Q1 2026 UFP Industries Inc Earnings Call

April 30, 2026

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

Speaker #1: This time all participants are on 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 *11 on your telephone.

Speaker #1: You will then hear an automated message advising your hand is raised. To withdraw your question, press *11 again. Please be advised that today's conference is being recorded.

Speaker #1: I would now like to hand the conference over to your speaker, Mr. Stanley Elliott, Director of Investor Relations. Please go ahead.

Operator: This time all participants are in a listen only mode. I would now like to hand the conference over to your speaker, Mr. Stanley Elliott, Director of Investor Relations. Please go ahead.

Speaker #2: Good morning, everyone. Thank you for joining us to discuss UFP INDUSTRIES' first quarter 2026 results. Joining me on our call are Will Schwartz, our President and Chief Executive Officer, and Mike Cole, our Chief Financial Officer.

Stanley Elliott: Good morning, everyone. Thank you for joining us to discuss UFP Industries' Q1 2026 results. Joining me on our call are Will Schwartz, our President and Chief Executive Officer, and Mike Cole, our Chief Financial Officer. Following our prepared remarks, we will open the call for questions. 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 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 include, but are not limited to, the factors identified in this release, in our most recent annual report on Form 10-K, and in our other filings with the Securities and Exchange Commission. Today's presentation will also include certain non-GAAP measures.

Speaker #2: Following our prepared remarks, we will open the call for questions. 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 Securities Litigation Reform Act of 1995.

Speaker #2: These statements are subject to risk and uncertainties that could cause actual results to differ materially from expectations. These risks and uncertainties include but are not limited to the factors identified in this release, and our most recent annual report on Form 10-K, and in our other filings with the Securities and Exchange Commission.

Speaker #2: Today's presentation will also include certain non-GAAP measures. For reconciliation of these non-GAAP measures to the corresponding GAAP measures, please refer to our earnings press release and our website ufpi.com.

Stanley Elliott: For a reconciliation of these non-GAAP measures to the corresponding GAAP measures, please refer to our earnings press release and our website, ufp.com. I will now turn the call over to Will.

Speaker #2: I will now turn the call over to Will.

Speaker #3: Good morning, everyone, and thank you for joining today's call to discuss our financial results for the first quarter of fiscal year 2026. We'll start by sharing our thoughts on the quarter, what we are seeing in the marketplace, and provide some thoughts on how we see the business performing for the balance of the year before opening the call for questions.

Will Schwartz: Good morning, everyone, and thank you for joining today's call to discuss our financial results for Q1 of fiscal year 2026. We'll start by sharing our thoughts on the quarter, what we are seeing in the marketplace, and provide some thoughts on how we see the business performing for the balance of the year before opening the call for questions. Many of these same dynamics that we saw through much of 2025 continued into our Q1. After seeing some stabilization through much of the quarter, macro headwinds and competitive pressures increased volatility as the quarter progressed. We were also adversely affected this quarter by a longer than normal winter season. The normal seasonal uplift during the month of March failed to materialize. In addition to the impacts of softer demand, our results were impacted by higher medical costs than the previous year.

Speaker #3: Many of these same dynamics that we saw through much of 2025 continued into our first quarter. After seeing some stabilization through much of the quarter, macro headwinds and competitive pressures increased volatility as the quarter progressed.

Speaker #3: We were also adversely affected this quarter by a longer-than-normal winter season and so the normal fell to materialize. In addition to the impacts of softer demand, our results were impacted by higher medical costs than the previous year.

Speaker #1: Continues to weigh on results. Overshadowing improvements across our other businesses. Residential builders remain cautious, managing home inventories carefully ahead of the spring selling season.

Speaker #3: This abnormal activity throughout March contributed to roughly 60% of the year-over-year decline in profitability in the quarter. Business conditions have since leveled out, but given the ongoing geopolitical uncertainty, and broadening inflation, particularly around higher transportation costs, we are approaching the remainder of the year with a slightly more cautious outlook.

Will Schwartz: This abnormal activity throughout March contributed to roughly 60% of the year-over-year decline in profitability in Q1. Business conditions have since leveled out, but given the ongoing geopolitical uncertainty and broadening inflation, particularly around higher transportation costs, we are approaching the remainder of the year with a slightly more cautious outlook. Our Q1 results are reflective of the current operating environment. Net sales of $1.46 billion were down 8% from Q1 of 2025, representing a 7% decrease in units and a 1% decrease in price. Our adjusted EBITDA margin for Q1 was 7.6%, and earnings per share for Q1 was $0.89. Despite the temporarily challenged environment, we will continue to be focused on refining and growing our core business.

Speaker #1: While consumer confidence and affordability headwinds persist. We continue to make investments in automation and other initiatives to improve our cost position and throughput. One of these initiatives is the Frameforward Systems brand that we launched in February, at the International Builder Show.

Speaker #3: Our Q1 results are reflective of the current operating environment. Net sales of $1.46 billion were down 8% from Q1 of 2025, representing a 7% decrease in units and a 1% decrease in price.

Speaker #1: Frameforward Systems positions our site-built business unit to move our wood-framing business beyond commodity component sale to capture increased margin through a system selling approach and to drive greater customer loyalty.

Speaker #1: While early, Frameforward Systems has been very well received by the construction trade as we continue to raise the bar on off-site manufacturing to address the on-site challenges in the construction industry.

Speaker #3: Our adjusted EBITDA margin for the quarter was 7.6%, and earnings per share for quarter was 89 cents. Despite the temporarily challenged environment, we will continue to be focused on refining and growing our core business.

Speaker #1: Similarly, in our factory-built business, this business unit continues to actively add more value to our customers through partnerships, expansion of distribution capabilities, and by facilitating cross-selling with other parts of our business.

Speaker #3: We will focus on controlling costs, and we plan to use this period of uncertainty to be more opportunistic and leverage our strong financial position.

Will Schwartz: We will focus on controlling costs. We plan to use this period of uncertainty to be more opportunistic and leverage our strong financial position. With approximately $2 billion in liquidity, we intend to pursue meaningful M&A while returning our free cash flow to shareholders through opportunistic share repurchase and dividends. As we've said before, we continue to target above-market growth with an emphasis on returns. We continue to make strategic investments that contribute to the long-term success of our business. In the immediate term, new product sales remain consistent at 7.5% of sales on a trailing twelve-month basis. We also have a sharp eye towards strengthening our core business for the long term, deploying capital for greenfield investments in M&A, introducing innovative products, and structurally lowering our cost base.

Speaker #3: With approximately $2 billion in liquidity, we intend to pursue meaningful M&A, while returning our free cash flow to shareholders through opportunistic share repurchase and dividends.

Speaker #1: Our concrete-forming business continues to expand our product and services offerings to capture more of our customers' wallets, while helping them address labor challenges on the job site.

Speaker #3: As we've said before, we continue to target above-market growth with an emphasis on returns, and we continue to make strategic investments that contribute to the long-term success of our business.

Speaker #1: Finally, our commercial business continues to build on new products, new customer relationships, and the benefits from prior restructuring actions to deliver improved results. Across our construction segment, we are actively finding ways to solve our customers' problems by helping address labor, quality, production cost, and reduce build time to help our customers win in the marketplace.

Speaker #3: In the immediate term, new product sales remain consistent at 7.5% of sales, on a trailing 12-month basis. We also have a sharp eye towards strengthening our core business for the long term.

Speaker #3: Deploying capital for greenfield investments and M&A, introducing innovative products, and structurally lowering our cost base. On the cost side, we are actively mitigating higher costs and remain on track to deliver the remaining 25 million of our $60 million cost-out program by year-end with the potential to capture incremental savings beyond our initial targets.

Speaker #1: Looking ahead, we remain committed to our long-term targets and believe the steps we are taking today will position us to achieve these results in the future.

Will Schwartz: On the cost side, we are actively mitigating higher costs and remain on track to deliver the remaining $25 million of our $60 million cost out program by year-end, with the potential to capture incremental savings beyond our initial targets. While Mike will share additional color on the results, we were also pleased to announce two post-quarter end acquisitions that align with our disciplined strategy to deploy capital toward high-quality strategic fits. Before I get into the details, I'd like to start by welcoming the employees of MoistureShield and Berry Pallets into the UFP family. These companies were a strategic financial fit, but equally important, they aligned well with our future. In our Deckorators business unit, we announced the acquisition of MoistureShield decking operations from Oldcastle APG.

Speaker #1: As a reminder, we are driving towards the following goals: a $12.5% EBITDA margin, 7 to 10 percent unit sales growth, some of which will come from M&A and new products, ROIC in excess of 15%, which is well ahead of our cost of capital, and lastly, to achieve all of this while maintaining a conservative capital structure.

Speaker #3: While Mike will share additional color on the results, we were also pleased to announce two post-quarter end-acquisitions that align with our disciplined strategy to deploy capital toward high-quality strategic fits.

Speaker #1: While the market dynamic has changed since our last call in February, it is not dampened our enthusiasm for our business longer term. As we've said before, we have confidence in our model, and our focus remains on the most attractive opportunities that enhance our core business.

Speaker #3: Before I get into the details, I'd like to start by welcoming the employees of Moisture Shield and Berry Pallets into the UFP family. These companies were strategic financial fit but equally important, they aligned well with our future.

Speaker #3: In our decorators' business unit, we announced the acquisition of Moisture Shield decking operations from Old Castle, APG. The acquisition adds a wood-plastic composite plant in Springdale, Arkansas, which meaningfully expands our capacity adds redundancy to our operation, and enhances our ability to bring unique products to market.

Speaker #1: 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 normalize.

Will Schwartz: The acquisition adds a wood plastic composite plant in Springdale, Arkansas, which meaningfully expands our capacity, adds redundancy to our operation, and enhances our ability to bring unique products to market. Additionally, this acquisition eliminates the need to spend capital on a new greenfield as demand for our product has outpaced capacity. We anticipate that this acquisition gives us the needed footprint to double our wood plastic composite decking manufacturing capacity by 2027. Additionally, the acquisition also brings the rights to MoistureShield's CoolDeck technology, a proprietary heat mitigating technology which reduces heat transfer by up to 35%. We believe this would fit alongside our Deckorators decking line, including integration into our Surestone technology boards.

Speaker #1: With that, I'll turn it over to Mike Cole.

Speaker #2: Thank you, Will. Net sales for the March quarter were 1.5 billion, down 8% from 1.6 billion last year. The change reflected a 7% decline in units and a 1% decline in pricing.

Speaker #3: Additionally, this acquisition eliminates the need to spend capital on a new greenfield, as demand for our product has outpaced capacity. We anticipate that this acquisition gives us the needed footprint to double our wood-plastic composite decking manufacturing capacity by 2027.

Speaker #2: Units declined due to continued weakness in residential construction activity, adverse weather, the exiting of select low-margin commodity sales, and softer demand for new pallets.

Speaker #3: Additionally, the acquisition also brings the rights to Moisture Shield's cool deck technology, a proprietary heat-mitigating technology which reduces heat transfer by up to 35%.

Speaker #2: Pricing was impacted by a 6% decline in lumber and continued price pressure in our site-built business. Adjusted EBITDA was 111 million, down 31 million dollars year over year.

Speaker #3: We believe this would fit alongside our decorators' decking line, including integration into our Shurestone technology boards. In our packaging segment, we also welcome to the UFP family Berry Pallets.

Speaker #2: And adjusted EBITDA margin was 7.6% compared with 8.9% in the prior year period. The decline was driven primarily by site build, where gross profit decreased by nearly 19 million dollars along with higher healthcare and transportation costs across the portfolio.

Will Schwartz: In our packaging segment, we also welcome to the UFP family Berry Pallets, a new pallet manufacturer in the upper Midwest that expands our geographic reach and strengthens the density of our pallet network. These opportunities to increase the scale and synergy of our business only create value if we integrate it well. That's exactly why earlier this month, we announced Patrick Benton will transition from his role as President of UFP Industries Construction segment to the newly created Executive Vice President of Operations Integration position. Patrick has spent his career running some of our most profitable plants and business units, and he knows firsthand what it takes to drive efficiency, reduce cost, and accelerate the path to strong returns.

Speaker #3: A new pallet manufacturer in the upper Midwest that expands our geographic reach and strengthens the density of our pallet network. These opportunities to increase the scale and synergy of our business only create value if we integrate it well, and that's exactly why earlier this month we announced Patrick Benton will transition from his role as president of UFP Industries Construction segment to the newly created executive vice president of operations integration position.

Speaker #2: Which increased approximately 7 million and 3 million respectively. Despite these headwinds, our trailing 12-month return on invested capital remained above our weighted average cost of capital at nearly 11%.

Speaker #2: Demonstrating continued value creation through the current phase of the cycle. Turning to our segments, I'll begin with the retail. Retail sales were 531 million, down 12% year over year, driven by a 13% decline in units, partially offset by 1% higher pricing.

Speaker #3: Patrick has spent his career running some of our most profitable plants and business units, and he knows firsthand what it takes to drive efficiency, reduce cost, and accelerate the path to strong returns.

Speaker #2: Pro-width units declined 15%, reflecting soft demand driven by adverse weather, weaker consumer sentiment, and the absence of storm-related demand. We also exited certain low-margin commodity sales starting in Q2 of 2025.

Speaker #3: In his new role, Patrick will apply that operational discipline across our growing portfolio of acquisitions, ensuring we move faster from closed to contribution and that every business we bring into the UFP family performs to its full potential.

Will Schwartz: In his new role, Patrick will apply that operational discipline across our growing portfolio of acquisitions, ensuring we move faster from close to contribution and that every business we bring into the UFP family performs to its full potential. Moving on to segment highlights, beginning with retail. Our largest business unit, ProWood, continues to make progress on lowering our cost positions and improving our manufacturing process. Some of this progress was overshadowed by the levels of inflation we saw in the quarter, as well as the later-than-usual winter conditions. ProWood is an industry-leading brand. We continue to add more value across our portfolio. A great example of this is our TrueFrame joist product launched last month at JLC. As a reminder, this is the business unit's first proprietary product designed specifically for use in deck substructures.

