UFP Industries, Inc.

Good day and welcome to the Q2 2025 UFP Industries, Inc. Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. Stanley Elliott, Director of Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining us this morning to discuss our second quarter results. With me on the call are Will Schwartz, our President and Chief Executive Officer, and Mike Cole, our Chief Financial Officer. Will and Mike will offer prepared remarks, and then we will open the call for questions. This conference call is available simultaneously to all interested investors and news media through the Investor Relations section of our website, ufpi.com. A replay of the call will be posted to our website as well. 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 also include but are not limited to those factors identified in the press release and in the company's filings with the Securities and Exchange Commission. I will now turn the call over to Will.

Good morning, everyone, and thank you for joining us to discuss our second quarter results. Our second quarter was largely a continuation of the conditions we saw in our first quarter, and while the market environment continues to present its challenges, I'm proud of our team's resilience and their unwavering focus on what we can control. We continue to make the necessary investments to lower our manufacturing costs, improve throughput, and improve customer service levels. We will continue to make investments to bring new products to market in areas where we have the right to win, and we will continue to evaluate the portfolio in ways that we can take out structural costs. All of our efforts are designed to position us to achieve our long-term strategies and deliver value to our shareholders. Turning to the quarter. Second quarter sales matched our expectations for low single-digit unit volume declines across each segment. Pricing remains competitive given the lack of visibility and softer demand in several of our end markets. Consistent with what we discussed on our last earnings call in April, we continue to see this dynamic playing out for the remainder of the year. All of this contributed to our earnings per share of $1.70 for the quarter and adjusted EBITDA of $174 million. Generally, results remain pressured from weaker demand, competitive pricing, higher input costs, and a less favorable sales mix. Southern Yellow Pine and Spruce prices were 18% and 13% higher on average for the quarter. With the exception of our site-built business, it appears that most of our business units are beginning to see a stabilization in sales and profit margins on a sequential basis. Operationally, we remain focused on maximizing capacity utilization within our existing footprint and streamlining our cost structure. The strategic initiatives we previously outlined, including managing our manufacturing footprint, reducing SG&A costs, and exiting underperforming businesses are progressing well. We have made great progress on our $60 million cost out program and our own track to realize the full savings exiting 2026. As part of this program, we recently announced plans to shift manufacturing for certain edge products to be more efficient, which will eliminate profit losses and position us to be more competitive and profitable. We have also completed the divestiture of a small industrial components business and have sold or are in the process of selling certain real estate assets, which could provide upwards of $15 million in one-time gains in our third quarter. These are not easy decisions, but necessary. We are also making targeted investments in areas that will drive our longer-term strategy to grow above market rates. We remain committed to our plan to invest $1 billion in growth capital over the next five years and have identified runways in each of our segments. We would prefer M&A in most cases and would be willing to pivot these investments to M&A, but only when the right opportunities materialize and valuations meet our expectations for returns. Within this framework, our commitment to innovation, automation, and expanding our value-add product offerings remains a top priority. We see promising results in our decorators brand with our first of its kind Shearstone product technology, the introduction of new products in our packaging segment, and others, and we will continue to invest in these areas organically and strategic acquisitions where appropriate. New product sales totaled $129 million in the quarter, or 7% of sales. We continue to see a pathway for new products to become 10% of sales over time. We are excited about the innovative products we have launched, as well as those in our pipeline. Last quarter, we highlighted the launch of new decking boards and trim products featuring our proprietary Shearstone technology. The momentum we discussed last quarter around our Shearstone products, including the launch of our Summit product, continued in the quarter. On our call last quarter, we shared that we have secured 1,500 new retail locations. We continue to make progress on adding capacity to reach all of these stores ahead of the 2026 decking season. We've added new traditional two-step distribution for our Shearstone decking board, as well as the pull-through from our marketing efforts and contractor