.

Speaker Change: We also balance our workforce among segments to ensure easy transfers from area seeking a slowdown to those that remained strong.

Speaker Change: We make sure that we keep our strong performers on our team while de emphasizing the need for temporary workers.

Speaker Change: We also continue to train recruit and hire to keep growing our skills and talent.

Speaker Change: We have a long history of promoting from within and we augment this practice by hiring outside outside expertise and talent to help us improve.

Speaker Change: The UFP business school continues to add unique opportunities for current and prospective employees to enhance their skills and knowledge and move up in the organization.

Operator: We believe our team's commitment to growing our portfolio of value-added products and our market-focused management structure continue to contribute to the structural improvement in our market. Return on invested capital finished the year at almost 24%, more than two times our weighted average cost. Operating cash flow improved by $128 million to $960 million for the year, as lower volumes and lumber prices reduced our investment in networking. And finally, our balance sheet continues to gain strength with a net cash surplus of $842 million this year compared to $281 million last year, providing us with flexibility to pursue financial and strategic objectives. Moving on to our segment, sales in our retail segment dropped 27% to $506 million, consisting of a 9% decline in selling prices and an 18% decline in units.

And in our quest to be the employer of choice in the communities. We serve we are honored to share bonuses and extra compensation with our hourly employees.

Speaker Change: These bonuses totaled over $53 million in 2023, as we continue to share performance rewards with all of our fulltime teammates.

Speaker Change: In the marketing space as we continue to grow our value added product categories, we recognize the need to refine and enhance and measure the effectiveness and efficiency of our marketing spend to ensure that we are driving sales in the most efficient manner possible.

Speaker Change: We are creating a small central marketing team to provide a more robust process to provide data driven and timely results to our leadership teams and to better leverage costs, where the marketing teams and our business units and segments.

Speaker Change: We have developed a five year strategic plan, which sets targets for sales of over 10 billion not including material acquisitions.

It also charts, a path to higher EBITDA margins, where the stretch goal of 12, 5% EBITDA margin.

Speaker Change: Now I'd like to turn it over to Mike Cole to review the financial information.

Operator: This unit decline was comprised of a 14% decline in volume with big box customers and a 23% decline in volume with independents. We experienced our greatest unit declines in our EDGE business unit, which Matt discussed, and the Outdoor Essentials and Building Products categories that are in line with this. In spite of lower demand and sales volumes, we're pleased to report a $2 million increase in our gross profit for the quarter, which was driven by our ProWood and Decorators units as a result of pricing and operations. Higher SG&A expenses contributed to a $4 million decrease in retail's operating profits for the quarter.

Michael R. Cole: Thank you Matt.

Michael R. Cole: Our consolidated results. This quarter include a 20% drop in sales to $1 5 billion, consisting of a 10% reduction in selling prices and a 10% decrease in units sold.

Michael R. Cole: The decline in selling prices as a result of the drop in lumber.

<unk> of the drop in lumber and more competitive pricing in certain business units.

Michael R. Cole: The biggest factor impacting our drop in unit sales as our calendar it's.

Michael R. Cole: It is important to note that in the fourth quarter of 2022, we operated with one extra week of activity due to the way our fiscal year end works.

Michael R. Cole: One less week resulted in a 6% unit decline in the fourth quarter of 2023.

Operator: The increase in SG&A was primarily comprised of an increase in incentive compensation. Moving on to packaging, Sales in this segment dropped 21% to $414 million, consisting of a 10% decline in selling prices and an 11% decrease in units. As we mentioned last quarter, customer demand continues to be soft, and that's contributed to more competitive prices. As a result of these factors, gross profits dropped by almost $49 million. The decline in gross profits was offset by a $10 million decrease in SG&A due to a decline in incentive compensation. Operating profits in the packaging segment declined more than $38 million to $43 million in total. Turning to construction, sales in this segment dropped 16% to $511 million, consisting of a 13% decline in selling prices and a 3% decrease. The unit decline was primarily due to our commercial and concrete forming business. A decline in selling prices was primarily experienced in our site-built and concrete-forming business units and resulted in an $18 million decrease in our overall gross profits and operating profits in the segment for the quarter.