Speaker #2: Decorators delivered 2% unit growth as decking continued to outperform the market. Overall decking sales increased 16%, led by 27% growth in Shurestone, which was supported by capacity added at our Alabama plant.

Speaker #3: Now, moving on to segment highlights. Beginning with retail. Our largest business unit, ProWood, continues to make progress on lowering our cost positions and improving our manufacturing process.

Speaker #3: Some of this progress was overshadowed by the levels of inflation we saw in the quarter as well as the later-than-usual winter conditions. ProWood is an industry-leading brand, and we continue to add more value across our portfolio.

Speaker #2: And wood plastic composite decking increased 4%. We continue to target above-market growth in our decorators' business unit. In April, we added wood plastic composite manufacturing capacity in Arkansas through an acquisition.

Speaker #2: Our new Shurestone plant in Buffalo just started shipping. And we continue to expand distribution across professional and retail channels, all of which is expected to support additional share gains in 2026 and beyond.

Speaker #3: A great example of this is our TrueFrame Joyce product launched last month at JLC. As a reminder, this is the business unit's first proprietary product designed specifically for use in deck substructures.

Speaker #2: Edge volume declined 20% as we closed our Bonner facilities and narrowed the portfolio to products we expect to meet profitability targets by the end of 2026, representing a significant actions needed to restructure the business unit.

Speaker #3: The value we add on the front end eases several common pain points for contractors, saving time and money. We have expanded production into four manufacturing plants, and increased our sales efforts to capitalize on the demand pull.

Will Schwartz: The value we add on the front end eases several common pain points for contractors, saving time and money. We have expanded production into four manufacturing plants and increased our sales efforts to capitalize on the demand pull. While still relatively small, this is a compelling product line extension in our core pressure treating and decking products. Similarly, we are pleased with the repositioning of our Edge business and prospects for profitable growth. Our new Arris trim made with SureStone technology will begin shipping to customers late this quarter. Early demand indicators look quite favorable as contractors are gravitating to the same product features that has made our SureStone decking offering so compelling. Turning to Deckorators, we continue to see strong momentum from last year carry over into our Q1.

Speaker #2: Retail adjusted EBITDA was down 1 million year over year. Gross profit and SG&A were both essentially flat, reflecting improved mix and continued cost control, while we continue to invest in the decorators' brand.

Speaker #3: While still relatively small, this is a compelling product line extension in our core pressure-treating and decking products. Similarly, we are pleased with the repositioning of our edge business and prospects for profitable growth.

Speaker #2: We remain focused on improving pro-width distribution and increasing throughput and margins in decorators. With these initiatives and the edge restructuring substantially complete, the retail segment is well positioned for improved results in 2026.

Speaker #3: Our new AerosTrim made with Shurestone technology will begin shipping to customers late this quarter. Early demand indicators look quite favorable, as contractors are gravitating to the same product features that have made our Shurestone decking offering so compelling.

Speaker #2: Packaging sales were 394 million, down 4% year over year, reflecting a 2% decline in units and a 2% decline in pricing. Structural packaging volumes were flat.

Speaker #3: Turning to decorators, we continue to see strong momentum from last year carry over into our first quarter. Our Shurestone decking sales increased 27%, and our traditional wood-plastic composite decking increased by 4%.

Will Schwartz: Our Surestone decking sales increased 27% and our traditional wood plastic composite decking increased by 4%, both from the same quarter a year ago. We believe both metrics remain ahead of the broader industry. We were pleased with the results of our efforts last year to enhance Deckorators brand and intend to maintain that effort in 2026. In addition to our elevated sales volumes, our measures of consumer interest have more than doubled over the past year. These metrics include where to find a contractor, where to buy Deckorators, and sample requests both at big box retailers and through our website. The outperforming demand stated earlier, combined with the measurable customer feedback, gives us confidence in our stated plan to double market share over the next 5 years.

Speaker #2: Pallet 1 units declined 7%, and protective packaging units increased 5% as new greenfield locations continue to ramp up. Across the segment, we continue to gain share with key customers because of our ability to provide value-added solutions in a comprehensive product portfolio on a national scale.

Speaker #3: Both from the same quarter a year ago. We believe both metrics remain ahead of the broader industry. We were pleased with the results of our efforts last year to enhance decorators' brand and intend to maintain that effort in 2026.

Speaker #2: Packaging adjusted EBITDA was 28 million, down 7 million year over year. The decline reflected lower volumes and higher input costs in Pallet 1, along with unabsorbed overhead as protective packaging greenfield operations continue to focus on achieving targeted volumes.

Speaker #3: In addition to our elevated sales volumes, our measures of consumer interest have more than doubled over the past year. These metrics include where to find a contractor, where to buy decorators, and sample requests, both at big box retailers and through our website.

Speaker #2: We partially offset this gross profit impact with a $2 million reduction in SG&A, primarily from incentives tied to profitability. Construction sales were 465 million, down 10% year over year, with a 5% decline in price and a 5% decline in units.

Speaker #3: The outperforming demand stated earlier combined with the measurable customer feedback gives us confidence in our stated plan to double market share over the next five years.

Speaker #3: We remain excited about the progress we are making within both our Shurestone and wood-plastic manufacturing facilities to increase capacity and meet growing consumer demand.

Will Schwartz: We remain excited about the progress we are making within both our SureStone and wood plastic manufacturing facilities to increase capacity and meet growing consumer demand. Our first truck left Buffalo in mid-April, and we continue to ramp up production at both our SureStone production locations. We look forward to being fully operational in Q2, which will help us continue to work through the sales backlogs that we were not able to realize in Q1. Coupled with the recent MoistureShield acquisition, we are well-positioned to capture growth entering 2026 and beyond. Despite near-term macro uncertainty, our confidence in the business remains strong, and we continue to expect $100 million of incremental Deckorators growth this year. Our packaging segment continues to make progress despite an uneven macro backdrop.

Speaker #2: The change was driven primarily by a 14% unit decline in site build, as housing demand remains pressured by affordability and weaker consumer sentiment, and larger builders are focused on lowering inventory.

Speaker #3: Our first truck left Buffalo in mid-April, and we continue to ramp up production at both our Shurestone production locations. We look forward to being fully operational in Q2, which will help us continue to work through the sales backlogs, that we were not able to realize in the first quarter.

Speaker #2: We are, however, seeing improving trends among multifamily customers. Factory-built units declined 7% as we exited certain low-margin commodity sales, while volume was lower, mix improved, and supported higher profitability.

Speaker #3: Coupled with the recent Moisture Shield acquisition, we are well positioned to capture growth entering 2026 and beyond. Despite near-term macro uncertainty, our confidence in the business remains strong, and we continue to expect 100 million of incremental decorators' growth this year.

Speaker #2: And commercial and concrete forming each achieved mid-teens unit growth. Construction adjusted EBITDA was 26 million, down 12 million year over year, driven by market weakness and competitive pricing pressure in site build.

Speaker #3: Our packaging segment continues to make progress despite an uneven macro backdrop. We are positioning the business for longer-term success by introducing new value-add products to our customers, investing in automation, and investing in new and lower-cost manufacturing.

Speaker #2: The other three business units improved profitability through growth and more favorable mix, partially offsetting the decline. As we manage through this cycle, we're balancing cost discipline with continued investment in our long-term strategy.

Will Schwartz: We are positioning the business for longer-term success by introducing new value-add products to our customers, investing in automation, and investing in new and lower-cost manufacturing. Quoting activity has remained strong, customer takeaway remained mixed, which is reflective of the uncertainty across many end markets. The combination of higher commodity prices and a competitive market remain an overhang on profitability. That said, we are encouraged that our margins continue to stabilize sequentially and supports our view that we are closer to the bottom of the cycle. We continue to believe that our national footprint gives us geographic expansion opportunities and our design and engineering capabilities separate us from many of our smaller, more regional competitors who lack the manufacturing scale and financial position to compete with national customers. With the improvements we made to the business, we can deliver above-market growth in a recovery. Moving on to construction.

Speaker #2: We remain focused on aligning our cost structure with current demand while continuing to fund growth initiatives, product innovation, brand awareness, and technology-enabled productivity improvements.

Speaker #3: Quoting activity has remained strong, but customer takeaway remained mixed, which is reflective of the uncertainty across many end markets. The combination of higher commodity prices and a competitive market remain an overhang on profitability.

Speaker #2: Consolidated SG&A declined over 3 million year over year, due to lower incentive compensation tied to profitability. For 2026, our key cost structure targets are 25 million in cost savings from capacity consolidations, reducing cost of goods sold, and keeping us on track to achieve the 60 million cost out goal we announced last year.

Speaker #3: That said, we are encouraged that our margins continue to stabilize sequentially, and supports our view that we are closer to the bottom of the cycle.

Speaker #3: We continue to believe that our national footprint gives us geographic expansion opportunities, and our design and engineering capabilities separate us from many of our smaller and more regional competitors who lack the manufacturing scale and financial position to compete with national customers.

Speaker #2: Core SG&A of approximately 570 million including decorators advertising and excluding the following incentive-related items: bonus expense of 17 to 18 percent of pre-bonus operating profit, sales incentives of about 3 percent of gross profit, and 21 million investing expense for prior year's stock-based incentives.

Speaker #3: With the improvements we've made to the business, we can deliver above-market growth in a recovery. Moving on to construction. The macro story in our construction segment has been fairly consistent for the past several quarters, but we continue to actively reposition our portfolio.

Will Schwartz: The macro story in our construction segment has been fairly consistent for the past several quarters, but we continue to actively reposition our portfolio. A challenging new residential construction environment continues to weigh on results, overshadowing improvements across our other businesses. Residential builders remain cautious, managing home inventories carefully ahead of the spring selling season, while consumer confidence and affordability headwinds persist. We continue to make investments in automation and other initiatives to improve our cost position and throughput. One of these initiatives is the Frame Forward Systems brand that we launched in February at the International Builders' Show. Frame Forward Systems positions our site-built business unit to move our wood framing business beyond commodity component sale to capture increased margin through a system selling approach and to drive greater customer loyalty.

Speaker #2: An effective tax rate of 25 to 26 percent, and total depreciation amortization and other non-cash expenses of approximately $200 million. Turning to capital resources and capital allocation, the company continues to maintain a strong balance sheet.

Speaker #3: A challenging new residential construction environment continues to weigh on results, overshadowing improvements across our other businesses. Residential builders remain cautious, managing home inventories carefully ahead of the spring selling season.

Speaker #3: While consumer confidence and affordability headwinds persist. We continue to make investments in automation and other initiatives to improve our cost position and throughput. One of these initiatives is the FRAME FORWARD Systems brand that we launched in February at the International Builder Show.

Speaker #2: At the end of March, the company had $714 million in surplus cash and no borrowings under its credit agreements, for a total liquidity of approximately $2 billion.

Speaker #2: Our surplus cash was approximately $200 million lower than at year-end, driven by a typical seasonal working capital build that we expect to convert to cash by early Q4.

Speaker #3: FRAME FORWARD Systems positions our site-built business unit to move our wood-framing business beyond commodity component sale to capture increased margin through a system selling approach and to drive greater customer loyalty.

Speaker #2: We believe our diversified business portfolio generates meaningful and consistent free cash flow to support organic growth and M&A. Last year, we converted 80 percent of adjusted EBITDA into free cash flow.

Speaker #3: While early, FRAME FORWARD Systems has been very well received by the construction trade as we continue to raise the bar on off-site manufacturing to address the on-site challenges in the construction industry.

Will Schwartz: While early, Frame Forward Systems has been very well received by the construction trade as we continue to raise the bar on off-site manufacturing to address the on-site challenges in the construction industry. Similarly, in our factory built business, this business unit continues to actively add more value to our customers through partnerships, expansion of distribution capabilities, and by facilitating cross-selling with other parts of our business. Our concrete forming business continues to expand our product and services offerings to capture more of our customers' wallets while helping them address labor challenges on the job site. Finally, our commercial business continues to build on new products, new customer relationships, and the benefits from prior restructuring actions to deliver improved results.

Speaker #2: Our highest capital allocation priority is to invest in opportunities, organic and inorganic, that grow our core businesses and increase margins and returns over time.

Speaker #3: Similarly, in our factory-built business, this business unit continues to actively add more value to our customers through partnerships, expansion of distribution capabilities, and by facilitating cross-selling with other parts of our business.

Speaker #2: Our focus areas are expanding geographically in core, higher margin businesses, where we have sustainable competitive advantages; expanding capacity for new and value-added products; and driving operational excellence through automation, consolidation, and enhanced productivity.

Will Schwartz: Continues to weigh on results, overshadowing improvements across our other businesses. Residential builders remain cautious, managing home inventories carefully ahead of the spring selling season, while consumer confidence and affordability headwinds persist. We continue to make investments in automation and other initiatives to improve our cost position and throughput. One of these initiatives is the Frame Forward Systems brand that we launched in February at the International Builders' Show. Frame Forward Systems positions our Site Built business unit to move our wood framing business beyond commodity component sale to capture increased margin through a system selling approach and to drive greater customer loyalty. While early, Frame Forward Systems has been very well-received by the construction trade as we continue to raise the bar on off-site manufacturing to address the on-site challenges in the construction industry.

Speaker #3: Our concrete-forming business continues to expand our product and services offerings to capture more of our customers' wallets, while helping them address labor challenges on-the-job site.

Speaker #2: Consistent with this framework, in April, we completed one acquisition and announced a second that we expect to close in May. On April 6th, we purchased the net operating assets of MoistureShield Inc. And on April 28th, we announced our plan to acquire the net operating assets of Berry Pallets.