support is exceeding expectations. Sales of our decking board portfolio featuring our Shearstone technology increased 45% year over year. We continue to upgrade existing manufacturing lines and plan to expand capacity again later this year. Our Buffalo facility remains on track for a Q1 2026 opening, leaving us with roughly $250 million of new capacity in place for next year's decking season. Our M&A pipeline remains very active, with a number of strategic investment opportunities presenting themselves across the portfolio. It's no secret that activity has picked up across our space, and our M&A team remains active and focused. We continue to explore deals of various sizes with a focus on how they align with our core business. Our teams have prioritized capital requests with an emphasis on what will deliver the best growth, margin, and return opportunities for the business while maintaining our strong balance sheet. Our experienced management team and dedicated employees are committed to driving profitability and sustainable growth for UFP industries. We remain confident in our long term. Our strong balance sheet and cash flow provide us with the ability to pursue a diversified, return-focused capital allocation strategy of growth, dividends, and share buybacks as a means of driving shareholder value. Turning to our segments. Retail sales declined 3% from year-ago levels, largely on a 7% decline in volumes. Pricing actions at the end of the first quarter contributed 4%, but the benefits to margins were largely offset by higher material costs. Part of the unit decline was from us intentionally exiting less profitable lines of business, as well as the customer shift we previously discussed in our decorators business. We will start to see the anniversary of the decorators customer shift in Q3, making for more favorable comparisons through the remainder of the year. Additionally, we believe the restructuring we've made at Edge and growth investments in SureStorm position us well moving into next year. Packaging sales declined 2%, largely due to a 4% decrease in pricing. Recent acquisitions contributed 2% to the quarter, while organic sales were essentially unchanged from year-ago levels. Markets remain highly competitive, but the sales and margin declines continue to flatten out sequentially. Share gains in our Palette 1 business and geographic expansion in our protective packaging business contributed to growth as we opened our Jeffersonville facility. In our structural packaging business, we continue to introduce a number of innovative and proprietary solutions, like our recently launched ULOT 200 tool-free fastening, aimed at making our customers safer and more efficient. Construction sales decelerated in the quarter, along with a broader outlook for residential construction. Construction revenues declined 4% from year-ago levels on a 2% increase in volumes driven by another quarter of double-digit unit growth in our factory-built business. This was more than offset by a 6% decline in pricing in the quarter, reflective of the competitive environment. Our factory-built business continues to benefit from affordability versus other residential construction and favorable industry trends in the modular construction markets and in adjacent markets like RV and cargo, where our new products are resonating with customers. Our site-built business was impacted by wheat builder sentiment, a softer spring selling season, and higher inventories of new and existing homes. This dynamic has created a pause for many of our builder customers while adding a competitive dynamic price to the marketplace. Infrastructure and data center projects have been a bright spot for our concrete forming business, which saw double-digit volume increases. Turning to our outlook, we expect the business conditions that impacted our first half of the year results will carry over for the remainder of 2025. News around duties on Canadian lumber and other tariffs has only created additional headwinds. That said, we still believe we are uniquely positioned given the natural hedge of our portfolio between fixed and variable-price lumber products. From an impact standpoint, we'd note that the industry imports less than 20% of lumber from Canada. We'd also note that Southern Yellow Pine is domestically produced and represents roughly two-thirds of our fiber purchases. Historically, periods of higher lumber prices have generally led to higher levels of profitability as we use our scale to buy lumber better than our peers. All of this uncertainty is contributing to a lack of visibility beyond the first half of 2025. Regardless of the outcome, we remain confident in our ability to navigate any potential tariff impacts. Longer term, we are well positioned to take advantage of favorable trends across many of our growth runways. We remain committed to our long-term targets. One, seven to 10% unit growth. Two, .5% EBITDA margins. Three, maintain our strong return on capital profile. And four, maintain our conservative capital structure. Before I close, I want to thank our ,000-plus employees for their hard work and their commitment. I always say tough times, tougher people. The uncertain times will pass, and we will come out on the other side stronger. And with that, I'll turn it over to Mike.