Q2 2024 Boise Cascade Co Earnings Call
and Stephen Roche, and all of the other people who have been involved in this work. So all. And I'm going to say goodbye now. And I'll be back in a couple minutes. So again,
Felicia Crabtree: Good morning. My name is Felicia Crabtree and I will be your conference facilitator today. At this time I would like to welcome everyone to Boise Cascade's second quarter 2024 earnings conference call.
Speaker Change: All lines have been placed on mute to prevent any background noise.
Chris Forrey: After the speaker's remarks, there will be a question and answer period. It is now my pleasure to introduce you to Chris Forrey, Vice President, Finance and Investor Relations, Boise Cascade. Mr. Forrey, you may now begin your conference.
Chris Forrey: Thank you, Felicia, and good morning, everyone. I'd like to welcome you to Boise Cascade's second quarter 2024 earnings call and business update.
Speaker Change: Joining me on today's call are Nate Jorgensen, our CEO , Kelly Hibbs, our CFO and Treasurer, Troy Little, head of our wood products operations, and Jeff Strom, head of our building material distribution operations.
Speaker Change: Turning to slide two. This call will contain forward-looking statements. Please review the warning statements in our press release, on the presentation slides, and in our filings with the SEC regarding the risks associated with these forward-looking statements.
Speaker Change: Also, please note that the appendix includes reconciliations from our GAAP net income to EBITDA and adjusted EBITDA and segment income to segment EBITDA. I will now turn the call over to Nate.
Nate Jorgensen: Thanks, Chris. Good morning, everyone. Thank you for joining us for our interview call today. I'm on slide number three.
Speaker Change: Total U.S. housing starts decreased 70%, driven by lower multifamily starts as single-family housing starts increased 7% compared to the prior year quarter. Our consolidated second quarter sales of $1.8 billion were down 1% from second quarter 2023.
Speaker Change: Our net income was $112.3 million, or $2.84 per share, compared to net income of $146.3 million, or $3.67 per share in the year-ago quarter.
Speaker Change: Both of our businesses delivered strong financial results during the quarter while operating in a somewhat tepid demand environment influenced by elevated mortgage rates and economic uncertainties.
Speaker Change: In addition, spending on our organic growth projects progressed as expected, and we continue to demonstrate that our returning capital to our shareholders is an important part of our capital deployment strategy. I want to thank our associates across the company who continue to deliver superior value to our customer and vendor partners as we navigate uncertainties posed by the current demand environment.
Speaker Change: Kelly will now walk through our segment financial results, give some insights on third quarter, and then provide an update on our capital allocation in more detail, after which I'll provide an outlook before we take your questions.
Kelly Hibbs: Thank you, Nate. And good morning, everyone. Wood's product sales in the second quarter, including sales to our distribution segment, were $489.8 million compared to $530.3 million in second quarter 2023.
Kelly Hibbs: Wood Products reported segment EBITDA of $95.1 million, down from EBITDA of $127 million reported in the year-ago quarter.
Kelly Hibbs: The decrease in segment EBITDA was due primarily to lower EWP sales prices, as well as higher wood fiber and conversion costs.
Kelly Hibbs: The decreases were offset partially by higher EWP sales volumes.
Kelly Hibbs: BMD sales in the quarter were $1.7 billion, up 1% from second quarter 2023.
Speaker Change: B&B reported Segment EBITDA of $97.1 million in the second quarter compared to Segment EBITDA of $105.9 million in the prior year quarter.
Speaker Change: BMD was able to deliver flat gross margin dollars in a challenging environment. As it relates to costs, selling and distribution expenses increased by $10.9 million, mainly due to the Brasco acquisition, and general and administrative expenses decreased by $2 million.
Speaker Change: Turn to slide 5.
Speaker Change: On a year-over-year and sequential basis, second quarter volumes for LVL were up 8% and 6% respectively, and IJOIS volumes over the same comparative periods were up by 5% and 16%.
