Boise Cascade, L.L.C.

Good morning. My name is Josh, and I will be your conference facilitator today. At this time, I would like to welcome everyone to Boise Cascades' fourth quarter and full year 2024 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer period. It is now my pleasure to introduce you to Chris Forey, Vice President, Finance and Investor Relations, Boise Cascades. Mr. Forey, you may begin your conference.

Thank you, Josh, and good morning, everyone. I'd like to welcome you to Boise Cascades' fourth quarter 2024 earnings call and business update. Joining me on today's call are Nate Jorgensen, our CEO, Kelly Hibbs, our CFO and treasurer, Troy Little, head of our wood products operations, and Jeff Strum, our recently announced COO and former head of our building materials distribution operations. Turning to slide two, this call will contain forward-looking statements. Please review the warning statements in our press release, on the presentation slides, and in our filings with the SEC regarding the risks associated with these forward-looking statements. Also, please note that the appendix includes reconciliations from our gap net income to EBITDA and adjusted EBITDA and segment income to segment EBITDA. I will now turn the call over to Nate.

Thanks, Chris. Good morning, everyone. Thank you for joining us for our earnings call today on slide number three. I'll start by highlighting some of our accomplishments as I reflect on our 2024 results. We reported full year net income of $376.4 million, or $9.57 per diluted share. We grew our distribution business through both our organic and acquisition initiatives, made progress on significant capital investments to support our EWP growth strategy, and provided meaningful capital returns to our shareholders. I'm grateful to our associates as they've shown commitment to our values and steadfast support for our customers, suppliers, and each other. Let me now turn to the fourth quarter results. Total U.S. housing starts and single-family housing starts decreased 6% and 4% respectively compared to the prior year quarter. Our consolidated fourth quarter sales of $1.6 billion were down 5% from fourth quarter 2023. Our net income was $68.9 million, or $1.78 per share, compared to a net income of $97.5 million, or $2.44 per share, in the year-ago quarter. Our year-ago quarter earnings per share were negatively impacted by approximately $0.18 per share from accelerated depreciation related to the Chapman, Alabama lumber facility closure and transaction expenses for the Brosco acquisition. Kelly will now walk through our segment financial results give some early insights on first quarter, and then provide an update on our capital allocation in more detail, after which I'll provide our outlook before we take your questions.

