Q1 2025 Builders FirstSource Inc Earnings Call

Operator: Please stand by your program is about to begin if you need assistance during your conference today, please press star zero Good day and welcome to the Builders FirstSource first quarter 2025 earnings conference call.

It began if you need assistance during your conference today, Please press Star zero.

Good day and welcome to the builders first source first quarter 2025 earnings conference call.

Operator: Today's call is scheduled to last about one hour, including remarks by management and the question and answer session. In order to ask a question, please press the star key followed by the number one on your phone at any time during the call.

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

Speaker Change: In order to ask a question. Please press the star key followed by the number one on your phone at any time during the call I'd now like to turn the call over to Heather Kos Senior Vice President Investor Relations for builders first source. Please go ahead.

Heather Kos: I'd now like to turn the call over to Heather Kos, Senior Vice President Investor Relations for Builders FirstSource. Please go ahead.

Heather Kos: Good morning, and welcome to our first quarter 2025 earnings call. With me on the call are Peter Jackson, our CEO, and Pete Beckmann, our CFO.

Peter Jackson: Good morning, and welcome to our first quarter 2025 earnings call with me on the call are Peter Jackson, our CEO and Peter <unk> our CFO.

Heather Kos: The earnings press release and presentation are available on our website at investors.bldr.com. We will refer to the presentation during our call.

Peter Jackson: The earnings press release and presentation are available on our website at investors <unk> B L. D. Our dotcom, we will refer to the presentation during our call.

Heather Kos: The results discussed today include GAAP and non-GAAP results adjusted for certain items. We provide these non-GAAP results for informational purposes, and they should not be considered in isolation from the most directly comparable GAAP measures. You can find the reconciliation of these non-GAAP measures to the corresponding GAAP measures where applicable, and a discussion of why we believe they can be useful to investors in our earnings press release, SEC filings, and presentation.

Peter Jackson: The results discussed today include GAAP and non-GAAP results adjusted for certain items. We provide these non-GAAP results for informational purposes, and they should not be considered in isolation from the most directly comparable GAAP measures.

Peter Jackson: You can find a reconciliation of these non-GAAP measures to the corresponding GAAP measures, where applicable and a discussion of why we believe that can be useful to investors in our earnings press release, SEC filings and presentation.

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

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

Peter Jackson: And with that, I'll turn the call over to Peter. Thank you, Heather, and good morning, everyone. Given the current environment, I'm proud of our resilient results for the first quarter, which reflect the strength of our differentiated product portfolio and our continued focus on driving operational activity. While macro and industry dynamics continue to be unsettled, we remain confident in our ability to navigate any challenge. We are a cycle-tested team that has withstood economic uncertainty in the past. We will execute again by staying rooted in our strategy and focusing on the factors within our control. During these uncertain times, our role as trusted partner is vital as we help our customers address affordability challenges and increase efficiency.

Peter Jackson: Forward looking statements and projections and with that I'll turn the call over to Peter.

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

Speaker Change: Given the current environment I'm proud of our resilient results for the first quarter, which reflect the strength of our differentiated product portfolio and our continued focus on driving operational excellence.

Speaker Change: While macro and industry dynamics continue to be unsettled, we remain confident in our ability to navigate any challenges.

Speaker Change: We were a cycle tested team that has withstood economic uncertainty in the past.

Speaker Change: We will execute again by staying rooted in our strategy and focusing on the factors within our control.

Speaker Change: During these uncertain times, our role as a trusted partner is vital as we help our customers address affordability challenges.

Speaker Change: Kris efficiency.

Peter Jackson: We are focused on the near term while laying the groundwork for future.

Speaker Change: We are focused on the near term, while laying the groundwork for future growth.

Peter Jackson: As the market recovers, I'm confident we will outperform.

Speaker Change: As the market recovers I'm confident we will outperform.

Peter Jackson: As shown on slide three, our strategy remains. We are focused on organic growth, operational excellence, and disciplined capital allocation. We are committed to advancing our strong foundation and driving value creation for our customers through investments in innovation. Our significant investments in value-added products, digital tools, and internal systems are cementing our leading industry position.

Speaker Change: As shown on slide three our strategy remains consistent we are focused on organic growth operational excellence and disciplined capital allocation.

Speaker Change: We are committed to advancing our strong foundation and driving value creation for our customers through investments and innovation.

Speaker Change: Our significant investments in value added products digital tools and internal systems are cementing our leading industry position.

Peter Jackson: Let's turn now to our first quarter performance on slide four. Our team's ability to drive resilient results, despite external headwinds, reflects our focus on execution, operational rigor, and customer success.

Speaker Change: Let's turn now to our first quarter performance on slide four.

Speaker Change: Our team's ability to drive resilient results. Despite external headwinds reflects our focus on execution operational rigor and customer success.

Pete Beckmann: Pete will expand on our results more later in the presentation.

Speaker Change: Pete will expand on our results more later in the presentation.

Peter Jackson: On slide five, we highlight key areas where we've been executing our strategy. In the first quarter, we invested $23 million in our value-added facilities to prepare for future demand in key markets. This included opening one new millwork location, expanding another millwork plant, and upgrading a truss. Adoption rates for our industry-leading BFS digital tools are steadily climbing each week, and we are garnering consistent, positive feedback from our growing customer base. I'm pleased that we realized $19 million in incremental digital sales for the quarter, bringing our total to $153 million since launch, despite the challenging environment that has persisted for our target customers.

Speaker Change: On slide five we highlight key areas, where we've been executing our strategy in the first quarter, we invested $23 million in our value added facilities to prepare for future demand in key markets.

Speaker Change: This included opening one new millwork location, expanding another millwork client and upgrading of trust facility.

Speaker Change: Adoption rates for our industry, leading DFS digital tools are steadily climbing each week, we are garnering consistent positive feedback from our growing customer base.

Speaker Change: We used it we realized $19 million in incremental digital sales for the quarter, bringing our total to $153 million since launch despite the challenging environment that has persisted for our target customers.

Peter Jackson: We achieved $17 million in productivity savings in Q1, primarily through targeted supply chain initiatives, more efficient trust manufacturing, and fleet management. We are focused on optimizing processes, leveraging technology, and improving supplier relationships to enhance efficiency. We remain disciplined stewards of discretionary spending, and we are continuing to maximize operational flexibility. We increased our service levels to our customers with an on-time and in-full delivery rate of 92%.

Speaker Change: <unk> $17 million in productivity savings in Q1, primarily through targeted supply chain initiatives more efficient truss manufacturing and fleet management.

Speaker Change: We are focused on optimizing processes, leveraging technology and improving supplier relationships to enhance efficiency.

Speaker Change: We remain disciplined stewards of discretionary spending and we are continuing to maximize operational flexibility.

Speaker Change: We increased our service levels to our customers with an on time and in full delivery rate of 92%.

Peter Jackson: Single-family starts remain soft as builders manage the pace of construction amid affordability challenges, inventory buildup, and increased economic uncertainty. as we expected and communicated previously. Multifamily also remains a headwind compared to 2024. In response to lower volumes over the last year, we have taken steps to align capacity across our facilities, manage headcount, and control expenses.

Speaker Change: Single family starts remain soft as builders manage the pace of construction and the affordability challenges inventory buildup and increased economic uncertainty.

Speaker Change: As we expected and communicated previously multifamily also remains a headwind compared to 2024.

Speaker Change: In response to lower volumes over the last year, we have taken steps to align capacity across our facilities manage head count and control expenses.

Peter Jackson: This continues to be an attractive and profitable business. Turning to single-family, builders continue to employ specs, smaller and simpler homes, and interest rate buy-downs to help buyers find affordable options. Our comprehensive product portfolio enables builders to optimize their costs while maintaining quality. And we continue to supply more lower-cost offerings in products like engineered wood, windows, and doors. We are standing alongside our customers to battle affordability. grow with them through the investment in our people, technology, and innovation.

Speaker Change: This continues to be an attractive and profitable business for us.

Speaker Change: Turning to single family builders continue to employ specs smaller and simpler homes and interest rate buy downs to help buyers find affordable options, our comprehensive product portfolio enables builders to optimize their costs, while maintaining quality and we continue to supply more lower cost offerings.

Speaker Change: And products like engineered wood windows doors.

Speaker Change: We are standing alongside our customers to battle affordability challenges and grow with them through the investment in our people technology and innovation.

Peter Jackson: While critical for the long-term health of the industry, these actions mean less near-term sales and gross profit dollars for BFS. Ultimately, this positions our company to accelerate when starts increase and current headwinds begin to subside.

Speaker Change: While critical for the long term health of the industry. These actions being less near term sales and gross profit dollars for BFS. Ultimately this positions our company to accelerate when starts increase in current headwinds begin to subside.

Peter Jackson: Turning to M&A on slide 6, we remain focused on pursuing high-return opportunities that expand our value-added product offerings and advance our leadership position in desirable geographies. Over the years, we have developed substantial and proven muscle memory to grow through M&A and have a track record of successful integration. The first quarter we completed two acquisitions with aggregate prior year sales of roughly $565 million. As a reminder, in early January, we acquired Alpine Lumber, the largest independently operated supplier of building materials and value-added products in Colorado and northern New Mexico. In February, we acquired OC Plus, a leading supplier of lumber, building materials, and installation services, with locations in Pennsylvania, Maryland, and West Virginia.

Speaker Change: Turning to M&A on slide six we remain focused on pursuing high return opportunities that expand our value added product offerings and advance our leadership position in desirable geographies.

Speaker Change: Over the years, we have developed a substantial improve in muscle memory to grow through M&A and have a track record of successful integration.

Speaker Change: In the first quarter, we completed two acquisitions with aggregate prior year sales of roughly $565 million.

Speaker Change: As a reminder, in early January we acquired Alpine lumber the largest independently operated supplier of building materials and value added products and Colorado in Northern New Mexico.

Speaker Change: Curious, we acquired O C class, a leading supplier of lumber building materials and installation services with locations in Pennsylvania, Maryland, and West Virginia.

Peter Jackson: In addition, we acquired Truckee Tahoe lumber in early April after quarter end. Truckee Tahoe has built a reputation of excellence as a leading supplier of lumber and building materials in the Northern California and Nevada markets.

Speaker Change: In addition, we acquired trucking Tahoe lumber in early April after quarter end.

Speaker Change: Jackie Tahoe has built a reputation of excellence as a leading supplier of lumber and building materials in the northern California, and Nevada markets.

Peter Jackson: We are excited to welcome these talented new team members to the BFS family. Our industry remains highly fragmented, and despite a slowing M&A environment, we are confident that our M&A capabilities will remain an important catalyst for our long-term growth.

Speaker Change: We are excited to welcome these talented new team members to the BFS family.

Speaker Change: Our industry remains highly fragmented and despite a slowing M&A environment. We are confident that our M&A capabilities will remain an important catalyst for our long term growth.

Peter Jackson: Turning to slide seven, our disciplined capital allocation strategy focuses on maximizing shareholder returns through organic growth, inorganic growth, and share repurchase. In the first quarter, we deployed over $900 million towards investing in the business, acquisitions, and share repurchase.

Turning to slide seven our disciplined capital allocation strategy focuses on maximizing shareholder returns through organic growth inorganic growth and share repurchases.

Speaker Change: In the first quarter, we deployed over $900 million towards investing in the business acquisitions and share repurchases.

Peter Jackson: Now let's turn to slide 8 and discuss the latest updates on our digital strategy. With our BFS digital tools, we are focused on creating value for our home builder customers and doing so further extending our industry leadership position and driving substantial organic growth. Despite the challenging market, we have seen continued adoption and growth with our target audience of smaller builders. Our sales team continues to increase digital tool usage, which will further drive customer adoption. Since launch in early 2024, we have seen more than $1.5 billion of orders placed through our BFS digital tools, of which $153 million were incremental sales from existing and new customers.

Speaker Change: Now, let's turn to slide eight and discuss the latest updates on our digital strategy.

Speaker Change: With our BFS digital tools, we are focused on creating value for our homebuilder customers and doing so further extending our industry leadership position and driving substantial organic growth.

Speaker Change: Despite the challenging market, we have seen continued adoption and growth with our target audience of smaller builders. Our sales team continues to increase digital tool use usage, which will further drive customer adoption.