Speaker Change: Our EWP volumes continue to be supported by the Resilience and Single-Family Starts. Sequential pricing for iJoyce and LVL was down 3% and 2%, respectively, due to continued pricing pressure in the market.
Speaker Change: Turning to slide six.
Speaker Change: Our second quarter plywood sales volumes.
Speaker Change: was 383 million feet compared to 440 million feet in second quarter 2023.
Speaker Change: As expected and consistent with our strategy, plywood volumes decreased during the current quarter as we shifted a higher proportion of our internally produced veneer into EWP production given improved demand for EWP.
Speaker Change: To $362 per thousand, average plywood net sales price in the second quarter was down 1% year-over-year and 4% sequentially. Plywood pricing weakened steadily as we progressed through the second quarter, with our June average price realizations around $340 per thousand.
Speaker Change: Moving to slides 7 and 8, B&B second quarter sales were $1.7 billion, up 1% from second quarter 2023, driven by sales volume increases of 2%.
Speaker Change: offset partially by sales price decreases of 1%.
Speaker Change: Excluding the impact of the Brasco acquisition, BMD sales would have decreased 2% from second quarter 2023. By product line, commodity sales decreased 6%, general line product sales increased 8%, and sales of EWP decreased less than 1%.
Speaker Change: Gross margin dollars were flat when compared with the same quarter last year, as lower margin dollars on commodity and EWP products were offset by higher margin dollars generated on generalized products.
Speaker Change: B&B's gross margin percentage was 14.8% down, 20 basis points year-over-year and sequentially.
Speaker Change: BMD's EBITDA margin was 5.9% for the quarter, down from the 6.5% reported in the year-ago quarter, but up 30 basis points sequentially.
Speaker Change: We are pleased with BMD's performance in the second quarter given the market landscape.
Speaker Change: We benefited from our continued growth in general line products.
Speaker Change: where sales of those products represented 42% of our sales mix in the second quarter, the highest in our history. In commodities, our team's performance was outstanding in a quarter with continued weakness in lumber markets and panel markets that drifted significantly lower as the quarter progressed.
Speaker Change: I'm now on slide nine.
Speaker Change: Looking forward to the third quarter, our EWP order intake has slowed in conjunction with recent declines in builder sentiment, weakening single-family starts and permits data, and ongoing affordability constraints for homebuyers.
Speaker Change: Assuming we don't see an acceleration of single-family starts from recent levels, we expect mid to high single-digit sequential volume declines in EWP. On EWP pricing, we currently expect low single-digit sequential price declines in the third quarter.
Speaker Change: For plywood, we expect our volumes to be comparable to second quarter. However, market conditions have remained weak with July price realizations approximately 10% below our second quarter average.
Speaker Change: With regards to BMD, our daily sales pace through July is approximately 5% below second quarter daily sales averages. The number of sales days in the third quarter will be consistent with second quarter at 64 days.
Speaker Change: I'm now on slide 10.
Speaker Change: We had capital expenditures of $74 million in the six months into June 2024, with $37 million of spending in both wood products and BMD.
Speaker Change: Our capital spending range for 2024 remains at $250 to $270 million, with the pace of spending to accelerate as we move through the back half of the year.
Speaker Change: In Wood Products, the significant modernization of our Oakdale facility will occur in stages between fourth quarter 2024 and second quarter 2025, and plans are in place to mitigate the potential impact to our EWP production in the southeast region as we take project-related downtime at that facility.
Speaker Change: In BMD, we're excited to have recently broken ground on our new distribution facility in Hondo, Texas, and expect it to be operational in late 2025.
Speaker Change: Speaking to shareholder returns, we paid $19 million in regular dividends in the first half of 2024, and our year-to-date July share repurchase activity was nearly 768,000 shares for approximately $100 million.
Speaker Change: Today, we have approximately 1.2 million shares still available for repurchase under our Share Repurchase Program.
Speaker Change: Also, our Board of Directors recently approved two additional dividend payments for our common shareholders.