Speaker #3: Finally, our commercial business continues to build on new products, new customer relationships, and the benefits from prior restructuring actions to deliver improved results. Across our construction segment, we are actively finding ways to solve our customers' problems by helping address labor, quality, production cost, and reduce build time to help our customers win in the marketplace.

Will Schwartz: Across our Construction segment, we are actively finding ways to solve our customers' problems by helping address labor, quality, production cost, and reduce build time to help our customers win in the marketplace. Looking ahead, we remain committed to our long-term targets and believe the steps we are taking today will position us to achieve these results in the future. As a reminder, we are driving towards the following goals: a 12.5% EBITDA margin, 7% to 10% unit sales growth, some of which will come from M&A and new products, ROIC in excess of 15%, which is well ahead of our cost of capital, and lastly, to achieve all of this while maintaining a conservative capital structure. While the market dynamic has changed since our last call in February, it has not dampened our enthusiasm for our business longer term.

Speaker #2: These transactions are aligned with our capital allocation strategy to strengthen our core portfolio and expand capacity in the geographies we serve, and improve margins.

Speaker #2: We also intend to return capital by growing our dividend in line with long-term free cash flow and repurchasing shares primarily to offset dilution from stock-based compensation.

Speaker #3: Looking ahead, we remain committed to our long-term targets and believe the steps we are taking today will position us to achieve these results in the future.

Speaker #3: As a reminder, we are driving towards the following goals: a 12.5% EBITDA margin, 7 to 10 percent unit sales growth, some of which will come from M&A and new products, ROYC in excess of 15%, which is well ahead of our cost of capital, and lastly, to achieve all of this while maintaining a conservative capital structure.

Speaker #2: We will evaluate additional repurchases' opportunistically when we believe our shares are trading below intrinsic value. And we'll preserve our balance sheet strength to fund growth.

Will Schwartz: Similarly, in our UFP Site Built business, this business unit continues to actively add more value to our customers through partnerships, expansion of distribution capabilities, and by facilitating cross-selling with other parts of our business. Our concrete forming business continues to expand our product and services offerings to capture more of our customers' wallets while helping them address labor challenges on the job site. Finally, our commercial business continues to build on new products, new customer relationships, and the benefits from prior restructuring actions to deliver improved results. Across our Construction Segment, we are actively finding ways to solve our customers' problems by helping address labor, quality, production cost, and reduce build time to help our customers win in the marketplace. Looking ahead, we remain committed to our long-term targets and believe the steps we are taking today will position us to achieve these results in the future.

Speaker #2: With these points in mind, the board approved a quarterly dividend of $36 per share, a 3% increase from a year ago. We have a $300 million share repurchase authorization in place through July 2026.

Speaker #2: Year to date, we've repurchased $30 million shares at an average price under $90 per share. We currently expect $250 million to $275 million of capex, about $50 million lower than our February target, due to the MoistureShield transaction.

Speaker #3: While the market dynamic has changed since our last call in February, it is not dampened our enthusiasm for our business longer term. As we've said before, we have confidence in our model, and our focus remains on the most attractive opportunities that enhance our core business.

Will Schwartz: As we've said before, we have confidence in our model and our focus remains on the most attractive opportunities that enhance our core business. 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 normalize. With that, I'll turn it over to Mike Cole.

Speaker #2: And we continue to build our M&A pipeline to run targets that fit strategically, offer higher margin and return potential, and present opportunities to meaningfully scale our core businesses.

Speaker #3: 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 normalize.

Speaker #2: As we pursue these opportunities, we'll remain disciplined on valuation. I'll conclude with our outlook. We expect current market environment to persist through 2026. Based on current headwinds and visibility, we believe demand for the balance of the year is trending toward the lower end of our prior guidance.

Speaker #3: With that, I'll turn it over to Mike Cole.

Speaker #2: Thank you, Will. Net sales for the March quarter were 1.5 billion. Down 8% from 1.6 billion last year. The change reflected a 7% decline in units and a 1% decline in pricing.

Mike Cole: Thank you, Will Schwartz. Net sales for Q1 were $1.5 billion, down 8% from $1.6 billion last year. The change reflected a 7% decline in units and a 1% decline in pricing. Units declined due to continued weakness in residential construction activity, adverse weather, the exiting of select low-margin commodity sales, and softer demand for new pallets. Pricing was impacted by a 6% decline in lumber and continued price pressure in our site-built business. Adjusted EBITDA was $111 million, down $31 million year-over-year, and adjusted EBITDA margin was 7.6%, compared with 8.9% in the prior year period.

Will Schwartz: As a reminder, we are driving towards the following goals: a 12.5% EBITDA margin, 7% to 10% unit sales growth, some of which will come from M&A and new products, ROIC in excess of 15%, which is well ahead of our cost of capital, and lastly, to achieve all of this while maintaining a conservative capital structure. While the market dynamic has changed since our last call in February, it has not dampened our enthusiasm for our business longer term. As we've said before, we have confidence in our model and our focus remains on the most attractive opportunities that enhance our core business. 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 normalize. With that, I'll turn it over to Mike Cole.

Speaker #2: Which assume flat to slightly down unit volumes across our segments based on mix. With respect to input costs, we expect continued pressure from energy and transportation.

Speaker #2: Units declined due to continued weakness in residential construction activity, adverse weather, the exiting of select low-margin commodity sales, and softer demand for new pallets.

Speaker #2: While pricing actions are underway to offset these items, the benefit is expected to take time to flow through the income statement this year. Positively, we believe market share gains capital investments and operating improvements should help offset headwinds and markets tied to new residential construction.

Speaker #2: Pricing was impacted by a 6% decline in lumber and continued price pressure in our site-built business. Adjusted EBITDA was 111 million, down 31 million dollars year over year.

Speaker #2: And adjusted EBITDA margin was 7.6% compared with 8.9% in the prior year period. The decline was driven primarily by site-built, where gross profit decreased by nearly 19 million dollars along with higher healthcare and transportation costs across the portfolio.

Speaker #2: For example, we continue to target $100 million of growth in decorators ducking and railing sales. With that, we'll open the line for questions.

Mike Cole: The decline was driven primarily by site-built, where gross profit decreased by nearly $19 million along with higher healthcare and transportation costs across the portfolio, which increased approximately $7 million and $3 million respectively. Despite these headwinds, our trailing twelve-month return on invested capital remained above our weighted average cost of capital at nearly 11%, demonstrating continued value creation through the current phase of the cycle. Turning to our segments, I'll begin with the retail. Retail sales were $531 million, down 12% year over year, driven by a 13% decline in units, partially offset by 1% higher pricing. ProWood units declined 15%, reflecting soft demand driven by adverse weather, weaker consumer sentiment, and the absence of storm-related demand. We also exited certain low-margin commodity sales starting in Q2 of 2025.

Speaker #1: Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, press star 11 again.

Speaker #2: Which increased approximately 7 million and 3 million, respectively. Despite these headwinds, our trailing 12-month return on invested capital remained above our weighted average cost of capital at nearly 11%.

Speaker #1: One moment while we compile the Q&A roster. Our first question will come from the line of Kurt Yinger with DA Davidson. Your line is open.

Mike Cole: Thank you, Will. Net sales for Q1 were $1.5 billion, down 8% from $1.6 billion last year. The change reflected a 7% decline in units and a 1% decline in pricing. Units declined due to continued weakness in residential construction activity, adverse weather, the exiting of select low-margin commodity sales, and softer demand for new pallets. Pricing was impacted by a 6% decline in lumber and continued price pressure in our site-built business. Adjusted EBITDA was $111 million, down $31 million year over year, and adjusted EBITDA margin was 7.6%, compared with 8.9% in the prior year period.

Speaker #2: Demonstrating continued value creation through the current phase of the cycle. Turning to our segments I'll begin with the retail. Retail sales were 531 million, down 12% year over year, driven by a 13% decline in units, partially offset by 1% higher pricing.

Speaker #2: Great. Thank you. Good morning, everyone.

Speaker #3: Morning, Kurt.

Speaker #2: Morning.

Speaker #3: I just wanted to start off on ProWood. I know that you lost some lower margin business last year. There also sounds like kind of that slow progression into spring impacted the March period.

Speaker #2: ProWood units declined 15%, reflecting soft demand driven by adverse weather, weaker consumer sentiment, and the absence of storm-related demand. We also exited certain low-margin commodity sales starting in Q2 of 2025.

Speaker #3: I guess with the commentary that April's maybe leveled out a little bit, would you expect to see some better volume trends there?

Speaker #2: Yeah. I think that's fair to say, Kurt. If you look at it, the factors and points that we referenced in some of the commentary, whether it's kind of carryover of really a very slow storm season from last year, a lot of that tail drags into 2026, into the first quarter.

Mike Cole: Deckorators delivered 2% unit growth as decking continued to outperform the market. Overall decking sales increased 16%, led by 27% growth in Surestone, which was supported by capacity added at our Alabama plant. Wood plastic composite decking increased 4%. We continue to target above-market growth in our Deckorators business unit. In April, we added wood plastic composite manufacturing capacity in Arkansas through an acquisition. Our new Surestone plant in Buffalo just started shipping, and we continue to expand distribution across professional and retail channels, all of which is expected to support additional share gains in 2026 and beyond. Edge volume declined 20% as we closed our Bonner facilities and narrowed the portfolio to products we expect to meet profitability targets by the end of 2026, representing the significant actions needed to restructure the business unit.

Mike Cole: The decline was driven primarily by Site Built, where gross profit decreased by nearly $19 million along with higher healthcare and transportation costs across the portfolio, which increased approximately $7 million and $3 million respectively. Despite these headwinds, our trailing twelve-month return on invested capital remained above our weighted average cost of capital at nearly 11%, demonstrating continued value creation through the current phase of the cycle. Turning to our segments, I'll begin with the Retail. Retail sales were $531 million, down 12% year over year, driven by a 13% decline in units, partially offset by 1% higher pricing. ProWood units declined 15%, reflecting soft demand driven by adverse weather, weaker consumer sentiment, and the absence of storm-related demand. We also exited certain low-margin commodity sales starting in Q2 of 2025.

Speaker #2: And wood plastic composite decking increased 4%. We continue to target above-market growth in our decorators' business business unit. In April, we added wood plastic composite manufacturing capacity in Arkansas through an acquisition.

Speaker #2: We didn't have that, obviously. You combine that with unusual weather patterns and then the change in business mix, some of those volumes that you talked about.

Speaker #2: So yeah, I think if you take some of that noise out, it really matches up well to some of the guidance we've talked about for single-digit down.

Speaker #2: And I think that carries forward.

Speaker #3: Okay. That's helpful. And then on a decorator side, obviously still a very good quarter. In terms of decking sales growth, can you just talk about how that matches up maybe internally versus your plan?

Speaker #2: Edge volume declined 20% as we closed our Bonner facilities and narrowed the portfolio to products we expect to meet profitability targets by the end of 2026, representing the significant actions needed to restructure the business unit.

Speaker #3: And then, as we think about the need to hit accelerating growth to get to that $100 million target, with Buffalo Online, does that really help ramp things up in Q2?

Mike Cole: Retail adjusted EBITDA was down $1 million year over year. Gross profit and SG&A were both essentially flat, reflecting improved mix and continued cost control while we continue to invest in the Deckorators brand. We remain focused on improving ProWood distribution and increasing throughput and margins in Deckorators. With these initiatives and the Edge restructuring substantially complete, the retail segment is well-positioned for improved results in 2026. Packaging sales were $394 million, down 4% year over year, reflecting a 2% decline in units and a 2% decline in pricing. Structural packaging volumes were flat. PalletOne units declined 7% and protective packaging units increased 5% as new greenfield locations continue to ramp up. Across the segment, we continue to gain share with key customers because of our ability to provide value-added solutions in a comprehensive product portfolio on a national scale.

Speaker #3: Or is it maybe more of a back-half kind of phenomenon, in terms of when a lot of that starts to flow through?

Speaker #2: We remain focused on improving ProWood distribution and increasing throughput and margins in decorators. With these initiatives and the edge restructuring substantially complete, the retail segment is well positioned for improved results in 2026.

Speaker #2: Kurt, it's a combination of both. I think your what you're reading into Q1 is exactly aligned with the amount of production that we had.

Speaker #2: So with those capex improvements coming online, Selma, fully operational, but as described, we shipped our first truck mid-April out of Buffalo. So that's a quick ramp-up that really, as you get to Q3, Q4, we'll be able to capitalize on a lot of backlog of orders.

Speaker #2: Packaging sales were 394 million, down 4% year over year, reflecting a 2% decline in units and a 2% decline in pricing. Structural packaging volumes were flat.

Speaker #2: So our first quarter sales matched up to what we had to sell, so we were very happy. It's right on track in those CapEx advancements.

Speaker #2: It's right where we expected to be at this point.

Speaker #3: Okay. Okay. Great. And then just last one on the transportation and energy side, without maybe putting too fine a point on it, could you just help us kind of frame maybe what type of headwinds you expect that to be relative to what you were kind of budgeting at the start of the year?

Mike Cole: Packaging adjusted EBITDA was $28 million, down $7 million year-over-year. The decline reflected lower volumes and higher input costs in PalletOne, along with unabsorbed overhead as protective packaging greenfield operations continue to focus on achieving targeted volumes. We partially offset this gross profit impact with a $2 million reduction in SG&A, primarily from incentives tied to profitability. Construction sales were $465 million, down 10% year-over-year, with a 5% decline in price and a 5% decline in units. The change was driven primarily by a 14% unit decline in site build as housing demand remains pressured by affordability and weaker consumer sentiment and larger builders are focused on lowering inventory. We are, however, seeing improving trends among multi-family customers. Factory built units declined 7% as we exited certain low margin commodity sales.