Kelly? Thank you, Nate. Wood product sales in the fourth quarter, including sales for our distribution segment, were $419.7 million, down 7% compared to fourth quarter 2023. Wood product segment EBITDA was $56.6 million compared to EBITDA of $92.7 million reported in the year-ago quarter. The decrease in segment EBITDA was due primarily to lower EWP and plywood sales prices. In BMD, our sales in the quarter were $1.4 billion, down 4% from fourth quarter 2023. BMD reported segment EBITDA of $84.5 million in the fourth quarter compared to segment EBITDA of $80.6 million in the prior year quarter. Despite the sales decline, a 60 basis point increase in gross margin percentage positioned BMV to deliver comparable year-over-year gross margin dollars. In addition, BMV's general administrative expenses decreased by $3.6 million due primarily to acquisition-related expenses in the prior year quarter for the acquisition of Brasco. Turning to slide five, on a year-over-year basis, fourth quarter volumes for LVL increased an impressive 11%, and iJoyce volumes were down 2%. both better than the 4% year-over-year decline in single-family starts, which we believe is a testament to the strength of our tightly aligned manufacturing and nationwide distribution capabilities. As expected, seasonal declines in construction activity drove lower volumes on a sequential basis, with LVL and I-joys volumes down 8% and 10% respectively. But again, for this comparative period, our volume changes were better than underlying activity in single-family starts would imply. At current demand levels, competition for shares prevalent in the marketplace today and our sequential LVL pricing for LVL and I-Joyce were down 2% and 1% respectively. Turning to slide six, our fourth quarter plywood sales volume was 371 million feet compared to 363 million feet in fourth quarter 2023. The 350 per thousand average plywood net sales price in the fourth quarter was down 7% on the year-over-year basis. However, plywood net sales prices were up 5% sequentially. We experienced higher plywood pricing through the first half of the fourth quarter before expected seasonal declines set in, with December average price realizations of approximately $340 per thousand. Moving to slide seven and eight, BMD's year-over-year fourth quarter sales decline of 4% was driven by a 2% decrease in both sales price and volume. By product line, commodity sales decreased 4%, general line product sales increased 1%, and sales of EWP decreased 11%. As I alluded to earlier, B&B's fourth quarter gross margin percentage was 15.8%, up 60 basis points year over year. In particular, our commodity inventory position, coupled with strengthening commodity markets during the first half of the fourth quarter, provided tailwinds for our commodity margins. BMV's EBITDA margin was 5.9% for the quarter, up from the 5.4% reported in the year ago, and up 30 basis points sequentially. Very strong results in a seasonally slower quarter. I'm now on slide nine. Weather has made for a difficult start to the quarter, as we have had a couple days of unplanned downtime across several of our manufacturing and distribution locations. As we look forward to our expectations for the first quarter, EWP volumes are expected to increase modestly from fourth quarter levels, and EWP pricing is expected to reflect low single-digit sequential declines. In plywood, the significant modernization projects at our Oakdale facility are progressing well. As planned, that facility will be down for the entirety of the first quarter and is expected to operate near 50% of capacity in the second quarter. As a result, our plywood volumes and cost absorption will be negatively impacted in the near term. For the first quarter, we expect plywood volumes to decline mid to high single digits sequentially, and that we will incur negative cost impacts of approximately $7 million due to the Oakdale downtime. On plywood pricing, quarter-to-date realizations are approximately 3% below fourth-quarter averages. With regards to B&D sales, seasonal impacts are evident with our quarter-to-date daily sales pace about 8% below our fourth quarter daily sales averages. We'd expect activity to strengthen as we move towards the spring building season. Now on slide 10, we had capital expenditures of $230 million in 2024 with $122 million of spending in wood products and $108 million of spending in B&B. Looking forward to 2025, we expect our capital spending to be between $220 million and $240 million. This range includes additional spending on our multi-year investments in support of EWP production capabilities, including adding iJoyce production at our Thorsby, Alabama EWP facility and the significant modernization projects at our Oakdale, Louisiana veneer and plywood mill. In BMD, we are making great progress on our greenfield distribution center in Hondo, Texas. Activity at the Walterboro, South Carolina greenfield has been slow, but we expect to gain momentum there in the back half of 2025. Speaking to shareholder returns in 2024, we paid $229 million in regular and special dividends, which was comprised of $0.82 per share in regular quarterly dividends and a $5 per share special dividend. Our board of directors also recently approved a $0.21 per share quarterly dividend on our common stock. Shareholders of record as of February 24th will receive payment of this dividend on March 19th. For the 13 months ended January 2025, We have repurchased approximately 1.75 million shares or 4.5% of our outstanding shares for approximately 225 million. Today, we have about 1.6 million shares available for repurchase under our share repurchase program. As our actions demonstrate, we continue to strive for a balanced approach to capital allocation that includes ongoing investments in our existing asset base, organic growth projects, and returns to our shareholders. Our balance sheet also gives us the flexibility to pursue M&A if opportunities surface that align with our strategy. I will now turn it back over to Nate to share our business outlook and closing remarks.