Michael R. Cole: Next while adjusted EBITDA dropped 22% to $166 million adjusted EBITDA margin remained well above historical levels at 10, 9%.

Michael R. Cole: We believe our team's commitment to grow our portfolio of value added products and our market focus management structure continued to contribute to the structural improvement in our margins.

Michael R. Cole: Return on invested capital finished the year at almost 24% more than two times, our weighted average cost of capital.

Michael R. Cole: Operating cash flow improved by 128 million to $960 million for the year as lower volumes in lumber prices reduced our investment in networking capital.

Michael R. Cole: And finally, our balance sheet continues to gain strength within net cash surplus of $842 million this year compared to $281 million last year.

Michael R. Cole: Adding us with flexibility to pursue financial and strategic objectives.

Speaker Change: Moving on to our segments.

Speaker Change: Sales in our retail segment dropped 27% to $506 million, consisting of a 9% decline in selling prices and an 18% decline in unit sales.

Speaker Change: This unit decline was comprised of a 14% decline in volume with big box customers and a 23% decline in volume with independent retailers.

Speaker Change: We experienced the greatest unit declines in our edge business unit, which Matt discussed.

Speaker Change: And the outdoor essentials and building products categories of our <unk> business unit.

Speaker Change: In spite of lower demand and sales volumes were pleased to report a $2 million increased in our gross profit for the quarter, which was driven by our pro wood and decorators units as a result of pricing and operational improvements.

Operator: As we manage through this cycle, each segment continues to focus on executing our strategies to grow our portfolio of value-added products, and we're pleased to report an improvement in our annual ratio of value-added sales to total sales, to 68% this year from 63% last. Similarly, our annual ratio of new product sales to total sales improved to 9.7% this year from 7.7%. We're confident these factors will not only help us maintain the structural improvements and margins we've realized today but enable further improvements in our EBITDA margins over time. We're also mindful of our cost structure in this environment as we ensure the company is appropriately sized relative to demand, while still providing resources needed to execute long-term strategies that enhance our ability to offer value-added solutions and drive innovation. Our SC&A expenses came in unplanned for the quarter and were $17 million lower than last year, driven primarily by lower bonus and sales incentives for the quarter. Lower incentive expenses were also the primary reason SG&A expenses dropped $67 million for the year.

Speaker Change: Higher SG&A expenses contributed to a $4 million decrease in Retail's operating profits for the quarter.

Speaker Change: The increase in SG&A was primarily comprised of an increase in incentive compensation expenses.

Speaker Change: Moving on to packaging sales.

Speaker Change: Sales in this segment dropped 21% to $414 million, consisting of a 10% decline in selling prices and an 11% decrease in units.

Speaker Change: As we mentioned last quarter customer demand continues to be soft and thats contributed to more competitive pricing.

Speaker Change: As a result of these factors gross profit dropped by almost $49 million.

Speaker Change: The decline in gross profits was offset by a $10 million decrease in SG&A due to a decline in incentive compensation expenses.

Speaker Change: Operating profits in the packaging segment declined more than 38 million to $43 million in total.

Speaker Change: Turning to construction sales in this segment dropped 16% to $511 million, consisting of a 13% decline in selling prices and a 3% decrease in units.

Speaker Change: Unit decline was primarily due to our commercial and concrete forming business units the.

Speaker Change: The decline in selling prices was primarily experienced in our site built and concrete forming business units and resulted in the $18 million decrease in our overall gross profits and operating profits in the segment for the quarter.

Operator: Before we move on from the income statement, we think it's important to assess the impact of our strategies and structure on our overall profitability by looking at our performance in 2019 compared to 2023. The metrics we focus on are gross profit margin, SCNA as a percentage of gross profit, adjusted EBITDA margin, and adjusted EBITDA growth to units. Gross profit margin improved from 15.5% in 2019 to 19.7% in 2023. SCNA as a percentage of gross profit improved from 64% to 54% in 2021. Adjusted EBITDA margin improved from 7.2% to 11.2%, and our adjusted EBITDA growth was four and a half times greater than our unit sales growth since 2008. This track record gives us confidence that our strategies are working and that continued execution of them will help us reach the long-term goals we highlighted in the press release.