Mike Cole: Retail adjusted EBITDA was down $1 million year over year. Gross profit and SG&A were both essentially flat, reflecting improved mix and continued cost control while we continue to invest in the Deckorators brand. We remain focused on improving ProWood distribution and increasing throughput and margins in Deckorators. With these initiatives and the Edge restructuring substantially complete, the Retail segment is well-positioned for improved results in 2026. Packaging sales were $394 million, down 4% year-over-year, reflecting a 2% decline in units and a 2% decline in pricing. Structural packaging volumes were flat. PalletOne units declined 7%, and protective packaging units increased 5% as new greenfield locations continue to ramp up. Across the segment, we continue to gain share with key customers because of our ability to provide value-added solutions and a comprehensive product portfolio on a national scale.

Speaker #2: We partially offset this gross profit impact with a $2 million reduction in SG&A primarily from incentives tied to profitability. Construction sales were 465 million, down 10% year over year, with a 5% decline in price and a 5% decline in units.

Speaker #3: And then also talk a little bit about kind of the process of passing that additional cost on. Is it something that a portion of your contracts with customers might be embedded with just a time lag, or is it something that's more negotiated?

Speaker #3: Just help us understand that dynamic a little bit.

Speaker #2: The change was driven primarily by a 14% unit decline in site-built, as housing demand remains pressured by affordability and weaker consumer sentiment, and larger builders are focused on lowering inventory.

Speaker #2: Yeah. That's a hard one. The month of March is where we really felt the impacts. And certainly, when the conflict started, we didn't know how prolonged that would be.

Speaker #2: At the point that we realized we were a month in, that looks like this is going to have a longer-lasting effect, we started those conversations with customers.

Speaker #2: We are, however, seeing improving trends among multifamily customers. Factory-built units declined 7% as we exited certain low-margin commodity sales. While volume was lower, mix improved and supported higher profitability.

Speaker #2: And fortunately for us, because of the relationships we have, they understand. We're not the only ones in that game. It's a cost out of our control.

Mike Cole: While volume was lower, mix improved and supported higher profitability, and commercial and concrete forming each achieved mid-teens unit growth. Construction adjusted EBITDA was $26 million, down $12 million year over year, driven by market weakness and competitive pricing pressure in site build. The other three business units improved profitability through growth and more favorable mix, partially offsetting the decline. As we manage through this cycle, we're balancing cost discipline with continued investment in our long-term strategy. We remain focused on aligning our cost structure with current demand while continuing to fund growth initiatives, product innovation, brand awareness, and technology-enabled productivity improvements. Consolidated SG&A declined over $3 million year over year due to lower incentive compensation tied to profitability.

Mike Cole: Packaging adjusted EBITDA was $28 million, down $7 million year-over-year. The decline reflected lower volumes and higher input costs in PalletOne, along with unabsorbed overhead as protective packaging greenfield operations continue to focus on achieving targeted volumes. We partially offset this gross profit impact with a $2 million reduction in SG&A, primarily from incentives tied to profitability. Construction sales were $465 million, down 10% year-over-year, with a 5% decline in price and a 5% decline in units. The change was driven primarily by a 14% unit decline in UFP Site Built, as housing demand remains pressured by affordability and weaker consumer sentiment, and larger builders are focused on lowering inventory. We are, however, seeing improving trends among multifamily customers. Factory built units declined 7% as we exited certain low-margin commodity sales. While volume was lower, mix improved and supported higher profitability.

Speaker #2: And so, those are starting to go into place. They're already in place in most cases and will continue as we move forward in the different markets that we serve.

Speaker #2: But yeah, as it looks right now, it looks like that's going to continue to be a bit of a headwind. But we've got it covered in the form of covering those costs and through it with customers.

Speaker #3: Is it fair to say, then, that we kind of see that headwind in Q2, and then in the back half you feel like you're pretty well set and offsetting it, barring another kind of material inflation shock?

Speaker #3: Or is it maybe going to be really the latter part of the year where you think it's covered?

Speaker #2: Consolidated SG&A declined over 3 million year over year, due to lower incentive compensation tied to profitability. For 2026, our key cost structure targets are: 25 million in cost savings from capacity consolidations, reducing cost of the $60 million cost out goal we announced last year.

Speaker #2: Yeah. I think as you described it, I think it's a very fair assessment of it. Most of those are already in place at this point, those offsets.

Mike Cole: For 2026, our key cost structure targets are $25 million in cost savings from capacity consolidations, reducing cost of goods sold, and keeping us on track to achieve the $60 million cost out goal we announced last year. Core SG&A of approximately $570 million, including Deckorators advertising and excluding the following incentive-related items: bonus expense of 17% to 18% of pre-bonus operating profit, sales incentives of about 3% of gross profit, and $21 million of vesting expense for prior years stock-based incentives, an effective tax rate of 25% to 26%, and total depreciation, amortization, and other non-cash expenses of approximately $200 million. Turning to capital resources and capital allocation. The company continues to maintain a strong balance sheet.

Speaker #2: But we continue to work through things through the quarter. But by the back half of the year, for certain, I wouldn't expect to be taking hits as a result of those increased fuel costs.

Speaker #3: Okay. Awesome. Thanks for the color. Appreciate it.

Speaker #2: Absolutely. Thank you. Thanks, Kurt.

Mike Cole: Commercial and concrete forming each achieved mid-teens unit growth. Construction adjusted EBITDA was $26 million, down $12 million year-over-year, driven by market weakness and competitive pricing pressure in UFP Site Built. The other three business units improved profitability through growth and more favorable mix, partially offsetting the decline. As we manage through this cycle, we're balancing cost discipline with continued investment in our long-term strategy. We remain focused on aligning our cost structure with current demand while continuing to fund growth initiatives, product innovation, brand awareness, and technology-enabled productivity improvements. Consolidated SG&A declined over $3 million year-over-year due to lower incentive compensation tied to profitability. For 2026, our key cost structure targets are $25 million in cost savings from capacity consolidations, reducing cost of goods sold, and keeping us on track to achieve the $60 million cost out goal we announced last year.

Speaker #2: Core SG&A of approximately $570 million including decorators' advertising and excluding the following incentive-related items: bonus expense of $17 to 18 percent of pre-bonus operating profit, sales incentives of about 3 percent of gross profit, and $21 million investing expense for prior year's stock-based incentives.

Speaker #1: One moment for our next question. And that will come from the line. Of Jeff Stevenson with Loop Capital. Your line is open.

Speaker #2: Good morning, Jeff.

Speaker #3: Hey, Jeff.

Speaker #4: Hey. Good morning. Thanks for taking my questions today. First, I was wondering if you could provide some more color on how the moisture shield assets fit into your long-term decorator strategy.

Speaker #4: And then the opportunity to leverage your Deckorators products at existing MoistureShield distribution partnerships that you previously were not working with.

Speaker #2: Yeah. You hit the nail on the head. There's combination. I would say it's certainly an opportunity that we were happy to be able to take advantage of.

Speaker #2: At the end of March, the company had $714 million in surplus cash and no borrowings under its credit agreements, for a total liquidity of approximately $2 billion.

Mike Cole: At the end of March, the company had $714 million in surplus cash and no borrowings under its credit agreements, for a total liquidity of approximately $2 billion. Our surplus cash was approximately $200 million lower than at year-end, driven by a typical seasonal working capital build that we expect to convert to cash by early Q4. We believe our diversified business portfolio generates meaningful and consistent free cash flow to support organic growth and M&A. Last year, we converted 80% of adjusted EBITDA into free cash flow. Our highest capital allocation priority is to invest in opportunities, organic and inorganic, that grow our core businesses and increase margins and returns over time.

Speaker #2: We needed additional capacity we've been challenged there. We needed a secondary plant. And so we had budgeted. It was reflected in the capex expectation for another plant.

Speaker #2: Our surplus cash was approximately $200 million lower than at year-end, driven by a typical seasonal working capital build that we expect to convert to cash by early Q4.

Speaker #2: That eliminated that need. So we got immediately a product that's really, really good, a manufacturing plant that satisfies that additional capacity need. But I'll tell you, the cool deck technology and being able to apply that across the decorator's portfolio of products also is extremely exciting.

Speaker #2: We believe our diversified business portfolio generates meaningful and consistent free cash flow to support organic growth and M&A. Last year, we converted 80% of adjusted EBITDA into free cash flow.

Mike Cole: Core SG&A of approximately $570 million, including Deckorators advertising and excluding the following incentive-related items. Bonus expense of 17% to 18% of pre-bonus operating profit, sales incentives of about 3% of gross profit, and $21 million of vesting expense for prior year stock-based incentives. An effective tax rate of 25% to 26%. Total depreciation, amortization, and other non-cash expenses of approximately $200 million. Turning to capital resources and capital allocation, the company continues to maintain a strong balance sheet. At the end of March, the company had $714 million in surplus cash and no borrowings under its credit agreements for a total liquidity of approximately $2 billion. Our surplus cash was approximately $200 million lower than at year-end, driven by a typical seasonal working capital build that we expect to convert to cash by early Q4.

Speaker #2: And then lastly, coming with it, as you described, some other distributor partners that we think are extremely valuable, and potentially we can expand on that.

Speaker #2: Our highest capital allocation priority is to invest in opportunities, organic and inorganic, that grow our core businesses and increase margins and returns over time.

Speaker #2: So it was a win all the way around.

Speaker #3: Oh, that's great to hear. And then at a high level, how should we think about the margin cadence over the next several quarters in your retail business?

Speaker #2: Our focus areas are: expanding geographically in core, higher margin businesses, where we have sustainable competitive advantages; expanding capacity for new and value-added products; and driving operational excellence through automation, consolidation, and enhanced productivity.

Mike Cole: Our focus areas are expanding geographically in core higher margin businesses where we have sustainable competitive advantages, expanding capacity for new and value-added products, and driving operational excellence through automation, consolidation, and enhanced productivity. Consistent with this framework, in April, we completed one acquisition and announced a second that we expect to close in May. On 6 April, we purchased the net operating assets of MoistureShield Inc. On 28 April, we announced our plan to acquire the net operating assets of Berry Pallets. These transactions are aligned with our capital allocation strategy to strengthen our core portfolio, expand capacity in the geographies we serve, and improve margins. We also intend to return capital by growing our dividend in line with long-term free cash flow and repurchasing shares primarily to offset dilution from stock-based compensation.

Speaker #3: Given the full load-in of your low-and-summit decking products across the 1,500 retail stores, and then the new decorators capacity coming online here in mid-April, just any more color there would be helpful.

Speaker #2: Consistent with this framework, in April, we completed one acquisition and announced a second that we expect to close in May. On April 6th, we purchased the net operating assets of Moisture Shield, Inc. And on April 28th, we announced our plan to acquire the net operating assets of Berry Pallets.

Speaker #2: Yeah. And let's go back to the last quarter. We kind of repivoted on that 1,500 stores. So a little different. So store count, where products flow in from distribution centers, etc.

Speaker #2: And that's why we really explained the $100 million of additional decorator sales that we expected to get. You'll see that continue to build through out the year.

Speaker #2: These transactions are aligned with our capital allocation strategy to strengthen our core portfolio, expand capacity in the geographies we serve, and improve margins. We also intend to return capital by growing our dividend in line with long-term free cash flow and repurchasing shares primarily to offset dilution from stock-based compensation.

Mike Cole: We believe our diversified business portfolio generates meaningful and consistent free cash flow to support organic growth and M&A. Last year, we converted 80% of adjusted EBITDA into free cash flow. Our highest capital allocation priority is to invest in opportunities, organic and inorganic, that grow our core businesses and increase margins and returns over time. Our focus areas are expanding geographically in core, higher-margin businesses where we have sustainable competitive advantages, expanding capacity for new and value-added products, and driving operational excellence through automation, consolidation, and enhanced productivity. Consistent with this framework, in April, we completed one acquisition and announced a second that we expect to close in May. On 6 April, we purchased the net operating assets of MoistureShield Inc. On 28 April, we announced our plan to acquire the net operating assets of Berry Pallets.

Speaker #2: So describing back to the last question, we've only been limited by the production that we've had. So as that additional capacity comes on, Jeff, you'll see those sales build and revenues grow.

Speaker #2: So super excited about that.

Speaker #2: We will evaluate additional repurchases' opportunistically when we believe our shares are trading below intrinsic value. And we'll preserve our balance sheet strength to fund growth.

Mike Cole: We will evaluate additional repurchases opportunistically when we believe our shares are trading below intrinsic value and will preserve our balance sheet strength to fund growth. With these points in mind, the board approved a quarterly dividend of $0.36 per share, a 3% increase from a year ago. We have a $300 million share repurchase authorization in place through July 2026. Year to date, we've repurchased 30 million shares at an average price under $90 per share. We currently expect $250 million to $275 million of CapEx, about $50 million lower than our February target, due to the MoistureShield transaction. We continue to build our M&A pipeline around targets that fit strategically, offer higher margin and return potential, and present opportunities to meaningfully scale our core businesses.

Speaker #3: Okay. Great. Thank you.

Speaker #1: One moment. One moment for our next question. And that will come from the line of William Carter. Your line is open.

Speaker #5: Hey, thank you. Good morning. What I wanted to ask is about the kind of inflation, the energy pass-through. I think, just to make sure, you are saying that when it's a headwind, it's transitory, like in March?

Speaker #5: Could you give us a sense of how big that transitory headwind, particularly, was in the first quarter? How long you lived with the lag?

Speaker #5: And then, if it's just if we see diesel stop or whatever, then the lag goes the other way. Any other incremental color to get some clarity around that incremental headwind this year?

Mike Cole: These transactions are aligned with our capital allocation strategy to strengthen our core portfolio, expand capacity in the geographies we serve, and improve margins. We also intend to return capital by growing our dividend in line with long-term free cash flow and repurchasing shares primarily to offset dilution from stock-based compensation. We will evaluate additional repurchases opportunistically when we believe our shares are trading below intrinsic value, and we'll preserve our balance sheet strength to fund growth. With these points in mind, the board approved a quarterly dividend of $0.36 per share, a 3% increase from a year ago. We have a $300 million share repurchase authorization in place through July 2026. Year to date, we've repurchased 30 million shares at an average price under $90 per share.

