Q2 2025 UFP Industries Inc Earnings Call

Twenty-five UFP Industries, Inc earnings conference call and webcast.

At this time all participants are in a listen only mode.

After the speaker presentation, there will be a question and answer session.

To ask a question during the session you will need to press star one on your telephone you will then hear an automated message advising your hand is right.

Withdraw your question Press Star one again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your Speaker, Mr. Stanley Elliott Director of Investor Relations. Please go ahead.

Good morning, everyone and thank you for joining us this morning to discuss our second quarter results with me on the call are real Schwartz, our president and Chief Executive Officer and me.

Cole, our Chief Financial Officer, Willie Mic wall for prepared remarks, and then we will open the call for questions. This conference call is available simultaneously to all interested investors and news media through the Investor Relations section of our website <unk> Dot com a replay of the call will be posted to our website as well before I turn.

Turn the call over let me remind you that yesterday's press release and presentation include forward looking statements as defined in the private Securities Litigation Reform Act of 1995.

These statements are subject to risks and uncertainties that could cause actual results to differ materially from expectations.

These risks and uncertainties also include but are not limited to those factors identified in the press release and in the company's filings with the Securities and Exchange Commission I will now turn the call over to will.

Good morning, everyone and thank you for joining us to discuss our second quarter results. Our second quarter. It was largely a continuation of the conditions. We saw in our first quarter and while the market environment continues to present its challenges I am proud of our team's resilience and their unwavering focus on what we can control we continue to make the necessary investments to lower.

Manufacturing costs improved throughput and improve customer service levels, we will continue to make investments to bring new products to market in areas, where we have the right to win and we'll continue to evaluate the portfolio and ways that we can take out structural costs. All of our efforts are designed to position us to achieve our long term strategies.

And deliver value to our shareholders.

Turning to the quarter.

Second quarter sales matched our expectations for low single digit unit volume declines across each segment.

Pricing remains competitive given the lack of visibility and softer demand in several of our end markets.

<unk> with what we discussed on our last earnings call in April we continue to see this dynamic playing out for the remainder of the year.

All of this contributed to our earnings per share of $1 70 for the quarter and adjusted EBITDA of $174 million Jimmy.

Generally results remain pressured from weaker demand competitive pricing higher input costs and a less favorable sales mix.

Southern yellow pine and spruce prices were 18% and 13% higher on average for the quarter with.

With the exception of our site built business. It appears that most of our business units are beginning to see a stabilization in sales and profit margins on a sequential basis.

Operationally, we remained focused on maximizing capacity utilization within our existing footprint and streamlining our cost structure.

The strategic initiatives, we've previously outlined including managing our manufacturing footprint, reducing SG&A costs and exiting underperforming businesses are progressing well.

We have made great progress on our $60 million cost out program and are on track to realize the full savings exiting 2026.

As part of this program, we recently announced plans to shift manufacturing for certain edge products to be more efficient, which will eliminate profit losses and position us to be more competitive and profitable.

We've also completed the divestiture of a small industrial components business and have sold or are in the process of selling certain real estate assets, which could provide upwards of $15 million in one time gains in our third quarter. These are not easy decisions, but necessary.

We are also making targeted investments in areas that will drive our longer term strategy to grow above market rates, we remain committed to our plan to invest 1 billion in growth capital over the next five years and have identified runways and each of our segments.

We would prefer M&A in most cases and would be willing to pivot these investments to M&A, but only when the right opportunities materialized in valuations meet our expectations for returns.

Within this framework Arkansas.

Operation and expanding our value add product offerings remains a top priority.

We see promising results in our decorators brand with our first of its kind sure stone product technology, the introduction of new products and our packaging segment and others and we will continue to invest in these areas organically and strategic acquisitions where appropriate.

New product sales totaled $129 million in the quarter or 7% of sales.

We continue to see a pathway for new products to become 10% of sales over time.

We are excited about the innovative products, we've launched as well as those in our pipeline.

Last quarter, we highlighted the launch of new decking boards and trim products, featuring our proprietary <unk> technology.

The momentum we discussed last quarter around our sheer stone products, including the launch of our summit products continued in the quarter on our call last quarter. We shared that we have secured 500, new retail locations. We continue to make progress on adding capacity to reach all of these stores ahead of the 2026 decking season.

We've added new traditional two step distribution for our share stone decking board as well as the pull through from our marketing efforts and contractor support is exceeding expectations.

Sales of our decking board portfolio, featuring our <unk> technology increased 45% year over year, we continue to upgrade existing manufacturing lines and plan to expand capacity again later this year, our Buffalo facility remains on track for a Q1 2026 opening leaving us with roughly two.

$250 million of new capacity in place for next year's decking season.

Our M&A pipeline remains very active with a number of strategic investment opportunities presenting themselves across the portfolio. It's no secret that activity has picked up across our space and our M&A team remains active and focused.

We continue to explore deals of various sizes with a focus on how they align with our core business. Our teams have prioritized capital request with an emphasis on what will deliver the best growth margin and return opportunities for the business, while maintaining our strong balance sheet.

Our experienced management team and dedicated employees are committed to driving profitability and sustainable growth for UFP industries, we remain confident in our long term.

Our strong balance sheet and cash flow provide us with the ability to pursue a diversified return focused capital allocation strategy of growth dividends and share buybacks as a means of driving shareholder value.

Turning to our segments.

Retail sales declined 3% from year ago levels, largely on a 7% decline in volumes.

Pricing actions at the end of the first quarter contributed 4%, but the benefits to margins were largely offset by higher material costs.

Part of the unit decline was from us intentionally exiting less profitable lines of business as well as the customer shift we've previously discussed and our decorators business, we will start to see the anniversary of the decorators customer shipped in Q3, making for more favorable comparisons through the remainder of the year.

Additionally, we believe the restructuring we've made it edge and growth investments ensure storm physician as well moving into next year.

Packaging sales declined 2% largely due to a 4% decrease in pricing.

Acquisitions contributed 2% to the quarter, while our organic sales were essentially unchanged from year ago levels.

<unk> remain highly competitive, but the sales and margin declines continue to flatten out sequentially.

Share gains in our palette, one business and geographic expansion in our protective packaging business contributed to growth as we opened our jeffersonville facility.

And our structural packaging business, we continue to introduce a number of innovative and proprietary solutions like our recently launched new lock 200 tool free fastening aimed at making our customers' safer and more efficient.

Construction sales decelerated in the quarter, along with the broader outlook for residential construction construction revenues declined 4% from year ago levels on a 2% increase in volumes driven by another quarter of double digit unit growth in our factory built business.

This was more than offset by a 6% decline in pricing in the quarter reflective of the competitive environment.

Our factory built business continues to benefit from affordability versus other residential construction and favorable industry trends in the modular construction markets and in adjacent markets like RV and cargo, where our new products are resonating with customers.

Our site built business was impacted by weak builder sentiment.

Software spring selling season, and higher inventories of new and existing homes. This dynamic has created a pause for many of our builder customers, while adding a competitive dynamic price to the marketplace infrastructure and data center projects had been a bright spot for our concrete forming business, which saw double digit volume increases.

Turning to our outlook, we expect the business conditions that impacted our first half of the year results will carryover for the remainder of 2025.

News around duties on Canadian lumber and other tariffs has only created additional headwinds.

That said, we still believe we are uniquely positioned given the natural hedge of our portfolio between fixed and variable price lumber products.

From an impact standpoint, with no industry imports less than 20% of lumber from Canada.

We would also note that southern yellow pine is domestically produced and represents roughly two thirds of our fiber purchases.

Historically periods of higher lumber prices have generally led to higher levels of profitability as we use our scale to buy lumber better than our peers.

All of this uncertainty is contributing to a lack of visibility beyond the first half of 2025.

Regardless of the outcome, we remain confident in our ability to navigate any potential tariff impacts.

Longer term, we are well positioned to take advantage of favorable trends across many of our growth runways. We remain committed to our long term targets, one 7% to 10% unit growth to 12, 5% EBITDA margins three maintain a strong return on capital profile and four maintain.

Our conservative capital structure.

Before I close I want to thank our 15000 plus employees for their hard work and their commitment I always say tough comps tougher people. The uncertain times will pass and we will come out on the other side stronger and with that I'll turn it over to Mike.

Thank you, we'll net sales for our June quarter were $1 8 billion down three 5% from $1 9 billion last year.

Results were driven by a 3% decline in units and a 1% decline in pricing with recent acquisitions, providing a modest offset.

The decline in selling prices, primarily resulted from weaker demand we've seen in the past few quarters, which has led to more competitive pricing and a slight build structural packaging and pallet one business units when comparing year over year results.

These headwinds resulted in a 15% decline in our adjusted EBITDA to $174 million, while adjusted EBITDA margin fell to 95% from 10, 7% a year ago.

Pricing and cost pressure as well as lower volumes weighed on profitability this quarter.

It's worth noting that $28 million of the $50 million decline in our gross profit was due to lower volume and price competition on our site built business unit as macro conditions continue to weigh on new housing starts.

Even with these headwinds our trailing 12 month return on invested capital remained resilient at 15%, which remains well ahead of our weighted average cost of capital. We believe this highlights the strong returns our business can achieve even when faced with challenging market conditions.

Operating cash flow was $113 million for the year and includes a seasonal increase in our net working capital of $166 million, we expect will convert to cash by the end of the third quarter.

We also expect approximately $40 million of cash flow benefits from the big beautiful Bill in the back half of the year as we put the bonus depreciation the ability to expense certain construction costs associated with manufacturing facilities and the ability to expense R&D costs.

Bottom line, our balance sheet remains strong providing us with ample flexibility to pursue our financial and strategic objectives as we move through 2025 and beyond.

Moving on to our segments.

Sales in our retail segment were 788, million% to 3% decline compared to last year due to a 7% decline in unit sales offset by a 4% increase in price.

By business unit, we experienced a 7% unit decrease in pro rate and a 3% decline in decorators that.

The decline in pro with volume is primarily due to softer demand as a result of higher interest rates and weaker consumer sentiment.