Speaker Change: As we manage through this cycle. Each segment continues to focus on executing our strategies to grow our portfolio of value added products and we're pleased to report an improvement in our annual ratio of value added sales to total sales to 68% this year from 63% last year.

Speaker Change: Similarly, our annual ratio of new product sales to total sales improved to nine 7% this year from seven 7% last year.

Speaker Change: We're confident these factors will not only help us maintain the structural improvements in margins, we've realized to date, but enable further improvements in our EBITDA margins over time.

Speaker Change: We're also mindful of our cost structure in this environment as we ensure the company is appropriately sized relative to demand, while still providing resources needed to execute long term strategies that enhance our ability to offer value added solutions and drive innovation.

Speaker Change: Our SG&A expenses came in on plan for the quarter and were $17 million lower than last year, driven primarily by lower bonus and sales incentives for the quarter.

Speaker Change: Lower incentive expenses were also the primary reason SG&A expenses dropped $67 million for the year.

Before we move on from the income statement, we think it is important to assess the impact of our strategies and structure on our overall profitability by looking at our performance in 2019 compared to 2023.

Operator: And then I'll touch on it at the end of my prepared remarks. Moving on to our cash flow statement, our cash flow from operations was $960 million, a $928 million improvement over last year as lower volumes and lumber prices reduced our investment in networking. Our cash cycle for the year decreased to 63 days this year from 64 days last year due to an improvement in our receivables cycle, and our receivables remain healthy at 91 percent current. Our investing activities included $180 million in capital expenditures.

Speaker Change: The metrics, we focus on our gross profit margin SG&A as a percentage of gross profit.

Speaker Change: Adjusted EBITDA margin and adjusted EBITDA growth to unit sales growth.

Speaker Change: Gross profit margin improved from 15, 5% no 19 to 19, 7% in 2023.

Speaker Change: SG&A as a percentage of gross profit improved from 64% to 54% in 2023, adjusted EBITDA margin improved from seven 2% to 11, 2%.

And our adjusted EBITDA growth was four five times greater than our unit sales growth since 2019.

Speaker Change: This track record gives us confidence our strategies are working and that continued execution of them will help us reach the long term goals. We highlighted in the press release, and then I'll touch on at the end of my prepared remarks.

Operator: Our expansionary investments, which totaled about $70 million, are primarily focused on four key areas. These include expanding our capacity to manufacture new and value-added products, primarily in our structural packaging, protective packaging, and decorators business. Geographic Expansion and Core Higher Margin Business. Achieving efficiencies through automation and increasing our transportation, We also spent $52 million to acquire Pallet Sous L'Air, a leading manufacturer of machine-built pallets in Spain that gives us an attractive runway for growth geographically and in new verticals they don't currently serve.

Speaker Change: Moving onto our cash flow statement, our cash flow from operations was $960 million and $928 million improvement over last year as lower volumes in lumber prices reduced our investment in net working capital.

Speaker Change: Our cash cycle for the year decreased to 63 days. This year from 64 days last year due to an improvement in our receivables cycle and our receivables we remained healthy at 91% current.

Speaker Change: Our investing activities included $180 million and capital expenditures are expansionary investments, which totaled about 70 million are primarily focused on four key areas.

Speaker Change: Expanding our capacity to manufacture new and value added products, primarily in our structural packaging protective packaging and decorators business units.

Speaker Change: Geographic expansion in core higher margin businesses.

Operator: Finally, our financing activities included returning capital to our shareholders through almost $68 million of dividends and more than $82 million of share returns. Turning to our capital structure and resources, we continue to have a strong balance sheet with $842 million in surplus cash in excess of debt compared to $281 million last year. Our total liquidity was $2.4 billion.

Speaker Change: Achieving efficiencies through automation and increasing our transportation capacity.

Speaker Change: We also spent $52 million to acquire talent soulliere and leading manufacturer of machine build pallets in Spain that gives us an attractive runway for growth geographically and in new verticals. They don't currently serve.