Speaker Change: Since launch in early 2024, we have seen more than $1.5 billion of orders placed through our PFS digital tools of which $153 million were incremental sales from existing and new customers.

Peter Jackson: We're pleased with our progress to date and expect an additional $200 million of incremental sales in 2025, bringing our total to $334 million at the end of the year.

Speaker Change: We're pleased with our progress to date and expect an additional $200 million of incremental sales in 2025, bringing our total to $334 million at the end of the year.

Peter Jackson: I'm incredibly grateful to lead such a talented and hardworking team that makes a difference every day. One great example is Delmar Little Deer in Oklahoma City, who has been with BFS for more than 20 years. Del Mar excels as a trusted partner to our customers, who have relied on him both as a driver and now as a dispatcher to ensure that deliveries are accurate and on time. Dispatcher. He has helped keep his location ranked among the best in the company for dispatch and delivery management. Beyond his technical skills, Delmar is a mentor to our drivers.

Speaker Change: I'm incredibly grateful to lead such a talented and hard working team that makes a difference every day.

Speaker Change: One Great example is del Mar a little here in Oklahoma City, who has been with BFS for more than 20 years.

Speaker Change: <unk> sells as a trusted partner to our customers who have relied on your both as a driver and now as a dispatcher to ensure that deliveries are accurate and on time.

Speaker Change: It's a dispatcher. He has helped keep us location ranked among the best in the company for dispatch and delivery management efficiency.

Speaker Change: Beyond his technical skills Delmarva meant toward where our drivers' experience in the field allows them to guide them not just not roots and best practices, including safety, but also on ways to provide value to our customers.

Peter Jackson: His experience in the field allows him to guide them not just on routes and best practices, including safety, but also on ways to provide value to our customers. His leadership and calm demeanor help keep our team running efficiently, even on the most challenging. I'm proud of Delmar and our countless other dedicated team members who continually raise the bar in service to our customers and each other.

Speaker Change: His leadership calm demeanor help keep our team running efficiently even on the most challenging of days.

Speaker Change: I'm proud of del Mar and are countless other dedicated team members, who continually raise the bar and service to our customers and each other.

Pete Beckmann: I'll now turn the call over to Pete to discuss our financial results in greater detail. Thank you, Peter, and good morning, everyone. Our first quarter results were driven by our durable business model and unwavering commitment to executing our strategy. We have a proven track record of generating strong free cash flow through the cycle and deploying capital in a disciplined manner, in line with our capital allocation priority. Our scale, differentiated platform, and talented team members give us confidence that we will continue to compound value now and into the future.

I'll now turn the call over to Pete to discuss our financial results in greater detail.

Speaker Change: Thank you Peter and good morning, everyone.

Our first quarter results were driven by our durable business model and unwavering commitment to executing our strategy.

Speaker Change: We have a proven track record of generating strong free cash flow through the cycle and deploying capital in a disciplined manner in line with our capital allocation priorities.

Speaker Change: Our scale differentiated platform and talented team members give us confidence that we will continue to compound value now and into the future.

Pete Beckmann: Let's begin by reviewing our first quarter performance on slides 9 through 11. Net sales decreased 6% to $3.7 billion, driven by lower organic sales, one fewer selling day, and commodity beef partially offset by growth from acquisition. Although we expect higher commodity prices for the full year, we experienced commodity deflation in Q1, given the prior year spike in OSV prices.

Speaker Change: Let's begin by reviewing our first quarter performance on slides nine through 11.

Speaker Change: Net sales decreased 6% to $3 7 billion.

Speaker Change: Driven by lower organic sales, one fewer selling day and commodity deflation.

Speaker Change: We offset by growth from acquisitions.

Speaker Change: Though we expect higher commodity prices for the full year, we experienced commodity deflation in Q1, given the prior year spike in OSB prices.

Pete Beckmann: The core organic sales decrease was driven by a 33% decline in multifamily, with muted activity levels again stronger prior to your comp. Additionally, single-family declined 6%, attributable to lower starts activity, value per start, and weather, while repair and remodel increased 4%, driven by strength in the Mid-Atlantic and Southeast regions. As we have shared on recent calls, there are a few main variables reconciling single-family starts to our core organics. First, the value of the average home has fallen as size and complexity have. Second, we have seen ongoing margin pressure as starts remain below normal.

Speaker Change: The organic sales decrease was driven by a 33% decline in multifamily with muted activity levels against stronger prior year comps.

Speaker Change: Additionally, single family declined 6% attributable to lower starts activity volume per start and weather.

Speaker Change: Repair and remodel increased 4% driven by strength in the mid Atlantic and southeast regions.

Speaker Change: As we have shared on recent calls there are a few main variables reconcile in single family starts to work organic sales.

Speaker Change: First the value of the average home has fallen the size and complexity have decreased.

Speaker Change: Second we have seen ongoing margin pressure starts remain below normal.

Pete Beckmann: Third, extreme weather in the southeast in California impacted the corridor by approximately $80 million in long-term damage. Although macro headwinds persist, and there are fewer sales dollars available per start today, we are the market leader in building products and continue to be a trusted partner to our customers that start to remain below normal levels.

Speaker Change: Third extreme weather in the south Eastern California impacted the quarter by approximately $80 million and long term deferrals.

Speaker Change: Although macro headwinds persist and there are fewer sales dollars available per start today, we are the market leader in building products and continue to be a trusted partner to our customers that starts remain below normal levels.

Pete Beckmann: For the first quarter, gross profit was $1.1 billion, a decrease of 14% compared to the prior year. Margins were 30.5%, down 290 bases. primarily driven by single and multifamily margin normalization, as well as a below normal starts environment. Adjusted SG&A of $771 million, decreased $9 million. Primarily attributable to lower variable compensation due to lower core organic net sales, partially offset by acquired operations. On an annual basis, adjusted SG&A is approximately 30% fixed and 70% variable with volumes, enabling flexibility during challenging periods.

Speaker Change: For the first quarter gross profit was $1 1 billion.

Speaker Change: Decrease of 14% compared to the prior year period.

Speaker Change: Gross margins were 35% down 290 basis points, primarily driven by single and multifamily margin normalization as well as a below normal starts environment.

Speaker Change: Adjusted SG&A of $771 million decreased $9 million.

Speaker Change: Primarily attributable to lower variable compensation due to lower organic net sales, partially offset by acquired operations.

Speaker Change: On an annual basis, adjusted SG&A, as approximately 30% fixed and 70% variable with volumes, enabling flexibility during challenging periods.

Pete Beckmann: As Peter mentioned, we are investing in technology with a look toward the future despite ongoing headwinds. One big component of this is moving to a single modern ERP platform. Our ERP investment is projected to incur approximately $140 million this year. This positions us to drive innovation, enhance efficiency, and support our long-term growth objectives. We are focused on carefully managing our SG&A and are well positioned to leverage our fixed costs as the market grows.

Speaker Change: As Peter mentioned, we are investing in technology with a look towards the future despite ongoing headwinds.

Speaker Change: One big component of this is moving to a single modern ERP platform.

Speaker Change: Our ERP investment is projected to incur approximately $140 million this year.

Speaker Change: This positions us to drive innovation and enhance efficiency and support our long term growth objectives.

Speaker Change: We are focused on carefully managing our SG&A and are well positioned to leverage our fixed costs as the market grows.

Pete Beckmann: Adjusted EBITDA was $369 million, down 32%, primarily driven by lower gross profit. down 380 basis points from the prior year, primarily due to lower gross profit margins and reduced operating leverage.

Speaker Change: Adjusted EBITDA was $369 million down.

Speaker Change: 32%, primarily driven by lower gross profit.

Speaker Change: Adjusted EBITDA margin was 10, 1% down.

Speaker Change: Down 380 basis points from the prior year, primarily due to lower gross profit margins and reduced operating leverage.

Pete Beckmann: Adjusted EPS was $1.51, a decrease of 43% compared to the prior year. on a year-over-year basis, Sherry Purchase. enabled by our strong free cash flow generation added roughly 11 cents per share for the first quarter.

Speaker Change: Adjusted EPS was $1 51, a day.

Speaker Change: Increase of 43% compared to the prior year.

Speaker Change: On a year over year basis share repurchases enabled by our strong free cash flow generation at roughly <unk> 11 per share for the first quarter.

Pete Beckmann: Now let's turn to our cash flow, balance sheet, and liquidity on slide 12. Our first quarter operating cash flow was $132 million, a decrease of $185 million, mainly attributable to lower net income. We generated free cash flow of $45 million. Our trend in 12 months free cash flow yield was 9%. Operating cash flow return on invested capital was 19%. Our net debt-to-adjusted EBITDA ratio was approximately $2 to $3,000. Including our ABL, we have no long-term debt maturities until 20th. At quarter end, our total liquidity was $1.1 billion. Consisting of $944 million in net borrowing availability under the ABL and $115 million in cash.

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

Speaker Change: Our first quarter operating cash flow was $132 million, a decrease of $185 million, mainly attributable to lower net income.

Speaker Change: We generated free cash flow of $45 million.

Speaker Change: Our trailing 12 months free cash flow yield was 9% operating cash flow return on invested capital was 19%.

Speaker Change: Our net debt to adjusted EBITDA ratio was approximately two times, excluding our ABL, we have no long term debt maturities until 2030.

At quarter end, our total liquidity was $1 1 billion.

Speaker Change: Consisting of $944 million and net borrowing availability under the ABL and $115 million in cash.

Pete Beckmann: Moving to Capital Deployment. Capital expenditures were $87 million in the first. We deployed $828 million on two acquisitions.

Speaker Change: Moving to capital deployment.

Speaker Change: Capital expenditures were $87 million in the first quarter.

Speaker Change: We deployed $828 million on two acquisitions.

Pete Beckmann: If you won, we will purchase roughly 100,000 shares for $13 million. Additionally, in April, we repurchased 3.3 million shares for $391 million.

Speaker Change: In Q1, we repurchased roughly 100000 shares for $13 million.

Speaker Change: Additionally, in April we repurchased three 3 million shares for $391 million as.

Pete Beckmann: As we announced this morning, our board has authorized a $500 million share repurchase program, inclusive of the $100 million remaining on the prior $1 billion offer. This reflects our commitment to returning capital to shareholders while maintaining flexibility for strategic investment. With our current leverage ratio at approximately two times, we remain mindful of maintaining a leverage ratio of roughly one to two times at year end. We remain disciplined stewards of capital and have multiple paths for value creation to maximize.

Speaker Change: As we announced this morning, our board has authorized a 500 million share repurchase program inclusive of the $100 million remaining on the prior $1 billion authorization.

Speaker Change: This reflects our commitment to returning capital to shareholders, while maintaining flexibility for strategic investments.

Speaker Change: With our current leverage ratio at approximately two times, we remain mindful of maintaining a leverage ratio of roughly one to two times at year end.

Speaker Change: Okay.

Speaker Change: We remain disciplined stewards of capital and have multiple paths for value creation to maximize returns.

Pete Beckmann: On slide 13, we show our 2025 outlook. For full year 2025, our forecast assumes a down mid-single-digit single-family market and continued weakness in multifamily. As a result, we are guiding net sales in the range of $16.05 to $17.05 billion. We expect adjusted EBITDA to be $1.7 to $2.1 billion. Adjusted EBITDA margin is forecasted to be in the range of 10.6 to 12.3 percent. In the lower starts environment, we expect our 2025 full year gross margin to be in a range of 29 to 31 percent. We expect free cash flow of $800 million to $1.2 billion.

Speaker Change: On slide 13, we show our 2025 outlook.

Speaker Change: For full year 2025, our forecast assumes a down mid single digits single family market.

Speaker Change: And continued weakness in multifamily.

Speaker Change: As a result, we are guiding net sales in the range of $16 five to $17 5 billion.

Speaker Change: Okay.

Speaker Change: We expect adjusted EBITDA to be one seven to $2 1 billion.

Speaker Change: Adjusted EBITDA margin is forecasted to be in the range of $10 six to 12, 3%.

Speaker Change: You've got lower starts environment, we expect our 2025 full year gross margin to be in a range of 29% to 31%.