Speaker Change: A $0.21 per share quarterly dividend, which represents a 5% increase, and also a $5 per share special dividend. Shareholders of record as of September 3rd will receive payment of these dividends on September 16th.
Speaker Change: In summary, our balance sheet remains very strong and we are committed to our balanced approach to capital allocation that includes ongoing investment in our existing asset base, organic growth projects, and returns to our shareholders.
Speaker Change: We also have the flexibility to execute M&A if opportunities surface that align with our strategy.
Speaker Change: I will turn it back over to Nate to discuss our business outlook.
Nate Jorgensen: Thanks, Kelly. I'm on slide number 11.
Nate Jorgensen: Current industry forecasts for 2024 U.S. housing starts are slightly below actual housing starts of $1.42 million in 2023, as reported by the U.S. Census Bureau. Home affordability remains a challenge for many consumers due to the cost of housing combined with elevated mortgage rates.
Nate Jorgensen: However, with low unemployment and undersupplied existing housing stock available for sale and favorable demographic trends, new residential construction is expected to remain an important source of supply for homebuyers.
Nate Jorgensen: Multifamily starts have declined sharply from historic levels seen in recent years due to increased capital costs for developers combined with elevated supply.
Nate Jorgensen: Regarding home improvement spending, the age of U.S. housing stock and elevated levels of homeowner equity will continue to provide a favorable backdrop for repair and remodel spending.
Nate Jorgensen: However, while home improvement spending is expected to remain healthy compared to history, renovation spending has softened due to consumer uncertainty, labor availability, higher borrowing costs, and building material inflation.
Nate Jorgensen: Although near-term market demand expectations have moderated, our longer-term view on housing fundamentals remains favorable, supported by demographic trends and under-built housing stock.
Nate Jorgensen: That constructive long-term view, in tandem with our outstanding balance sheet, affords us the ability to maintain a clear focus on our strategy and the execution of our growth initiatives that position the company for continued success in the future.
Nate Jorgensen: Thank you for joining us today and your continued support and interest in Boise Cascade. We welcome any questions at this time. Felicia, would you please open the phone lines?
Operator: Thank you. One moment.
Felicia Crabtree: Thank you. One moment while we compile the Q&A roster.
Speaker Change: The first question comes from the line of Susan Maklari of Goldman Sachs. Susan, please go ahead.
Susan McCleary: Thank you. Good morning everyone. Morning Susan.
Susan McCleary: I want to start on the performance in the general line segment within BMD. It seems like you are outperforming the market there, even with all the noise and some of the shifts that we're seeing in housing broadly. Can you just talk about what is driving some of that? Any of the dynamics that you're seeing across the various products that you're pulling through that segment? And how do you think about the ability to continue to outperform that as you execute on your own initiatives? Thank you.
Susan McCleary: Yeah, hey, Sue, this is Kelly. Good morning. Hope you're well. Um, yeah, so as you know, and as we flagged in our commentary, general line is is continues to be a focus for us in terms of
Susan McCleary: increasing that portion of our sales mix. And we do think it continues to show up. Well, we have really good alignment.
Susan McCleary: You know, with our supplier base and also downstream to our dealer base where those products and services are desired and so nothing maybe that I'd really specifically call out. But, but yeah, it continues continues to be a focus. So I'll let Jeff maybe add just a little bit more color here.
Susan McCleary: This is Jeff. I'll just tell you on the general line.
Jeff Strum: You know, all the projects that we've done and the growth that we've done and adding our footprint has allowed us to go deeper and wider in that segment. The millwork piece continues to grow.
Jeff Strum: And one other thing that we did this year is we leaned in really hard during the winter buys and set ourselves up. And we knew this was going to be a distribution-friendly market, and so we had everything in stock, and we continued to grow and move those products right along.
Stewart: Hey Stewart, maybe just one final comment on that, as you think about our general line of suppliers, our partners.
Stewart: they continue to add to their product mix.