Thanks, Kelly. I'm on slide number 11. Current industry forecasts for total U.S. housing starts are around $1.35 million for 2025, essentially flat with actual housing starts in 2024, as reported by the U.S. Census Bureau. Single-family housing starts in 2024 outpace 2023 levels by 7% and are expected to again be around the 1 million level despite the affordability challenges consumers are facing in the current rate environment. Multifamily starts declined sharply in 2024 are expected to continue to face headwinds in 2025 due to prohibitive capital costs for developers combined with elevated levels of multifamily unit completions in both 2023 and 2024. For home improvement spending, we expect 2025 to reflect modest growth as the age of US housing stock, elevated levels of homeowner equity, and some recent improvement in existing home sales will provide a favorable backdrop for repair and remodel spending. While uncertainties around the macro economy and policy decisions from the new administration make it challenging to predict the near-term demand environment, our constructive view on the medium and longer-term housing fundamentals remains. which affords us the ability to maintain a clear focus on our strategy and the execution of our growth initiatives. Lastly, I would like to take the opportunity to congratulate Jeff Strom and Joe Barney on their recently announced promotions. Both are seasoned and accomplished leaders and look forward to their continued contributions in their new roles. These changes were part of our intentional strategic succession planning process as we positioned the company for continued service and support to our stakeholders in the future. Thank you for joining us on our call today and your continued interest and support of the Boise Cascade. We welcome any questions at this time. Josh, would you please open the phone lines?

Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. One moment for questions. Our first question comes from Kurt Yinger with DA Davidson. You may proceed.

Great. Thanks, and good morning, everyone. Good morning, Kurt. I just wanted to start off on tariffs. We have pretty robust data on lumber and OSB and how important Canadian supply is there, but EWP is kind of a murkier picture. I guess, first off, could you maybe frame Canadian supply relative to U.S. consumption, maybe where you run into some of those call it secondary suppliers in the market, and how you're thinking about opportunities that could arise for Boise if we were to see some sort of tariff implementation.

Hey, Curt, it's Nate. Let me start that, and Kelly and others can jump in. Yeah, I think in terms of the tariff question, obviously there's more unknowns than knowns relative to that. To your point, there's... clarity in terms of how much volume is moving across I think largely from an industry perspective and for Boise Cascade from Canada into the US and some of that is obviously around some of our commodities but as you think about the you know some of the other items that we bring across the border whether it's web stock or other items it's I think in terms of the impact we haven't we've done a lot of modeling and a lot of work hurt just to make sure we understand some of the actions and decisions we may need to take as a result of tariffs. But there's nothing that we've concluded at this stage in terms of anything immediate that we'll be doing in the marketplace. At this point, the other thing that we're looking at is the demand environment in terms of the ripple effect on affordability, as we've talked about, is a potential challenge with tariffs. So as we think about the consequences of what could take place, again, not just on the lumber items, but other items as well. That's going to be something that we're watching carefully and closely. But we've done a lot of work just to make sure we're prepared to move forward should that tariff arrive. And again, there's a lot of discussion and debate on when and if that's possible. So maybe with that, Kelly, anything you would add just in terms of how we're thinking about that and just maybe a backdrop on that?

Yeah, sure, Nate. So good to hear you, Kurt. So, yeah, for us, you kind of think about it in our two segments. As you well know, our manufacturing is substantially based in the U.S. And to Nate's point, we would have some cost pressure from OSB Webstaff that we do get from Canada. But we are very well positioned there and so feel good about our ability to operate. Again, given that, to Nate's point, there's a lot more unknowns and there are knowns in that space. And then in BMD, if there are tariffs and we do import a lot of commodity products from Canada, for example, if there were higher costs there, our intent would be to push those through and maintain our normal margin percentage. And that's kind of how we play the market every day. if you will and so that would be our expectation the broader concern is probably if it gets if if the tariffs end up to nate's point causing further affordability challenges do we have demand destruction and that would be a bigger broader concern maybe just to kind of close in on that kurt i think the um what do you think about the um you know some of the policy um uncertainty that's out there um and even kind of the weather that kelly described it's just um

you know, kind of the risk reward, there's a lot of hesitancy in the marketplace. And so I think, you know, we're seeing and experiencing that. I think for us, the good news is that, you know, we're seeing continued strength out of warehouse as people kind of mitigate and manage that risk reward. So, you know, our warehouse business remains steady, but you can certainly hear, you know, the influence of that policy risk and the conversations across the industry. Right.

