UFP Industries, Inc.

Good day and welcome to the UFP Industries fourth quarter and full year 2025 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 to discuss our fourth 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 to all investors and news media through the investor relations section of our website, ufpi.com, where we will also post a replay of this call. 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 statements 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 today's call to discuss our fourth quarter financial results for fiscal year 2025. We'll start by sharing our thoughts on the quarter and what we're seeing in the marketplace before providing some thoughts on where we see the business heading into 2026 and opening the call for questions. The market dynamics we saw in early 2025 continued into our fourth quarter, with net sales totaling $1.33 billion, representing a 7% decline in units and a 2% decline in price. Our profitability remained pressured, although the structural improvements we've made to the business were masked by several one-time accounting items Mike will detail later in the call. 2025 proved to be a difficult operating environment with several of our key markets facing both cyclical and competitive pricing pressures. Despite generally soft in-market demand, our fourth quarter sales and profits were in line with internal expectations. On a trailing 12-month basis, our margins continue to flatten and we continue to see stabilizing trends across the majority of our businesses. Throughout the year 2025, we took disciplined steps to invest in the future success of our business while returning capital to our shareholders. Last year, we executed on share repurchases of $443 million, representing 7% of outstanding shares. Further, we paid $82 million in dividends, and we announced a 3% dividend increase for 2026. We spent $270 million on maintenance and growth CapEx. Together, with share repurchases and dividends, that's roughly $800 million of capital deployed in a disciplined and balanced fashion, and we still have $2.2 billion in balance sheet capacity. A hallmark of our balanced portfolio is our ability to generate strong and consistent free cash flow. This only enhances our position looking ahead. We plan to use our strong balance sheet to pursue meaningful M&A opportunities while continuing to return capital to the shareholders through opportunistic share repurchases and dividends. Finally, our team made progress navigating a tough environment and executing on our strategy to manage things within our control. We exited underperforming businesses, reduced excess capacity, and we are on a path to successfully achieving our $60 million cost-out program. We expect to see the savings continue to build throughout the year as we remain committed to lowering our cost structure. As a result, we are entering 2026 in a stronger position to drive improved results. As we've said before, we continue to focus on innovation across the portfolio to bring value-added and higher-margin products to market. New product sales totaled 7.6% of total sales, and we liked the trajectory and opportunities ahead of us. As we move into 2026, we are in position to build on that momentum. Last week at the International Builders Show, we showcased five new products and brands. We continue to build on the success of our SureStone technology introduced to the market last year. In the decking space, we are responding to market demand with a new color palette and continue to enhance our offering with a patent pending process designed to closely mimic the look of natural wood. We further leverage the success of our Shearstone technology with the introduction of a new trim board, which brings the outstanding qualities of Shearstone into the trim space. Additionally, Our decorators brand continues to expand our lineup of decking and railing products. Decorators introduced to our traditional wood plastic composite offering a class B rated option at a price point targeting the retail and do it yourself customer. We have expanded our railing portfolio, giving this product at all price points in all consumer styles. Capitalizing on our strength and knowledge in the decking space, Crowwood recently introduced True Frame Joist, the business unit's first proprietary product designed specifically for use in deck substructures. The value we add on the front end eases several common pain points for contractors saving time and money. Finally, UFP SiteBuilt launched Frame Forward Systems, which leverages our depth of experience in construction and our investment in automation to ease some of the bottlenecks common to on-site construction with an off-site system solution. I also want to note that while not featured at IBS this month, our packaging business continues to design and engineer proprietary packaging solutions that promote in-line safety and improve productivity. We are encouraged by the patent awarded to our nail-gun-free crepe fastener, ULOT 200, this past December, and will continue to build on this success. These are just a few examples of the types of actions up and down our brand portfolio to position us for success in market share gains. M&A has always been a key part of our growth strategy, and that will not change. With $2.2 billion in liquidity and strong recurring free cash flow, we are entering the year with flexibility. Our pipeline is more active today than it has been in the past 36 months, and we have identified targets across each of our business units that can strengthen our core. At the same time, we have taken intentional steps to be more strategic in our deal evaluation. We remain focused on complementing our