Stewart: And so as you think about their SKU intensity, they're continuing to grow their SKUs and their optionality. And that's really great for us on the distribution side to support that. And so that I think is part of our, you know, the tailwind as well as they introduce new products and new services. That's an important part of what we need to execute on their behalf as well.
Speaker Change: Okay, that's very helpful color. And then switching to EWP.
Speaker Change: As you add the incremental veneer capacity and that comes through and allows you to grow the volumes in EWP, how are you thinking about that relative to the pricing dynamic for those products and what's your ability to sort of manage those in the next couple quarters?
Speaker Change: Yeah, I would say suits me. I think in terms of our, you know, our EWP footprint, I mean, as you know, our commitment was making sure that we had the right, you know, capabilities, including all of our input materials, specifically on veneer side. So making sure that we had the right
Speaker Change: Quantity, quality, and price for Veneer was an important part of what we needed to get done as an organization.
Speaker Change: I think as we think about competing in the marketplace moving forward, we're going to remain obviously centric on what the market needs and what our customers require. So in terms of that supply-demand balance, that will continue to be part of how we think about it. We, again, feel very good about the capability that we continue to build, and as we head the next couple of years, if we have a favorable housing.
Speaker Change: environment, specifically single family. Again, we think we're really well positioned to serve and support our customers in that kind of environment. So
Kelly Hibbs: nothing we're gonna you know we're gonna continue to kind of build that capability and as Kelly described in his comments you know some of that activity will begin here in the third and fourth quarter into early next year and making sure that we have you know those kind of capabilities in Oakdale among other spots
Speaker Change: Okay, and then just following up on that, Nate, really quickly, as the builders are positioning to add supply in the back half, you know, they're still really busy on the spec side of things. What does that mean for EWV pricing as you think about the next couple of quarters?
Nate Jorgensen: Yeah, I think for EWP, I would say in general, Sue, EWP is really an important part of the builder's story in terms of what they need to get accomplished, and I think specifically there, it's
Speaker Change: One of the things they continue to focus on is cycle times.
Speaker Change: And how do they take, you know, complexity out of the job site and add speed and efficiency to the job site? So, as I think about, you know, what EWP brings to that and to the builder, that's an important deliverable for them moving forward and what they need to get accomplished on reducing cycle times.
Speaker Change: So I think in terms of the EWP presence, again, we feel good how we're kind of set up.
Speaker Change: going through the balance of this year. And again, we'll stay very close to our builder partners on what they're seeing and experiencing and making sure that, again, our products and services are set up to support them as they navigate their way through the second half of this year.
Speaker Change: Yeah, okay, and I just want to squeeze one more in which is on the capital allocation side of things
Speaker Change: It's good to see you starting to get into those buybacks. You've done, I think, $100 million year-to-date through July , which is...
Speaker Change: Nice to see you in there. Any thoughts on, you know, how you'll approach that last 1.2 million shares that are available on the authorization? I think it's 1.2 million. And, you know, overall in terms of shareholder returns, that versus the special dividend?
Speaker Change: Yeah, yeah. Thanks, Sue. This is Kelly. Yeah, and you had the right data you laid out there. So maybe just let me think about, let me speak to kind of priorities as it relates to capital allocation just a little bit more broadly as we go.
Speaker Change: We're going to be focused on executing our capital program, which we do have a big lift ahead of us here in the second half of the year to hit our target.
Speaker Change: In terms of shareholder returns, you know, we did announce that the nice special dividend recently, I expect will continue to be opportunistically in the market, buying back shares, you know, no specific to lay out through how much and when for you today, but I that will continue to be part of our playbook.
Speaker Change: And then we do have, obviously, the capability to do M&A.
Speaker Change: More M&A if the right opportunity surfaces, maybe just one brief call out I'd give you on that, which is that we did close on a small acquisition just yesterday in Boise, Idaho, actually a small door and millwork operation that's an existing business, a small entity, but it does
Speaker Change: does have facility, does have employees, and so it gets us a nice little running start into the Boise market. So we were happy to get that done.