Speaker #2: Yeah. Absolutely. I think Mike's chomping at the bit to get a word in. So I'm going to let him kind of jump in here.

Speaker #3: Yeah. It was about a $3 million headwind in March. Andrew, and it did increase in April. But the good news is that in April, as Will had indicated, that's when we started taking actions with our customers and now through the freighter charges and price increases on the products.

Speaker #2: As we pursue these opportunities, we'll remain disciplined on valuation. While conclude with our outlook, we expect the current market environment to persist through 2026.

Mike Cole: As we pursue these opportunities, we'll remain disciplined on valuation. I'll conclude with our outlook.

Will Schwartz: We expect the current market environment to persist through 2026. Based on current headwinds and visibility, we believe demand for the balance of the year is trending toward the lower end of our prior guidance, which assume flat to slightly down unit volumes across our segments based on mix. With respect to input costs, we expect continued pressure from energy and transportation. While pricing actions are underway to offset these items, the benefit is expected to take time to flow through the income statement this year. Positively, we believe market share gains, capital investments, and operating improvements should help offset headwinds in markets tied to new residential construction. For example, we continue to target $100 million of growth in Deckorators decking and railing sales. With that, we'll open the line for questions.

Mike Cole: We expect the current market environment to persist through 2026. Based on current headwinds and visibility, we believe demand for the balance of the year is trending toward the lower end of our prior guidance, which assume flat to slightly down unit volumes across our segments based on mix. With respect to input costs, we expect continued pressure from energy and transportation. While pricing actions are underway to offset these items, the benefit is expected to take time to flow through the income statement this year. Positively, we believe market share gains, capital investments, and operating improvements should help offset headwinds in markets tied to new residential construction. For example, we continue to target $100 million of growth in Deckorators decking and railing sales. With that, we'll open the line for questions.

Speaker #2: Based on current headwinds and visibility, we believe demand for the balance of the year is trending toward the lower end of our prior guidance, which assumed flat to slightly down unit volumes across our segments based on mix.

Speaker #3: Depending on which approach the customers prefer, we're now beginning to pass that through. And so working through that process, like Will said, and expect that's going to be completed here in pretty short order in Q2.

Speaker #2: With respect to input costs, we expect continued pressure from energy and transportation. While pricing actions are underway to offset these items, the benefit is expected to take time to flow through the income statement this year.

Speaker #5: And I 100% apologize if you all answer this to Jeff's question because I actually cut out. But it's kind of something we were chomping at the bit to ask about the moisture shield locations.

Speaker #2: Positively, we believe market share gains capital investments and operating improvements should help offset headwinds and markets tied to new residential construction. For example, we continue to target $100 million of growth in decorators, decking, and railing sales.

Mike Cole: We currently expect $250 to 275 million of CapEx, about $50 million lower than our February target due to the MoistureShield transaction.

Speaker #5: Basically, if you look at the kind of the dealer locations for moisture shield and kind of decorators where you are today, it's highly incremental in terms of incremental distribution points.

Will Schwartz: We continue to build our M&A pipeline around targets that fit strategically, offer higher margin and return potential, and present opportunities to meaningfully scale our core businesses. As we pursue these opportunities, we'll remain disciplined on valuation. I'll conclude with our outlook. We expect the current market environment to persist through 2026. Based on current headwinds and visibility, we believe demand for the balance of the year is trending toward the lower end of our prior guidance, which assume flat to slightly down unit volumes across our segments based on mix. With respect to input costs, we expect continued pressure from energy and transportation. While pricing actions are underway to offset these items, the benefit is expected to take time to flow through the income statement this year.

Speaker #2: With that, we'll open the line for questions.

Speaker #5: So I guess the first thing is, obviously, moisture shield is going to go more two-step. Is it an easy conversation to pick that up for kind of decorators or sure stone?

Speaker #1: Thank you. As a reminder to ask a question, please press star 11 on your telephone, and wait for your name to be announced. To withdraw your question, press star 11 again.

Operator: Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, press star one one again. One moment while we compile the Q&A roster. Our first question will come from the line of Kurt Yinger with D.A. Davidson. Your line is open.

Speaker #5: Obviously, you'd also be the factory-constrained that you kind of your kind of playbook for launching moisture shield. And I guess long-term, what's the brand strategy here?

Speaker #1: One moment while we compile the Q&A roster. Our first question will come from the line of Kurt Yinger with DA Davidson. Your line is open.

Speaker #5: Is it keep moisture shield? Is it kind of and make it more of the brand or just anything to help out there? Thank you.

Speaker #3: Great. Thank you. Good morning, everyone.

Kurt Yinger: Great. Thank you.

Will Schwartz: Morning, Kurt.

Kurt Yinger: Good morning, everyone.

Speaker #4: Morning, Kurt.

Will Schwartz: Morning, Kurt.

Kurt Yinger: Morning. I just wanted to start off on ProWood. I know that, you know, you lost some lower margin business last year, it also sounds like kinda that slow progression into spring, you know, impacted the March period. I guess, with the commentary that April's maybe leveled out a little bit, would you expect to see some better volume trends there?

Speaker #3: Morning.

Speaker #2: Yeah. Good question. And I'm going to start with the last question first or the last point. So the intent is to the moisture shield brand.

Speaker #4: I just wanted to start off on ProWood. I know that you lost some lower margin business last year, but it also sounds like kind of that slow progression into spring impacted the March period.

Speaker #2: For the remainder of the year, and in 2027, we'll start a transition moving under the decorators' umbrella. And starting to introduce some of those products into the mix, as well as the cool deck technology applying that towards the whole portfolio of products where we deem fit.

Speaker #4: I guess with the commentary that April's maybe leveled out a little bit, would you expect to see some better volume trends there?

Will Schwartz: Positively, we believe market share gains, capital investments, and operating improvements should help offset headwinds in markets tied to new residential construction. For example, we continue to target $100 million of growth in Deckorators decking and railing sales. With that, we'll open the line for questions.

Speaker #2: Yeah. We're excited. And we're working through that with those customers and partners that were part of moisture shield that weren't part of the decorators' customer mix.

Speaker #3: Yeah. I think that's fair to say, Kurt. If you look at it, the factors and points that we referenced in some of the commentary, whether it's kind of carryover of really a very slow storm season from last year, a lot of that tail drags into 2026, into the first quarter.

Will Schwartz: Yeah, I think that's fair to say, Kurt. If you look at it, there's, you know, the factors and points that we referenced in some of the commentary, whether it's kind of carryover of really a very slow storm season from last year. A lot of that tail drags into 2026 into the Q1. We didn't have that, obviously. You combine that with unusual weather patterns and then the change in business mix, some of those volumes we've talked about. Yeah, I think if you take some of that noise out, it really matches up well to some of the guidance we've talked about for single digit down. I think that carries forward.

Speaker #2: And we're working through that right now. And but very, very excited about the opportunities that presents to us.

Speaker #5: Thanks. I'll pass it on.

Speaker #2: Thank you.

Speaker #3: Thank you.

Speaker #1: Thank you. One moment for our next question. That will come from the line of Ruben Garner with Benchmark. Your line is open.

Speaker #3: We didn't have that, obviously. You combine that with unusual weather patterns and then the change in business mix, some of those volumes that you talked about.

Speaker #2: Hey. Good morning, Ruben.

Speaker #3: Thanks. Good morning. Good morning, guys. Let's see. This may be too early. But any plans from a branding perspective? Will the moisture shield assets ultimately become decorators' wood plastic composite?

Speaker #3: So yeah, I think if you take some of that noise out, it really matches up well to some of the guidance we've talked about for single-digit down.

Kurt Yinger: Great. Thank you.

Will Schwartz: Morning, Kurt.

Kurt Yinger: Good morning, everyone.

Will Schwartz: Morning, Kurt.

Kurt Yinger: Morning. I just wanted to start off on ProWood. I know that, you know, you lost some lower margin business last year. It also sounds like kind of that slow progression into spring, you know, impacted the March period. I guess with the commentary that April's maybe leveled out a little bit, would you expect to see some better volume trends there?

Speaker #3: And I think that carries forward.

Kurt Yinger: Okay. That's helpful. On the Deckorators side, you know, obviously still a very good quarter in terms of decking sales growth. Can you just talk about how that matches up maybe internally versus your plan? As we think about, you know, the need to hit accelerating growth to get to that $100 million target, with Buffalo online, you know, does that really help ramp things up in Q2? Or, is it maybe more of a H2 kind of phenomenon in terms of when a lot of that starts to flow through?

Speaker #4: Okay. That's helpful. And then on a decorator side, obviously still a very good quarter. In terms of decking sales, growth. Can you just talk about how that matches up maybe internally versus your plan?

Speaker #3: Or is there a need or a reason to keep this separate branding longer term?

Speaker #2: Yeah. Yeah. So, Ruben, I think you probably cut out in the Q for asking the question. And yeah. So we will transition that moisture shield brand under the decorators' umbrella at some point in 2027.

Speaker #4: And then as we think about the need to hit accelerating growth to get to that $100 million target, with Buffalo Online, does that really help ramp things up in Q2, or is it maybe more of a back half kind of phenomenon in terms of when a lot of that starts to flow through?

Speaker #2: So we'll carry it through the year. And then we'll start that transition process.

Will Schwartz: Yeah, I think that's fair to say, Kurt. If you look at it, there's, you know, the factors and points that we referenced in some of the commentary, whether it's kind of carryover, of really a very slow storm season from last year. A lot of that tail drags into 2026 into the Q1. We didn't have that, obviously. You combine that with, unusual weather patterns and then the change in business mix, some of those volumes we talked about. Yeah, I think if you take some of that noise out, it really matches up well to some of the guidance we've talked about for single-digit down, and I think that carries forward.

Speaker #3: I'm sorry. I missed that. And then the lot of moving parts the last couple of years, with both demand and the supply, you've been adding.

Will Schwartz: Kurt, it's a combination of both. I think your, what you're reading into Q1, it's exactly aligns with the amount of production that we had. With those CapEx improvements coming online, some are fully operational, but as described, we shipped our first truck mid-April out of Buffalo, so that's a quick ramp-up. Really, as you get to Q3 and Q4, we'll be able to capitalize on a lot of backlog of orders. Our, our Q1 sales matched up to what we had to sell. We were very happy. It's right on track in those CapEx advance. It's right where we expect it to be at this point.

Speaker #3: Kurt, it's a combination of both. I think your what you're reading into Q1 is exactly aligned with the amount of production that we had.

Speaker #3: And now moisture shield. Can you give us an idea of what total wood plastic composite business you have today? What total sure stone business you have today?

Speaker #3: So with those capex improvements coming online, Selma, fully operational, but as described, we shipped our first truck mid-April out of Buffalo. So that's a quick ramp-up, but really, as you get to Q3, Q4, we'll be able to capitalize on a lot of backlog of orders.

Speaker #3: And then what the capacity is today and where it's ultimately headed in each of those so we can kind of level set it on a go-forward basis?

Speaker #2: Yeah, so I'll work off of the 2025 numbers, Ruben. I think we finished the year in total decking and railing sales at about $245 million.

Speaker #3: So our first quarter sales matched up to what we had to sell. So we were very happy. It's right on track in those capex advancements.

Speaker #3: It's right where we expected to be at this point.

Speaker #2: I think of that $245 million, there was $165 million of decking. And of the $165 million, about $90 million was mineral-based, so the Sure Stone. And about $75 million was wood plastic composite.

Speaker #4: Okay. Okay. Great. And then just last one on the transportation and energy side, without maybe putting too fine a point on it, could you just help us kind of frame maybe what type of headwinds you expect that to be relative to what you were kind of budgeting at the start of the year?

Kurt Yinger: Okay. Okay, great. Just last one on the transportation and energy side. You know, without maybe putting too fine a point on it, could you just help us kind of frame maybe what type of headwinds you expect that to be relative to, you know, what you were kind of budgeting at the start of the year? Also talk a little bit about kind of the process of passing that additional cost on. Is it something that, you know, a portion of your contracts with customers might be embedded with just a time lag or something that's more negotiated? Just help us understand that dynamic a little bit.

Speaker #2: And the balance there, 80—I think it's $80 million—was railing. Now, to your point about capacity, prior to this year, we had $100 million, I think, in capacity of mineral-based or sure stone.

Speaker #4: And then also talk a little bit about kind of the process of passing that additional cost on. Is it something that a portion of your contracts with customers might be embedded with just a time lag or something that's more negotiated?

Speaker #2: We had about 100 million in wood plastic composite. We've now doubled as a result of the or have the ability to double as a result of the moisture shield acquisition, wood plastic composite.

Will Schwartz: Kurt Yinger, it's a combination of both. I think you're what you're reading into Q1 is exactly aligns with the amount of production that we had. With those CapEx improvements coming online, some are fully operational, but as described, we shipped our first truck mid-April out of Buffalo, that's a quick ramp-up. Really, as you get to Q3, Q4, we'll be able to capitalize on a lot of backlog of orders. Our Q1 sales matched up to what we had to sell. We were very happy. It's right on track in those CapEx advance. It's right where we expect it to be at this point.

Speaker #4: Just help us understand that dynamic a little bit.

Speaker #2: So that's going to go from 100 to 200. And as a result of Selma and Buffalo, we go from 100 million of capacity to adding another 250.

Speaker #3: Yeah. That's a hard one. The month of March is where we really felt the impacts. And certainly, when the conflict started, we didn't know how prolonged that would be.

Will Schwartz: Yeah. That's a hard one. The month of March is where we really felt the impacts. Certainly, when the conflict started, we didn't know how prolonged that would be. At the point that we realized we were a month in, that looks like this is gonna have a longer lasting effect, we started those conversations with customers. Fortunately for us, because of the relationships we have, they understand. You know, we're not the only ones in that game. It's a cost out of our control. Those are starting to go into place or already in place in most cases and will continue as in the different markets that we serve.