Speaker Change: We expect free cash flow of $800 million to $1 2 billion.

Pete Beckmann: The change from the prior guidance is primarily due to a lower working capital assumption based on our lower sales outlook for the year.

Speaker Change: The change from the prior guidance is primarily due to a lower working capital assumption based on our lower sales outlook for the year.

Pete Beckmann: As we have stated previously, imports accounted for approximately 15% of our total raw materials spend in 2024, comprised of roughly 11% commodities and 4% non-commodities. Given what we know today, we estimate a tariff cost impact of $175 to $250 million annually. This impact reflects the products we import, as well as potential U.S. supplier. This range also assumes USMCA tariff exemptions on Canadian lumber. 2025 guidance assumes average commodity prices in the range of $400 to $440 per thousand board foot, an increase of $15 at the mid Note that this is our best current estimate and subject to change.

Speaker Change: As we have stated previously imports accounted for approximately 15% of our total raw material spend in 2024.

Speaker Change: Apprised of roughly 11% commodities and 4% non commodity.

Speaker Change: Given what we know today, we estimate the tariff cost impact of $175 million to $250 million annually. This impact.

Speaker Change: <unk> reflects the products, we import as well as potential U S supplier impacts.

Speaker Change: This range also assumes U S MCA tariff exemptions on Canadian lumber.

Speaker Change: 2025 guidance assumes average commodity prices in the range of $400 to $440 per thousand board foot, an increase of $15 at the midpoint.

Speaker Change: Note that this is our best current estimate and subject to change.

Pete Beckmann: Our guide does not reflect potential tariff and duty.

Our guidance does not reflect potential tariff and duty impacts.

Pete Beckmann: Please refer to our earnings release and presentation for a list of key 2025 assumptions.

Speaker Change: Please refer to our earnings release and presentation for a list of key 2025 assumptions.

Pete Beckmann: Additionally, we want to provide color for Q2 given ongoing macro volatility. We expect Q2 net sales to be between $4.1 and $4.4 billion. due to adjusted EBITDA is expected to be between $475 and $525 million.

Speaker Change: Additionally, we want to provide color for Q2, given the ongoing macro volatility.

Speaker Change: We expect Q2 net sales to be between $4, one and $4 4 billion.

Speaker Change: Q2, adjusted EBITDA is expected to be between 475 and $525 million.

Pete Beckmann: In closing, I am confident in our ability to drive long-term growth by executing our strategy, leveraging our exceptional platform, and maintaining financial flexibility.

Speaker Change: In closing I am confident in our ability to drive long term growth by executing our strategy leveraging our exceptional platform and maintaining financial flexibility.

Peter Jackson: With that, I'll turn the call back over to Peter for some final. Thanks, Pete.

Peter Jackson: With that I'll turn the call back over to Peter for some final thoughts.

Speaker Change: Thanks Pete.

Peter Jackson: Let me close by reiterating that we remain focused on controlling the Our resilient business model enables us to win in any environment, given our scale, breadth of product offerings, and our disciplined investments in technology. I'm confident in the long-term strength of our industry due to the significant housing underbill across our poor market. We are well-positioned to capitalize. driving growth for years to come as we execute our We continue to deepen our value proposition as a key partner to our customers by helping them solve problems through our investments in value-added products, digital tools, and install services.

Speaker Change: Close by reiterating that we remain focused on controlling the controllable.

Speaker Change: Our resilient business model enables us to win in any environment, given our scale breadth of product offerings and our disciplined investments in technology.

Speaker Change: I'm confident in the long term strength of our industry due to the significant housing under build across our core markets. We are well positioned to capitalize on this driving growth for years to come as we execute our strategy.

Speaker Change: We continue to deepen our value proposition as a key partner to our customers by helping them solve problems through our investments in value added products digital tools and install services.

Peter Jackson: Our proven growth playbook, fortress balance sheet, and robust free cash flow generation through the cycle will help us continue to compound long-term shareholder value. In the meantime, we are closely monitoring the current environment and remain agile to mitigate downside risks in the near term, while also investing strategically for the future.

Speaker Change: Our proven growth playbook fortress balance sheet and robust free cash flow generation through the cycle will help us continue to compound long term shareholder value.

Speaker Change: In the meantime, we are closely monitoring the current environment and remain agile to mitigate downside risks in the near term while also investing strategically for the future.

Peter Jackson: Thank you again for joining us today.

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

Operator: Operator, let's please open the call now for questions. Thank you.

Speaker Change: Thank you.

Operator: And at this time, if you would like to ask a question, please press the star and 1 on your telephone keypad. You may remove yourself from the queue at any time by pressing star 2.

Speaker Change: And at this time, if you would like to ask a question. Please press the star and one on your telephone keypad you may remove yourself from the queue at any time by pressing star two and the interest of time, we ask that you. Please limit your questions to one question and one follow up once again that is star and one to ask a question and your first question comes from the law.

Operator: In the interest of time, we ask that you please limit your questions to one question and one follow-up. Once again, that is star and 1 to ask a question.

Matthew Bouley: And your first question comes from the line of Matthew Bouley with Barclays. Please go ahead. Morning, everyone. Thank you for taking the questions. So the question is on market share. If I look at single family housing starts in Q1, they were down 6%. Your single family was down 6%, even with presumably, you know, still being impacted by less dollar content per home. So however you look at it, it is a really notable change in terms of your growth versus the market from 2024. And what I'm getting at, of course, your thoughts on share, how your views on share have evolved over the past year.

Matthew Bouley: Line of Matthew Bouley with Barclays. Please go ahead.

Matthew Bouley: Hi, Good morning, everyone. Thank you for taking the questions.

Speaker Change: So the question is on market share if I look at single family housing starts in Q1, they were down 6% your single family was down 6% even with presumably.

Speaker Change: They'll being impacted by less dollar content per home. So however, you look at it. It is a really notable change in terms of your growth versus the market from 2024.

Speaker Change: And what I'm getting at is of course that your thoughts on share.

Speaker Change: Your views on share have evolved over the past year and in this declining market or are you actually looking to to increase your market share going forward or simply maintain your share in this type of market. Thank you.

Peter Jackson: And in this declining market, are you actually looking to increase your market share going forward, or simply maintain your share in this type of market? Thank you. Hey, Matt. Good morning. Thank you for the question. So I will consistently say we are always trying to increase our share no matter what. You know, I think the dynamic over the past year, and we've talked about it a little bit, this below normal starts environment has changed some patterns of behavior, and we have had to fight the fight. So being in the market each day, reacting, acting and reacting to competitive dynamics, partnering with customers and some of the strategic things they're trying to do, adapting to the affordability challenges in the marketplace, it's all part of what we do every day.

Speaker Change: Hey, Matt Good morning, Thank you for the question so.

Speaker Change: I will consistently say, we are always trying to increase our share no matter what the market is.

Speaker Change: I think the dynamic over the past year, and we've talked about a little bit this below normal starts environment has changed.

Speaker Change: Change some patterns of behavior and we have had to fight the fight so being in the market each day reacting acting and reacting to competitive dynamics.

Speaker Change: <unk> with customers and some of the strategic things. They are trying to do adapting to the affordability challenges in the marketplace. It's all part of what we do every day.

Peter Jackson: I think the team is doing a fantastic job, ebbs and flows every quarter. And I think what you're seeing here is the hard work, the kind of the culmination of the hard work over the last year of the team to lean back in and drive behaviors at the local market level that allow us to continue to be consistent and competitive. We've done the right things to invest, our cost positions are very good. We continue to run the operations very efficiently and focused on our customers. And I think that's why you're seeing the performance.

Speaker Change: I think the team is doing a fantastic job.

Speaker Change: Ebbs and flows every quarter and I think what youre seeing here is the hard work the kind of the culmination of the hard work over the last year the team to to lean back in and drive behaviors at the local market level that allow us to continue to be consistent and competitive we've done the right things to invest our cost.

Speaker Change: Physicians are very good we continue to run the operations very efficiently and focused on our customers and I think thats why youre seeing the performance, we're going to continue to strive for it over time.

Pete Beckmann: We're going to continue to strive for it over time. Okay, got it. And then, so that of course, then leads to the gross margin question, if we're in this kind of market that requires a balance between share versus margin, and your gross margin guide now does have 29% at the low end for this year. You know, it begs the question of sort of where you are willing to go on the gross margin? Is there a level on that margin at which you would prioritize the margin again? Or should we be looking for share to kind of be the dominant strategy?

Speaker Change: Okay got it and then so that of course, then leads to the gross margin question. If we're in this kind of market that requires.

Speaker Change: Our balance between share versus margin.

Speaker Change: And your gross margin guide now does have a 29% at the low end for this year.

Speaker Change: So it begs the question of sort of what where you are willing to go on on the gross margin is there a level on that margin at which you would prioritize the margin again or should we be looking for sure to kind of be the dominant strategy. So kind of where would you be willing to go on that gross margin and in this type of market. Thank you.

Pete Beckmann: So kind of where would you be willing to go on that gross margin in this type of market? Thank you.

Pete Beckmann: Morning, Matt. This is Pete. What I would say is our margins are still very strong. We're pleased with the performance. We are anticipating margins to drift lower through the year. Some of that is due to the margin normalization that we're experiencing with the multifamily as well as the single family side. But as this market continues to present additional challenges, being below normal levels, now calling down about 5%. I think you're going to see continued competitive pressure and we have to make that call every day on how to balance share versus margin. And as Peter mentioned, that's that's just part of running the business every day.

Peter Jackson: Good morning, Matt This is Pete.

Speaker Change: What I would say is our margins are.

Speaker Change: Are still very strong we're pleased with the performance we are anticipating margins to drift lower through the year. Some of that is due to the margin normalization that we're experiencing with the multifamily as well as the single family side, but as this market continues to present additional challenges.

Speaker Change: Being below normal levels now.

Speaker Change: Now calling down about 5%.

Speaker Change: I think youre going to see continued competitive pressure and we have to make that call every day on how to balance share versus margin.

Peter Jackson: And as Peter mentioned.

Peter Jackson: Just part of running the business every day and we know that we need to be in the game in order to continue to win and position ourselves to bundle the products, where we're going to be more competitive.

Pete Beckmann: And we know that we need to be in the game in order to continue to win and position ourselves to bundle the products, or we're going to be more And I think we're, we are overall very pleased with the performance of margins.

Peter Jackson: And I think where we are overall very pleased with the performance of margins It's Ben.

Pete Beckmann: It's been a bit of a discovery process post the whole COVID push as to where normal is. We've tried to talk about that with everybody. Hopefully that's come through as an attempt to be transparent. What I think we're seeing now is a lot of that normalization is done. Now it's just hand to hand combat in given markets with specific So that dynamic is where our advantaged position from a cost perspective, from a coverage perspective, allows us to have superior margins than the competition. Our pricing discipline and knowing exactly where we stand and what we're doing in each individual decision is a powerful advantage to some of our competitors.

Peter Jackson: A bit of a discovery process post the whole COVID-19 pushes to where normal is we've tried to talk about that with everybody. Hopefully that's come through is an attempt to be transparent with I think we're seeing now is a lot of that normalization is done now it's just hand to hand combat in given markets with specific compare.

Peter Jackson: So that dynamic is where.

Peter Jackson: Our advantaged position from a cost perspective from a coverage perspective allows us allows us to have superior margins, then the competition or pricing discipline in knowing exactly where we stand and what we're doing in each individual decision is a powerful advantage to some of our competitors. So we will continue to balance it it has to be a ban.

Pete Beckmann: So we'll continue to balance it. It has to be a balance. You can't walk away from the table. But the reality is our continued success has led to that bundling ability. Our customers do see the value of the combined offering that we have in our product portfolio. The benefits of value add have been very sticky, even when there's some uncertainty and challenges in the market. And we still continue to sell to a wide variety of customers, both ups and downs in various markets. So we feel good, but no question, it's a time of pressure and we're having to be smart.

Allen: Allen you can't you can't walk away from the table.

Allen: But the reality is our continued success has led to that bundling ability.

Allen: Customers do you see the value of the combined offering that we have in our product portfolio the benefits and value add had been very sticky even when there's some uncertainty and challenges in the market and we still continue to sell to a wide variety of customers both.