Okay. No, that's great, Keller. I appreciate it. And then moving on to ewp pricing you know it's been kind of this slide over the last two years and you know maybe some of that's ringing out some excess margin and and now it seems like more supply and demand finding a balance you talked about some of the competitive dynamics in terms of securing share i guess as we look out to 2025 thinking about maybe a flattish kind of housing starts environment Do you feel like the market is pretty close to finding that equilibrium, or are there any other big variables on the supply side that you're watching more closely?

Yeah, Kurt, this is Kelly again. I don't think on the supply side, I don't know that there's a lot of variables there. I mean, there's no new capacity coming online here in the near term, but I do think if we're If we're in a 1.35 total or a 1.0 single family environment, I think there will continue to be competition for share. And so we've continued to see that in some modest price erosion. And if the environment stays like that, we'd expect to see some erosion. And then there could be some seasonally stronger periods where maybe it's a little less competitive at times. There's no reason for us to believe we won't continue to see some level of erosion if demand kind of stays where it is.

Hey, Curtis, maybe the other thing I would just add is when you think about EWP relative to other options, I think it still represents the right answer for the builder in terms of the cycle time at the job site. you know, the simplicity and, you know, relative to other options and materials that might be available. So as we look at the backdrop of EWP overall, I think, again, it's favorable in terms of what the builder is looking at and needing to get done and at the job site. And so we feel good about, you know, that being a, continuing to be a kind of a tailwind for EWP moving forward.

Got it. And if I could just sneak one more in following up on that. I mean, you know, historically, I don't think you guys have ever viewed pricing on lumber as a huge driver of substitution between solid saw and I-joist or open web floor trusses. But if we were to see kind of more upward pressure there on the commodity pricing, is that something on the margin that you think could be a potential positive, or is there not really any historical evidence to support that?

Generally, most of the builders generally stay pretty true to the product, whether it's dimensional lumber, to your point, open web floor trusses, or EWP. I think there's a fair bit of consistency there, but to your point, if they're at the margin, if there's higher pressure on pricing on dimensional lumber, as an example, that'll probably create some discussion and some opportunities for a potential conversion. But I think the builder, you know, they'll continue to look at the, you know, the affordability side of things. That's, you know, certainly first and foremost on their mind. And part of that affordability is not just materials, but also, you know, speed on the job site and simplicity at the job site as well.

Right. Okay. Awesome. Appreciate all the color, guys. Thank you. Thanks, Rick.

Thank you. And as a reminder, to ask a question, please press star 1-1 on your telephone. Our next question comes from Susan McClary with Goldman Sachs. You may proceed.

Thank you. Good morning, everyone.

Hey, Sue.

Good morning. And congrats to Jeff. Thank you, Sue. I appreciate that. Yeah. I want to start by talking a bit about the operating environment. You know, you mentioned the impact to weather that will come through in the first quarter. But can you also talk a bit about how we should think of the weather and the macro environment and what you're hearing as the builders are starting to get into the early parts of the selling season?

Yeah, I think, Sue, it's Nate. I think, you know, the builders, you know, there's, you know, the affordability remains, you know, probably first and foremost in the conversation. And so I think when you look at, you know, home prices, when you look at cost of money, that remains front and center. And they've been, some of the builders, as you know, have been active in terms of of buying down rates. So I think that's been an important part of what we experienced as we closed 2024, and I think what the builders are describing in terms of 2025. I think in terms of the medium to longer term, I think there's still a lot of optimism and belief that we still are under built as a country. And so I think that narrative remains, if more again, probably from the medium to longer term. In the short term, again, I think there's some complexity and unknowns, and part of that is certainly around the economy and what could be happening there, including things like tariffs that could drive that. But maybe hesitancy is maybe more of the theme that we've heard here over the past couple of weeks. So I don't think that's, for me, there's a lot of anxiety. It's simply people are probably a little bit more measured, at least in the short term, until they have a better view of what the environment is. So I think the home builders remain, I think, still optimistic about certainly the future. And I think in the near term, they're going to kind of manage it on a day-by-day basis to make sure that they're making the right choices and decisions for each of their stakeholders, including their shareholders.