As well as our ongoing efforts to exit lower margin product lines.

Within our decorators business unit, our sales of railings declined 25% and wood plastic composite decking was flat while share stone composite decking increased over 45%.

Ah railing sales declined due to the loss of placement with a large retail customer, which also impacted our wood plastic composite decking volumes.

However, we gained market share with another major retailer and initial stocking orders from this retailer for our decking and stronger demand from the pro channel has provided an offset.

This shift positions us for a modest market share gain in 2025% as we add capacity to supply approximately 500 stores by 2026.

We expect to realize the full benefit of this share gain in 2026 and remain focused on our long term goal to double our composite decking and railing market share over the next five years.

Our year over year gross profits and gross margins in retail declined primarily due to lower volumes higher material and manufacturing costs for composite decking and operational challenges in our edge manufacturing locations.

As we indicated last quarter composite decking material and manufacturing costs are expected to improve with a new more efficient manufacturing lines for installing.

And we're taking the necessary actions to close our two bond our manufacturing facilities in 2025.

These closures are expected to improve operating profits by $16 million in 2020.

For clarity the business conducted out of our <unk> plant will be transitioned to other existing facilities to create efficiencies and lower our cost structure.

And we are exiting the coated side of the business conducted the second facility, which has been difficult to scale we.

We anticipate these actions will result in between $15 million and $17 million of impairment and other onetime costs in Q3.

Operating profits in retail declined by $6 million as a result of the decline in gross profit offset by a $7 million decrease in SG&A looking forward to continued enhancement and resiliency of our <unk> business growth trajectory and margin potential of our decorators business and restructuring of.

Our edge business provide optimism for improved results in 2026.

Moving on to packaging sales in this segment declined 2% to $429 million consisting of a 4% decrease in selling prices and 2% unit growth from recent acquisitions.

Customer demand in this segment remained soft and pricing remains competitive, but we continue to gain share with key customers.

We also had an unfavorable change in product mix this quarter as our largest and most profitable business unit structural packaging declined 2% in volume due to soft demand, while our protective packaging and power one business is up 8% and 5% unit growth respectively.

As a result of these factors year over year gross profit dropped by $13 million for the quarter.

Encouragingly sequential gross profit trends suggests results may have stabilized offering some cautious optimism for 2026.

Operating profits in the packaging segment declined by $3 million to a total of $26 million for the quarter due to the decrease in gross profit SG&A was $10 million lower than last year.

Operator: to the Q2 2025 UFP Industries, Inc.

Turning to construction sales in this segment declined 4% to $552 million as a 6% decline in selling prices was partially offset by a 2% increase in units.

2% to $429 million, consisting of a 4% decrease in selling prices and 2% unit growth from recent acquisitions.

Operator: Earnings Conference Call-In Webcast. At this time, all participants are now listed only. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, press star 1-1 again.

Customer demand in this segment remained soft and pricing remains competitive, but we continue to gain share with key customers.

The overall unit increase was due to significant volume increases in our factory.

Marshall and concrete forming business units. These increases were partially offset by a 7% unit decline in our cycle business as demand for housing remains challenged due to affordability and the sentiment.

We also had an unfavorable change in product mix this quarter as our largest and most profitable business unit structural packaging declined 2% in volume due to soft demand, while our protective packaging and pallet, one businesses saw 8% and 5% unit growth respectively.

Operator: Please be advised that today's conference is being recorded.

Stanley Elliott: I would now like to hand the conference over to your speaker, Mr. Stanley Elliott, Director of Investor Relations. Please go ahead.

As a result, the market environment and our cycle of business remains competitive which continues to pressure pricing as we protect our market share gross profit in the segment decreased by $25 million year over year due entirely to our cyclone business unit.

William Schwartz: Good morning, everyone, and thank you for joining us this morning to discuss our second quarter results.

As a result of these factors year over year gross profit dropped by $13 million for the quarter.

Stanley Elliott: With me on the call are Will Schwartz, our President and Chief Executive Officer, and Mike Cole, our Chief Financial Officer. Will and Mike will offer prepared remarks, and then we will open the call for questions.

Encouragingly sequential gross profit trends suggest results may have stabilized offerings, some cautious optimism for 2026.

The decline in gross margin in the segment is due to these factors as well as the less favorable change in sales mix as cycled has historically been our largest most profitable business unit.

Operating profits in the packaging segment declined by $3 million to a total of $26 million for the quarter due to the decrease in gross profit as SG&A was $10 million lower than last year.

Operator: This conference call is available simultaneously to all interested investors and news media through the Investor Relations section of our website, ufpi.com. A replay of the call will be posted to our website as well.

Our operating profits declined by $16 million to a total of $36 million for the quarter. As a result of the decrease in gross profit offset by a $10 million reduction in SG&A.

Stanley Elliott: Before I turn the call over, let me remind you that yesterday's press release and presentation include forward-looking statements as defined in the Private Security Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results and differ materially from expectations. These risks and uncertainties also include, but are not limited to, those factors identified in the press release and in the company's filings with the Securities and Exchange Commission.

Turning to construction sales in this segment declined 4% to $552 million as a 6% decline in selling prices was partially offset by a 2% increase in units.

As we manage through this cycle, we are focused on maintaining the right balance between cost discipline and advancing our long term objectives that means ensuring the company is appropriately sized relative to current demand while continuing to invest in the resources needed to drive growth expand market share further product innovation strengthened brand awareness.

The overall unit increase was due to significant volume increases in our factory built commercial and concrete forming business units. These increases were partially offset by a 7% unit decline in our site both business as demand for housing remains challenged due to affordability and sentiment.

Ernest and improve operational efficiencies through technology.

William Schwartz: I will now turn the call over to Will.

William Schwartz: Good morning, everyone, and thank you for joining us to discuss our second quarter results. Our second quarter was largely a continuation of the conditions we saw in our first quarter, and while the market environment continues to present its challenges, I'm proud of our team's resilience and their unwavering focus on what we can control. We continue to make the necessary investments to lower our manufacturing costs, improve throughput and improve customer service levels. We will continue to make investments to bring new products to market in areas where we have the right to win and will continue to evaluate the portfolio in ways that we can take out structural costs.

Our consolidated SG&A expenses declined $18 million for the quarter due to a $16 million decrease in bonuses and sales incentives and a $2 million reduction in our core SG&A.

As a result, the market environment and our cyclone business remains competitive which continues to pressure pricing as we protect our market share gross profit in the segment decreased by $25 million year over year due entirely to a safer business unit.

It's important to note that our core SG&A includes a $6 million increase in decorative as advertising costs associated with our <unk> technology.

The decline in gross margin in the segment is due to these factors as well as the less favorable change in sales mix as site build has historically been our largest most profitable business unit.

Looking forward, we have targeted an annual run rate of EBITDA improvements from cost and capacity reductions of $60 million in 2026.

Our operating profits declined by $16 million to a total of 36 million for the quarter as a result of the decrease in gross profit offset by a $10 million reduction in SG&A.

Our plan for SG&A expenses next year, excluding highly variable sales and bonus incentives tied to profitability is $554 million.

William Schwartz: All of our efforts are designed to position us to achieve our long-term strategies and deliver value to our shareholders.

As we manage through this cycle, we are focused on maintaining the right balance between cost discipline and advancing our long term objectives that means ensuring the company is appropriately sized relative to current demand while continuing to invest in the resources needed to drive growth expand market share further product innovation strengthened brand awareness.

William Schwartz: Turning to the quarter. The second quarter sales matched our expectations for low single-digit unit volume declines across each segment. Pricing remains competitive given the lack of visibility and softer demand in several of our end markets. Consistent with what we discussed on our last earnings call in April, we continue to see this dynamic playing out for the remainder of the year.

This is $10 million lower when compared with 2024 and is comprised of $30 million of anticipated cost reductions offset by a $20 million increase in our decorators advertising spend as we invest in building the <unk> brand.

In addition to the SG&A cost reductions, we've taken actions to reduce and consolidate capacity at locations that don't meet our profitability targets. We anticipate these actions will have a favorable impact on our gross profits totaling approximately $13 million in 2025.

And improve operational efficiency through technology.

William Schwartz: All of this contributed to our earnings per share of $1.70 for the quarter and adjusted EBITDA of $174 million. Generally, results remain pressured from weaker demand, competitive pricing, higher input costs, and a less favorable sales mix. Southern Yellow Pine and Spruce prices were 18% and 13% higher on average for the quarter. With the exception of our site built business, it appears that most of our business units are beginning to see a stabilization in sales and profit margins on a sequential basis. Operationally, we remain focused on maximizing capacity utilization within our existing footprint and streamlining our cost structure.

Our consolidated SG&A expenses declined $18 million for the quarter due to a $16 million decrease in bonuses and sales incentives and a $2 million reduction in our core SG&A.

And as I previously mentioned the closure of our <unk> facilities and transfer of business to other locations is expected to eliminate operating losses totaling $16 million in 2026.

It is important to note that our core SG&A includes a $6 million increase in decade as advertising costs associated with our <unk> technology.

Based on the actions we've taken today and opportunities for continued improvement, we think we're well positioned to achieve or exceed our goal of $60 million and cost outs by the end of 2026.

Looking forward, we've targeted an annual run rate of EBITDA improvements from cost and capacity reductions of $60 million in 2026.

Our plan for SG&A expenses next year, excluding highly variable sales and bonus incentives tied to profitability is $554 million.

Moving onto our cash flow statement, our operating cash flow was $113 million for the year and includes a $166 million of seasonal net working capital that we expect to convert to cash by the end of Q3.

This is $10 million lower when compared with 2024 and is comprised of $30 million of anticipated cost reductions offset by a $20 million increase in our decorators advertising spend as we invest in building industry Stone brand.

William Schwartz: The strategic initiatives we've previously outlined, including managing our manufacturing footprint, reducing SG&A costs, and exiting underperforming businesses, are progressing well. We have made great progress on our $60 million cost-out program and are on track to realize the full savings exiting 2026. As part of this program, we recently announced plans to shift manufacturing for certain edge products to be more efficient, which will eliminate profit losses and position us to be more competitive in profit. We have also completed the divestiture of a small industrial components business, and have sold or are in the process of selling certain real estate assets, which could provide upwards of $15 million in one-time gains in our third quarter.