Speaker Change: That's great to hear. Okay, thank you both for all the color and good luck with everything. Thank you.
Speaker Change: One next, or one moment for your next question.
Speaker Change: The next question comes from the line of Kurt Yinger of D.A. Davidson. Kurt, please go ahead.
Kurt Yinger: Great, thanks and good morning, everyone.
Kurt Yinger: I was hoping to just start off on EWP and I was hoping you could maybe just frame kind of the overall competitive backdrop you're seeing in the markets at this stage.
Speaker Change: As you move into the back half of the year, what are you looking at that maybe gives you more optimism that perhaps we're near a bottom on pricing, or conversely, that things could perhaps get a little bit more challenging here over the back half?
Speaker Change: Good morning, Kurt. This is Troy Little. I'll start and then others can jump in. In terms of the, you know, you saw the pressure that we
Speaker Change: It has a second quarter, some sequential decline in our pricing. We remain targeted on how we approach that, it's a geographical situation, and so we continue to
Speaker Change: evaluate. And then, you know, we're kind of anticipating as we look out into the third quarter, that that pressure is still there as we kind of finished up Q2. And so we see that kind of playing out a little bit more in Q3.
Speaker Change: So right now, we're still modeling, you know, kind of sequential decline that low to mid-single digit.
Speaker Change: And then, you know, that point, depending on kind of where things are at relative to, you know, buyers on the sideline with the elevated mortgage rates and the home affordability, kind of see where that goes from there.
Speaker Change: I would say this, on the commodity side, without a doubt, we're seeing it a bit slower. On the general line, it is very much steady, is how I'd kind of describe it. And what the customers are saying to us, there is not one.
Speaker Change: But overall, what everyone is telling us is, no, there's not gonna be a major de-stocking, but people are gonna buy exactly what they need. And we're seeing that and feeling it, and without a doubt, that plays into a distribution-friendly market. And there's no doubt we're seeing it right now.
Unknown Executive: Got it. Okay, I appreciate the color. Thank you.
Speaker Change: The next question comes from the line of George Staphos of Bank of America. George, please go ahead.
George Stathos: You know, pricing, right? You know, you're saying you have higher price, perhaps an inventory based on prior trends relative to what's happening in the market right now.
Speaker Change: You need to manage, maybe to the earlier question, down a little bit, and how do you feel about managing against any inventory risks to the P&L? Relatedly...
Speaker Change: with demand being what it is and prices maybe being off and commodity into the third quarter, obviously anything can change. How do you feel about BMD margins third quarter versus second quarter, at least directionally, if you can give us any thoughts there. Thank you.
Speaker Change: Yeah, you bet, George. This is Kelly. I'll take a swing at those to start here.
Speaker Change: So in terms of BMD's overall networking capital, you are correct, it is up.
Speaker Change: And in many cases, that's very intentional.
Speaker Change: If you think about, you know, we now have Roscoe in the mix, we didn't a year ago. We're starting up door shops in Kansas City, starting up door shops in Denver. So things like that are certainly showing up. And then that's intentional. And that's purposeful.
Speaker Change: Right now, it just doesn't feel like there's a whole lot of downside risk. There might be, you know, we're seeing a little bit of lies and lumber, we'll see. But I think we are very well positioned in terms of days on hand and days on order in terms of our inventory. So
Speaker Change: So you put all that together, I think, in short, I'd say we feel...
Speaker Change: Good about where we're positioned. And we would expect as you get into, you know, seasonally softer period into the fourth quarter, we will we will start to see some generation from working capital seasonally coming down as expected.
Speaker Change: But given that things are as you anticipated.
Speaker Change: And you said that commodity is not a lot of downside risk from here. Again, who knows, but given what we're saying, given what you're saying.
Speaker Change: Then would a decent placeholder be to hold your BNB margins relatively consistently in 3Q versus 2Q? If you feel comfortable even commenting to that, I figured I'd give it one shot.