Allen: Ups and downs in various markets. So we feel good but no question. It's a time of pressure and were happened to be smart about it.

Matthew Bouley: Got it. Well, I appreciate the thoughts. Good luck, guys. Thanks again.

Allen: Got it well I appreciate the thoughts good luck guys. Thanks, Ken.

Speaker Change: Thanks, Matt.

Mike Dahl: And we will take our next question from Mike Dahl with RBC Capital Markets. Please go ahead. Morning, thanks for taking my questions.

Speaker Change: Thank you and we will take our next question from Mike Dahl with RBC capital markets. Please go ahead.

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

Mike Dahl: Just, I guess, to pick up on the gross margin dynamic, can we just put a finer point on what drift lower through the year means? You're starting at 30.5, you know, presumably there's still some near term pressure doing where you've got a 2Q, just, you know, how, just help us ballpark what the 2Q gross margin is, and then, you know, drift lower through the year. I guess, are you expecting sequential declines each quarter from here? Yeah, thanks, Mike. So when we look at our results, excluding the multifamily, we really see margins flattening out for acute and slightly down if we continue to see below normal source environment.

Speaker Change: Morning, Mike.

Speaker Change: To pick up on the on the gross margin dynamic can we just put a finer point on what drifts lower through the year means youre starting at 35.

Speaker Change: Presumably there is still some near term pressure.

Speaker Change: Given where you guided to Q just.

Speaker Change: How.

Speaker Change: Just help us ballpark, what the <unk> gross margin is in that.

Speaker Change: Sure.

Speaker Change: Yes drift lower through the year I guess are you expecting sequential declines each each quarter from here.

Mike Dahl: Yes, Thanks, Mike.

Mike Dahl: So when we look at our results excluding the multifamily we really see margins flattening out.

Mike Dahl: For Q2.

Mike Dahl: And slightly down if we continued to see below normal sorts environment. So that's kind of what we've baked in.

Pete Beckmann: So that's kind of what we've baked in from a multifamily standpoint. We continue to have a little bit of that normalization. I think we're on our last leg of that. But when we look year over year, it's a much bigger step down. So it has an impact as we look at the overall year to year. So I would say we're getting pretty close to flat. Our competitive advantages with what we've invested in our manufacturing continues to support our margins with our value-added products. And we're very confident in our ability to deliver higher margins. Okay, thanks, that's helpful, Pete.

Mike Dahl: From a multifamily standpoint, we continue to have a little bit of them normalization I think were in our last leg of that.

Mike Dahl: But when we look year over year, it's a much bigger step down. So it has an impact as we look at the overall year to year.

Mike Dahl: So I would say, we're we're getting pretty close to flat or competitive advantages with what we've invested in our manufacturing continues to support our margins.

Mike Dahl: With our value added products and.

Mike Dahl: We're very confident in our ability to deliver higher margins.

Mike Dahl: Okay. Thanks Thats helpful.

Mike Dahl: The second question is capital allocation. This has been a hallmark of the company for a number of years in terms of the ability to aggressively deploy capital both on M&A and buybacks. We're reaching a point here where given the compression we're seeing in EBITDA and cash flow and some of what you've already deployed on the acquisitions and now this big buyback in 2Q, your pro forma leverage says what to be. you know, a couple ticks higher than your your 2x range in an uncertain environment. So how are you thinking about balancing that? I mean, as much as we like to see the buybacks, that's a pretty big number to lean into in the quarter, given what's transpiring, just maybe a little more elaboration on how you plan to balance.

Mike Dahl: The.

Mike Dahl: Second question capital allocation framework. This has been a hallmark of the company for a number of years in terms of the ability to aggressively deploy capital both on buyback.

Mike Dahl: Buybacks, we're reaching a point here, where given the compression we're seeing the EBITDA and cash flow and some of what you've already deployed.

Mike Dahl: The acquisitions and now this big buyback in <unk> your pro forma leverage does look to be yes.

Mike Dahl: A couple of ticks higher than your two X rays.

Mike Dahl: Range.

Mike Dahl: In an uncertain environment.

Mike Dahl: How are you thinking about balancing that I mean as much as we like to see the buybacks.

Mike Dahl: That's a big number.

Mike Dahl: In the quarter, given what's transpired just maybe a little more elaboration on how you plan to balance.

Mike Dahl: All of this in the coming quarters.

Mike Dahl: All of this in the coming quarters.

Pete Beckmann: Yeah, great question, Mike. So our capital allocation priorities remain the same. We are going to focus on protecting our balance sheet, making sure that we're investing in the core. The next priority is of M&A and stock buyback. We will have to continue to evaluate as we move forward. so that we're committed, staying to our commitment of managing to a one to two times leverage by year end. So yeah, the only thing I would add, we have been very disciplined and thoughtful about building out our balance. Making sure our tenures, our rates, our liquidity position, all remains very strong.

Mike Dahl: Yeah, Great question Mike.

Speaker Change: So our capital allocation priorities remain the same.

Speaker Change: We are going to focus on protecting our balance sheet, making sure that we're investing in the core the next priorities of M&A and stock buyback.

Speaker Change: We will have to continue to evaluate as we move forward.

Speaker Change: So that we're committed to staying to our commitment of managing to a one to two times leverage by year end.

Speaker Change: So yes, nothing I would add we have been very disciplined and thoughtful about building out our balance sheet, making sure. Our 10 years our rates our liquidity position all remains very strong. So none of that has really changed all that has really evolved here is that we've seen.

Pete Beckmann: So none of that has really changed. All that's really evolved here is that we've seen a pullback in the EBITDA number for the basis. And what I would say is, you know, we were targeting a year end one to two times. It's always been the sort of the theme because of our seasonal borrowing fluctuations. It's pretty normal for us to have some changes across the year. And I think we're still in a position to be able. We employ capital in a very intelligent way to position the business for growth over time at the current level.

Speaker Change: Pull back in that EBIT number for the basis of the math and what I would say is we are targeting a year and.

Speaker Change: One to two times, it's always been sort of the theme because of our seasonal borrowing fluctuations, it's pretty normal for us to have some changes across the year.

Speaker Change: And I think we're still in a position to be able to deploy capital in a very intelligent way to position the business for growth over time at the current level and as each year passes we will have more opportunities as we returned to growth. We will have more opportunities. So I think fair I think your observations are on point.

Pete Beckmann: And as each year passes, we'll have more opportunities as we return to growth, we'll have more opportunities. So I think fair, I think your observations are on point, but it's a point. Got it. Okay.

Speaker Change: But it's a point in time.

Speaker Change: Got it okay. Thank you.

Mike Dahl: Thank you.

Speaker Change: Okay.

Speaker Change: Thank you and we will take our next question from Charles Perron Quiche with Goldman Sachs. Please go ahead.

Charles Perron: And we will take our next question from Charles Perron-Piche with Goldman Sachs. Please go ahead. Thank you. Good morning, everyone. First, I want to talk a bit about the commodity backdrop. You know, lumber prices have been trading higher through the spring, and you obviously revised your guidance higher to reflect that. But can you talk about how you expect this to flow through your commodity inflation expectations for 2025? And how are those higher lumber prices impacting the mix of value add? Are you seeing specifically increased elasticity of demand as builders are facing, you know, green margin pressure?

Speaker Change: Thank you and good morning, everyone.

Speaker Change: Good morning.

Speaker Change: First I wanted to talk a bit about the commodity backdrop lumber prices have been trading higher through the spring and you. Obviously you revised your guidance higher to reflect that but can you talk about how you expect this to flow through year commodity inflation expectations for 2025, and how are those higher lumber prices impacting the mix of value add.

Speaker Change: Are you seeing specifically increased elasticity of demand as builders are facing margin pressures.

Charles Perron: Yeah, thanks for the question, Charles. So with commodities... We are seeing the impact of the year to date higher prices on lumber. But as a reminder, and I don't know if we've shared this with you specifically, but when we look at our commodity prices, it's 70 percent weighted to the the lumber composite and 30 percent weighted to the OSB. So that's kind of the blend of what we see going into a normal home. So with that, with OSB being super depressed, especially to where it was a year ago, we're seeing that pull the number overall down, but we are seeing the lumber composite year-over-year higher.

Speaker Change: Yes, thanks for the question Charles.

Speaker Change: So with commodities.

Speaker Change: We are seeing the impact of the year to date higher prices on lumber.

Speaker Change: But as a reminder, and I don't know if we've shared this with you specifically, but.

Speaker Change: When we look at our commodity prices at 70% weighted to the lumber composite.

Speaker Change: <unk> and 30% weighted to the OSB composite.

Speaker Change: So that's kind of the blend of what we see going into <unk>.

Speaker Change: A normal home size.

Speaker Change: So with that with OSB being super depressed, especially to where it was a year ago, we're seeing that pull the number overall down.

Speaker Change: But we are seeing the lumber composite year over year higher so what.

Pete Beckmann: So, what we see for the balance of the year is kind of holding at this level, if not even drifting down a little bit as people digest some of the initial reaction to tariff concerns. And that's going to continue to benefit, but modestly in our results through the balance of the year as we proceed. With respect to the value added products, it is a portion of the truss and the wall panels that we produce, and that'll change the cost basis as we continue to design and engineer, optimize those. I think your point is right on, though.

Speaker Change: What we see for the balance of the year is kind of holding at this level, if not even drifting down a little bit as people digest some of the initial reaction to tariff concerns.

Speaker Change: And that's going to continue to.

Speaker Change: Benefit, but modestly and our results through the balance of year as we pass that through.

Speaker Change: With respect to the value added products. It is a portion of the trust and the wall panels that we produce and that'll that'll change the cost basis as we continue the same design and engineer optimize those trust funds.

Speaker Change: Thank you your point is right on anything that grows commodities as a percentage will.

Pete Beckmann: Anything that grows commodities as a percentage will, by mathematical equation, reduce value-add as a percentage of total mix, but it's fairly modest overall. And to clarify a point, so Lumberata, Canada is covered under USMCA for tariff reasons, meaning no tariff impact on what we've been up to lately, but the traditional duty regime is still in place. So there is expected to be an update to that duty regime later on this year that, for the time being, looks to be fairly substantial. The reality is, by the time it gets implemented, it'll be kind of into the fourth quarter, really, before we start to see it hit.

Mathematical equation reduced value add as a percentage of total mix, but its fairly modest overall.

Speaker Change: And to clarify a point.

Lumbar erotic Canada is.

Speaker Change: <unk> is covered under U S. MCA for tariff reasons, meaning no tariff impact on what we've been up to lately, but the traditional duty regime is still in place. So there is expected to be an update to that duty regime. Later on this year that for the time being looks to be fairly substantial the reality is by the time it gets in.

Speaker Change: <unk> will be kind of into the fourth quarter really before we start to see it hit and as you know fourth quarter is a fairly small quarter for us overall, so some development, we think will play out.

Pete Beckmann: And as you know, fourth quarter is a fairly small quarter for us overall.

Charles Perron: So some development we think will play out, although I'll be quite candid and tell you that given the amount of uncertainty around tariffs and duties in general, I wouldn't necessarily deposit that check. That's super helpful, Collar.

Speaker Change: Although I'll be quite candid and tell you that given the amount of uncertainty around tariffs and duties in general I wouldn't necessarily deposit that check on anything yet.

Speaker Change: Got it.

Charles Perron: And second, you know, you talked about the progress of digital initiatives in your prepared remarks, I think adding $19 million this quarter.

Speaker Change: Helpful color and second you talked about the progress of digital initiatives in your prepared remarks, I think that the adding $90 million. This quarter. When you consider softer housing backdrop, what factors lead your confidence of reaching that $200 million targeting 25, I think you mentioned last quarter you were adjusting your go to market strategy for dose how are you progressing against that.

Pete Beckmann: When you consider software housing backdrop, what factors lead your confidence to reaching that $200 million target in 2025? I think you mentioned last quarter, you were adjusting your gold market strategy for those. How are you progressing against that? Yeah, no, that's a great question. So, you know, the reality is the tools are being really well received. The customers that are engaging with them and using them like them a lot. They find it valuable in terms of their pace of build, their ability to understand the components, the ability to adapt to what they want to do on the ground more quickly.