<unk> of our cash flow generation and balance sheet have allowed us to continue to invest in growing the business, while also being more aggressive on share buybacks.

Our investing activities included $130 million in capital expenditures, comprising $48 million in maintenance Capex and $82 million of expansionary Capex.

In addition to the SG&A cost reductions, we've taken actions to reduce and consolidate capacity at locations that don't meet our profitability targets. We anticipate these actions will have a favorable impact on our gross profits totaling approximately $13 million in 2025.

As a reminder, our expansionary investments are primarily focused on three key areas.

Expanding our capacity to manufacture new and value added products.

Geographic expansion in core higher margin businesses.

And as I previously mentioned the closure of our <unk> facilities and transfer of business to other locations is expected to eliminate operating losses totaling $16 million in 2026.

And achieving efficiencies through automation.

Investing activities also included two small acquisitions.

Packaging manufacturer located in Mexico that allows us to strengthen our business with certain multinational customers and a supplier to the manufactured housing RV and cargo markets dislocation is complementary to our existing footprint and allows us to execute strategies to reduce our operating costs, while providing additional capacity for growth.

Based on the actions we've taken to date and opportunities for continued improvement, we think we're well positioned to achieve or exceed our goal of $60 million and cost outs by the end of 2026.

William Schwartz: These are not easy decisions, but necessary.

William Schwartz: We are also making targeted investments in areas that will drive our longer-term strategy to grow above market rates. We remain committed to our plan to invest $1 billion in growth capital over the next five years and have identified runways in each of our segments. We would prefer M&A in most cases and would be willing to pivot these investments to M&A, but only when the right opportunities materialize and valuations meet our expectations for return. Within this framework, our commitment to innovation, automation, and expanding our value-add product offerings remains a top priority. We see promising results in our decorators brand with our first-of-its-kind SureStone product technology, the introduction of new products in our packaging segment, and others, and we will continue to invest in these areas organically and strategic acquisitions where appropriate.

Moving onto our cash flow statement, our operating cash flow was $113 million for the year and includes a $166 million of seasonal net working capital that we expect to convert to cash by the end of Q3.

Finally, our financing activities, primarily consisted of returning capital to shareholders through almost $42 million in dividends and $261 million in share repurchases.

The strength of our cash flow generation and balance sheet have allowed us to continue to invest in growing the business, while also being more aggressive on share buybacks.

Turning to our capital structure and resources, we continue to have a strong balance sheet with $842 million in cash and total liquidity of $2 1 billion.

Our investing activities included $130 million in capital expenditures, comprising $48 million in maintenance Capex and $82 million of expansionary Capex.

Our liquidity includes cash and amounts available to borrow under our long term lending agreements.

As a reminder, our expansionary investments are primarily focused on three key areas.

With respect to capital allocation, we remain committed to a balanced returns driven approach.

Expanding our capacity to manufacture new and value added products.

Geographic expansion in core higher margin businesses.

As we've discussed in the past our highest priority for capital allocation is to drive organic and inorganic growth and results in higher margins and returns.

And achieving efficiencies through automation.

Investing activities also included two small acquisitions a.

William Schwartz: New product sales totaled $129 million in the quarter, or 7% of sales. We continue to see a pathway for new products to become 10% of sales over time. We are excited about the innovative products we've launched, as well as those in our pipeline. Last quarter, we highlighted the launch of new decking boards and trim products featuring our proprietary SureStone technology. The momentum we discussed last quarter around our Surestone products, including the launch of our Summit product, continued in the quarter. On our call last quarter, we shared that we have secured 1,500 new retail locations. We continue to make progress on adding capacity to reach all of these stores ahead of the 2026 decking season.

Our strategy also includes growing our dividends in line with our long term anticipated free cash flow growth.

A wood packaging manufacturer located in Mexico that allows us to strengthen our business with certain multinational customers and a supplier to the manufactured housing RV and cargo markets dislocation is complementary to our existing footprint and allows us to execute strategies to reduce our operating costs, while providing additional capacity for growth.

And repurchasing our stock to offset dilution from share based compensation plans.

We'll continue to Opportunistically buy back more stock when we believe it's trading at a discounted value.

With these points in mind, our board approved a quarterly dividend of <unk> 75 per share to be paid in August representing a 6% increase from a year ago.

Finally, our financing activities, primarily consisted of returning capital to shareholders through almost $42 million in dividends and $261 million in share repurchases.

Lastly, our board approved an incremental $100 million to our previously existing share repurchase authorization, bringing the total to $300 million.

Turning to our capital structure and resources, we continue to have a strong balance sheet with $842 million in cash and total liquidity of $2 1 billion.

As of July 25, 2025.

Two 6 million shares repurchased for almost $270 million at an average price of $103 55.

William Schwartz: We've added new traditional two-step distribution for our Surestone decking board, as well as the pull-through from our marketing efforts and contractor support is exceeding expectations. Sales of our decking board portfolio, featuring our Shearstone technology, increased 45% year-over-year. We continue to upgrade existing manufacturing lines and plan to expand capacity again later this year.

Our liquidity includes cash and amounts available to borrow under our long term lending agreements.

Under this authorization last.

With respect to capital allocation, we remain committed to a balanced returns driven approach.

Last week, our board of directors approved a new $300 million authorization that will be effective through the end of July 2026.

As we've discussed in the past our highest priority for capital allocation is to drive organic and inorganic growth that results in higher margins and returns.

With regard to capital expenditures, we currently plan to spend approximately $300 million to $325 million for the year.

Our strategy also includes growing our dividends in line with our long term anticipated free cash flow growth and repurchasing our stock to offset dilution from share based compensation costs.

William Schwartz: Our Buffalo facility remains on track for a Q1 2026 opening, leaving us with roughly $250 million of new capacity in place for next year's decking season.

Finally, we continue to pursue a pipeline of M&A opportunities there are strong strategic fit while providing higher margin return and growth potential.

As we pursue these opportunities we will remain disciplined on valuation.

We'll continue to Opportunistically buy back more stock when we believe it is trading at a discounted value.

William Schwartz: Our M&A pipeline remains very active, with a number of strategic investment opportunities presenting themselves across the portfolio. It's no secret that activity has picked up across our space, and our M&A team remains active and focused. We continue to explore deals of various sizes with a focus on how they align with our core business. Our teams have prioritized capital requests with an emphasis on what will deliver the best growth, margin, and return opportunities for the business while maintaining our strong balance sheet.

I'll finish with comments about our outlook.

With these points in mind, our board approved a quarterly dividend of <unk> 35 per share to be paid in August representing a 6% increase from the rate paid a year ago.

Our outlook remains unchanged from last quarter, we continue to expect low single digit unit declines across our segments through year end, reflecting ongoing soft end market demand and competitive pricing pressures.

Last April our board approved an incremental $100 million to our previously existing share repurchase authorization, bringing the total to $300 million.

As expected cycles is experiencing more pronounced headwinds the strength in factory built that's helping to offset some of that pressure.

As of July 25, 2025.

And $2 6 million shares repurchased for almost $270 million at an average price of $103 55.

We remain focused on gaining share in each business unit to help mitigate volume declines and support overall results.

William Schwartz: Our experienced management team and dedicated employees are committed to driving profitability and sustainable growth for UFB Industries. We remain confident in our long-term goals. Our strong balance sheet and cash flow provide us with the ability to pursue a diversified, return-focused capital allocation strategy of growth, dividends, and share buybacks as a means of driving shareholder value.

Under this authorization.

To navigate the current environment, we're taking action to reduce costs right size capacity and exit underperforming or noncore businesses, while positioning the company to deliver above market growth and margin expansion as market conditions normalize.

Last week, our board of directors approved a new $300 million authorization that will be effective through the end of July 2026.

With regard to capital expenditures, we currently plan to spend approximately $300 million to $325 million for the year.

With that we'll open it up for questions.

Finally, we continue to pursue a pipeline of M&A opportunities there are strong strategic fit while providing higher margin return and growth potential.

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

William Schwartz: Turning to our second Retail sales declined 3% from year-ago levels, largely on a 7% decline in volume. Pricing actions at the end of the first quarter contributed 4%, but the benefits to margins were largely offset by higher material costs. Part of the unit decline was from us intentionally exiting the less profitable lines of business, as well as the customer shift we previously discussed in our decorators business. We will start to see the anniversary of the decorator's customer shift in Q3, making for more favorable comparisons through the remainder of the year.

As we pursue these opportunities we'll remain disciplined on valuation.

One moment, while we compile the Q&A roster.

I'll finish with comments about our outlook.

Our outlook remains unchanged from last quarter, we continue to expect low single digit unit declines across our segments through year end.

And our first question will come from the line of Kurt Yinger with D. A Davidson your line is open.

<unk> ongoing soft end market demand and competitive pricing pressures.

Great. Thanks, and good morning, everyone.

Good morning, Kurt.

As expected site builds is experiencing more pronounced headwinds those strength in factory built is helping to offset some of that pressure.

Just hoping to maybe unpack the sequential improvement in construction gross margins a bit I know you've talked about on a year over year basis site built.

We remain focused on gaining share in each business unit to help mitigate volume declines and support overall results.

William Schwartz: Additionally, we believe the restructuring we've made at EDGE and growth investments in Surestone position us well moving into next year.

Accounting for all of the decline in gross profit, but I guess with that business additive to the 60 basis point improvement versus Q1 or is that entirely driven by factory build in commercial concrete forming.

To navigate the current environment, we're taking action to reduce costs rightsize capacity and exit underperforming or noncore businesses, while positioning the company to deliver above market growth and margin expansion as market conditions normalize.