Speaker Change: Yeah, yeah, sure. So I'll, I'll take a shot. As I sit here today, I would say yes, that's reasonable to assume our gross margins can be
Speaker Change: similar in the third to what they were the second.
Speaker Change: There's always the caveat with might we get some surprises.
Speaker Change: on pricing either way, specifically in commodities. So, yes, on gross margin. On EBITDA margin, I would expect that to, you know, again, if our sales pace stays off 5% relative to second quarter average, that would...
Speaker Change: That would constrain our EBITDA margins a little bit, so we'd be more probably in the mid fives as opposed to high fives, if that all plays out.
Nate: Hey, George, it's Nate. Maybe just another quick comment on that is, Kelly described it well. As you think about the, I think, the environment that we'll be in as we go through the second half of this year, and largely have been in it for a while, the dependence that our customers have on a warehouse remains high. And so, if you think about, you know, kind of the margin profile, and that, you know, making sure we're that safe harbor for our customers and our suppliers, that they have confidence that we're going to have material on the shelf, ready to serve and support them, kind of, no matter what the market conditions provide.
Speaker Change: Hey, George, it's Nate. Maybe just another quick comment on that is, Kelly described it well. As you think about the, I think, the environment that we'll be in as we go through the second half of this year, and largely have been in it for a while,
Speaker Change: The dependence that our customers have on a warehouse remains high. And so, if you think about, you know, kind of the margin profile and that, you know, making sure we're that safe harbor for our customers and our suppliers that they have.
Speaker Change: confidence that we're going to have material on the shelf ready to serve and support them no matter what the market conditions provide. So that's part of, as you know, who we are in the distribution side of things, and that will remain an important part of our game plan as we move through the second half of this year.
Nate: So, that's part of, as you know, who we are and the distribution side of things, and that'll remain an important part of our game plan as we move through the second half of this year.
Speaker Change: Okay, thanks for that, Nate.
Speaker Change: Last question for me in this round and piggybacking on I think Kurt's question earlier you know so as you think about competition
Speaker Change: and EWP and recognizing this is
Speaker Change: How much of the competition is coming from producers of similar engineered wood products, and how much, if you had to think about it maybe a quarter, two quarters ago,
Speaker Change: of the pressures coming from, you know, open web trusts and things like that, or substitution, recognizing it's
Speaker Change: In many ways, it can be two sides of the same coin. How would you have us think about those things and what it means, more importantly, really, into fourth quarter, into 2025? Thanks, guys. Transcribed by https://otter.ai
Speaker Change: Hey George, Nate, I'll take a shot at that and others can jump in. I think EWP in terms of the competitive landscape is largely around looking like competitors in terms of producing I-joist and laminate veneer lumber. So that's, I think, kind of the starting point for the conversation.
Speaker Change: There's always questions potentially on plated floor trusses or dimensional lumber, but largely our team has to really kind of navigate the look-a-like competitors that are out there.
Speaker Change: And again, as I mentioned earlier, you know, I think EWP is well positioned in support of the builders and what they need to get accomplished on cycle time. So again, we feel good about, you know, how that shows up relative to some of the other competitive alternatives that are out there.
Nate Jorgensen: Thank you, Nate.
Nate Jorgensen: One moment for the next question.
Speaker Change: The next question comes from the line of Mike Roxland of Truist Securities. Mike, please go ahead.
Mike Roxland: Thank you Nate, Kelly, Chris for taking my questions and congrats on the good quarter, despite the challenges.
Mike Roxland: I just want to follow up quickly on George's question regarding the EBITDA margin. I get the point around sales pace.
Mike Roxland: and whatnot. But how do you think about how a higher quality mix should impact your EBITDA margin as well? Because from what I understand, the 3Q is typically a higher quality mixed quarter. So what type of benefits should that have that might be able to offset some of the slower sales pace you're seeing?
Mike Roxland: Yeah, you're heading in the right direction there, Mike.