Speaker #2: So we'll be at 350 million of capacity for sure stone. And some of that will be most of it will be for decking. But we don't want to forget about the term product that we're launching this year as well.

Speaker #3: At the point that we realized we were a month in, that looks like this is going to have a longer-lasting effect, we started those conversations with customers.

Speaker #3: And fortunately for us, because of the relationships we have they understand. We're not the only ones in that game. It's a cost out of our control.

Speaker #3: Perfect, Terry, helpful. And then a question about—you mentioned, I think, you used the term 'price mechanisms,' and maybe there being a lag for offsetting some of the inflationary pressures that you've seen.

Speaker #3: And so those are starting to go into place. They're already in place in most cases and will continue as in the different markets that we serve.

Speaker #3: But yeah, as it looks right now, it looks like that's going to continue to be a bit of a headwind, but we've got it covered in the form of covering those costs and continue to work through it with customers.

Will Schwartz: Yeah, as it looks right now, it looks like that's gonna continue to be a bit of a headwind, but we've got it covered in the form of covering those costs and continue to work through it with customers.

Speaker #3: What exactly are those mechanisms? Are you using surcharges for fuel and transportation? And they're delayed for some reason? Just walk me through that comment.

Kurt Yinger: Is it fair to say then that, you know, we kinda see that headwind in Q2, then, you know, the H2, you feel like you're pretty well set in offsetting it barring, you know, another kinda material inflation shock? Is it maybe gonna be really the latter part of the year where you think it's covered?

Speaker #4: Is it fair to say then that we kind of see that headwind in Q2 and then the back half you feel like you're pretty well set and offsetting it barring another kind of material inflation shock?

Speaker #2: Yeah. Combination. And so you're exactly right. Fuel surcharges in certain situations. Others want repricing building that into the price. So each of those scenarios is different.

Speaker #2: So when we speak mechanisms, we have a lot of business that we quote each time. And so you obviously take that into account, the new updated costs and what's reflected in the market.

Speaker #4: Or is it maybe going to be really the latter part of the year where you think it'll be covered?

Will Schwartz: Yeah. The... That's a hard one. The month of March is where we really felt the impacts. Certainly, when the conflict started, we didn't know how prolonged that would be. At the point that we realized we were a month in, that looks like this is gonna have a longer lasting effect, we started those conversations with customers. Fortunately for us, because of the relationships we have, they understand, you know, we're not the only ones in that game. It's a cost out of our control. Those are starting to go into place. They're already in place in most cases and will continue as in the different markets that we serve.

Speaker #2: So it's just a combination of all of those. And each of the segments we serve. Have different pricing timelines. So site builds very different than retail.

Speaker #3: Yeah. I think as you described it, I think it's a very fair assessment of it. Most of those are already in place at this point.

Will Schwartz: Yeah, I think as you described it, I think that's a very fair assessment of it. Most of those are already in place at this point, those offsets, but we continue to work through things through the quarter. By the back half of the year for certain, I wouldn't expect to be taking hits as a result of those increased fuel costs.

Speaker #3: Those offsets. But we continue to work through things through the quarter. But by the back half of the year, for certain, I wouldn't expect to be taking hits as a result of those increased fuel costs.

Speaker #2: Example.

Speaker #3: Understood. Thanks for the detail, guys. Congrats on the deals and good luck going forward.

Speaker #2: Thank you very much.

Speaker #3: Thanks, Ruben.

Speaker #4: Okay. Awesome. Thanks for the color. Appreciate it.

Kurt Yinger: Okay. Awesome. Thanks, Will Schwartz, for the color. Appreciate it.

Speaker #1: One moment for our next question. And that will come from the line of Keaton Mamtora with BMO Capital Markets.

Speaker #3: Absolutely. Thank you.

Will Schwartz: Absolutely. Thank you. Thanks, Kurt.

Will Schwartz: Absolutely. Thank you.

Speaker #4: Thanks, Kurt.

Mike Cole: Thanks, Kurt.

Speaker #1: One moment for our next question. And that will come from the line of Jeff Stevenson with Loop Capital. Your line is open.

Operator: One moment for our next question. That will come from the line of Jeff Stevenson with Loop Capital. Your line is open.

Speaker #2: Hey. Good morning, Keaton.

Speaker #4: Good morning. So sticking with the flavor of the day, which is decorators, so just help me understand a little bit on Q1. Obviously, sure stone and wood plastic composite, both grew quite nicely in Q1.

Speaker #4: Good morning, Jeff.

Will Schwartz: Good morning, Jeff.

Speaker #3: Hey, Jeff.

Mike Cole: Hey, Jeff.

Jeff Stevenson: Hi, good morning. Thanks for taking my questions today. You know, first, I was wondering if you could provide, you know, some more color on how the MoistureShield assets fit into your long-term Deckorators strategy, and then the opportunity to leverage your Deckorators products at existing MoistureShield distribution partnerships that you previously were not working with.

Kurt Yinger: Is it fair to say then that, you know, we kind of see that headwind in Q2 and then, you know, H2, you feel like you're pretty well set not setting it barring, you know, another kind of material inflation shock? Is it maybe gonna be really the latter part of the year where you see it being covered?

Speaker #4: Yet overall, decorators' sort of bucket was up 2%. So what are the other offsetting sort of factors there?

Speaker #4: And then the opportunity to leverage your decorator's products at existing moisture shield distribution partnerships that you previously were not working with.

Speaker #2: Yeah. Railing was off 6%. I think we called that out in the release. So that was an offset. And then the other product categories that are sitting inside the decorators' business unit are decorative aluminum fencing, deck accessories, generally post caps, balusters, and then vinyl lattice is also in the category.

Speaker #3: Yeah. You hit the nail on the head. There's combination. I would say that's certainly an opportunity that we were happy to be able to take advantage of.

Will Schwartz: Yeah. It's, you hit the nail on the head. There's a combination. That was a, that's certainly an opportunity that we were happy to be able to take advantage of. We needed additional capacity. We've been challenged there. We needed a secondary plant. We had budgeted, it was reflected in the CapEx expectation for another plant. That eliminated that need, so we got immediately a product that's really, really good, a manufacturing plant that satisfies that additional capacity need. I'll tell you, the CoolDeck technology and being able to apply that across the Deckorators portfolio of products also is extremely exciting. Lastly, coming with it, as you described, some other distributor partners that we think are extremely valuable and potentially we can expand on that. It was a win all the way around.

Will Schwartz: Yeah, I think as you described it, I think that's a very fair assessment of it. Most of those are already in place at this point, those offsets, but we continue to work through things through the quarter. By H2 of the year, for certain, I wouldn't expect to be taking hits as a result of those increased fuel costs.

Speaker #3: We needed additional capacity we've been challenged there. We needed a secondary plant. And so we had budgeted. It was reflected in the capex expectation for another plant.

Speaker #3: That eliminated that need. So we got immediately a product that's really, really good, a manufacturing plant that satisfies that additional capacity need. But I'll tell you, the cool deck technology and being able to apply that across the decorator's portfolio of products also is extremely exciting.

Kurt Yinger: Okay, awesome. Thanks, Will, for the color. Appreciate it.

Speaker #2: So those are areas that were softer and obviously the decking sales themselves were obviously fine.

Will Schwartz: Absolutely. Thank you.

Mike Cole: Thanks, Kurt.

Operator: One moment for our next question. That will come from the line of Jeffrey Stevenson with Loop Capital. Your line is open.

Speaker #4: I see. Okay. No, that's helpful. So as I think about sort of decorators and now with moisture shield coming into the fold, Mike, is the right way to sort of think about as 100 million incremental sales, you all talked about previously.

Speaker #3: And then lastly, coming with it, as you described, some other distributor partners that we think are extremely valuable and potentially we can expand on that.

Will Schwartz: Morning, Jeff.

Mike Cole: Hey, Jeff.

Jeffrey Stevenson: Hi. Good morning. Thanks for taking my questions today. You know, first, I was wondering if you could provide, you know, some more color on how the MoistureShield assets fit into your long-term Deckorators strategy, and then the opportunity to leverage your Deckorators products at existing MoistureShield distribution partnerships that you previously were not working with.

Speaker #3: So it was a win all the way around.

Speaker #4: Oh, that's great to hear. And then at a high level, how should we think about the margin cadence over the next several quarters in your retail business?

Jeff Stevenson: Oh, that's great to hear. Then, you know, at a high level, you know, how should we think about the margin cadence over the next several quarters in your retail business? You know, given the, you know, full load in of your low-end summer decking products across the 1,500 retail stores and then the new Deckorators capacity coming online here in mid-April. Just, you know, any more color there would be helpful.

Speaker #4: And now we've got moisture shield for probably eight months of the year or something like that. So is that the way we should be thinking about decorators' growth in '26?

Speaker #4: Given the full load-in of your low-in-summer decking products across the 1,500 retail stores, and then the new decorators capacity coming online here in mid-April, just any more color there would be helpful.

Will Schwartz: It's, you hit the nail on the head. There's a combination. I would say, it's certainly an opportunity that we were happy to be able to take advantage of. We needed additional capacity. We've been challenged there. We needed a secondary plant. We had budgeted, it was reflected in the CapEx expectation for another plant. That eliminated that need, we got immediately a product that's really good, a manufacturing plant that satisfies that additional capacity need. I'll tell you, the CoolDeck technology and being able to apply that across the Deckorators portfolio of products also is extremely exciting. Lastly, coming with it, as you described, some other distributor partners that we think are extremely valuable and potentially, we can expand on that. It was a win all the way around.

Speaker #2: Yeah. That's exactly right. The 100 million that we originally talked about with the capacity coming online that goes a long way towards helping us achieve that.

Speaker #2: And now the incremental increase from the moisture shield transaction.

Speaker #3: Yeah. And let's go back to the last quarter. We kind of repivoted on that 1,500 stores. So a little different. So store count, where products flow in from distribution centers, etc.

Will Schwartz: Yeah. Let's go back to last quarter. We kind of repivoted on that 1,500 stores. It's a little different. Store count, where products flow in from distribution centers, et cetera, and that's why we really explained the $100 million of additional Deckorators sales that we expected to get. You'll see that continue to build throughout the year. Describing back to the last question, we've only been limited by the production that we've had. As that additional capacity comes on, Jeff, you'll see those sales build and revenues grow. Super excited about that.

Speaker #4: Got it. Okay. That's helpful. And then just switching to the construction side, inside-build, are you seeing sort of continual price competition among players? Or is that sort of largely leveling out at this point, given that we've been at it for a while now?

Speaker #3: And that's why we really explained the $100 million of additional decorator sales. We expected to get you'll see that continue to build through out the year.

Speaker #3: So describing back to the last question, we've only been limited by the production that we've had. So as that additional capacity comes on, Jeff, you'll see those sales build and revenues grow.

Speaker #3: So super excited about that.

Speaker #2: Yeah. That's the hardest part of the business for us today. Obviously, that business is very tough. And when you talk about even some of the cost inputs that we recognized in the first quarter, it's hardest to pass along.

Speaker #4: Okay. Great. Thank you.

Jeff Stevenson: Okay, great. Thank you.

Jeffrey Stevenson: Oh, that's great to hear. You know, at a high level, you know, how should we think about the margin cadence over the next several quarters in your retail business? You know, given the, you know, full load-in of your low-end summer decking products across the 1,500 retail stores and then the new Deckorators capacity coming online here in mid-April. Just, you know, any more color there would be helpful.

Speaker #1: One moment. One moment for our next question. And that will come from the line of William Carter with Stifel. Your line is open.

Operator: One moment. One moment for our next question. That will come from the line of William Carter with Stifel. Your line is open.

Speaker #2: So that's reflective in margins too. When you talk fuel increases, lumber costs going up during the quarter. And so it continues to be a very pressured market for us on the margin side.

Speaker #5: Hey, thank you. Good morning. What I wanted to ask is on the kind of inflation, the energy pass-through, I think just to make sure, you are saying that when it's a headwind, it's transitory like in March.

William Carter: Hey, thank you. Good morning. What I wanted to ask is on the kind of inflation, the energy pass-through, I think just to make sure, you are saying that when it's a headwind, it's transitory, like in March. Could you give us a sense of how big that transitory headwind particularly was in Q1? How long you live with the lag? If it's just, if we see diesel stop or whatever, then the lag goes the other way. Any other incremental color to get some clarity around that incremental headwind this year?

Speaker #4: Understood. But has the competitive dynamics changed at all? Since the start of this year, obviously, the start of this year, there was expectation that things will that housing activity will get better.

Speaker #5: Could you give us a sense of how big that transitory headwind, particularly, was in the first quarter? How long you live with the lag?

Will Schwartz: Yeah. Let's go back to last quarter. We kind of re-pivoted on that 1,500 stores. It's a little different. Store count, where products flow in from distribution centers, et cetera, and that's why we really explained the $100 million of additional Deckorators sales that we expected to get. You'll see that continue to build throughout the year. Describing back to the last question, we've only been limited by the production that we've had. As that additional capacity comes on, Jeff, you'll see those sales build and revenues grow. Super excited about that.

Speaker #5: And then if it's just if we see diesel stop or whatever, then the lag goes the other way. Any other incremental color to get some clarity around that incremental headwind this year?

Speaker #4: And then with sort of the geopolitical events, it sort of feels like things have become a little softer since then. Has there been any change?

Speaker #3: Yeah. Absolutely. I think Mike's chomping at the bit to get a word in. So I'm going to let him kind of jump in here.

Will Schwartz: Yeah, absolutely. I think Mike's chomping at the bit to get a word in, so I'm gonna let him kind of jump in here.

Speaker #2: Yeah. I think your assessment is exactly right. From the start of the year until today, it has certainly not gotten better. And the geopolitical tensions, interest rate increases, consumer sentiment, all those factors in play it's a tough environment.