William Schwartz: Packaging sales declined 2%, largely due to a 4% decrease in pricing. Recent acquisitions contributed 2% to the quarter, while organic sales were essentially unchanged from year-to-level. Markets remain highly competitive, but the sales and margin declines continue to flatten out sequentially. Share gains in our Pallet One business and geographic expansion in our protective packaging business contributed to growth as we opened our Jeffersonville facility. In our structural packaging business, we continue to introduce a number of innovative and proprietary solutions like our recently launched U-Lock 200 tool-free fastening aimed at making our customers safer and more efficient.

Mike do you want to pick that.

Yes happy to.

Playbook.

With that we'll open it up for questions.

Challenging quarter Kurt.

So.

Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question Press Star One again, one moment, while we compile the Q&A roster.

Year over year decline was $28 million.

Looking from Q1 to Q2, there was still a there was a volume pick ups.

That benefited.

Site built.

Price pressure that was that was coming through so any improvement there was just simply do the.

Seasonality I think in the concrete forming and commercial side.

And our first question will come from the line of Kurt Yinger with D. A Davidson your line is open.

As well as well as performance of factory built.

Great. Thanks, and good morning, everyone.

So yes <unk>.

William Schwartz: Construction sales decelerated in the quarter along with a broader outlook for residential construction. construction revenues declined 4% from year ago levels on a 2% increase in volumes driven by another quarter of double digit unit growth in our factory built business. This was more than offset by a 6% decline in pricing in the quarter, reflective of the competitive environment. Our factory built business continues to benefit from affordability versus other residential construction and favorable industry trends in the modular construction markets and in adjacent markets like RV and cargo where our new products are resonating with customers. Our site built business was impacted by wheat builder sentiment, a softer spring selling season, and higher inventories of new and existing homes.

Correct.

And we expect that trend to continue with safely through the balance of the year.

Was just hoping to maybe unpack the sequential improvement in construction gross margins a bit I know you talked about on a year over year basis site built.

With where.

With where demand seems to be we.

We expect continued pricing pressure.

Accounting for all of the decline in gross profit, but I guess was that business additive to the 60 basis point improvement versus Q1 or is that entirely driven by factory build and in commercial and concrete forming.

And for that to be a headwind for volume and pricing.

For the balance of the year really.

Okay and is that something.

You alluded to it in the prepared remarks in terms of kind of a natural hedging across the business around.

Mike do you want to put that yes happy too.

Lumber pricing fluctuations and historically you guys have done a really good job managing through that but.

So I believe you had a very challenging quarter Kurt.

Is this kind of a unique environment, where that causes more of a risk than we'd seen in the past just given.

So I think the year over year decline was $28 million.

Looking from Q1 to Q2, there was still a there was a volume pick ups that.

What you've alluded to in terms of competitive pressures.

Yes, I think if you look at that Kurt certainly with the demand environment being weak and the pressures there.

<unk> benefited.

Site built book, but there is still price pressure that was that was coming through so any improvement there was just simply due to seasonality.

William Schwartz: This dynamic has created a pause for many of our builder customers while adding a competitive dynamic price to the market.

There's no question, it's a little harder to pass those along specifically in that in that area. So.

Seasonality I think in the concrete forming and commercial side.

William Schwartz: Infrastructure and data center projects have been a bright spot for our concrete forming business, which saw a double-digit volume increase.

As well as well as performance of factory built.

I think I think youre asking that question.

So, yes, <unk> and we expect that trend to continue with site built through the balance of the year with where.

Okay perfect.

William Schwartz: Turning to our outlook, we expect the business conditions that impacted our first half of the year results will carry over for the remainder of 2025. News around duties on Canadian lumber and other tariffs has only created additional headwinds. That said, we still believe we are uniquely positioned given the natural hedge of our portfolio between fixed and variable priced lumber products. From an impact standpoint, we'd note that the industry imports less than 20% of lumber from Canada. We'd also note that Selvignola pine is domestically produced and represents roughly two-thirds of our fiber purchase. Historically, periods of higher lumber prices have generally led to higher levels of profitability as we use our scale to buy lumber better than our peers.

Switching gears to decorators.

I guess when you talk about kind of a modest market share gain for this year.

With where demand seems to be.

We expect continued pricing pressure.

Should we interpret that as kind of flight positive sales growth versus a market you expect to be flat or I guess, how would you kind of have us frame what that means from an overall sales perspective.

And for that to be a headwind for volume and pricing.

For the balance of the year.

Okay and is that something.

You alluded to it in the prepared remarks in terms of kind of a natural hedging across the business around.

Yes, certainly we expect market growth.

Modest we've talked about this switch and a customer mix. So first half of the year. There was some offset there that should be more.

Lumber pricing fluctuations and historically you guys have done a really good job managing through that but.

More.

Is this kind of a unique environment, where that poses more of a risk than we'd seen in the past just given.

Should be closer for the back half of the year would that transition.

That side, the decking market for us we've seen improvement and we expect to continue that market share gain in the back half.

What you've alluded to in terms of competitive pressures.

William Schwartz: All of this uncertainty is contributing to a lack of visibility beyond the first half of 2025. Regardless of the outcome, we remain confident in our ability to navigate any potential tariff impact.

Yes, I think if you look at that Kurt certainly with the demand environment being weak and the pressures there.

Okay, especially on the shares coincide.

Right right I mean.

The 45% increase very impressive.

There's no question, it's a little harder to pass those along specifically in that in that area. So I think.

Thought it was also interesting that the wood plastic composite side was was flat despite the shelf space kind of shifts there.

William Schwartz: Longer term, we are well positioned to take advantage of favorable trends across many of our growth runways. We remain committed to our long-term targets. One, 7 to 10 percent unit growth. Two, 12.5 percent EBITDA margins. Three, maintain our strong return on capital profile. And four, maintain our conservative capital structure.

I think youre asking that question, okay. Okay perfect.

Can you maybe help us understand what drove the offset on the wood plastic composite side and then also help us think about.

Ching gears to decorators.

I guess when you talk about kind of a modest market share gain for this year.

Sure stone gains how much of that was.

Should we interpret that as kind of slight positive sales growth versus a market you expect to be flat or I guess, how would you kind of have us frame what that means from an overall sales perspective.

The stocking benefits versus maybe what youre seeing on kind of the traditional.

Pro dealer space.

William Schwartz: Before I close, I want to thank our 15,000-plus employees for their hard work and their commitment. I always say, tough times, tougher people.

So I think I think it's twofold I think you've really got to highlight the internal distribution piece, we've talked about that a lot our ability to distribute through our pro with facilities and we're winning share.

Yes, certainly we expect market growth.

William Schwartz: The uncertain times will pass, and we will come out on the other side stronger.

Modest we've talked about this switch and a customer mix. So first half of the year. There was some offset there that should be more.

Michael Cole: And with that, I'll turn it over to Mike. Thank you, Will. Net sales for our June quarter were $1.8 billion, down 3.5% from $1.9 billion last year. Results were driven by a 3% decline in units and a 1% decline in pricing with recent acquisitions providing a modest offset. The decline in selling prices primarily resulted from weaker demand we've seen in the past few quarters, which has led to more competitive pricing on our site build, structural packaging, and Pallet One business units when comparing year-over-year results. These headwinds resulted in a 15% decline in our adjusted EBITDA to $174 million, while adjusted EBITDA margins fell to 9.5% from 10.7% a year ago.

Secondarily, if you go over to assure stone side, it's a pretty good mix between the retail component, but as well as through the distribution component, we're seeing wins in both places and as we continue to ramp up that production in that store count you'll continue to see that growth I think you can't lose sight, either the fact that we.

Should be closer for the back half of the year would that transition.

That side, the decking market for us we've seen improvement and we expect to continue that market share gain in the back half.

Okay, especially on the shirt coincide.

This is the first year, we really had a marketing campaign like we do and so we're seeing the returns on that marketing campaign.

Right right I mean.

The 45% increase very impressive.

Right right, Okay that makes sense I'll jump back in the queue. Thank you.

Thought it was also interesting that the wood plastic composite side was was flat despite the shelf space kind of shifts there.

Thanks.

Thank you one moment our next question.

Can you maybe help us understand what drove the offset on the wood plastic composite side and then also help us think about of the sure stone gains how much of that was.

Okay.

And that will come from the line of Reuben Garner with benchmark. Your line is open.

Hey, good morning, everybody.

Good morning, gentlemen.

Michael Cole: Pricing and cost pressure, as well as lower volumes, weighed on profitability this quarter. It's worth noting that $28 million of the $50 million decline in our gross profit was due to lower volume and price competition in our site-built business unit as macro conditions continue to weigh on new housing starts. Even with these headwinds, our trailing 12-month return on invested capital remained resilient at 15%, which remains well ahead of our weighted average cost of capital. We believe this highlights the strong returns our business can achieve, even when faced with challenging market conditions. Operating cash flow was $113 million.

The stocking benefits versus maybe what youre seeing on kind of the traditional.

Well the marketing campaign that you mentioned.

Is that still geared towards the contractors or has the kind of lower price point sure stone technology enabled or pushed you guys to market more directly to the consumer.

Pro dealer space.

Yes, So I think I think it's twofold I think you've really got to highlight the internal distribution piece, we've talked about that a lot our ability to distribute through our <unk> facilities and we're winning share.

Yes, good question and it's really driven this year towards the consumer we've got a really explained the value in that technology, and what makes that product different and so when you see those advertisements you really start to see the benefits that are associated with that technology, that's where that marketing campaigns focus for this year. So it really hits both.

Secondarily, if you go over to the sheer stone side, it's a pretty good mix between the retail component, but as well as through the distribution component, we're seeing wins in both places and as we continue to ramp up that production in that store count Youll continue to see that growth I think you can't lose sight either the fact that this is the first year, we really had a market.

Michael Cole: and includes a seasonal increase on our networking capital of $166 million we expect will convert to cash by the end of the third quarter. We also expect approximately $40 million of cash flow benefits from the big, beautiful bill in the back half of the year as a result of bonus depreciation, the ability to expense certain construction costs associated with manufacturing facilities, and the ability to expense R&D costs.

Okay.

Campaign like we do and so we're seeing the returns on that marketing campaign.

Got it and then on the packaging side I think.