Yeah. Okay. That's helpful, Collar. And then, you know, thinking about the environment and and the fact that maybe there's some increasing competition on commodity EWP products. Can you talk about the potential benefits and the more resilient nature of the general line, part of the business, and how that could perhaps be a relative offset in this kind of situation?

So this is Jeff. The general line, it continues to hold up very well. That being said, it is competitive out there, and as things slow down, If people are looking for market share, you know, it does get incredibly competitive. And, you know, we're having to keep our eye on that and react where we need to.

Okay. That's helpful. And then I just want to sneak one more in, which is, you know, it was nice to see the buybacks that came through in 2024. As you do think about your approach to capital allocation for this year, can you talk a bit about shareholder returns and how you're thinking about buybacks versus perhaps the special dividend, just any color there?

Yeah, sure, Sue. So let me... I guess start maybe a little more broadly and then we can work our way to your specific question. So capital allocation, as you've seen in the materials, we have the second year for us a pretty heavy capital spending program. So that is going to be the main focus here is to make sure we execute on our capital spending objectives. Go get M&A if we find something that makes sense. Specific to shareholder returns, We're going, you know, I expect us to opportunistically stay in the market in buying shares on a more consistent basis. And then, like you've seen recently, and then special dividend, you know, that will be a conversation with the board, you know, but I anticipate that'd be more later in the year, more like a third quarter event if we, if the board chooses to do that. And again, that could be also dependent upon what might we find in the M&A space, or do we seek out and find some additional organic growth opportunities?

Okay. Well, I got an answer from all three of you, which I appreciate, so good luck to everyone. We'll talk soon.

Thank you. Thank you. Our next question comes from Mike Rocklin with Truist Securities. You may proceed.

Yeah, thanks very much for taking my questions, and congrats on all the progress.

Morning, Mike.

Morning. Yeah, Kelly, as you noted, BMD margin was strong in 4Q, certainly better than we expected, despite some sales pace deterioration during the quarter. Mix was also a little more unfavorable versus 3Q. So can you help us understand then how you generated a higher sequential margin, especially as margins are seasonally lower sequentially? Was any of that due to Nate's point on increasing warehouse sales? Just any comment you can provide about the margin and how you were able to achieve the type of margin in 4Q.

Yeah, there's several components in there, and you hit on several of them, Mike. The one is warehouse and, again, the uncertainty in the marketplace and how that increases reliance from our customers on our inventory position. So that helped. Then I would also say commodities had a decent little run, kind of the first part, the first half of the fourth quarter. And that really gave us some tailwinds that we were able to capture in the fourth quarter.

Got it. So when you think about, you know, take the transition from 4Q to 1Q in terms of EBITDA margins, how should we think about it? Because obviously you're guiding to a sales pace that has deteriorated further in 1Q relative to 4Q. Um, obviously you decided winter weather, there's uncertainty. I get all that, but you know, you're, you're able to maintain that level in 4Q or should we see some type of erosion because of the sales pace deterioration relative to 4Q?

Yeah, we, we will see erosion from fourth quarter for sure. Mike, I mean, given the, the 8% sales pace, uh, decline that we've seen so far in the first quarter compared to the fourth quarter. And that coupled with, you know, no tailwinds in terms of across any product lines in terms of price appreciation, yeah, we will not report that same level of EBITDA margin here in the first quarter.

Got it. And then one last one from me. Can you help us understand what drove the growth in LBL? Obviously very strong growth in 4Q up 11%. I think single-family startups are down 4% to 5%. Did you gain share against your peers? Is that something that you expect to continue? Just help us frame what happened and how we should think about the go forward.