Speaker Change: Finally, our financing activities included returning capital to our shareholders through almost $68 million of dividends and more than $82 million of share repurchases.

Operator: This includes cash of $1.1 billion and $1.3 billion in availability under certain long-term lending agreements we have. The strength of our cash flow generation, conservative approach to managing our capital structure, and prudent return-driven approach to capital allocation continues to provide us with an abundance of capital to grow our business and also return to shareholders through different sites. We plan to continue to pursue a balanced and return-driven approach between dividends, share buybacks, capital investments, and M&A. www. UniversalForest.com. Our board approved a quarterly dividend of 33 cents a share to be paid in March, which represents a 10% increase from the most recent quarterly rate and a 32% increase from the rate paid last March.

Speaker Change: Turning to our capital structure and resources.

Speaker Change: We continue to have a strong balance sheet with $842 million in surplus cash in excess of debt compared to $281 million last year.

Speaker Change: Our total liquidity was $2 4 billion, which includes cash of $1 1 billion and $1 3 billion in availability under certain long term lending agreements we have in place.

Speaker Change: The strength of our cash flow generation conservative approach to managing our capital structure and prudent return driven approach to capital allocation continues to provide us with an abundance of capital to grow our business and also return to shareholders through different cycles. We plan to continue to pursue a balanced and return driven approach between dividends share buybacks.

Speaker Change: <unk> capital investments and M&A, specifically, our board approved a quarterly dividend of 33, a share to be paid in March which represents a 10% increase from the most recent quarterly rate and a 32% increase from the rate paid last March.

Operator: We currently plan to continue to increase our dividend annually at a rate that is aligned with our targeted long-term growth rate in earnings and cash flow. The Share Repurchase Program our board approved in July provides us with authorization to repurchase up to $200 million worth of shares until the end of July 2024. Since the approval, we've repurchased more than 274,000 shares at an average price of $97.22, resulting in $173 million in remaining authorization. As a result of the growth and margin improvement opportunities we see, we plan to increase our total capital expenditures to an estimated range of $250 to $300 million in 2025. Expansionary capital investments are expected to comprise $150 to $200 million of this total.

Speaker Change: We currently plan to continue to increase our dividend annually at a rate that is aligned with our targeted long term growth rate in earnings and cash flow.

Speaker Change: The share repurchase program. Our board approved in July provides us with authorization to repurchase up to $200 million worth of shares until the end of July 2024.

Speaker Change: Since the approval, we've repurchased more than 274000 shares at an average price of $97 22.

Speaker Change: Resulting in $173 million in remaining authorization.

Speaker Change: As a result of the growth and margin improvement opportunities. We see we plan to increase our total capital expenditures to an estimated range of $250 million to $300 million in 2024.

Speaker Change: Expansionary capital investments are expected to comprise of $150 million to $200 million of this total.

Operator: We plan to continue to invest at this elevated level in the future to capitalize on the higher margin growth opportunities we see in each of our sectors. Finally, our strong balance sheet allows us to continue to pursue a pipeline of M&A opportunities. We'll continue to target companies that are a strong strategic fit and enhance our capabilities and competitive position, while providing higher margin return and growth. I'll finish up with comments about our outlook for the year and our long-term goals. Looking into 2024, we believe the soft demand and more competitive pricing we're currently experiencing will continue into the first half of the year. But we're optimistic we'll see improvements in the second half of the year based on the current economic forecast, including the trajectory of interest rates.

Speaker Change: We plan to continue to invest at this elevated level in the future to capitalize on the higher margin growth opportunities, we see in each of our segments.

Speaker Change: Finally, our strong balance sheet continues to allow us to continue to pursue a pipeline of M&A opportunities will continue to target companies that are strong strategic fit and enhance our capabilities and competitive position.

Speaker Change: While providing higher margin return and growth potential.

Speaker Change: I'll finish up with comments about our outlook for the year and our long term goals.

Speaker Change: Looking into 2024, we believe the soft demand and more competitive pricing currently experiencing will continue into the first half of the year.