Speaker Change: Sure.

Speaker Change: Yeah, No. That's a great question. So then.

Speaker Change: The reality is the tools are being really well received the customers that are engaging with them and using them like them a lot. They find it valuable in terms of their.

Speaker Change: Their pace of build their ability to understand.

Speaker Change: Ponant the ability to adapt to what they wanted to do on the ground more quickly.

Peter Jackson: The interfaces, I think, more seamless, more modern than anything that the industry has seen before. So the adoption has been I think our internal rollout is a lot more about training, dialing in some of the features and functions of the tool internally, and getting things re-platformed to be able to, I would say, accelerate the adoption by the customer.

Speaker Change: Interfaces I think are more seamless more modern than anything that the industry has seen before so the adoption has been good.

Speaker Change: Our internal rollout is a lot more about.

Speaker Change: Training dialing in some of the features and functions of the tool internally and getting things re.

Speaker Change: Re platform to be able to I would say accelerate the adoption by the customer now.

Peter Jackson: Now the one thing I will point out, and it came through hopefully in the materials, is that our initial target audience for this tool is the smaller builders, so production builders between 50 and 2,000 homes a year, until we get the tool really dialed in the way we want it, and that is a customer category that has been under a lot of pressure. I would say, comparative to last year, they're pretty stable, pretty good, maybe even up a little. Some other customer categories are maybe down a bit versus last year, but that gives us confidence that we're on the right track, both the momentum we've seen in the initial I think those are the three reasons we've remained confident that digital is on the right track and going the right way.

Speaker Change: Now the one thing I will point out and it came through hopefully the materials is that our initial target audience for this tool is the smaller builders. So a production builder between 50 and 2000 homes a year.

Speaker Change: Until we get the tool really dialed in the way we want it and that is a customer category that has been under a lot of pressure I would say comparative to last year, they're pretty stable pretty good maybe even up a little.

Speaker Change: Some other customer categories, or maybe down a bit versus last year, but that gives us confidence that we're on the right track both the momentum we've seen in the initial reset internally as well as customer adoption and overall customer Hal I think those are the sort of the three reasons. We remain confident that digital is on the right track and going the right direction.

Charles Perron: Okay, thanks for the call, guys, and good luck.

Speaker Change: Okay. Thanks for the color guys and good luck.

Speaker Change: Thank you.

Speaker Change: Thank you and your next question comes from the line of John Lovallo with UBS. Please go ahead.

John Lovallo: And your next question comes from the line of John Lovallo with UBS. Please go ahead. Good morning, guys. Thanks for taking my questions as well. The first one is kind of working off of Matt's question at the onset here in terms of the competition. I mean, really, what does the competition look like today? And what I'm getting at is if you're expecting gross margins, call it 29 to 31 percent, and your competitors, some of the smaller ones have higher costs, new capacity, have to imagine that they're running closer to break even. I mean, how sustainable is some of this newer competition that has come into the market?

John Lovallo: Good morning, guys. Thanks for taking my questions as well.

John Lovallo: The first one is kind of working off of Matt's question at the onset here in terms of the competition I mean, it really what does the competition look like today and what I'm getting at is if youre expecting gross margins call it 29% to 31%.

John Lovallo: And your competitors some of the smaller ones have higher cost new capacity have to imagine that theyre running closer to breakeven I mean, how sustainable is some of this newer competition that's come into the market.

Peter Jackson: That's a fantastic question. It's an ongoing debate. I would tell you, based on some of the behaviors that we've seen, the lowest of the low is not sustainable and they're regretting some of the decisions they've made, and rightfully so. I think builders, to their credit, are trying to get the lowest cost possible, which I respect, right? It's business. The counterpoint to that is they need actual there, this is our role in the industry, we need to be able to provide products to the job site. In order to do that, we need to have a sustainable there are certain players in this space that I think are trying to play the short game, right?

That's a fantastic question.

John Lovallo: Yes, it's an ongoing debate.

John Lovallo: I would tell you based on some of the behaviors that we've seen the lowest of the law was not sustainable and there. They are writing some of the decisions they've made and rightfully so I think.

John Lovallo: Builders to their credit are trying to get the lowest cost possible, which I respect <unk> business. The counterpoint to that is they need actual partners to do what they do there. This.

John Lovallo: This is our role in the industry, we need to be able to provide products to the job site in order to do that we need to have a sustainable business. There are certain players in this space that I think are trying to play the short game right. This is <unk>.

Peter Jackson: This is a space that's been known to, you know, try and grow quick and flip the business so that they could make a few bucks. If you're a builder, particularly a big builder, that is got to be tempting, but also long term, I think very detrimental, because they're reliant on a stable industry, an industry that's focused on the future, becoming more efficient, leveraging technology, being able to provide the best quality, most efficient tools for builders to be able to build homes. And that's us. And there's a cost associated with it. That's the trick, right? They, like any good customer, they want everything and they want it nearly free.

John Lovallo: Space Thats been known to.

John Lovallo: Try and grow quick can flip the business so that they could make a few box if Europe builder, particularly a big builder.

John Lovallo: That is got to be tempting, but also long term I think very detrimental because they're reliant on a stable industry an industry that is focused on the future becoming more efficient.

John Lovallo: Leveraging technology being able to provide the best quality, most efficient tools for builders to be able to build homes and that's us and theres a cost associated with it thats the track right.

John Lovallo: Like any good customer they want everything and they want it nearly free.

Peter Jackson: There's a balance that needs to play out in the market. There are some players that have historically, you know, made lower single digit margins and have been comfortable there, but they're unwilling and frankly unable to invest in the type of future for this industry that I think we all deserve as Americans. And so, you know, my challenge to them, to my competitors, is get better. Do better for this industry because we deserve it. And we're going to walk the talk. We're going to continue to invest. We're going to make this a business that's able to support the biggest, the best, the fastest, the most innovative home builders in this country.

John Lovallo: There is a balance that needs to play out in the market. There are some players that have historically.

John Lovallo: Lower single digit margins and have been comfortable there, but they are unwilling and frankly unable to invest in the type of.

John Lovallo: Future for this industry that I think we all deserve as Americans and so.

John Lovallo: My challenge to them to my competitors get better.

John Lovallo: Do better for this industry, because we deserve it and we're going to walk the talk we're going to continue to invest we're going to make this a business that's able to support the biggest the best the fastest the most innovative homebuilders in this country, we're going to help solve problems. So is there a balance there on margins is there a fight that needs to be had yes. There is.

Peter Jackson: We're going to help solve problems. So is there a balance there on margins? Is there a fight that needs to be had? Yeah, there is, right? And we're going to stay in the fight. But I think in the long run, we are going to win this and we're going to make our business, our industry, our country better because. Yeah, that makes a lot of sense to me.

John Lovallo: Right and we're going to stay in the fight.

John Lovallo: But I think in the long run.

John Lovallo: Going to win this and we're going to make.

John Lovallo: Our business our industry, our country better because of it.

Speaker Change: Yes that makes a lot of sense to me, okay and the next.

John Lovallo: Okay, and the next question is on the productivity savings, $17 million in the quarter, targeting $70 to $90 for the full year.

Speaker Change: Question is on the productivity savings of $17 million in the quarter targeting 770 to 90 for the full year curious how you kind of view the cadence of the remainder of those savings and what sort of actions are you taking to drive those savings through the year.

Peter Jackson: Curious how you kind of view the cadence of the remainder of those savings? And, you know, what sort of actions are you taking to drive those savings through the year?

Peter Jackson: So I'll let Pete talk to the cadence, but you know, productivity for us is very core to who we are. And we'll Our expectation is every quarter, every day, really, our employees are looking for ways to get a little bit better, one step better, one step in the right direction. And that incremental progress as a team has had tremendous cumulative value for us. We're better, we're more profitable, we're faster. Candidly, jobs are more fun because we take some of the garbage work out. So I think that's something that we have gotten comfortable with as an organization, that we're very good at as an organization.

Speaker Change: So I'll, let Pete talk to the cadence, but productivity for US is very core to who we are and what our expectation is every quarter every day really our employees are looking for ways to get a little bit better one step better one step in the right direction and that incremental progress as a team has had tremendous cumulative value.

Speaker Change: For us as an organization, we're better more profitable we're faster.

Speaker Change: Candidly jobs are more fun, because we take some of it some of the garbage work out.

Speaker Change: So I think that's something that we have.

Speaker Change: <unk> gotten comfortable with as an organization that we're very good at as an organization Thats, what youre seeing in terms of our performance, we do have a little bit of pullback because the diversion that some of our ERP work is requiring we've got to be able to put ours in some of our best people to make sure that ramp up goes well.

Pete Beckmann: That's what you're seeing in terms of our performance. We do have a little bit of pullback because of the diversion that some of our ERP work is requiring. We've got to be able to put hours in some of our best people to make sure that ramp up goes well. But the numbers in general continue to be a core part of what we do, and our delivering that is critical to our long-term success.

Speaker Change: But the numbers in general continue to be a core part of what we do and are delivering that is critical to our long term success.

Pete Beckmann: Yeah, and as Peter said, from the way that it's going to roll in, we've been delivering productivity for several years now. And it's not something that just starts and stops. It's a constant. And we're seeing that productivity that will roll in throughout the course of the year. I would say ratably, and it's kind of generally in that kind of linear line. However, with the ERP rollout that we're expecting toward the back half of the year, we may see some of that impact that Peter mentioned in the back half. But right now, we're expecting more of a ratable realization of that.

Peter Jackson: And as Peter said from a.

Peter Jackson: The way that it's going to roll in we have been delivering productivity for several years now and it's not something that just.

Peter Jackson: Starts and stops of comps and we're seeing that productivity that'll roll in throughout the course of the year.

Peter Jackson: I would say ratably and that's kind of generally in that kind of linear line.

Peter Jackson: However, with the ERP rollout that we're expecting towards the back half of the year. We may see some of that impact that Peter mentioned in the back half, but right now we're expecting more of a ratable realization of it.

John Lovallo: Great.

Speaker Change: Great. Thank you guys.

Rafe Jadrosich: Thank you guys. Thank you.

Peter Jackson: Thank you.

Speaker Change: Thank you and your next question comes from the line of Ravi <unk>.

Rafe Jadrosich: And your next question comes from the line of Rafe Jadrosich with Bank of America. Please go ahead. Hi, good morning. It's Rafe. Thanks for taking my question.

Speaker Change: With Bank of America. Please go ahead.

Speaker Change: Hi, good morning, it's Rafe thanks, Thanks for taking my questions.

Speaker Change: Well.

Rafe Jadrosich: First, when we look at the full year guidance, it implies second half growth over the first half, which is a little bit stronger than what you've done sort of historically. Can you just talk about some of the assumptions, specifically around like content per house, market share, multifamily mix, in terms of what's driving the stronger second half sequentially versus the first? Rafe, I'll take the first pass at this. What we're seeing in the full year is more of a seasonal, a normal seasonal year, where the first quarter is really the lowest quarter of the year, fourth quarter is kind of the second lowest, but the peak in the build through Q2 and really in Q3.

Speaker Change: First one when you look at the full year guidance it implies.

Speaker Change: Sure.

Speaker Change: Can have growth over the first half.

Speaker Change: Which is a little bit stronger than what you've done sort of historically can you just talk about some of the assumptions.

Speaker Change: Specifically around my content per house market share multifamily mix in terms of what's driving the stronger second half sequentially versus the first half.

Ralph: So Ralph I'll take the first pass at this well.

Ralph: What we're seeing in the full year is more of a seasonal normal seasonal year.

Ralph: First quarter is really the lowest quarter of the year fourth quarters kind of the second Lewis.

Ralph: The peak in the Bill through Q2 and really in Q3.

Rafe Jadrosich: The other factors that we're looking at with multifamily multifamily is really stabilizing that we're seeing in 2025. So we don't have the same downward headwind or trajectory in the back part. So it may look like it's, it's stronger, but it's actually holding the line more. And we're just realizing that that sees no benefit. We're also generating growth from our acquisitions that we've completed. So all the ones we completed last year and early this year that we're going to benefit in the back half of the year that we didn't have a year ago.

Ralph: The other factors that we're looking at with multifamily.