You said that all businesses X site, built where kind of either showing signs of stabilization or improvement.

Right right, Okay that makes sense I'll jump back in the queue. Thank you.

Thanks.

Thank you one moment for our next question.

Sequentially can you talk specifically about what youre seeing in packaging any signs of acceleration.

And that will come from the line of Reuben Garner with benchmark. Your line is open.

There at all just in the end market overall I know, it's been a challenging couple of years.

Hey, good morning, everybody.

Michael Cole: Bottom line, our balance sheet remains strong, providing us with ample flexibility to pursue our financial and strategic objectives as we move through 2025 and beyond.

Yes.

Morning, gentlemen.

I wouldn't call any signs of improvement, but certainly sequentially. It feels like we've found stabilization so I wouldn't highlight.

Will that marketing campaign that you mentioned.

Is that still geared towards the contractors or has the kind of lower price point sure stone technology enabled or pushed you guys to market more directly to the consumer.

Improving it's still a very difficult market.

Michael Cole: Moving on to our site. Sales on our retail segment were $788 million, a 3% decline compared to last year, due to a 7% decline in unit sales offset by a 4% increase in price. By business unit, we experienced a 7% unit decrease in ProWood and a 3% decline in Decorator. The decline in pro-wood volumes is primarily due to softer demand as a result of higher interest rates and weaker consumer sentiment. as well as our ongoing efforts to exit lower margin product lines. Within our decorators business unit, our sales of railings declined 25% and wood plastic composite decking was flat, while surestone composite decking increased over 45%.

Okay.

Okay.

That's the best way I can describe it at this point I'd love to tell you that it is improving but I think it's just stabilized which is which is good to see.

Yes. Good question its really driven this year towards the consumer we've got to really explain the value in that technology, and what makes that product different and so when you see those advertisements you really start to see the benefits that are associated with that technology, that's where that marketing campaign is focused for this year. So it really hits both.

Okay, and I'm going to sneak one more in just a clarification on site build so I think you did say pricing and profitability and.

I don't know about demand because of the seasonal aspect, but I think you said that it was kind of cylinder pressure sequentially, where where does all of that stand relative to like.

Okay.

Got it and then on the packaging side I think.

2020, like or if we round trips back to the previous high is in pricing and profitability are they under pressure relative to that like how does it look relative to previous cycles.

You said that all businesses X site, built where kind of either showing signs of stabilization or improvement.

Sequentially can you talk specifically about what youre seeing in packaging any signs of acceleration.

Michael Cole: Our railing sales declined due to the loss of placement with a large retail customer, which also impacted our wood plastic composite decking volume. However, we gained market share with another major retailer, and initial stocking orders from this retailer for our SureStone decking and stronger demand from the Pro Channel has provided an offset. This shift positions us for a modest market share gain in 2025 as we add capacities to supply approximately 1,500 stores by 2026. We expect to realize the full benefit of this share gain in 2026 and remain focused on our long-term goal to double our composite decking and railing market share over the next five years.

Yes, I think that.

There at all just in the end market overall I know, it's been a challenging couple of years.

Think that pricing and.

And margins I guess in particular have largely normalized in <unk>.

Yes.

I wouldn't call any signs of improvement, but certainly sequentially. It feels like we've found stabilization. So I wouldn't highlight as improving its still a very difficult market.

Come under a little more pressure than what we were seeing.

Pandemic more recently now driven.

Okay. Thanks for the color guys and good luck going forward.

A competitive market and so that's the best way I can describe it at this point I'd love to tell you that it's improving but I think it's just stabilized which is which is good to see.

You bet. Thanks.

Thank you our next question.

And that will come from the line of Keith <unk> with BMO capital markets. Your line is open.

Thank you good morning, good morning, Mike.

Okay, and I'm going to sneak one more in just a quick clarification on site built so I think you did say pricing and profitability and.

Morning.

Maybe just continuing on five bid.

The margin pressure that you are seeing the competitive market backdrop. I know you had mentioned that last quarter, we saw a big step down from Q4 2024 <unk> 25.

Michael Cole: our year-over-year gross profits and gross margins in retail declined, primarily due to lower volumes, higher material and manufacturing costs for composite decking, and operational challenges in our edge manufacturing. As we indicated last quarter, composite decking material and manufacturing costs are expected to improve with the new, more efficient manufacturing lines we're installing. And we're taking the necessary actions to close our two bottom manufacturing facilities in 2025. These closures are expected to improve operating profits by $16 million in 2026. For clarity, the business conducted out of our Bonner Term Plant will be transitioned to other existing facilities to create efficiencies and lower our cost structure.

I don't know about demand because of the seasonal aspect, but I think you said that it was kind of cylinder pressure sequentially, where where does all of that stand relative to like.

<unk> 2020, like or if we round trips back to the previous high is in pricing and profitability are they under pressure relative to that like how does it look relative to previous cycles.

Have those kind of competitive dynamics stabilize as you've gone through second quarter and in <unk> quarter, or big BC sort of another leg down given what the homebuilders are telling us.

Yes, I think that.

Think that pricing is.

Thank you you want to hit that yes, sure yes volumes. It moved up as you as you would expect going from Q1 to Q2, so that that's provided a benefit.

And margins I guess in particular have largely normalized in come under a little more pressure than what we were seeing.

Pandemic more recently now.

But we have but we have had more pricing pressure from Q1 into Q2, so when I look at the sequential bridge there in gross profits. There is still some pricing challenges from Q1 to Q2 and Thats, what we expect to continue through the balance of the year.

Yeah.

Okay. Thanks for the color guys and good luck going forward.

You bet. Thanks.

Michael Cole: and we're exiting the coded siding business conducted out of the second facility, which has been difficult to scale. We anticipate these actions will result in between $15 million and $17 million of impairment and other one-time costs in Q3. Operating profits in retail declined by $6 million as a result of the decline in gross profit offset by a $7 million decrease in SG&A.

Thank you our next question.

And that will come from the line of Keith <unk> with BMO capital markets. Your line is open.

Yes going back to Rubens last question now.

Thank you good morning, good morning, Mike.

This feels like.

We're into a down cycle, we haven't found the bottom yet I don't think on site both probably.

Good morning.

Maybe just continuing on five bid.

The margin pressure that you are seeing the competitive market backdrop. I know you had mentioned that last quarter. We saw a big step down from Q4 2024 into fourth quarter opening 25.

But.

The good news is once this does normalize we do expect that.

Michael Cole: Looking forward, the continued enhancement and resiliency of our ProWood business, growth trajectory and margin potential of our decorators business, and restructuring of our edge business provide optimism for improved results in 2026.

EBITDA margins gross margins will improve.

In future years once demand rebounds.

Have those kind of competitive dynamics stabilize as they've gone through second quarter and into third quarter, our BBC sort of another leg down given what the homebuilders are telling us.

Understood Okay.

That's helpful and then just switching to.

Michael Cole: Moving on to PAC. Sales in this segment declined 2% to $429 million, consisting of a 4% decrease in selling prices and 2% unit growth from recent acquisition. Customer demand in this segment remains soft and pricing remains competitive, but we continue to gain share with key customers. We also had an unfavorable change in product mix this quarter, as our largest and most profitable business unit, Structural Packaging, declined 2% in volume due to soft demand, while our Protective Packaging and Pallet One businesses saw 8% and 5% unit growth respectively. As a result of these factors, year-over-year gross profits dropped by $13 million for the quarter.

Lumber and <unk>.

And again the last few years, you guys have done a phenomenal job of kind of managing the volatility.

If you want to pick up yes, sure. Yes volumes have moved up as you would expect going from Q1 to Q2, so that that's provided a benefit.

Duties on lumber outside of what happens.

These number do you think these are going to go up meaningfully during the next several weeks.

But we have but we have had more pricing pressure from Q1 for Q2, so when I look at the sequential bridge there in gross profits, there's still some pricing challenges from Q1 to Q2 and Thats, what we expect to continue through the balance of the year.

Weak.

How are you sort of Brazil.

Position EUR staff and I know, that's only on what comes from Canada.

But I'm just curious how are you positioning us just at the large number of buyer.

But yeah going back to Rubens last question, though.

Yes, good question.

I would remind you that's a small component of the total spend and what we bring in most of our purchases are domestic and I would tell you that a lot of products. If those things come into play we will continue to look for opportunities to convert some of those products to domestic species.

This feels like.

We're into a down cycle, we haven't found the bottom yet I don't think on site both probably.

Michael Cole: Encouragingly, sequential gross profit trends suggest results may have stabilized, offering some cautious optimism for 2026. Operating profits in the packaging segment declined by $3 million to a total of $26 million for the quarter due to the decrease in gross profits as SG&A was $10 million lower than last Turning to construction, sales in this segment declined 4% to $552 million, as the 6% decline in selling prices was partially offset by a 2% increase in units. The overall unit increase was due to significant volume increases in our factory-built, commercial, and concrete-forming business units. These increases were partially offset by a 7% unit decline in our site build business as demand for housing remains challenged due to affordability incentives.

But.

The good news is once this does normalize we do expect that EBITDA margins gross margins will improve.

I think the hardest place and where most of the Canadian product as it goes in is certainly to the site built into the construction arena and those that's the most difficult arena, we are in today or segment or business unit and so I feel good about our ability to pass those along for the most part I think we will be able to utilize some of our manufacturing abilities.

In future years once demand rebounds.

Understood Okay.

That's helpful and then just switching to.

Lumber and.

And again the last few years, you guys have done a phenomenal job of kind of managing the volatility.

Stickley as well as some of the.

Have you not.

These on lumber outside of what happens with tariffs, but just.

Switch in sourcing to offset a lot of that but we'll see how that shakes out exactly.

Lumber duties are going to go up meaningfully during the next several weeks.

Got it.

And then just one last one from my side on capital allocation.

How are you positioning yourself and I know that's only on what comes from Canada.

Pretty meaningful pickup in share repurchases this year.

But I'm just curious how are you positioning us just as the large number of buyer.

So I'm just curious.