Yeah, that's a great segue for me to give a great shout-out to the combined efforts of the Wood Products and B&B sales teams. Very active this year in... you know, getting out and selling our value proposition. And that's really showing up in our volumes. And like I alluded to in my comments, volumes better than what underlying single family starts would imply. And so really good execution. And again, that linkage between our manufacturing distribution showed up really well.

The other thing for me, Mike, and Nate, is if you think about LVL and, you know, kind of the applications for that in terms of beams and headers, it's really, it's a steady and probably growing application opportunity. So we've talked in times about competitiveness on EWP specifically with iJoyce and open web floor trusses and dimensional lumber. The complexity of designs and such continues to support beam and header use. And so I think in terms of the backdrop on the opportunity and how that shows up for that product category specifically, we feel good about what that represents. And obviously that's consistent with how we thought about continue to invest and grow that part of our business from a production standpoint. So, yeah, thanks for, you know, kind of calling that out. And, again, we feel good about where we finished and really what's in front of us. It's somewhat independent of the housing market.

Got it. Great, great call. I appreciate it and wish you the best of luck this year. Thanks, Mike.

Our next question comes from George Tapos with Bank of America Securities. You may proceed.

Hi, everyone. Good morning. Thanks for the details. And congrats to Jeff and Joe. I guess my first question, maybe I'll segue off of the discussion we were just having with Mike. So given the complexity of homes and the way that this is supporting greater demand for beam and header use, on the other hand, you talk about inflation affordability. What can you talk to about whether size of home, conservation materials, how that might be impacting, if at all, demand for EWP as you're seeing it right now. Relatedly, I know it's hard to parse this precisely, but are you seeing more of the price erosion coming from competition against other EWP products in the market, or is it coming from dimensional, is it coming from How should we think about that?

Yeah, so I'll start, George. So to answer your second question first, the price erosion is related to competition for like EWP products. It's not from competing products like Dimension Lumber, as you referenced. It's EWP. And then you're right. In terms of the Gee, how does the demand environment or how does the size of homes impact demand? Yes, it will. If you have smaller homes, that will create less footage used in a home. Not necessarily in terms of the applications or products that builders will use, but if the footprint is smaller, the usage will be smaller.

Hey George, maybe just to Kelly's point, good morning. When you think about the square footage, I think that to me probably focuses more on the I-joist kind of statement in terms of that kind of consumption. And certainly beams and headers are part of that and wall framing. But again, when you look at the designs today, even though those footprints are getting a little bit smaller, the complexity continues to grow in terms of the open spaces and the expectations around that. So I think that backdrop and theme remains. And that's really supportive of, you know, the beams and our LDL growth as a result. So the other piece of it, as you know, is housing starts are really, the consumption of EWP is really dependent on the geography basis. So, you know, consumption in Florida is different than in Colorado. And so as you think about where that housing start resides, you know, that has influence in terms of, you know, what's expected as well. So, but overall, you know, I think the beam and header market is, you know, generally has a little more stability around it in part based upon, you know, some of the construction techniques that remain out there.

So Nate, I mean, just to summarize it and look, we're never going to hold you to this. We just want to understand what you're saying in terms of the market, even with some of the headwinds, um, you know, on square footage and like your view holding everything else, constant dangerous phrase there is that you should see incrementally better demand for EWP because of those points on complexity of design, and the related factors. Would that be fair?

Yeah, I would say more on the kind of the beam and header side of things, George, as opposed to the, you know, the floor system. So I would say, you know, pretty kind of separate it, separate those, you know, two product categories. And, but again, iJoyce do have a role in terms of, again, creating that simplicity and that speed of the job site. And that's important to the builder, always has been, and certainly is today. So I think that's, you know, that's going to be favorable relative to other options that are out there.

Thanks, Nate. Kelly, you called out Oakdale, and I think it's kind of a $7 million impact in the quarter coming up. Is there any residual effect that we should build into the model? And then relatedly, and we appreciate it, you qualitatively called out, hey, it's a little bit tougher start to the 1Q from weather than would normally be the case for weather in the 1Q. Is there any sort of number you would sort of give us, hey, this has been the effect above and beyond a normal 1Q, anything that we could do to size our models? And really, my last question, and again, appreciate all the color, you know, kind of where's your inventory position right now in BMD relative to where you'd like it to be?