Ralph: Multifamily is really stabilizing that were seen in 2025. So we don't have the same downward headwind or trajectory in the back part so it may look like.

Ralph: It's stronger, but it's actually at the holding the line more and we're just realizing that that seasonal benefit.

Ralph: Also generating growth from our acquisitions that we've completed so all the ones. We completed last year and early this year that we're going to benefit in the back half of the year that we didn't have a year ago.

Rafe Jadrosich: That's helpful.

Speaker Change: Okay. That's helpful. And then just following up on some of the changing patterns.

Rafe Jadrosich: And then just following up on some of the changing patterns and behavior in the market. Can you is that more on the commodity side or manufacturing products? And is that you know, are you seeing that broad base across the country? Are there specific markets where you're seeing more more pressure? Well, there's no question there's pressure across the board, right? I mean, this is in an affordability focused environment, you're, you're getting a deep dive What I would say though is, and I think maybe we've talked about this in prior quarters, is we've seen an evolution and a progression of how at the various categories.

Speaker Change: Behavior in the market can you is that more on the commodity side.

Speaker Change: Side or manufactured products.

Speaker Change: Is that are you seeing that broad base across the country are there specific markets, where youre seeing more and more pressure than others.

Speaker Change: There's no question there is pressure across the board right. I mean this is in an affordability focused environment.

Speaker Change: We're getting a deep dive on everything.

Speaker Change: What I would say, though is I think.

Speaker Change: Maybe we've talked about this in prior quarters as we've seen an evolution and a progression of how builders have looked at the various categories commodities easiest commodities first so commodity got got attack I would say the FERC.

Rafe Jadrosich: Commodities easiest, commodities first. So commodity got attacked, I would say, the first. As you look at other categories, it's more complex. There are more pieces to be considered. The consequences are potentially more impactful. So it's been a little slower in terms of the review and the focused work. There's no question that there are some regional. Differentiation between profitability and the pressure. Some areas of the country, you know, very high utilization, lots of competition, lots of capacity, reacts very different than a smaller environment where maybe you're the only game in town. So all of them see pressure, but different levels of pressure depending on where you are in life.

Speaker Change: As you look at other categories. It's it's more complex there are more pieces to be considered the consequences are potentially more impactful. So it's been a little slower in terms of the review and the focused work. There's no question that there is some regional.

Speaker Change: Differentiation.

Speaker Change: Asian between profitability and the pressure some areas of the country.

Speaker Change: <unk>.

Speaker Change: Very high utilization lots of competition lots of capacity reacts very different than a smaller environment, where maybe you are the only game in town. So all of them see pressure, but different levels of pressure, depending on where you are and what the competitive environment looks like.

Rafe Jadrosich: Thank you, it's helpful. Thank you.

Speaker Change: Thank you that's helpful.

Speaker Change: Okay.

Speaker Change: Thank you and your next question comes from the line of Keith Hughes with <unk> Securities. Please go ahead.

Keith Hughes: And your next question comes from the line of Keith Hughes with Truist Securities.

Keith Hughes: Please go ahead. Thank you.

Speaker Change: Alright, thank you.

Keith Hughes: Questions on your value added products. Did you talk about In terms of the reported numbers, how much of that's units and how much...

Speaker Change: First is on your value added products could you talk about.

Speaker Change: In terms of the reported numbers, how much about units and how much is <unk>.

Speaker Change: Price pressure.

Speaker Change: And the work.

Pete Beckmann: Morning, Keith. I don't think we provide that level of information. But what I can tell you in the decline in the manufactured product Just a reminder, in the multifamily space, we're much more heavily weighted toward the value-added products, so I think previously we were about 75% to the value-add. What we're seeing in the declines, as we've indicated year over year, was a big headwind as we lapped that multifamily normalization. and our trust decline within the multifamily was down about 46%. So more than the 32 multifamily down that we communicated. So that's given you a disproportionate decline in that manufacturing.

Speaker Change: Good morning, Keith I don't think we've provided that level of information, but what I can tell you in the decline in the manufactured products.

Just reminder, in the multifamily space, we're much more heavily weighted towards the value added products. So I think previously we're about 75% to the value add.

Speaker Change: What we're seeing in the declines as we've indicated year over year was a big headwind as we lap that multifamily normalization and our truss decline within the multifamily was down about 46% so more than the 32 multifamily down that we communicated.

Speaker Change: So that's given you a disproportionate decline in manufactured products.

Pete Beckmann: There will be price and units included in that. And do you anticipate based on your multifamily comments you in this guide, you're anticipating that number to start flattening out what third quarter? Really, we're starting to see it flatten out now. What we're year over year, we'll start to get to parity by probably around closer to the fourth quarter, because there's still a headwind that we're lapping from the Okay, great.

Speaker Change: There will be price and units included in that.

Speaker Change: Question is on that.

<unk>.

Speaker Change: And based on your multifamily comments, you Scott Youre anticipating that number to start flattening out what third quarter.

Speaker Change: Really we're starting to see a flattened out now what were year over year will start to get to parity by <unk>.

Speaker Change: Probably around closer to the fourth quarter, because there is still a headwind that we're lapping from the prior year.

Speaker Change: Okay, great. Thank you very much.

Keith Hughes: Thank you.

Speaker Change: Okay.

Speaker Change: Thank you and your next question comes from the line of Trey Grooms with Stephens. Please go ahead.

Trey Grooms: And your next question comes from the line of Trey Grooms with Stevens. Please go ahead. Hey, good morning, Peter and Pete. Hope you're well. So, I know you guys, first off, you know, you mentioned, you know, your Capital allocation priorities haven't changed. But I guess kind of going back to that question, you know, where, where does the appetite stand for additional acquisitions at this point? Or maybe that's another way?

Speaker Change: Hey, good morning, Peter and peak.

Speaker Change: Hope you're well.

Speaker Change: So.

Speaker Change: I know you guys.

Speaker Change: First off you.

Speaker Change: Mentioned.

Speaker Change: Sure.

Speaker Change: Capital allocation priorities haven't changed.

Speaker Change: But.

Speaker Change: Kind of going back to that question, where does the appetite stand for additional acquisitions at this point or maybe asked another way.

Trey Grooms: At what point do you start to take, you know, the foot off the accelerator as far as you know, with with M&A and buybacks, things of that nature? Well, I mean, it's interesting because A piece of this is completely outside of our control and is dependent on the sort of the personality and the mood of the market. I will start by saying that the mood of the market has cooled significantly. I would say, you know, a year ago, there were a lot of deals out there, a lot of folks talking. As it stands today, I think uncertainty more broadly has contributed to a lot of uncertainty in the M&A.

Speaker Change: At what point do you start to take the foot off the accelerator as far as M&A in.

Speaker Change: Buybacks things of that nature.

Speaker Change: Well I mean, it's interesting because.

Speaker Change: A piece of this is completely outside of our control and is dependent on the sort of the personality and the mood in the market.

Speaker Change: I'll start by saying that the mood in the market has cooled significantly.

Speaker Change: I would say.

Speaker Change: Year ago, there were a lot of deals out there a lot of folks talk in.

Speaker Change: As it stands today I think uncertainty more broadly.

Has contributed to a lot of uncertainty in the M&A steps, so I'll start with that.

Peter Jackson: I'll start with that. The other is to say, there's been a theme, and I think we've been pretty clear about it, to say, for the right deal, in the right market, for the right product categories, we would do something special. But those are pretty rare. They're pretty few and far between. So I don't want to come out and say, never.

Speaker Change: The other is to say.

Speaker Change: There is there has been a theme and I think we've been pretty clear about it to say for the right deal.

Speaker Change: And the right market for the right product categories, we would do something special.

Speaker Change: But those are pretty rare they are pretty few and far between.

Speaker Change: So.

Speaker Change: I don't want to come out and say never but at this stage of the game I would say it seems pretty unlikely that there's anything big going to happen anytime soon.

Peter Jackson: But at this stage of the game, I would say, it seems pretty unlikely that there's anything big going to happen anytime soon. But we continue to look. Our M&A team is, I would argue, a finely tuned weapon, and we are not shy about using it when it makes sense for shareholders in that long-term strategic lens. Okay, and then... Maybe kind of sticking with it with the same theme of. You know, if things continue to kind of hang around here, or, or maybe even slow a little more than expected, you know, when you when you think about your, your footprint, your, your branch network, are there, how do you see the opportunity?

Speaker Change: But we continue to look.

Our M&A team is.

Speaker Change: I would argue a finely tuned weapon and we we are not shy about using it when it makes sense for shareholders and not long term strategic plan.

Speaker Change: Okay and then.

Speaker Change: Maybe kind of sticking with that with the same theme of.

Speaker Change: If things continue to kind of.

Speaker Change: Hang around here or or maybe even slow a little more than expected. When you when you think about your.

Speaker Change: Your footprint.

Speaker Change: Branch network.

Are there how do you see the opportunity or is there any opportunity if the time comes when it's needed to.

Peter Jackson: Or is there any opportunity if the time comes when it's needed to streamline any of those, you know, the footprints in any certain markets?

Streamline any of those.

Peter Jackson: Or do you feel like you're kind of at a critical place right now with your, your branches and the, you know, the, the, the footprint you have where you're happy with that over a, over, you know, kind of any situation really that is feasible in the, in the near term? Yeah, that's a great question. The short answer is we're already doing it. We are a very disciplined organization when it comes to the variable costs and the way that we manage capacity into the market. Every market across the country has their operating metrics that they use to govern how they run their business.

Speaker Change: The footprints in any certain markets or do you feel like you're kind of at a critical place right now with your.

Speaker Change: Your branches.

Speaker Change: The footprint you have where you are happy with that over over kind of any situation really that is feasible in the in the <unk>.

Speaker Change: Near term.

Speaker Change: Yeah. That's a great question. The short answer is we're already doing it.

Speaker Change: We are a very disciplined organization when it comes to the variable costs and the way that we manage capacity into the market that we plan every market across the country.

Speaker Change: They are they are operating metrics that they use to govern how they run their business. We look at every location and every market from a profitability perspective, so we're very disciplined about continuing to.

Peter Jackson: We look at every location and every market from a profitability perspective. So we're very disciplined about continuing to Have a seat. maintain the right operating hygiene, managing capacity, you know, over the last year we've we've closed 1720 locations, you know, that dynamic is something that we will continue to manage to ensure that we've, we've got the right footprint, you know, putting our best people in the best locations, that's all part of what we do.

Speaker Change: I would say.

Speaker Change: Maintain the right operating hygiene managing capacity over the last year we've closed.

Speaker Change: 17 20 locations.

Speaker Change: That dynamic is something that we will continue to manage to ensure that we've got the right footprint.

Speaker Change: Putting our best people in the best locations, that's all part of what we do.

Trey Grooms: We just don't really talk about it externally very much. The other piece that I would mention, and I know you've seen this, Trey, is the downturn playbook is certainly available for us if we need it, and we use it on a market level just in terms of responding to the dynamics. Yep. Got it. Okay. Thank you very much for that. And it was helpful. I'll pass it on. Thanks. Thank you.

Speaker Change: We just don't really talk about it externally very much.

Speaker Change: The other piece that I would mention and I know you've seen this <unk>.

The downturn playbook is certainly available for us if we need it and we use it on a market level just in terms of.

Speaker Change: Responding to the dynamics at play.

Speaker Change: Yes.

Speaker Change: Got it okay. Thank you very much for that.

Speaker Change: Helpful I'll pass it on.

Joe: Thanks, Joe.

Speaker Change: Thank you and your next question comes from the line of Phil <unk> with Jefferies. Please go ahead.

Phil Ng: And your next question comes from the line of Phil Ng with Jeffries. Please go ahead. Hey, guys. Thanks for all the great color. I guess implicit in your guide, you're calling for a second half earnings ramp. And Peter, it sounds like it's more seasonal and recent deals? Or does your guide actually assume some second half pickup in activity? Perhaps maybe the production builders are kind of easing some of that D stock as we kind of look out to the back half? Kind of give us a little more context, which you're kind of assuming for the back half.

Speaker Change: Hey, guys.

Speaker Change: For all the great color.