Michael Cole: As a result, the market environment in our site-built business remains competitive, which continues to pressure pricing as we protect our market share. Gross profit in this segment decreased by €25 million year-over-year, due entirely to our site-built business. The declining gross margin in the segment is due to these factors, as well as the less favorable change in sales mix, as SiteBuild has historically been our largest, most profitable business unit. Our operating profits declined by $16 million to a total of $36 million for the quarter as a result of a decrease in gross profit offset by a $10 million reduction in SG&A.

As you look at the different options that you have and clearly part of a strong balance sheet.

Yes, good question.

I would remind you that's a small component of the total spend and what we bring in most of our purchases are domestic and I would tell you that a lot of products. If those things come into play we will continue to look for opportunities to convert some of those products to domestic species.

Can you talk to sort of the options in terms of whether it is M&A are all kind of share repurchases.

Should we think about it.

In terms of kind of back half and into client classics.

I'm going to hit that Mike, Yes, sure happy to so.

I think the hardest place and where most of the Canadian product as it goes in it.

So I.

I think we've been pretty consistent in our philosophy. So.

Certainly to the site built into the construction arena and those that's the most difficult arena, we are in today or segment or business unit and so I feel good about our ability to pass those along for the most part I think we will be able to utilize some of our manufacturing abilities domestically as well as some of the switch in sourcing to offset a lot of that.

We've always preferred to grow and so that I think the capital investment reaffirming what we plan to do on capital investments, what we wanted to do with M&A.

Michael Cole: As we manage through this cycle, we're focused on maintaining the right balance between cost discipline and advancing our long-term objectives. That means ensuring the company is appropriately sized relative to current demand, while continuing to invest in the resources needed to drive growth, expand market share, further product innovation, strengthen brand awareness, and improve operational efficiency through technology. Our consolidated SG&A expenses declined $18 million for the quarter, due to a $16 million decrease in bonuses and sales incentives, and a $2 million reduction in our core SG&A. It's important to note that our core SG&A includes a $6 million increase in decorative advertising costs associated with our SureStone technology.

Our target first.

To be able to use capital and invest it in those areas.

If if if.

But we'll see how that shakes out exactly.

M&A isn't there.

The opportunity I think to invest several hundred million dollars to $1 billion I guess, if you look at each segment.

Got it.

And then just one last one from my side on capital allocation.

And trying to strengthen the core businesses there.

Pretty meaningful pickup in share repurchases this year.

So we have a lot of capital we can deploy but if the opportunities don't present themselves.

So I'm just curious.

Multiples are too high.

As you look at the different options that you have and clearly part of a strong balance sheet.

Share buybacks is a great Avenue, particularly at the current price we feel like it's trading at a discount.

Can you talk to sort of the options in terms of whether it is M&A are all kind of share repurchases.

Intrinsic value so.

That's been our approach and in.

Should we think about it.

We won't waver from that we're going to continuing to continue to be return driven and we will continue to be patient and waiting for those opportunities to present themselves.

In terms of kind of back half and into <unk>.

Well hit that Mike, Yes, sure happy to yes, So I think we've been pretty consistent in our philosophy. So.

Michael Cole: Looking forward, we've targeted an annual run rate of EBITDA improvements from cost and capacity reductions of $60 million in 2026. Our plan for SG&A expenses next year, excluding highly variable sales and bonus incentives tied to profitability, is $554 million. This is $10 million lower when compared with 2024 and is comprised of $30 million of anticipated cost reductions, offset by a $20 million increase in our decorators' advertising spend as we invest in building the SureStone brand. In addition to the SG&A cost reductions, we've taken actions to reduce and consolidate capacity at locations that don't meet our profitability targets.

Perfect. That's very helpful I'll jump back into queue. Thank you.

We've always preferred to grow and so that I think the capital investment.

Thank you.

And one moment our next question.

Reaffirming what we plan to do on capital investments, what we wanted to do with M&A.

That will come from the line of Jeff Stevenson with loop capital. Your line is open.

Our target first.

Hi, Thanks for taking my questions today.

Be able to use capital.

You reported a nice sequential improvement in decorator salesmen that prevent them from the low end or the low end of your new summer decking product and 500 stores.

<unk> invested in those areas.

If if if M&A isn't there.

The opportunity I think to invest several hundred million dollars to $1 billion I guess, if you look at each segment.

I wondered whether the loading is largely complete here in the second quarter and you know how much will spill into the back half per year, and then on top of that whether you've seen any changes in underlying composite decking demand or bidding activity due to macroeconomic uncertainty or have sell through demand trends remain largely stable.

And trying to strengthen the core businesses there.

So we have a lot of capital we can deploy but if the opportunities don't present themselves are multiples are too high.

Michael Cole: We anticipate these actions will have a favorable impact on our gross profits, totaling approximately $13 million in 2025. And as I previously mentioned, the closure of our Bonner facilities and transfer of business to other locations is expected to eliminate operating losses totaling $16 million in 2026. Based on the actions we've taken to date and opportunities for continued improvement, we think we're well positioned to achieve or exceed our goal of $60 million in cost outs by the end of 2026. Moving on to our cash flow statement, our operating cash flow was $113 million for the year and includes $166 million of seasonal net working capital that we expect to convert to cash by the end of Q3.

Buybacks is a great Avenue, particularly at the current price we feel like it's trading at a discount.

Intrinsic value so.

Yes, Jeff.

That's been our approach.

To answer your first question the store count the loading that we talk about really remained unchanged in Q2, I'd say, what I would call a difficult time to do a swap out in the stores. That's the selling season that can be very disruptive and so the store count that we talked about at the end of Q1, approximately 400 out of the 1500 remains fierce.

We won't waver from that we're going to continue to be return driven and will continue to be patient and waiting for those opportunities to present themselves.

Perfect. That's very helpful I'll jump back into queue. Thank you.

Thank you.

And one moment our next question.

Unchanged the majority of that in the remainder of that number really take place in the back half of the year that coincides with the capital investment that we talked about the additional capacity is coming online so really youll see that.

That will come from the line of Jeff Stevenson with loop capital. Your line is open.

Hi, Thanks for taking my questions today.

Michael Cole: The strength of our cash flow generation and balance sheet have allowed us to continue to invest in growing the business while also being more aggressive on share buyback. Our investing activities included $130M in capital expenditures, comprising $48M in maintenance cap backs and $82M of expansionary capital. As a reminder, our expansionary investments are primarily focused on the three key areas. expanding our capacity to manufacture new and value-added products. Geographic Expansion and Core, Higher Margin Businesses, and Achieving Efficiencies Through Automation. Investing activities also include two small acquisitions. A wood packaging manufacturer located in Mexico that allows us to strengthen our business with certain multinational customers and a supplier to the manufactured housing, RV and cargo markets whose location is complementary to our existing footprint and allows us to execute strategies to reduce our operating costs while providing additional capacity for growth.

You reported a nice sequential improvement in decorator sales benefited from the low end or below.

Our target date is really to have ourselves prepared and ready for that 2026 decking selling season will be on shelf and ready to go. So that's the first question.

The low end of your new summer decking product in 500 stores and I wondered whether the loading is largely complete here in the second quarter and you know how much will spill into the back half of a year and then on top of that you know whether you've seen any changes in underlying composite decking demand or bidding activity due to macroeconomic.

I think the second part of your question really comes back to that we're really seeing a device you've got your affluent customer you've got your average consumer and so really the.

Composite decking space is winning in that that affluent customer continues to spend and grow and really is.

With the uncertainty around sell through demand trends remained largely stable.

The average consumer that's downgrading or choosing to not participate or delay of projects. So so really that space has been really good and we continue to grab that market share.

Yes, Jeff.

Answering your first question the store count and the loading that we talk about really remained unchanged in Q2, let's say a what I would call a difficult time to do a swap out in the stores. That's the selling season that can be very disruptive and so the store count that we talked about at the end of Q1, approximately 400 out of the 500 remains fierce.

Oh, that's great to hear and I. Thank you for that.

I wanted to ask about the.

Share gain opportunity to this step distribution for that creators.

Unchanged the majority of that in the remainder of that number really take place in the back half of the year that coincides with the capital investment that we've talked about the additional capacity is coming online. So really youll see that in our target date is really to have ourselves prepared and ready for that 2026 decking selling season will be.

Obviously, the retail ones who've got to most of the attention, but I just wanted to talk about the opportunity to expand your partnerships with distribution.

Michael Cole: Finally, our financing activities primarily consisted of returning capital to shareholders through almost $42 million in dividends and $261 million in share repurchase.

Driven by your increased investments and improving brand awareness and capacity.

New product introductions, and the potential benefits of industry consolidation.

Michael Cole: Turning to our capital structure and resources, we continue to have a strong balance sheet with $842 million in cash and total liquidity of $2.1 billion. Our liquidity includes cash and amounts available to borrow under our long-term lending With respect to capital allocation, we remain committed to a balanced and return-driven approach. As we've discussed in the past, our highest priority for capital allocations is to drive organic and inorganic growth that results in higher margins in return. Our strategy also includes growing our dividends in line with our long-term anticipated cash flow growth and repurchasing our stock to offset dilution from share-based compensation.

On shelf and ready to go so that's the first question.

Yeah.

Twofold, So we've kind of hit on that in the past some of the competition uses that in blocks out space and that's been one of the question Mark is how do we get our product to market.

I think the second part of your question really comes back to that we're really seeing a device you've got your affluent customer you've got your average consumer and so really the.

Winning and I would tell you the shear zone technology to marketing campaign is certainly resonating and opening doors for us, but I cannot highlight enough in markets that we don't have a distribution partner that works well to get to those markets that internal distribution piece, we continue to invest and expand and thats growing rapidly.

Composite decking space is winning in that that affluent customer continues to spend and grow and really is.

The average consumer that's downgrading or choosing to not participate or delay of projects. So so really that space has been really good and we continue to grab that market share.

So it's two fold for us.

Oh, that's great to hear and I'll. Thank you for that.

I wanted to ask about the share gain.

Understood. Thank you.

The opportunity to this step distribution protect creators.

Thank you one moment our next question.