Speaker #5: Yeah. It was about a $3 million headwind in March. Andrew, and it did increase in April. But the good news is that in April, as Will had indicated, that's when we started taking actions with our customers and now through Fraser Charges and price increases on the products.

Mike Cole: It was about a $3 million headwind in March, Andrew. It did increase in April. The good news is that in April, as Will indicated, that that's when we started taking actions with our customers and now through, you know, the freight surcharges and price increases on the products, depending on, you know, which approach the customers prefer. You know, we're now beginning to pass that through. Working through that process, like Will said, and, you know, expect that's gonna be completed here in pretty short order in Q2.

Speaker #3: Although we did expect a tougher front half of the year, we had tougher year-over-year comparisons. Obviously, housing was pretty tough coming into the beginning of the year.

Jeffrey Stevenson: Okay, great. Thank you.

Operator: One moment. One moment for our next question. That will come from the line of W. Andrew Carter with Stifel. Your line is open.

Speaker #5: Depending on which approach the customers prefer, we're now beginning to pass that through. And so working through that process, like Will said, and expect that's going to be completed here in pretty short order in Q2.

Speaker #3: And we had anticipated it being tougher but yeah, exactly the recent events have made it even more soft.

W. Andrew Carter: Hey, thank you. Good morning. What I wanted to ask is on the kind of inflation, the energy pass-through, I think just to make sure, you are saying that when it's a headwind, it's transitory, like in March. Could you give us a sense of how big that transitory headwind particularly was in Q1? How long you live with the lag, and then if it's just we see diesel stop or whatever, then the lag goes the other way. Any other incremental color to get some clarity around that incremental headwind this year?

Speaker #4: Yeah. Okay. That's fair. And then just final one from me on capital allocation. Are you sort of how are you thinking about M&A opportunities?

Speaker #6: And I 100% apologize if you all answer this to Jeff's question because I actually cut out, but it's kind of something we were chomping at the bit to ask about.

William Carter: I 100% apologize if you all answer this to Jeff's question 'cause I actually cut out, but it's kind of something that we were chomping at the bit to ask about. The MoistureShield locations. Basically, if you look at the, kind of the dealer locations for MoistureShield and kind of Deckorators where you are today, it's highly incremental in terms of incremental distribution points. I guess the first thing is, obviously, MoistureShield's gonna go more two-step. Is it an easy conversation to pick that up for, kind of Deckorators or SureStone? Obviously, you'd also be the factory constraint that you, kind of your kind of playbook for launching, MoistureShield. I guess long term, what's the brand strategy here? Is it keep MoistureShield?

Speaker #4: And it seems like that pipeline is growing and you are seeing more opportunities versus kind of the other tool that you all have on share repurchases.

Speaker #6: The moisture shield locations, basically, if you look at the kind of the dealer locations for moisture shield and kind of decorators where you are today, it's highly incremental in terms of incremental distribution points.

Speaker #4: How are you stacking those two at this point? And if you were to rank order?

Speaker #6: So I guess the first thing is, obviously, moisture shield's going to go more two-step. Is it an easy conversation to pick that up for Ketan decorators or SureStone?

Will Schwartz: Yeah, absolutely. I think Mike's chomping at the bit to get a word in, so I'm gonna let him kind of jump in here.

Speaker #2: Yeah. We are definitely more focused on growing. That's where we start. We talk about that a lot, but never losing sight of return. And I would tell you the pipeline is the best we've had in five-plus years.

Mike Cole: Yeah. It was about a $3 million headwind in March, Andrew. It did increase in April. The good news is that in April, as Will had indicated, that's when we started taking actions with our customers. Now through, you know, freight surcharges and price increases on the products, depending on, you know, which approach the customers prefer, you know, we're now beginning to pass that through. Working through that process, like Will said, you know, expect that's gonna be completed here in pretty short order in Q2.

Speaker #6: Obviously, you'd also be the factory-constrained that you kind of your kind of playbook for launching moisture shield. And I guess long-term, what's the brand strategy here?

Speaker #2: I think a lot of that is intent and action. We've done a lot more prospecting. I personally have done more prospecting, allocated more time towards it.

Speaker #6: Is it keep moisture shield? Is it kind of and make it more of the brand or just anything to help out there? Thank you.

William Carter: Is it to kind of, you know, and make it more of the brand or just anything to help out there? Thank you.

Speaker #2: For strategic opportunities, to fit where we want to take the corporation and so when you think about the liquidity, we want to put that to work.

Speaker #3: Yeah. Good question. And I'm going to start with the last question first or the last point. So the intent is to the moisture shield brand.

Will Schwartz: Yeah, good question. I'm gonna start with the last question first or the last point. The intent is to run the MoistureShield brand for the remainder of the year, and in 2027, we'll start a transition moving that under the Deckorators umbrella, and starting to introduce some of those products into the mix, as well as the CoolDeck technology, applying that towards the whole portfolio of products where we deem fit. Yeah, we're excited, and we're working through that with those customers and partners that were part of MoistureShield, that weren't part of the Deckorators customer mix. We're working through that right now. Very, very excited about the opportunities that presents to us.

Speaker #2: But it's got to be the right opportunities.

Speaker #3: For the remainder of the year, and in 2027, we'll start a transition, moving that under the decorators umbrella. And starting to introduce some of those products into the mix as well as the cool deck technology applying that towards the whole portfolio of products where we deem fit.

Speaker #4: Understood. Very helpful alternative or good luck.

Speaker #2: Thank you very much.

Speaker #3: Thank you.

Speaker #1: 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.

W. Andrew Carter: I 100% apologize if you all answer this to Jeffrey's question because I actually cut out, but it's kind of something we were chomping at the bit to ask about. The MoistureShield locations. Basically, if you look at the kind of the dealer locations for MoistureShield and kind of Deckorators where you are today, it's highly incremental in terms of incremental distribution points. I guess the first thing is, obviously, MoistureShield's gonna go more two-step. Is it an easy conversation to pick that up for kind of Deckorators or SureStone? Obviously, you'd also be the factory constraint that kind of your kind of playbook for launching MoistureShield. I guess long term, what's the brand strategy here? Is it keep MoistureShield?

Speaker #3: Yeah. We're excited. And we're working through that with those customers and partners that were part of moisture shield that weren't part of the decorators' customer mix.

Speaker #2: Thank you for joining us this morning. While the operating environment remains challenging and visibility limited, we're confident in the strategy we have in place and the actions underway to strengthen our business.

Speaker #3: And we're working through that right now. And but very, very excited about the opportunities that presents to us.

Speaker #2: We're staying disciplined. We're focused on what we can control, investing thoughtfully in our core businesses, and managing costs while remaining patient in how we deploy capital.

Speaker #6: Thanks. I'll pass it on.

William Carter: Thanks. I'll pass it on.

Speaker #3: Thank you.

Will Schwartz: Thank you.

Speaker #5: Thank you.

Mike Cole: Thank you.

Speaker #2: I want to thank our employees for their continued execution and commitment and our customers and shareholders for their trust and support. Thank you and have a great day.

Speaker #1: Thank you. One moment for our next question. That will come from the line of Reuben Garner with Benchmark. Your line is open.

Operator: Thank you. One moment for our next question. That will come from the line of Reuben Garner with Benchmark. Your line is open.

Speaker #3: Hey. Good morning, Reuben.

Will Schwartz: Hey, good morning, Reuben.

Reuben Garner: Thanks. Good mor-

Speaker #4: Thanks. Good morning.

Reuben Garner: Hi, Reuben.

Mike Cole: Hi, Reuben.

Reuben Garner: Good morning, guys. Let's see. This may be too early days, any plans from a branding perspective? Will the MoistureShield assets ultimately become Deckorators wood plastic composite, or is there a need or a reason to keep the separate branding longer term?

Speaker #7: Good morning, guys. Let's see. This may be too early. But any plans from a branding perspective? Will the moisture shield assets ultimately become decorators' wood plastic composite or is there a need or a reason to keep the separate branding longer term?

W. Andrew Carter: Is it to kinda, you know, and make it more of the brand or just anything to help out there? Thank you.

Will Schwartz: Yeah, good question. I'm gonna start with the last question first or the last point. The intent is to run the MoistureShield brand for the remainder of the year, and in 2027, we'll start a transition, moving that under the Deckorators umbrella, and starting to introduce some of those products into the mix, as well as the CoolDeck technology, applying that towards the whole portfolio of products where we deem fit. Yeah, we're excited, and we're working through that with those customers and partners that were part of MoistureShield, that weren't part of the Deckorators customer mix. We're working through that right now. Very, very excited about the opportunities that presents to us.

Will Schwartz: Yeah. Reuben, I think you probably cut out in the queue for asking the question. Yeah, so we will transition

Speaker #3: Yeah. Yeah. So Reuben, I think you probably cut out in the queue for asking the question. And yeah. So we will transition that moisture shield brand under the decorators' umbrella at some point in 2027.

Mike Cole: That MoistureShield brand under the Deckorators umbrella at some point in 2027. We'll carry it through the year, and then we'll start that transition process.

Will Schwartz: That MoistureShield brand under the Deckorators umbrella at some point in 2027. We'll carry it through the year, and then we'll start that transition process.

Speaker #3: So we'll carry it through the year, and then we'll start that transition process.

Speaker #7: Got it. Sorry. I missed that. And then the lot of moving parts the last couple of years, with both demand and the supply, you've been adding, and now moisture shield.

Reuben Garner: Got it. Sorry, I missed that.

Mike Cole: No, no problem.

Will Schwartz: No, no problem.

Reuben Garner: The lot of moving parts the last couple of years, with both demand and the supply you've been adding and now MoistureShield. Can you give us an idea of what total wood plastic composite business you have today? What total Surestone business you have today? What the capacity is today and where it's ultimately headed in each of those so we can kind of level set it on a go-forward basis?

W. Andrew Carter: Thanks. I'll pass it on.

Will Schwartz: Thank you.

Mike Cole: Thank you.

Operator: Thank you. One moment for our next question. That will come from the line of Reuben Garner with Benchmark. Your line is open.

Speaker #7: Can you give us an idea of what total wood plastic composite business you have today, what total SureStone business you have today? And then what the capacity is today and where it's ultimately headed in each of those so we can kind of level set it on a go-forward basis?

Will Schwartz: Hey, good morning, Reuben.

Reuben Garner: Thanks.

Will Schwartz: Hi, Reuben.

Reuben Garner: Good morning, guys. Let's see. This may be too early days, but any plans from a branding perspective? Will the MoistureShield assets ultimately become Deckorators wood plastic composite, or is there a need or a reason to keep the separate branding longer term?

Speaker #3: Yeah. So I'll work off of the 2025 numbers, Reuben. I think we finished the year in total decking and railing sales at about 245 million.

Mike Cole: I'll work off with the 2025 numbers, Reuben. I think we finished the year in total decking and railing sales of about $245 million. I think of that $245, there was $165 million of decking, and of the $165 in decking, about 90 was mineral-based, so the SureStone, and about $75 million was wood plastic composite. The balance there, 80, I think it's $80 million, was railing. To your point about capacity, prior to this year, we had about $100 million, I think, in capacity of mineral-based or SureStone. We had about $100 million in wood plastic composite. We've now doubled as a result of the...

Speaker #3: I think of that 245, there's 165 million of decking and of the 165 in decking, about 90 was mineral-based, so the SureStone. And about 75 million was wood plastic composite.

Will Schwartz: Yeah. Yeah. Reuben, I think you probably cut out and is in the queue for asking the question. Yeah, we will transition that MoistureShield brand under the Deckorators umbrella at some point in 2027. We'll carry it through the year, and then we'll start that transition process.

Speaker #3: And the balance there, 80, I think it's 80 million was railing. Now, to your point about capacity, prior to this year, we had about 100 million, I think, in capacity of mineral-based or SureStone.

Reuben Garner: Got it. Sorry, I missed that.

Will Schwartz: No, no problem.

Reuben Garner: This lot of moving parts the last couple of years, with both demand and the supply you've been adding and now MoistureShield. Can you give us an idea of what total wood plastic composite business you have today? What total Surestone business you have today? Then what the capacity is today and where it's ultimately headed in each of those so we can kind of level set it on a go-forward basis?

Speaker #3: We had about 100 million in wood plastic composite. We've now doubled as a result of the or have the ability to double as a result of the moisture shield acquisition, wood plastic composite.

Mike Cole: We have the ability to double as a result of the MoistureShield acquisition of wood plastic composite. That's going to go from 100 to 200. As a result of Soma and Buffalo, we go from 100 million of capacity to adding another 250. We'll be at 350 million of capacity for SureStone. Some of that will be for, most of it lion's share will be for decking, but, you know, we don't want to forget about the trim product that we're launching this year as well.

Speaker #3: So that's going to go from 100 to 200. And as a result of Selma and Buffalo, we go from 100 million of capacity to adding another 250.

Mike Cole: Yeah. I'll work off of the 2025 numbers, Reuben. I think we finished the year in total decking and railing sales of about $245 million. I think of that $245, there was $165 million of decking. Of the $165 in decking, about $90 was mineral-based, the Surestone, and $75 million was wood plastic composite. The balance there, $80, I think it's $80 million, was railing. Now, to your point about capacity, prior to this year, we had about $100 million, I think, in capacity of mineral-based or Surestone. We had about $100 million in wood plastic composite.

Speaker #3: So we'll be at 350 million of capacity for SureStone. And some of that will be most of it will line share be for decking, but we don't want to forget about the term product that we're launching this year as well.

Speaker #7: Perfect. Terry, helpful. And then a question about you mentioned I think you used the term price mechanisms and maybe there being a lag for offsetting some of the inflationary pressures that you've seen.

Reuben Garner: Perfect. Very helpful. A question about you mentioned I think you used the term price mechanisms, and maybe there being a lag for offsetting some of the inflationary pressures that you're seeing. What exactly are those mechanisms? Are you using surcharges for fuel and transportation, and they're delayed for some reason? Just walk me through that comment.