core business and how a potential asset meets those criteria while delivering strong future growth and margin accretion. Above all, we will remain disciplined on valuation and stay true to our return-targeted approach. Let's start with our retail segment. Our largest business, ProWood, has performed well even in a tougher market. Results in the ProWood segment were impacted by the lack of storm activity in the quarter versus a year ago, creating an unfavorable comp. We continue to work on lowering our cost positions and improving our manufacturing processes. Turning to decorators, we continue to see strong demand across our portfolio of products, and we were very pleased with our early buy program for our proprietary SureStone product. Demand for our SureStone product outstripped our ability to produce for much of the year. However, recently added capacity is helping our teams work through those strong backlogs. The Selma expansion is complete and the startup at our Buffalo plant is progressing nicely. We expect that the additional capacity will come online by the end of the first quarter. Both the Buffalo expansion and the expansion at Selma are on track to support robust demand in our spring selling season. Increased output combined with strong demand drove a 44% increase in surestone sales in the quarter and 35% increase in wood plastic composite sales. We believe both metrics are well ahead of the broader industry, and we remain optimistic about the 2026 selling season. To build on this momentum, we will maintain our higher marketing spend for 2026. As a reminder, we invested $30 million to support the brand, and we are pleased with the initial success. Our internal metrics indicate a successful return on the investment. Unaided brand awareness. product sample requests, and website traffic, just to name a few, have exceeded our expectations. Finally, we continue to expand our distribution partnerships, as well as investing in internal distribution capabilities. We believe our ability to distribute internally remains a key competitive advantage for us long term. These expansion plans and investments are consistent with our plans to double our composite decking market share over the next five years. Moving on to our packaging segment. The business continues to show signs of stabilizing, both in terms of sales volume and gross profit. Pricing remains competitive given the softness in certain markets. The lack of visibility caused by ongoing tariff discussions and volatile lumber pricing made 2025 a challenging market, but our team was busy working to position us for success. Our national footprint gives us the ability to support strategic customers in multiple geographies across the country, and our design and engineering capabilities separate us from many of our smaller, more regional competitors. Our business has become a trusted partner for major global brands and customers with highly specific specialty needs alike. This, coupled with our scale and financial flexibility, gives us the opportunity to invest in automation to lower our cost position while developing innovative and patented solutions for our customers. With the improvements we made to the business, we expect above-market growth when the market recovers. To finish with construction, markets remained pretty consistent to our last quarter. where we reported a competitive new residential construction environment impacting results and overshadowing improvements in our other businesses. Residential builders continue to look to manage home inventories while consumer confidence and affordability remain challenged. While we don't have a national footprint, we do overlap with some of the markets that have been more pressured, particularly in the West. We continue to make investments in automation, and other initiatives to improve our cost position and throughput. As previously mentioned, our site built business launched Frame Forward Systems, which joins our successful and durable building products and pivot systems brands into a single solution selling approach. We have already been able to leverage this to secure major contracts with new national customers. Our factory-built business continues to add more value to our customers by using our expertise to develop products that improve the aesthetics of manufactured housing, such as the addition of our endurable drop-down deck with decorators' decking. Our concrete-forming business continues to expand our product portfolio and services offering to capture more of our customers' wallets while helping them address labor challenge on the job site. Finally, our commercial business continues to yield improved results built on new products, new customer wins, and the benefits from prior restructuring efforts. 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. Return on invested capital 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. We are entering 2026 in a position of strength. We are excited about the changes underway as we continue to refine and strategically refocus our business. As we've said before, our focus remains on the most attractive opportunities that enhance our core business. We are making progress even in this down cycle, and we finished the year with an EBITDA margin that is 170 basis points higher than in 2019. We will continue to bring to market value-added solutions that will strengthen our company, all for the benefit of our shareholders, our customers, and our communities. Thank you again for joining us today. We're proud of the progress we've made and the talented teams behind it, and we remain confident in our path forward. With that, I'll hand the call over to our Chief Financial Officer, Mike Cole.