Speaker Change: I guess implicit in your guide you're calling for a second half earnings wrap and Peter It sounds like it's more seasonal than recent deals or does your guide actually assume some second half pick up in activity, perhaps maybe the production builders are kind of easing some of that destock as we kind of look out to the back half kind of give us a.

Speaker Change: A little more context, what youre kind of assuming for the back half.

Speaker Change: Got it.

Pete Beckmann: I was just gonna say it's definitely not an assumed ramp. And trying to use the word seasonality is we definitely have footprint across certain geographies that the spring summer selling season are the when you're looking across Alaska and the Northern Hemisphere, the lower 48. So it's disproportionate in that way for those markets. And we're seeing healthy activity currently, and we're expecting that to continue on a normal seasonal basis.

Speaker Change: It's just going to say, it's definitely not an assumed ramp.

Speaker Change: Trying to use the word seasonality is we definitely have footprint across certain geographies that.

Speaker Change: Spring summer selling season are the peaks when youre looking across Alaska and the northern hemisphere.

Speaker Change: The lower 48.

Speaker Change: So it's disproportionate in that way for those markets and were seeing healthy activity.

Speaker Change: Currently and we're expecting that to continue on a normal seasonal basis.

Phil Ng: Yeah, just to confirm that right, it's it's mostly what you said, it's mostly M&A. And the comps from a percentage perspective, the daily sales number in the core business is a gentle seasonal curve like you'd expect, but not expecting a recovery. in the in the broader market or from key customers. Okay, that's helpful. Appreciate that. And then your larger, some of the larger public builders have talked about one, they haven't seen inflation from tariffs yet, and perhaps not even anticipated much over the course of the year. And you called out call 175 to 200 million potential impact from tariffs.

Speaker Change: Yes, just to confirm that right. It's mostly what you said, it's mostly M&A and the comps from a precise perspective, the daily sales number in the core business is.

A gentle seasonal curve like you'd expect but not expecting recovery.

Speaker Change: In the in the broader market or for key customers or any of that.

Speaker Change: Okay. That's helpful. I appreciate that and then your larger several larger public builders have talked out one they haven't seen inflation from tariffs, yet and perhaps not even anticipated much over the course of the year.

And you called out call it $175 million to $200 million potential impact from tariffs. So just wanted to get your thoughts and your ability to kind of pass through because implicit your gross margin guidance. I think you were assuming it to kind of hold relatively steady from <unk> levels, maybe it drift down a little bit, but still pretty healthy. So just kind of give us some context there.

Pete Beckmann: Just want to get your thoughts in your ability kind of passes through, because implicit your gross margin guidance, I think you're assuming it to kind of hold relatively steady from one key levels, maybe it drifts down a little bit, but still pretty healthy. So give us kind of give us some context. Yeah, it's going to be an interesting environment as those tariffs continue to make their way into the inventories and as we need to supply to our customers. Our intent is to pass it through but we will work with our customer partners. We are going to continue to figure out the right approach and dealing with affordability challenges as the tariffs are coming through.

Speaker Change: Yes, it's going to be an interesting environment as those tariffs continue to to make their way into the inventories and as we need to supply to our customers.

Speaker Change: Our intent is to pass it through but we will work with our customer partners. We are going to continue to figure out the right approach and.

Speaker Change: Dealing with affordability challenges as the tariffs are coming through but the expectation is that that's a cost that's increase and it will it will need to go through.

Pete Beckmann: But the expectation is that that's a cost that's increased and it will need to go through. A lot of this is going to be passed through in focused encounters. I mean, China's the China's the big player. We don't actually import virtually anything from China ourselves. A lot of this is stuff that we buy and then we have. So there's a limited opportunity for us to participate. For the most part, the real question is, how does the market respond? Are there substitutions? Is it a logical progression in terms of movement over time? Does it happen all at once?

Speaker Change: Okay.

Speaker Change: Okay. A lot of this is going to be pass through and focused in key categories right. I mean, China is that China is the big player. We don't actually import virtually anything from China ourselves a lot of this is stuff that we buy and then we have to sell so there's there's a limited opportunity for us to.

Speaker Change: <unk> for the for the most part the real question is how does the market respond or their substitution is it is it a logical progression in terms of movement over time as it happened all at once how much is on the ground at a time, where does where does the tariffs get negotiated too. So everybody wants to know the answer to the question we've tried to take.

Pete Beckmann: How much is on the ground at a time? Where does the tariff get negotiated to? So everybody wants to know the answer to the question. We've tried to take a pass at it. I'll put my hand up and tell you, this is our best guess. And the actual follow-through impact of this isn't even. And when does that actually hit your P&L? Because there's an inventory balancing. Yeah, exactly. It's This number is a full year estimated impact. So whenever it starts hitting, you'll get the pro rata share of it. Even based on today, you're talking about a delay based on what is already on the ground that I don't think any of us actually understand.

Speaker Change: A pass at it I'll put my hand up and tell you. This is our best guess and the actual fall through impact of this is an even bigger guys.

Speaker Change: And when does that actually hit your P&L, because theres a inventory balance sheet dynamic.

Speaker Change: Yes exactly.

Speaker Change: This number is a full year estimated impact so whenever it starts hitting youll get the pro rata share of it even based on today Youre talking about a delay based on what is already on the ground I don't think any of us actually understand there have been a few announcements from certain players but.

Pete Beckmann: There have been a few announcements from certain players. But I mean, you saw the GDP numbers, there was a ton of inventory that came in early that people are trying to prepare for this.

I mean, you saw the GDP numbers there was a ton of inventory that came in early that people are trying to prepare for this or when it actually into the ground I don't think any of us really know.

Phil Ng: So when it actually hits the ground, I don't think any of us Okay, thank you. Thank you.

Speaker Change: Okay. Thank you.

Speaker Change: Thank you and your next question comes from the line of Colin therein with Deutsche Bank. Please go ahead.

Ketan Mantora: And your next question comes from the line of Collin Verron with Deutsche Bank. Please go ahead. Good morning. Thank you for taking my question. Just a point of clarity on the tariffs there. Does the guide or the debt tariff impact assume any tariff mitigation in it? Or is that just the cost number flowing through 100%?

Colin: Hey, good morning. Thank you for taking my questions just a point of clarity on the tariffs there does the guide or the debt care impacts assume any tariff mitigation in it or is that just the cost number flowing through 100%.

Pete Beckmann: So in our guide, we did not bake in any impact from the tariffs. We put that estimate together to kind of give an indication of size or impact that it would have. And that, as Peter was mentioning, includes the stuff we're importing directly, which is very little, and some of the impact from our suppliers that they're, they're going to ultimately be impacted by tariffs based on how they're sourcing products. So it is a big estimate at this time. And we We don't know what the true impact so it is not built into.

Colin: So in our guide we did not bake in any impact from the tariffs.

Colin: We put that estimate together to kind of give us an indication of size or impact that it would have and that as Peter was mentioning includes the stuff. We're importing directly which has very little and some of the impact from our suppliers that they are they're going to ultimately be impacted by tariffs based on how they're sourcing products.

Colin: So it is a big estimate at this time and we just we don't know what the true impact. So it is not built into the into the guidance. So I'm going to come over the top and say two things on that one we don't lose money on stuff that we sell into.

Peter Jackson: So I'm going to comb over the top and say two things. One, we don't lose money on stuff that we sell, and two, There is absolutely going to be an impact of some degree, but if you look at the band of our guidance, the dollar amount of the tariff impact, we are not talking about a change outside of our guidance. The question is, how do you dial it in?

Colin: There is absolutely going to be and the impact of some degree, but if you look at the band of our guidance. The dollar amount of the tariff impact we're not talking about a change outside of our guidance. The question is how do you dial it in.

Pete Beckmann: Man, if I had a crystal ball, I would promise to tell you the right number, but this is our attempt to provide guidance in the face of what we consider to be massive uncertainty. So I don't know if that helps.

Colin: Man, if I had if I had a crystal ball I would promise to tell you the right number but this is our attempt to provide guidance in the face of what we considered to be massive uncertainty. So.

Colin: I hope that helps you or not.

Speaker Change: Yes, that's very helpful color.

Pete Beckmann: And then I guess just on the Windows, Doors, and Millworks pricing headwind that you guys called out, I know you guys don't usually break it out, but any sense of just sort of what the magnitude is that you guys are dealing with in price from vendor price cuts and just how you're thinking about sort of that as a top line headwind through the rest of 2025? Yeah, if we if we said vendor price cuts, it was unintentional. I think that the environment is stable to inflationary, but in particular based on the tariffs. Um, yeah. Oh, I must have misread that in the slide deck.

Speaker Change: And then I guess, just on the Windows doors, and millwork pricing headwind that you guys called out I know you guys don't usually break it out but any signs of sort of what the magnitude is that you guys are dealing with some price from vendor price cuts and just how youre thinking about sort of that top line headwind through the rest of 2025.

Speaker Change: Yes, if we if we said vendor price cuts it was unintentional.

Speaker Change: Thank you.

Speaker Change: The environment is stable to inflationary.

Speaker Change: In particular based on the tariffs.

Speaker Change: Yeah.

Speaker Change: Oh, no service rather than in the slide deck I apologize. Thank you for the color.

Ketan Mantora: Apologies. Thank you for the color. Thank you.

Speaker Change: Thank you.

Speaker Change: Thank you and your next question comes from the line of Keeton mentor with BMO capital markets. Please go ahead.

Ketan Mantora: And your next question comes from the line of Ketan Mantora with BMO Capital Markets. Please go ahead. Good morning and thanks for taking my question.

Keeton Mentor: Good morning, and thanks for taking my question I'm curious as you think about your 2025 guidance.

Ketan Mantora: I'm curious, as you think about your 2025 guidance, you know, Can you, you know, sort of just at a high level, you know, maybe two or three key buckets where you are sort of seeing incrementally more challenges than, you know, kind of what you, you know, had when you put out your prior guidance. Clearly, it looks like single family housing starts, you've taken that down, but two or three sort of key buckets would be helpful. All right, so I'll just give you the high level. Starts are down. Single-family starts are down. Mavis are up a little to offset it.

Speaker Change: Can you sort of.

Speaker Change: Just at a high level, maybe two or three key buckets, where you have products seeing incrementally more challenges than in all kind of what you.

Speaker Change: Hi, Danielle put out your prior guidance clearly it looks like single family housing starts you've taken that down, but two or three key buckets would be helpful.

Speaker Change: Alright, so I'll just give you the high level.

Speaker Change: Starts are down single family starts are down.

Speaker Change: <unk> are up a little to offset it.

Ketan Mantora: And the margin pressure on single family is a little tighter than. a lot below. And part of it's because single-family starts are down. So there's a correlation. puts and takes on other things, but those are the big drivers. Got it. Now that's helpful.

Speaker Change: And the margin pressure on single family is a little tighter than we thought.

Speaker Change: A lot below.

Speaker Change: And part of it's because single family starts are down so there's a correlation.

Speaker Change: Puts and takes on other things, but those are the big drivers.

Speaker Change: Got it that's helpful. So fair to say that the multifamily piece that you. All had previously talked about like 175 to 100 million EBITDA impact that sort of still.

Ketan Mantora: So fair to say that the multifamily piece that y'all had previously talked about, like, you know, call it 175-200 million EBITDA impact, that's sort of still, you know, in line with how you guys were expecting It is, yeah, directionally. You know, and we're lapping most of it, you know, 80% of what we're going to see in terms of the downturn is going to happen in the first half, there'll be a tail on some little stuff that's still fading, but it's, it's largely stable and largely what we anticipated coming into the year. Understood. That's helpful. I'll jump back in the queue.

Speaker Change: In line with how you guys were expecting.

Speaker Change: It is yeah directionally.

Speaker Change: And we're lapping most of it 80% of what we're going to see in terms of the downturn is going to happen in the first half there'll be a tail on some little stuff, that's still fading, but it's it's largely stable and largely what we anticipated coming into the year.

Speaker Change: Understood that's helpful I'll jump back in the queue. Thank you.

Brian Biros: Thank you.

Dan: Thank you Dan.

Speaker Change: Thank you and your next question comes from the line of Adam Baumgarten with Zelman <unk> Associates. Please go ahead.