Speaker Change: We, you know, we would expect to see, generally, the general end products do carry a higher gross margin. So to the extent that that becomes a bigger part of your sales mix, that does provide you some opportunity. But
Speaker Change: But I would recognize also that, you know, 42% was the biggest number we've had in terms of the sales mix for general line. We want to continue, you know, continue that to be in the 40s. But make no mistake, commodities will continue to be an important part of the sales mix as well as EWP.
Speaker Change: And would it be fair to say that with the general line that the 42%, which is the highest on record for the companies you noted, is something that you think you can maintain in 3Q or look to maintain on a go-forward basis?
Speaker Change: Yeah, I mean, there are some product categories within General line that probably carry a bit more of a seasonal component that are stronger in the second and third and then they might tail off in the fourth and the first.
Speaker Change: But I guess comparatively, second to third, yeah, I think we should be able to continue it at a similar rate, a similar mix for the third quarter.
Kelly Hibbs: Thank you, Kelly. And there's one last question just in response to Nate's comment about warehouse sales. You know, given the increase in volatility in the backdrop, have you seen warehouse sales accelerate? I know they had represented around 70 to 75 percent of your mix.
Speaker Change: that was versus historically around 60, 65 to 70%. Have you seen an acceleration beyond that, particularly just given how volatile the environments have become?
Jeff: This is Jeff. Hey, we have absolutely seen the warehouse sales pick up, especially with the uncertainty in the commodity and no real reward for taking a position, and people want to rely on it. It's undeniable, and you can see clearly in the data that our warehouse sales are picking up.
Speaker Change: Hi, this is Jeff. Hey, we have absolutely seen the warehouse sales pick up, and especially with the uncertainty in the commodity and no real reward for taking a position and people want to rely on it. It's undeniable and you can see clearly in the data that our warehouse sales are picking up.
Mike Roxland: Gotcha, Jeff. Just one quick follow-up. So are you beyond the 75% that you were quoting a couple quarters ago? You're now between 75% and 80% in terms of warehouse sales? Just a real ballpark?
Mike: No, I don't think I would put us north of 75. Mike, I think historically it was probably more like 65. And now, maybe we're pushing more like seven.
Mike Roxland: No, I don't think I would put us north of 75. Mike, I think historically is probably more like 65. And now maybe we're pushing more like 70.
Unknown Executive: Got it. Thanks very much, guys. Appreciate it. Good luck in the crowd. Thank you.
Mike Roxland: Got it. Thanks very much guys. Appreciate it. Good luck in the class. Thank you.
Operator: One moment for your next question. The next question comes from the line of Reuben Garner of Benchmark. Reuben, please go ahead.
Speaker Change: One moment for your next question.
Speaker Change: The next question comes from the line of Reuben Garner of Benchmark. Reuben, please go ahead.
Reuben Garner: Thank you. Good morning, everybody.
Reuben Garner: Hey Reuben. So, question, BMD margin question to start. More about the breakdown of margins today versus what they were, you know, 5, 6, 7 years ago. It seems like the gross margin is stabilized at a...
Reuben Garner: a materially higher point as of EBITDA, but it looks like maybe the selling distribution costs are a little higher. Can you talk about
Speaker Change: Why that is, is that is that things like the higher mix of warehouse, the higher mix of general line, do those come with higher selling expenses? Is that something that we expect to kind of continue on to go forward any other kind of mix or company specific drivers for that?
Speaker Change: Yeah, I think there's a couple of things to speak to, Reuben, and I'll anecdotally address them, and maybe Jeff can add a little color if need be.
Jeff Strum: Selling distribution in terms of the most recent.
Jeff Strum: year-over-year results, really a big part of that is Brosco, right? So we added a meaningful business with nice margin, but also meaningful selling and distribution expenses.
Jeff Strum: And so, so that's one thing. And then just generally our growth across the system, whether it's Brasco, whether it's Dallas-Doran Millwork, Houston-Doran Millwork, etc., we've added, you know, we've added, you know,
Jeff Strum: with more sales.