Michael Cole: will continue to opportunistically buy back more stock when we believe it's trading at a discounted value. With these points in mind, our board approved a quarterly dividend of 35 cents a share to be paid in August, representing a 6% increase from the rate paid a year ago. Last April, our board approved an incremental $100 million to our previously existing share repurchase authorization, bringing the total to $300 million. As of July 25, 2025, there have been 2.6 million shares repurchased for almost $270 million at an average price of $103.55 under this authorization.

Obviously, the retail ones, who got to most of the attention, but I just wanted to talk about the opportunity to expand your partnerships with distribution.

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

Great. Thanks, good morning.

Driven by your increased investments and improving brand awareness and capacity.

It will if you don't mind repeating what you said about southern yellow Pine I think you said roughly two thirds of your fiber purchase and.

New product introductions, and the potential benefits of industry consolidation.

Could you maybe talk about that other third and what type of.

Yeah.

Twofold, So we've kind of hit on that in the past some of the competition uses that in blocks out space and that's been one of the question Mark is how do we get our product to market.

There are higher duties imposed with a new softwood agreement, what thats going to look like for UFP.

Yeah. So you hit the number right that's about two thirds of our purchases.

Winning and I would tell you the shear zone technology. The marketing campaign is certainly resonating and opening doors for us, but I cannot highlight enough in markets that we don't have a distribution partner that works well to get to those markets that internal distribution piece, we continue to invest and expand and thats growing rapidly.

Michael Cole: Last week, our Board of Directors approved a new $300 million authorization that will be effective through the end of July 2026. With regard to capital expenditures, we currently plan to spend approximately $300 to $325 million for the year.

And 75% of our purchases are domestically sourced. So in addition to that so you've got approximately 25% that are an important product.

Right now and then some of the other smaller but.

But important items also come from from other places around the Globe, Brazil included.

Michael Cole: Finally, we continue to pursue a pipeline of M&A opportunities that are a strong strategic fit, while providing higher margin return and growth to As we pursue these opportunities, we'll remain disciplined on valuation.

So it's twofold for us.

We're working very hard to look at alternatives, where those duties could come into play or tariffs.

Understood. Thank you.

Thank you one moment our next question.

And what we could substitute moved to other species that wouldnt be affected so.

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

All of those things are in play right now.

Michael Cole: I'll finish with comments about our outlook. Our outlook remains unchanged from last quarter. We continue to expect low single-digit unit declines across our segments through year-end, reflecting ongoing soft-end market demand and competitive price and pressure. As expected, site built is experiencing more pronounced headwinds, though strength in factory built is helping to offset some of that pressure. We remain focused on gaining share in each business unit to help mitigate volume declines and support overall results. to navigate the current environment. We're taking action to reduce costs, right size capacity and exit, underperforming or non-core businesses while positioning the company to deliver above market growth and margin expansion as market conditions normal.

Okay, great. Thank you.

Great. Thanks, good morning.

Second question I had.

It will if you don't mind repeating what you said about southern yellow Pine I think you said roughly two thirds of your fiber purchase in.

Great to hear the concrete forming benefited from some.

Some of the data center build out we've all been hearing about but is there any concern that some of those data centers and might not happen and what how are you all thinking about that business can it continue to put up the same level growth in the near term.

Could you maybe talk about that other third and what type of if there are higher duties imposed with a new softwood agreement, what thats going to look like for UFP.

We're confident in the infrastructure growth and feel like we're well position the value added solutions. We provide we think we're in a great space to win we continue to build out the footprint of ability to get to those markets.

Yeah. So you hit the number right that's about two thirds of our purchases.

And 75% of our purchases are domestically sourced. So in addition to that so you've got approximately 25% that are an important products. Obviously spruces highlighted right now and then some of the other smaller.

Not overly concerned about that because it's a small component of a much bigger business. So that's one little piece.

But important items also come from from other places around the Globe, Brazil included.

Operator: With that, we'll open it up for questions. Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, press star 1-1 again. One moment while we compile the Q&A roster.

Okay.

And then Mike I wanted to.

We're working very hard to look at alternatives, where those duties could come into play or tariffs.

Good to hear on the depreciation side the benefits that <unk> is getting there, but I also wonder is this may be an opportunity with all these new pretty expanded 179 deduction for packaging potentially seen uptick in business just as people try to go spend this year and take advantage of that business. You are seeing any early signs of that.

What we could substitute moved to other species that wouldnt be affected so.

All those things are in play right now.

Okay, great. Thank you.

Second question I had.

Kurt Yinger: And our first question will come from the line of Kurt Yinger with D.A. Davidson. Your line is open. Great. Thanks, and good morning, everyone. Morning, sir.

Great to hear the concrete forming benefited.

Some of the data center build out we've all been hearing about but is there any concern that some of those data centers and might not happen and what how are you all thinking about that business can it continue to put up the same level growth in the near term.

Not seeing any any signs and impacting our sales levels.

Yes, Jay so nicely.

Michael Cole: I was just hoping to maybe unpack the sequential improvement and construction gross margins a bit. I know you talked about on a year over year basis site built, you know, accounting for all the decline in gross profit. But I guess with that business additive to the 60 kind of basis point improvement versus Q1 or is that entirely driven by factory build and commercial and concrete?

Nice to be able to see the cash flow pick up for us in the back half of the year, but maybe at some point.

I would expect that.

We're confident in the infrastructure growth and feel like we're well position the value added solutions. We provide we think we're in a great space to win we continue to build out the footprint of ability to get to those markets.

Impact demand not seeing anything like that yet.

Got it okay. That's all I had thanks Scott.

Thank you. Thank you.

Thank you I'm showing no further questions in the queue. At this time I would now like to turn the call back over to Mr will Schwartz for any closing remarks.

Not overly concerned about that because it's a small component of a much bigger business. So that's one little piece.

Michael Cole: Mike, do you want to hit that?

Thank you to those joining us on the call for your time today. Despite this tough macro environment, we remain committed to our long term goals for greater operational efficiency and to bring new high value products to market. Most importantly, thanks to the hard work of the UFP team members, who make these goals possible have a great day.

Michael Cole: Yeah, happy to. Slide bill had a very challenging order, Kurt. So I think the year-over-year decline was $28 million. Looking from Q1 to Q2, there was volume pickups that benefited site-built, but there's still price pressure that was coming through, so any improvement there was just simply due to seasonality, I think, in the concrete forming and commercial side, as well as performance in factory-built. So, yeah, site-built, and we expect that trend to continue with site-built through the balance of the year. With where demand seems to be, we expect continued pricing pressure, and for that to be a headwind for volume and pricing for the balance of the year.

Okay.

And then Mike I wanted to.

Good to hear on the depreciation side the benefits that <unk> is getting there, but I also wonder is this may be an opportunity with all these new pretty expanded 179 deduction for packaging pencil the team uptick in business just as people try to go spend this year and take advantage of that business. You are seeing any early signs of that.

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

Not seeing any any signs and impacting our sales levels.

Yes, Jason nice nice to be able to see the cash flow pick up for us in the back half of the year, but maybe at some point.

I would expect that.

Yeah.

<unk> demand not seeing anything like that yet.

Got it okay. That's all I had thanks Scott.

Thank you. Thank you.

Michael Cole: Okay, and is that something, you know, you alluded to it in the prepared remarks in terms of kind of a natural hedging across the business around lumber pricing fluctuations, and historically, you guys have done a really good job managing through that, but Is this kind of a unique environment where that, you know, poses more of a risk than we've seen in the past, just given you know, what you've alluded to in terms of competitive pressure. Yeah, I think if you look at that, Kurt, certainly with the demand environment being weak, and the pressures there, there's no question, it's a little harder to pass those along specifically in that in that area.

Thank you I'm showing no further questions in the queue. At this time I would now like to turn the call back over to Mr will Schwartz for any closing remarks.

Thank you to those joining us on the call for your time today. Despite the tough macro environment, we remain committed to our long term goals for greater operational efficiency and to bring new high value products to market. Most importantly, thanks to the hard work of the UFP team members, who make these goals possible have a great day.

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

Yeah.

Kurt Yinger: So, yeah, I think I think you're fair in asking that question. Okay. Okay, perfect.

[music].

Kurt Yinger: Switching gears to decorators. I guess when you when you talk about kind of a modest market share gain for this year, Should we interpret that as kind of slight positive sales growth versus a market you expect to be flat? Or I guess, how would you kind of have us frame what that means from an overall sales perspective? Yeah, certainly we expect market growth, modest. We've talked about this switch in customer mix. So first half of the year, there was some offset there that should be more, should be closer for the back half the year with that transition.

Okay.

[music].

Okay.

Okay.

[music].

Kurt Yinger: That side, the decking market for us, we've seen improvement and we expect to continue that market share gain in the back half. especially on the sheriff's own side. Right, right. I mean, you know, the 45% increase, very impressive. I thought it was also interesting that the wood plastic composite side was was flat despite the shelf space kind of shifts there.

William Schwartz: Can you maybe help us understand what drove the offset on the wood plastic composite side and, and then also help us think about, you know, of the Surestone gains, how much of that was stocking benefits versus maybe what you're seeing on kind of the traditional pro dealer space. Yeah, so I think it's twofold. I think you've really got to highlight the internal distribution piece. We've talked about that a lot, our ability to distribute through our ProWood facilities, and we're winning share. Secondarily, if you go over to the Surestone side, it's a pretty good mix between the retail component, but as well as through the distribution component, we're seeing wins in both places.

Kurt Yinger: And as we continue to ramp up that production and that store count, you'll continue to see that grow. I think you can't lose sight either, the fact that this is the first year we've really had a marketing campaign like we do, and so we're seeing the returns on that marketing campaign. Right, okay, that makes sense.

Kurt Yinger: I'll jump back in the queue. Thank you.

Operator: One moment for our next question.

Reuben Garner: And that will come from the line of Reuben Garner with Benchmark. Your line is open. Thank you.