Brian Biros: And your next question comes from the line of Adam Baumgarten with Zellman & Associates. Please go ahead. Hey, good morning, guys.

Adam Baumgarten: Hey, good morning, guys.

Brian Biros: Can you talk about the trends you're seeing in the installation business? Has that been kind of trending in line with overall results or maybe outperforming a bit? Just curious what you're seeing there. Yeah, it's been good. You know, the multifamily is a headwind against us. So that's, you know, broader macro. But install itself, I think it's something that builders continue to be attracted to. Ease of doing business, efficiency, being able to manage labor, you know, the labor market's eased up a little bit. I think everybody can see that in the headlines. Still some question marks around what's going to happen with immigration.

Adam Baumgarten: Can you talk about the trends youre seeing in the installation business has that been kind of trending in line with overall results or maybe outperforming a bit just curious what youre seeing there.

Adam Baumgarten: Yes, it's been good.

Adam Baumgarten: The multifamily as a headwind against us so that's.

Adam Baumgarten: Broader macro.

Adam Baumgarten: Install itself I think it's something to builders continue to be attracted to.

Adam Baumgarten: Ease of doing business efficiency being able to manage labor the labor markets eased up a little bit I think everybody can see that in the headlines steel.

Adam Baumgarten: Still some question marks around what's going to happen with immigration I don't think were quite through that yet but in general the way we manage it that we feel really good about.

Peter Jackson: I don't think we're quite through that yet. But in general, the way we manage it, that we feel really good about our ability to be successful in that environment. And we think customers are continuing to adopt it and like it as an alternative.

Adam Baumgarten: Our ability to be successful in that environment, and we think the customers who are continuing to adopt it and like it as an alternative.

Peter Jackson: Okay, got it. Thanks.

Speaker Change: Okay got it thanks, and then just on digital just curious when you think you'll be moving to rollout the platform to some of the larger homebuilders and as that.

Peter Jackson: And then just on digital, just curious when you think you'll be moving to roll out the platform to some of the larger homebuilders? And is that a piece of getting to that $1 billion sales target that you guys have put out there? Yeah, I mean, there are some aspects of the tool that we're thinking about working with some of the larger builders on. They certainly have, have, there have been a lot of questions. And our answer to them is, yes, just give us a little bit of time to make sure. exactly where we want to be able to do it.

Speaker Change: A piece of getting to that $1 billion sales target that you guys have put out there.

Speaker Change: Yes, I mean, there are some aspects of the tool that we're thinking about working with some of the larger builders on they certainly have have.

Speaker Change: There've been a lot of questions from the large builders and our answer to them is yes, just give us a little bit of time to make sure that it's.

Speaker Change: Exactly where we want to be able to do it we feel really good about our ability to execute with smaller but a lot of scale changes everything as you know so that's been the pause button.

Peter Jackson: We feel really good about our ability to execute with smaller, but a lot of scale changes everything, as you know. So that's been the pause, but we're, you know, we're playing around with certain features and functionality, and I think that's something that we will absolutely deliver on. We don't need it to get to the billion dollar number in our estimation, but it certainly, I think, is a vote of confidence in what we've been focused on and why it's important to the future of the industry. Got it. Thanks. Thank you.

Speaker Change: We're playing around with certain features and functionality and I think thats something that we will absolutely deliver on we don't need it to get to the $1 billion number in our estimation.

Speaker Change: But certainly I think.

Speaker Change: Is a vote of confidence.

Speaker Change: What we've been focused on and why it's important to the future of the industry.

Speaker Change: Got it thanks.

Speaker Change: Thank you and your next question comes from the line of Brian <unk> with Thomas <unk> free.

Brian Biros: And your next question comes from the line of Brian Biros with Thomason Research Group. Hey, good morning. Thank you for taking my questions. The R&R segment was, I believe, up in the quarter. I know you cited some regional strengths there. Can you just expand on what drove that performance? It seems like that's maybe a more one-time phenomenon, just given the reduced outlook there for R&R and your guidance from, I think it was up low single digits to now flat.

Speaker Change: Research group.

Speaker Change: Hey, good morning, Thanks for taking my questions.

Speaker Change: The R&R segment was I believe up in the corner quarter I know you cited some regional strengths there Keith.

Speaker Change: To expand on what drove that performance. It seems like that's maybe more one time phenomenon just given the reduced outlook there for R&R in your guidance from I think it was up low single digits to now flat. So can you just talk about the expectations are for the rest of the year.

Peter Jackson: So can you just talk about the expectations there for the rest of the year? Well, the expectations, as you just said, so we're calling flat for the full year, had a little bit of bump in the first quarter, really coming from some of the lumber and sheet good categories where we're seeing strength in lumber and sheet. That's a part of our business, while fairly modest in size, that's more stable. You know, you do see the regional impact. One of the nice things about our size and scale is because we're in 43 states and 92 of the top 100 MSAs, you do get a blend and a smoothing at the corporate level, less of that with R&R.

Speaker Change: Well the expectations as you just said so we're calling it flat for the full year.

Speaker Change: I had a little bit of a bump in the first quarter really coming from some of the lumber and sheet good categories, where we're seeing strength in lumber and sheet.

Speaker Change: And that's a part of our business.

Speaker Change: While fairly modest in size, it's more stable.

Speaker Change: You do see the regional impact.

Speaker Change: Of the nice things about our size and scale is because we're in 43 states and 92 of the top 100, Msas you do get a blended smoothing at the corporate level less of that with R&R. So you do see a little bit of movement based on the mix of regions, but generally speaking it is a more stable part of what we do in <unk>.

Peter Jackson: So you do see a little bit of movement based on the mix of regions. But POPs here and there can have an impact, but generally we feel pretty good about us.

Speaker Change: A little bit up Pops here and there can have an impact, but generally we feel pretty good about estimating where tenants.

Speaker Change: Understood.

Peter Jackson: How are your customers managing activity and orders here with this weaker demand, but prices may be rising? Are you seeing anything of pre-buy or forward activity in response to any of that? Thank you. Not really. Good question. I think they just continue to stay focused on I want to call it trade downs, but compromises that are necessary to stay within the price points that they're targeting. Because builders are doing different things, right? Some are starter homes, some are move up homes, some are customs. And depending on what you're doing, it's going to require you to adapt in a certain way.

Speaker Change: How are your customers just managing activity in orders here with this weaker demand, but prices may be rising are you seeing.

Speaker Change: Anything of pre buy or forward activity in response to any of that thank you.

Speaker Change: Not really.

Speaker Change: Good question I think they just continue to stay focused on.

Speaker Change: Yes.

Speaker Change: I want to call it trade downs, but compromises that are necessary to stay within the price points that they are targeting because builders are doing different things right. Some are some are starter homes and remove upon some or customs and depending on what you're doing it's going to require you to adapt in a certain way and one of the common areas of folk.

Peter Jackson: And one of the common areas of focus is whether or not there's just a substitute that beats the job but does it in a more efficient way or take it out entirely. So those are the areas we've been partnering with our customers. Where can the design help take cost out? Where can individual product categories be adapted to the dynamics of what they're trying to meet in order to be the most efficient possible? But in terms of buying ahead, it's a pretty tough thing to do in our space. Thank you.

Speaker Change: This is.

Speaker Change: Whether or not there is just a substitute that beats the job, but does it in a more efficient way or take it out entirely.

Speaker Change: So that's those are the areas we've been partnering with our customers on this work and the design help take cost out where can individual product categories.

Speaker Change: <unk> adapted to the dynamics of what they're trying to meet in order to be the most efficient possible.

Speaker Change: <unk>.

Speaker Change: But in terms of buying ahead, it's pretty tough thing to do.

Speaker Change: In our space.

So the customer.

Speaker Change: Thank you and your next question comes from the line of Jeffrey Stevenson with loop capital. Please go ahead.

Jeffrey Stevenson: And your next question comes from the line of Jeffrey Stevenson with Loop Capital. Please go ahead. Hey, thanks for taking my questions today. I just wanted to follow up on install services and you know, wondered if they were, you know, positive in the in the first quarter. And then Peter, you talked about, you know, some of the labor disruptions we've seen due to the administration's immigration policy. And, you know, just wondered if you're continuing to lean into your third party assembly and install capabilities as a competitive advantage with builder customers. So, you know, on install, as I was alluding to before, the core business is still doing well, multifamilies, it's a headwind.

Jeffrey Stevenson: Hi, Thanks for taking my questions today.

Speaker Change: Wanted to follow up on install services.

Jeffrey Stevenson: Wondered if they were positive.

Jeffrey Stevenson: First quarter and then Peter you talked about some of the labor disruptions, we've seen due to the Atlanta administration's immigration policy.

Jeffrey Stevenson: Just wondered if youre continuing to lean in to your third Party Assembly and then install capabilities is a competitive advantage with builder customers.

Jeffrey Stevenson: So on install as I was alluding to before.

Jeffrey Stevenson: The core business is still doing well multifamily as a headwind that's in context of everything we said I think consistent.

Peter Jackson: I mean, that that's in context of everything we said, I think consistent. We still like install. Yeah. And I think the third party model is functional. I think it time will tell how much on the ground impact is going to come out of some of the conversations around immigration. To date, if they're going to stay focused on MS-13, I don't think we're going to feel anything. If there's a broader impact on some of the more traditional, non-newsworthy illegal immigration, that could be impactful in our industry, but I think only time will tell. And ultimately, given what we do and how we do it, there is a place for third-party contracting, subcontractors, if you will, in the industry more broadly.

Jeffrey Stevenson: We still like install yeah, and I think the third party model is functional I think.

Jeffrey Stevenson: Time will tell how much on the ground impact is going to come out of <unk>.

Some of the conversations around immigration.

Jeffrey Stevenson: To date, if theyre going to stay focused on M. S 13.

Jeffrey Stevenson: We're going to do anything if there is a more a broader impact on some of the more traditional.

Jeffrey Stevenson: Non newsworthy illegal immigration that could be impactful in our industry, but I think only time will tell and ultimately.

Jeffrey Stevenson: Given what we do and how we do it there is a place for third party contracting subcontractors if you will.

Jeffrey Stevenson: In the industry more broadly we think it's the right model. So we're going to continue to use it where it makes sense.

Peter Jackson: We think it's the right model, so we're going to continue to use it where it makes sense.

Peter Jackson: Okay, well, that makes sense. And then I wanted to shift to the M&A pipeline and wondered if, you know, during this period of market uncertainty, you're seeing, you know, any benefit from improved seller expectations, or whether, you know, potential sellers are pulling back right now to, you know, manage through this, you know, period of market uncertainty. Yeah, I think it's the latter. We're glad we're able to get Alpine into the family before things got too uncertain because we're excited about bringing him into the team. And our team in Colorado and northern New Mexico is really ramped up to deliver incredible value to our customers.

Speaker Change: Okay that makes sense and then I wanted to shift to the M&A pipeline in one day during this period of market uncertainty youre seeing any.

Speaker Change: From improved seller expectations or.

Speaker Change: Or whether you know potential sellers are pulling back right now.

Speaker Change: Managed through this.

Speaker Change: <unk> of market uncertainty.

Speaker Change: Yeah.

Speaker Change: Yeah, I think it's the latter.

Speaker Change: Yes.

Speaker Change: Because we have certainly seen sellers pulled back.

Speaker Change: Rumor deals that had been pulled off the table and just generally quiet space right now, there's a little but it's pretty small pretty quiet.

Speaker Change: We're glad we were able to get alpine into the family before things got too uncertain, because we're excited about bringing them into the team.

Speaker Change: Our team in Colorado in Northern New Mexico has really ramped up to to deliver incredible value our customers. We're excited about.

Peter Jackson: We're excited about it. Thank you. And it appears that there are no further questions at this time. This does conclude today's presentation. Thank you for your participation. You may disconnect at any time. THAT WAS JUST NOSTALGIA

Speaker Change: Great. Thank you.

Speaker Change: Thank you and it appears there are no further questions. At this time. This does concludes today's presentation. Thank you for your participation you may disconnect at any time.

Speaker Change: Yeah.

Speaker Change: [music].

Speaker Change: Uh huh.

Speaker Change: [music].

Speaker Change: Sure.

Speaker Change: [music].