Speaker Change: But we are optimistic we will see improvements in the back half of the year based on the current economic forecasts, including the trajectory of interest rates.

Operator: On a long-term basis, we'll continue to focus on executing our strategies to take advantage of the opportunities identified in our business. Generally, those opportunities consist of growing our portfolio of sales of new and value-added products and investing in our brand, expanding geographically in our higher margin core business, investing in automation and process improvements to expand capacity and enhance productivity, vertically integrating in certain areas, and gaining market share with large customers through more strategic sales efforts and our unique capabilities in geography. As we effectively execute our strategies, we believe we can achieve our new five-year financial goals of a 7-10% compounded annual growth rate in unit sales, a 12.5% adjusted EBITDA margin, and a return on invested capital exceeding our hurdle rate on new investments while maintaining a conservative capital. That's all I have on the financials.

Speaker Change: On a long term basis will continue to focus on executing our strategies to take advantage of the opportunities identified in our business units generally those opportunities consist of growing our portfolio of sales of new and value added products and investing in our brands.

Speaker Change: Spanning geographically in our higher margin core businesses.

Speaker Change: Investing in automation and process improvements to expand capacity and enhance productivity.

Speaker Change: Particularly integrating in certain businesses and gaining market share with large customers through more strategic sales efforts and our unique capabilities and geographic footprint.

As we effectively execute our strategies, we believe we can achieve our new five year financial goals of a 7% to 10% compounded annual growth rate in unit sales, a 12, 5% adjusted EBITDA margin and a return on invested capital exceeding our hurdle rate on new investments, while maintaining a conservative capital structure.

Operator: Thank you, Mike. Now I'd like to open it up to any questions that you may have. Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, press star 1-1 again.

Speaker Change: All I have in financials, Matt.

Matt: Thank you Mike now I'd like to open it up for any questions that you may have.

Speaker Change: Yes.

Speaker Change: Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question Press Star one again.

One moment while we compile the Q&A roster. Our first question will come from the line of Ketan Mamtora with BMO. Your line is open. Thank you. Good morning, Matt, Mike. Good morning, Steven.

Speaker Change: While we compile the Q&A roster.

Speaker Change: Our first question will come from the line of Keith <unk> with BMO. Your line is now open.

Keith: Thank you good morning, Mike.

First question: First question, coming back to the retail side, it sounds like, you know, UFP Edge and ProWard are kind of where there is, you know, some weakness right now. As you kind of see your current trends, are you seeing signs of stabilization, or are those, you know, kind of volumes still under pressure? I know you kind of talked about recovery in the back half, but I'm just curious if activity is kind of stabilizing at these levels. Yeah, I think, Ketan, it's kind of tough based on just January results. As I looked at January, it kind of gives you a little bit of a head fake in the sense that the weather, there are some weather issues.

Keith: Morning, Keith question.

Keith: Last question coming back to the retail side sounds like UFP edge in cohort is kind of where there is not some weakness right now.

Keith: As you kind of see a current trends are you seeing signs.

Keith: Of stabilization on all of those.

Speaker Change: Volumes still under pressure and I know, you've kind of talked about recovery in the back half, but I'm just curious if activity's kind of stabilizing at these levels.

Speaker Change: Yeah, I think Keith and it's kind of tough based on just January results as I looked at January kind of gives you a little bit of a head fake in the sense that the whether there's some weather issues and that's what we're hearing from the customer base.

And that's what we're hearing from the customer base. I'd like to think that it's stabilized, but it's always difficult to predict at this point. Fair enough.

I'd like to think that it's stabilized, but it's always difficult to predict at this point.

Speaker Change: Fair enough.

And then looking at more sort of longer-term targets, you kind of base them both on unit growth and also on EBITDA margin. Can you sort of talk about where you see the most opportunity within your three business lines, both on the top line and on the bottom line, you know, with margin and sort of revenue growth? Yeah, what I can tell you is I think each of the segments has good opportunities, but I would say they're not uniform across all areas.

Speaker Change: And then looking at more sort of longer term targets.

Based both on the on the unit growth and also on the EBITDA margin.