Speaker #7: What exactly are those mechanisms? Are you using surcharges for fuel and transportation, and they're delayed for some reason? Just walk me through that comment.

Speaker #3: Yeah. It's a combination. And so you're exactly right. Fuel surcharges in certain situations. Others want repricing building that into the price. So each of those scenarios is different.

Mike Cole: Yeah, it's a combination. You're exactly right. Fuel surcharges in certain situations, others want repricing, building that into the price. Each of those scenarios is different. When we speak mechanisms, we have a lot of business that we quote each time, you obviously take that into account, the new updated cost and what's reflected in the market. It's just a combination of all of those, each of the segments we serve have different pricing timelines. Site Built's very different than retail, an example.

Mike Cole: We've now doubled as a result of the or we have the ability to double as a result of the MoistureShield acquisition of wood plastic composite. That's gonna go from 100 to 200. As a result of Sama and Buffalo, we go from 100 million of capacity to adding another 250. We'll be at 350 million of capacity for Surestone. Some of that'll be for most of it will largely be for decking, but, you know, we don't wanna forget about the term product that we're launching this year as well.

Speaker #3: So when we speak mechanisms, we have a lot of business that we quote each time. And so you obviously take that into account, the new updated costs and what's reflected in the market.

Speaker #3: So it's just a combination of all of those. And each of the segments we serve, have different pricing timelines. So site-built's very different than retail.

Speaker #3: Example.

Speaker #7: Understood. Thanks for the detail, guys. Congrats on the deals, and good luck going forward.

Reuben Garner: Understood. Thanks for the detail, guys. Congrats on the deals and good luck going forward.

Speaker #3: Thank you very much.

Mike Cole: Thank you very much, Reuben.

Speaker #5: Thanks, Reuben.

Reuben Garner: Perfect. Very helpful. A question about you mentioned. I think you used the term price mechanisms, and maybe there being a lag for offsetting some of the inflationary pressures that you're seeing. What exactly are those mechanisms? Are you using surcharges for fuel and transportation, and they're delayed for some reason? Just walk me through that comment.

Speaker #1: One moment for our next question. And that will come from the line of Keaton Mamtora with BMO Capital Markets.

Operator: One moment for our next question. That will come from the line of Ketan Mamtora with BMO Capital Markets.

Speaker #3: Hey. Good morning, Keaton.

Mike Cole: Hey, good morning, Ketan.

Ketan Mamtora: Good morning. Sticking with the flavor of the day, which is Deckorators. Just help me understand a little bit on Q1. Obviously SureStone and wood plastic composite both grew quite nicely in Q1, yet overall Deckorators sort of bucket was up 2%. What are the other offsetting sort of factors there?

Speaker #8: Good morning. So sticking with the flavor of the day, which is decorators, so just help me understand a little bit on Q1. Obviously, SureStone and wood plastic composite, both grew quite nicely in Q1.

Will Schwartz: Yeah, it's a combination. You're exactly right. Fuel surcharges in certain situations, others want repricing, building that into the price. Each of those scenarios is different. When we speak mechanisms, we have a lot of business that we quote each time, you obviously take that into account, the new updated cost and what's reflected in the market. It's just a combination of all of those. Each of the segments we serve have different pricing timelines. Site Built's very different than retail, for example.

Speaker #8: Yet overall, decorators sort of bucket was up 2%. So what are the other offsetting sort of factors there?

Speaker #3: Yeah. Railing was off 6%. I think we called that out in the release. So that was an offset. And then the other product categories that are sitting inside the decorators' business unit are decorative aluminum fencing, deck accessories, generally post caps, balusters, s, and then vinyl lattice is also in the category.

Mike Cole: Railing was off 6%. I think we called that out in the release. That was an offset. The other product categories that are sitting inside the Deckorators business unit are decorative aluminum fencing, deck accessories generally, you know, post caps, balusters, and then, you know, vinyl lattice is also in the category. Those are areas that were softer and obviously the decking sales themselves are obviously very strong.

Reuben Garner: Understood. Thanks for the detail, guys. Congrats on the deals and good luck going forward.

Mike Cole: Thank you very much, Reuben.

Mike Cole: Thanks, Reuben.

Operator: One moment for our next question. That will come from the line of Ketan Mamtora with BMO Capital Markets.

Speaker #3: So those are areas that were softer and obviously, the decking sales themselves were obviously very strong.

Will Schwartz: Hey, good morning, Ketan.

Ketan Mamtora: Good morning. Sticking with the flavor of the day, which is Deckorators. Just help me understand a little bit on Q1. Obviously Surestone and wood plastic composite both grew quite nicely in Q1, yet overall Deckorators sort of bucket was up 2%. What are the other offsetting, sort of factors there?

Speaker #8: I see. Okay. No, that's helpful. So as I think about sort of decorators and now with moisture shield coming into the fold, Mike, is the right way to sort of think about as 100 million incremental sales, you all talked about previously, and now we've got moisture shield for probably eight months of the year or something like that.

Ketan Mamtora: I see. Okay. No, that's helpful. As I, as I think about sort of Deckorators and now with MoistureShield coming into the fold, Mike, is the right way to sort of think about as $100 million incremental sales you all talked about previously, and now we've got MoistureShield for probably 8 months of the year or something like that. Is that the way we should be thinking about Deckorators growth in 2026?

Speaker #8: So is that the way we should be thinking about decorators' growth in '26?

Mike Cole: Yeah. Railing was off 6%. I think we called that out in the release. That was an offset. The other product categories that are sitting inside the Deckorators business unit are decorative aluminum fencing, deck accessories generally, you know, post caps, balusters, and then, you know, vinyl lattice is also in the category. Those are areas that were softer and obviously the decking sales themselves are obviously very strong.

Speaker #5: Yeah. That's exactly right. The 100 million that we originally talked about, with the capacity coming online, that goes a long way towards helping us achieve that.

Mike Cole: Yeah, that's exactly right. The $100 million that we originally talked about, with the capacity coming online, that goes a long way towards helping us achieve that, and now the incremental increase from the MoistureShield transaction.

Speaker #5: And now the incremental increase from the moisture shield transaction.

Speaker #8: Got it. Okay. That's helpful. And then just switching to the construction side, inside-built, are you seeing sort of continual price competition among players? Or is that sort of largely leveling out at this point, given that we've been at it for a while now?

Ketan Mamtora: Got it. Okay. That's helpful. Just switching to the construction side. In SiteBuild, are you seeing, you know, sort of continued price competition, you know, among players or is that sort of largely leveling out at this point given that, you know, we've been at it for a while now?

Ketan Mamtora: I see. Okay. No, that's helpful. As I, as I think about sort of Deckorators and now with MoistureShield coming into the fold, Mike, is the right way to sort of think about as $100 million incremental sales you all talked about previously, and now we've got MoistureShield for probably eight months of the year or something like that. Is that the way we should be thinking about Deckorators growth in 2026?

Mike Cole: Yeah. That's the hardest part of the business for us today. Obviously that business is very tough, and when you talk about even some of the cost inputs that we recognized in Q1, it's hardest to pass along. That's reflective in margins too, when you talk fuel increases, lumber costs going up during the quarter. It continues to be a very pressured market for us on the margin side.

Speaker #3: Yeah. That's the hardest part of the business for us today. Obviously, that business is very tough. And when you talk about even some of the cost inputs that we recognized in the first quarter, it's hardest to pass along.

Speaker #3: So that's reflective in margins too. When you talk fuel increases, lumber costs going up during the quarter. And so it continues to be a very pressured market for us on the margin side.

Mike Cole: Yeah, that's exactly right. The $100 million that we originally talked about, with the capacity coming online, that goes a long way towards helping us achieve that. Now the incremental increase from the MoistureShield transaction.

Ketan Mamtora: Understood. Well, has the competitive dynamics changed at all, you know, since the start of this year? Obviously, the start of this year, there was expectation that things will, you know, that housing activity will get better. You know, with sort of the geopolitical events, it sort of feels like things have become a little softer since then. Has there been any change?

Speaker #8: Understood. But has the competitive dynamics changed at all? Since the start of this year, obviously, the start of this year, there was expectation that things will that housing activity will get better.

Ketan Mamtora: Got it. Okay. That's, that's helpful. Just switching to the construction side. In SiteBuild, are you seeing, you know, sort of continued price competition, you know, among players? Or is that sort of largely leveling out at this point, given that, you know, we've been at it for a while now?

Speaker #8: And then with sort of the geopolitical events, it sort of feels like things have become a little softer since then. Has there been any change?

Speaker #3: Yeah. I think you're assessment is exactly right. From the start of the year until today, it has certainly not gotten better. And the geopolitical tensions, interest rate increases, consumer sentiment, all those factors in play it's a tough environment.

Will Schwartz: Yeah. I think your assessment is exactly right. From the start of the year until today, it has certainly not gotten better. The geopolitical tensions, interest rate increases, consumer sentiment, all those factors in play, it's a tough environment.

Speaker #5: Although we did expect a tougher front half of the year, we had tougher year-over-year comparisons obviously. Housing was pretty tough coming into the beginning of the year.

Mike Cole: Although we did expect a tougher H1. We had tougher year-over-year comparisons. Obviously, housing was pretty tough coming into the beginning of the year. We had anticipated it being tougher, but yeah, exactly. The recent events have made it even more so.

Will Schwartz: Yeah. That's the hardest part of the business for us today. Obviously that business is very tough. When you talk about even some of the cost inputs that we recognized in Q1, it's hardest to pass along. That's reflective in margins too when you talk fuel increases, lumber costs going up during the quarter. It continues to be a very pressured market for us on the margin side.

Speaker #5: And we we had anticipated it being tougher but, yeah, exactly the recent events, it made it even more so.

Speaker #8: Yeah. Okay. That's fair. And then just final one from me on capital allocation. Are you sort of how are you thinking about M&A opportunities?

Ketan Mamtora: Yeah. Okay. That's fair. Then just final one from me on capital allocation. Sort of how are you thinking about M&A opportunities? It seems like that pipeline is growing, and you are seeing more opportunities versus, you know, kind of the other tools that you have on share repurchases. How are you stacking those two at this point, and if you were to rank order?

Speaker #8: And it seems like that pipeline is growing, and you are seeing more opportunities versus kind of the other tool that you all have on share repurchases.

Speaker #8: How are you stacking those two at this point? And if you were to rank order?

Speaker #3: Yeah. We are definitely more focused on growing. That's where we start. We talk about that a lot, but never losing sight of return. And I would tell you the pipeline is the best we've had in five-plus years.

Will Schwartz: Yeah. We are definitely more focused on growing. That's where we start. We talk about that a lot, but never losing sight of return. I would tell you the pipeline is the best we've had in 5-plus years. I think a lot of that is intent and action. You know, we've done a lot more prospecting. I personally have done more prospecting, allocated more time towards it, for strategic opportunities that fit where we wanna take the corporation. When you think about the liquidity, we wanna put that to work, but it's gotta be the right opportunities.

Speaker #3: I think a lot of that is intent and action. We've done a lot more prospecting. I personally have done more prospecting, allocated more time towards it.

Mike Cole: Although we did expect a tougher H1 of the year. We had tougher year-over-year comparisons. Obviously, housing was pretty tough coming into the beginning of the year, and we had anticipated it being tougher. Yeah, exactly. The recent events have made it even more so.

Speaker #3: For strategic opportunities, the fit where we want to take the corporation and so when you think about the liquidity, we want to put that to work.

Speaker #3: But it's got to be the right opportunities.

Speaker #8: Understood. Very helpful alternative. Good luck.

Ketan Mamtora: Understood. Very helpful. I'll turn it over. Good luck.

Speaker #3: Thank you. Very interesting.

Will Schwartz: Thank you very much.

Ketan Mamtora: Yeah. Okay. That's fair. Just final one from me on capital allocation. Sort of how are you thinking about M&A opportunities? It seems like that pipeline is growing, and you are seeing more opportunities versus kind of the other tools that you have on share repurchases. How are you stacking those two at this point, and if you were to rank order?

Speaker #1: 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.

Mike Cole: Thanks.

Mike Cole: Thanks

Operator: Thank you. I am 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.

Speaker #3: Thank you for joining us this morning. While the operating environment remains challenging and visibility limited, we're confident in the strategy we have in place and the actions underway to strengthen our business.

Will Schwartz: Thank you for joining us this morning. While the operating environment remains challenging and visibility limited, we're confident in the strategy we have in place and the actions underway to strengthen our business. We're staying disciplined. We're focused on what we can control, investing thoughtfully in our core businesses and managing costs while remaining patient in how we deploy capital. I wanna thank our employees for their continued execution and commitment, and our customers and shareholders for their trust and support. Thank you and have a great day.

Speaker #3: We are staying disciplined. We're focused on what we can control, investing thoughtfully in our core businesses, and managing costs while remaining patient in how we deploy capital.

Will Schwartz: Yeah, we are definitely more focused on growing. That's where we start. We talk about that a lot, but never losing sight of return. I would tell you the pipeline is the best we've had in 5+ years. I think a lot of that is intent and action. You know, we've done a lot more prospecting. I personally have done more prospecting, allocated more time towards it, for strategic opportunities to fit where we wanna take the corporation. When you think about the liquidity, we wanna put that to work, but it's gotta be the right opportunities.

Speaker #3: I want to thank our employees for their continued execution and commitment, and our customers and shareholders for their trust and support. Thank you, and have a great day.

Operator: This concludes today's program. Thank you for participating. You may now disconnect.

Ketan Mamtora: Understood. Very helpful. I'll turn it over. Good luck.

Will Schwartz: Thank you very much.

Mike Cole: Thanks.

Operator: 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.

Operator: This concludes today's program. Thank you for participating. You may now disconnect.

Q1 2026 UFP Industries Inc Earnings Call

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