Speaker Change: You need to have more sales folks.
Speaker Change: more services, more capabilities. And so I think it's just a natural growth because we are carrying more general line products.
Jeff Strum: But that is purposeful. Anything you'd add, Jeff? I'd just say, you know, we do load up with bodies before, especially in the lower places. You have to have people there before you start producing the sales. So there's kind of a timing effect there that's playing into it as well.
Speaker Change: Got it. That's, that's helpful. And then any specific thing that you'd call out within general line? I know you guys sell a number of products there, and I know that some of it is because of investments you've made to grow. Are you actually seeing kind of organic
Speaker Change: strength or weakness outside of your investments in any particular categories that you call out.
Speaker Change: I would tell you it's really been steady across the board. There are a few areas where we feel like we're picking up some share because we've really committed to making sure we have it on the ground, or maybe last year we didn't. And that's why I tell you we leaned hard into the winter buy and loaded up. And there are certain areas there that I think we have grown some take a share. But across the board, I'd say it's pretty even.
Speaker Change: Hey Reuben, it's Nate. Maybe just another data point is I think as we think about the our general line vendors all of our vendors, but our general line
Reuben Garner: We've got, there's some terrific brands and terrific franchises that we have a, you know, again, the privilege to kind of represent. So as we think about how they're positioned, and in terms of who they are, what they're doing, including around innovation and new products, you know, that that's, that's a great environment for us in BMD. So again, I would probably speak to not only the product, but some of the brands that we represent as well.
Speaker Change: Great and I'm going to sneak one more big picture question in if I could. Any any thoughts or color you could share on what you're seeing from us?
Speaker Change: Next.
Speaker Change: I know you guys are usually a pretty early read on some of the, you know, the building plans that are out there and I know volume has been.
Unknown Speaker: Pretty strong on the single-family front, but how much of a headwind do you think there is from the size of the home, people mixing down, or builders mixing down for affordability reasons? How would you think about that on a go-forward basis?
Speaker Change: Pretty strong on the single-family front, but how much of a headwind do you think there is from the size of the home, people mixing down or builders mixing down for affordability reasons? How would you think about that on a go-forward basis?
Speaker Change: Yeah, no, I think you're right, Reuben, in terms of, you know, year-over-year, I think home sizes are off something like, I think, 5%, and then builders...
Speaker Change: obviously needing to respond to affordability concerns for homebuyers, so less amenities.
Speaker Change: And so that does make its way into, if you have smaller structures, you have less consumption of wood.
Speaker Change: Where do we go forward from here?
Speaker Change: I guess I'm not sure I'd venture a guess yet, I think it'll depend upon the economy, it'll depend on affordability and mortgage rates, but I wouldn't be brave enough to venture a guess where we might go from here.
Speaker Change: Great. Thanks. Good luck guys going forward.
Speaker Change: Thanks, everybody. Take care.
Speaker Change: The next question comes from the line of Ketan Mamtora of BMO. Ketan, please go ahead.
Speaker Change: Hi, kids, please go ahead.
George Staphos: The next question, the next question comes from the line of George Staphos of Bank of America. George, please go ahead. Great, thank you. We appreciate everyone joining us this morning.
Speaker Change: The next question comes from the line of George Staphos of Bank of America. George, please go ahead.
Speaker Change: George
Speaker Change: One moment for your next question.
Speaker Change: I am actually showing no further questions so with that being said I will turn the call back over to Nate Jorgensen. Nate please go ahead.
Nate Jorgensen: Great, thank you. We appreciate everyone joining us this morning for our update and thank you for your continuing interest and support of Boise Cascade. Please be safe and be well. Thank you.
Speaker Change: This does conclude today's conference call. You may now disconnect.
Speaker Change: www.ukuleleroadtrips.com www.ukuleleroadtrips.com
Speaker Change: [inaudible]