Speaker Change: You sort of talk about where youll see the most opportunity within your three business lines, both on the top line and on the bottom line.

Speaker Change: Margin.

Speaker Change: And sort of revenue growth.

Speaker Change: Yes.

Speaker Change: <unk> I think each of the segments has good opportunities I would say they are not uniform across all areas.

As you look at the growth in decorators, for example, that's something we're excited about. We think a rebound in edge is going to have a really good impact on us. If we move to packaging, I think there's going to be parts of that that are going to be challenged, as Mike mentioned, simply because of the amount of manufacturing that's either not happening now or needs to recover in the back half of the year. But if you look at protective packaging materials, we expect that to remain strong and continue to grow, so kind of a mixture there.

Speaker Change: As you look at the growth on Decorators for example, that's something we're excited about we think a rebound in edge is going to have a really good impact for us.

Speaker Change: If we move to packaging I think theres going to be parts of that that are going to be challenged as Mike mentioned simply because of the amount of manufacturing that's either not happening now or it hasnt needs to recover in the back half of the year.

Speaker Change: If you look at the protective packaging materials, we expect that to remain strong and to continue to grow so.

Speaker Change: Kind of a mixed a mixture there and then if you move along into the construction space I would tell you that.

And then, if you move along into the construction space, I would tell you that we've outlined what we expect for the site built. It's either slightly up or slightly down on housing, and that's really going to help define what we're able to do there. The factory built we walked through, again, I think that's kind of aligned with the housing market itself. And then the potential areas for growth, commercial, and concrete forming, they both have room to improve. So we would look to see that being better in 24 here.

Speaker Change: We've outlined what we expect for site built either slightly up slightly down on housing and that's really going to help define what we're able to do there.

Speaker Change: The factory built we walk through again, I think thats kind of aligned with the housing market itself.

Speaker Change: And then the potential areas for growth commercial and concrete forming they both have room to improve so we would look to see that being better in 'twenty four there maybe.

Maybe adding to that too, there's one area that spans really all the segments, and that's investing in automation and driving efficiencies. And I think the capital ask for that area was nearly $100 million. Got it. Now that's helpful.

Speaker Change: Maybe adding onto that.

Speaker Change: One area that spans really all of the segments and thats investing in automation and driving efficiencies in that I think the capital asking that area was nearly $100 million for next year.

Speaker Change: Got it now that's helpful I'll jump back in the queue. Good luck.

I'll jump back in the queue. Good luck. Thanksgiving. Thank you. One moment for our next question, and that will come from the line of Kurt Yanger with D. A. Davidson. Your line is open. Great.

Speaker Change: Thanks Keith.

Speaker Change: Thank you one moment our next question.

Speaker Change: And that will come from the line of Kurt Yinger with D. A Davidson your line is now open.

Thanks and good morning, everyone. Good morning, Kurt. Hey, Kurt.

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

Speaker Change: Morning.

Morning, it looked like kind of the first sub 20% gross margin and packaging since early 21. I'm curious how you would describe the pricing environment between pallets and maybe more structural packaging offerings. And how does that impact your view on, you know, potentially getting back to 20% plus gross margins over the next couple of quarters? Yeah, I think that's a really good question, Kurt. What I would tell you is that I think what we're seeing in the marketplace is just a lot of pricing pressure, as we alluded to it from the standpoint of when companies aren't as busy, they tend to take a look at their purchasing and try to drive a little more value there.

Kurt Yinger: Good morning, it looks like the first sub 20% gross margin in packaging sense early 'twenty, one I am curious how you would kind of describe the pricing environment between pallets and maybe more structural packaging offerings.

Kurt Yinger: And how does that impact your view on.

Kurt Yinger: Potentially getting back to 20% plus gross margins over the next couple of quarters.

Speaker Change: Yes, I think Thats a really good question, Kurt what I would tell you is I think what we're seeing in the marketplace is.

Speaker Change: So a lot of pricing pressure as we alluded to it from the from the standpoint of when companies aren't as busy they tend to take a look at their purchasing and try to drive a little more value there.