Reuben Garner: Good morning, everybody. More and more Eman. Well, that that marketing campaign that you mentioned, is that still geared towards the contractors or has the kind of lower price point SureStone technology enabled or pushed you guys to market more directly to the consumer? Yeah, good question. It's really driven this year towards the consumer, we've got to really explain the value and that technology and what makes that product different. And so when you see those advertisements, you really start to see the benefits that are associated with that technology. That's where that marketing campaign is focused for this year.

Reuben Garner: So it really hits both. Got it.

Reuben Garner: And then on the packaging side, I think you said that all businesses ex-site built were kind of either showing signs of stabilization or improvement sequentially. Can you talk specifically about what you're seeing in packaging? Any signs of acceleration there at all, just in the end market overall? I know it's been a challenging couple of years. Yeah, I wouldn't call any signs of improvement. But certainly sequentially, it feels like we found stabilization. So I wouldn't highlight it as improving. It's still a very difficult market, a competitive market. And so that's the best way I can describe it at this point.

Reuben Garner: I'd love to tell you that it's improving, but I think it's just stabilized, which is which is good to say.

Reuben Garner: Okay, and I'm going to sneak one more in, just a clarification on site build. So I think you did say pricing and profitability and I don't know about demand because of the seasonal aspect, but I think you said that it was kind of still under pressure sequentially. Where does all of that stand relative to like 3 2020. Like if we round trips back to the previous highs in pricing and profitability, are they under pressure relative to that? Like how does it look relative to previous cycles? Yeah, I think that I think that pricing is and margins, I guess in particular, have largely normalized and come under a little more pressure than what we were seeing pandemic more recently now.

Reuben Garner: Okay, thanks for the call guys and good luck going forward. You bet. Thanks. Thank you.

Ketan Mamtora: One moment for our next question. And that will come from the line of Ketan Mamtora with BMO Capital Markets. Your line is open. Thank you. Good morning, Will. Good morning, Mike. We're looking up.

Ketan Mamtora: Maybe just continuing on site build, you know, the margin pressure that you are seeing the competitive market backdrop. I know you had mentioned that last quarter we saw a big step down from Q4 2024 into first quarter of 2025. Have those kind of competitive dynamics stabilized as we've gone through second quarter and into third quarter or did we see sort of another leg down given what the home builders are telling us? You want to hit that? Yeah, sure. Yeah, volumes have moved up as you'd expect going from Q1 to Q2, so that that's provided a benefit.

Michael Cole: But we have had more pricing pressure from Q1 to Q2. So when I look at the sequential bridge there in gross profits, there's still some pricing challenges. And that's what we expect to continue.

Michael Cole: But yeah, going back to Reuben's last question, this feels like we're into a down cycle. We haven't found the bottom yet, I don't think, on site build probably. But the good news is once this does normalize, we do expect that EBITDA margins, gross margins will improve in future years once demand rebounds. Understood. Okay, that's helpful.

Michael Cole: And then, you know, just switching to, you know, lumber, and here in the last few years, you know, you guys have done a phenomenal job of kind of managing the volatility. We have, you know, duties on lumber outside of what happens with tariffs, but just these lumber duties are going to go up meaningfully here in the next several weeks. How are you sort of, you know, positioning yourself? And I know that's only on what comes from Canada. But I'm just curious, how are you positioning yourself just as a large lumber buyer? Yeah, good question. And, you know, I would remind you, that's a small component of the total spend and and what we bring in most of our purchases are domestic.

Michael Cole: And I would tell you that a lot of products, if those things come into play, we'll continue to look for opportunities to convert some of those products to domestic species. I think the hardest place and where most of the Canadian product is, goes in is certainly to the site built into the construction arena. And that's the most difficult arena we're in today or segment or business unit. And so I feel good about our ability to pass those along for the most part. I think we'll be able to utilize some of our manufacturing abilities domestically as well as some of the.

Michael Cole: switch and sourcing to offset a lot of that, but we'll see how that shakes out exactly.

Michael Cole: got it.

Ketan Mamtora: And then just one last one from my side on capital allocation. Pretty meaningful pickup in share repurchases, you know, this year. So I'm just curious, you know. As you look at the different options that you have and clearly you've got a very strong balance sheet, can you talk to sort of the options in terms of whether it is M&A or kind of share-e purchases? How should we think about it in terms of kind of back half and into 25%? You want to hit that, Mike? Yeah, sure, happy to. Yeah, so, Ketan, I think we've been pretty consistent in our philosophy.

Michael Cole: So we've, we've always preferred to grow. And so that I think the capital investment, you know, reaffirming what we plan to do on capital investments, what we want to do with M&A, that's our target first, to be able to use capital and invest it in those areas. If M&A isn't there, we have the opportunity, I think, to invest, you know, several hundred million to a billion, I guess, if you look at each segment, you know, in trying to strengthen the core businesses there. So we have a lot of capital we can deploy. But if the opportunities don't present themselves, or if the multiples are too high, you know, share buybacks is a great avenue, particularly at the current price, you know, we feel like it's, you know, trading at a discount.

Michael Cole: intrinsic value. So that's that's been our approach. And we won't waver from that. We're going to continue to continue to be return driven. And we'll continue to be patient and waiting for those opportunities to present.

Ketan Mamtora: Perfect. That's very helpful. I'll jump back in the queue. Thank you. And one moment for our next question.

Jeff Stevenson: That will come from the line of Jeff Stevenson with Loop Capital. Your line is open. Hey, thanks for taking my questions today. You reported a nice sequential improvement in the decorator sales benefit and from the load-in of your new Summit decking product in 1,500 stores. I wondered whether the load-in is largely complete here in the second quarter and how much will spill into the back half of the year. And then on top of that, whether you've seen any changes in underlying composite decking demand or bidding activity due to macroeconomic uncertainty or f-cell through demand trends remain largely stable.

Jeff Stevenson: Yeah, Jeff, yeah, answer your first question. The store count, the load-in that we talked about really remained unchanged in Q2. That's a, what I would call a difficult time to do a swap out in the stores. That's the selling season. That could be very disruptive. And so the store count that we talked about at the end of Q1, approximately 400 out of the 1,500 remains fairly unchanged. The majority of that and the remainder of that number really takes place in the back half of the year. That coincides with the capital investment that we talked about, the additional capacities coming online.

Jeff Stevenson: So really, you'll see that in our target date is really to have ourselves prepared and ready for that 2026 decking selling season. We'll be on shelf and ready to go.

Jeff Stevenson: So that's the first question. You know, I think the second part of your question really comes back to that. We're really seeing a divide. You've got your affluent customer. You've got your average consumer. And so really, the composite decking space is winning in that. That affluent customer continues to spend and grow. And really, it's the average consumer that's downgrading or choosing to not participate or delay a project. So really, that space has been really good, and we continue to grab that market share. That's great to hear and thank you for that.

Jeff Stevenson: And then, you know, I wanted to ask about the, you know, share gain opportunity to this step distribution for decorators. You know, obviously the retail ones have gotten most of the attention, but I just wanted to talk about the opportunity to expand your partnerships of distribution, driven by your increased investments and improving brand awareness and capacity, new product introductions, and then potential benefits of industry consolidation. Yeah. Twofold. So we've kind of hit on that in the past. You know, some of the competition uses that and blocks out space. And that's been one of the question marks.

Jeff Stevenson: How do we get our product to market? We're winning. And I would tell you the SureStone technology, the marketing campaign is certainly resonating and opening doors for us. But I cannot highlight enough in markets that we don't have a distribution partner that works well to get to those markets, that internal distribution piece. We continue to invest and expand, and that's growing rapidly. So it's twofold for us. Understood. Thank you.

Operator: One moment for our next question.

Jay McCandless: And that will come from the line of Jay McCandless with Wedbush, your line is open. Great, thanks. Good morning.

Jay McCandless: Will, if you don't mind repeating what you said about Southern Yellow Pine. I think you said roughly that's two-thirds of y'all's fiber purchase and could you maybe talk about that other third and what type of, if there are higher duties imposed with the new softwood agreement, what that's going to look like for UFP? Yeah, so you hit the number right. That's about two-thirds of our purchases. And 75% of our purchases are domestically sourced. So in addition to that, so you've got approximately 25% that are import products. Obviously, spruce is highlighted right now, and then some of the other smaller, but important items also come from other places around the globe, Brazil included.

William Schwartz: We're working very hard to look at alternatives where those duties could come into play, or tariffs, and what we could substitute, move to other species that wouldn't be affected. So all those things are in play right now.

Jay McCandless: Thank you.

William Schwartz: The second question I had, you know, it's great to hear the concrete forming benefited from some of the data center build out we've all been hearing about, but is there any concern that some of those data centers might not happen? And what are y'all thinking about that business? Can it continue to put up the same level of growth in the near term? Yeah, we're confident in the infrastructure growth and feel like we're well positioned. The value added solutions we provide, we think we're in a great space to win. We continue to build out the footprint of ability to get to those markets.

William Schwartz: I'm not overly concerned about that because it's a small component of a much bigger business.

Michael Cole: So that's one little And then, Mike, I wanted to, that's good to hear on the depreciation side, the benefits that U of P is getting there, but I also wonder if this may be an opportunity with all these new, pretty expanded 179 deductions for packaging, potential to see an uptick in business just as people try to go spend this year and take advantage of that business. You all seeing any early signs of that? Not seeing any signs impacting our sales levels yet, Jay, so nice to be able to see the cash flow pick up for us in the back half of the year, but maybe at some point would expect it to impact demand.

Jay McCandless: Not seeing anything like that yet. Got it.

Jay McCandless: Okay, let's all head. Thanks guys. Thank you.

Operator: I'm showing no further questions in the queue at this time.

William Schwartz: I would now like to turn the call back over to Mr. Will Schwartz for any closing remarks. Thank you to those joining us on the call for your time today. Despite this tough macro environment, we remain committed to our long-term goals for greater operational efficiency and to bring new high-value products to market. Most importantly, thanks to the hard work of the UFP team members who make these goals possible.

William Schwartz: Have a great day.

Operator: This concludes today's program. Thank you all for participating.

Operator: You may now disconnect.