Yeah, sure, George. So, yeah, I guess kind of on the Q1 indicators, I would point you towards the table there in terms of the volume and price expectations for wood products. And then for BMD, yeah, the sales pace is really going to matter. That's very important, and that will very much have an impact on how we close out the quarter. And we've had multiple locations with multiple down days. Even several locations this week were down because of some very tough weather. Yeah, it's created some challenges for us. And then Oakdale, we've been working that project for some time now. So as expected, that facility is down and will be down for the entirety of this quarter as we do that significant modernization project that we're excited to do. And again, that's a big, important veneer supplier to Alexandria, Louisiana EWP mill. And so yeah, we will lose some volume from that, and certainly that will give us some negative sequential cost impacts. But again, it was part of the plan, and we're on schedule. And then we'll see probably some of that continue into the second quarter, because we'll be running at 50%-ish in the second quarter as we work towards completion of those projects by the end of the second quarter. And then I think inventory position, I'll send that one over to Mr. Strum.

Hey, George. It's Jeff. On our inventory position overall, you know what? I feel pretty good. Right now, with all the uncertainty and lack of clarity out there, you know, people are pulling more and more material out of a warehouse. And talking to our dealers, you know, years I've been doing this, I've never heard so much conversation from that level about networking capital and days on hand. So there is a real reliance. And so we're sitting there ready to serve every single day.

Okay. No doubt. No doubt. Thank you, guys. I'll turn it over. And good luck in the quarter. Thank you.

Our next question comes from Ketan Mamtoro with BMO Capital Markets. You may proceed.

Good morning, and thanks for taking my question. Maybe to start with, on the BNB side, you know, you have the slide where you look at sort of the last five years' EBITDA margins. You know, clearly the operating environment, you know, in 2024 and certainly looks like the start of this year is kind of tougher you know probably below normalized levels would you say given what you guys have done over the last few years in terms of the product mix that you can say that you know sort of cross-level margins in bmd are sort of you know a little bit above five percent is that you know would that be sort of a fair characterization yeah so so our our expectation and our strategy

with the investments we've made and with the product mix shifts that we've made is that, you know, BMD's margin is, you know, through a cycle is in the mid fives. And we've demonstrated that. And then, you know, and now we could have periods like, for example, here in the first quarter with the challenges on the top line, you know, we may not hit 5% here in the first quarter because of this pretty significant erosion here in the sales pace in the first quarter. But yes, over time, Absolutely. The strategy is we're mid fives.

Understood. Got it. And then, you know, curious as you look at sort of your M&A pipeline, is that something that would be, you know, sort of an area of interest as, you know, seller expectations moderate either on the distribution side or on the product side? And then just related to that, are there any other product categories within distribution that you think would make sense for you guys?

Yeah, so on the M&A front, Keaton, the short answer is yes, we would have interest if it aligns with our strategy. And I would say there's probably more potential opportunity on the distribution side than there would be on the wood product side. And then as it relates to new product categories, and I think you were kind of focused towards the BMD side, I think, you know, as we've talked before, we're very fortunate to be aligned with a lot of really world-class suppliers. And oftentimes, you know, they're continuing to add products to their SKU set, and we get some natural growth, organic growth opportunity from there.

Hey, Keaton, it's Nate. Maybe just to add to Kelly's comments is, you know, I think as we look at new opportunities, we always try to start the conversation with the customer and market as to, okay, what do they need? What are they experiencing? Where are there opportunities where Boise Cascade can step in? And we try to have that same conversation with the suppliers as Kelly described. And in many cases, they're bringing out new products, new SKUs, which is exciting. So I think it's a deliberate conversation we always look to have. and where customers ask us to step into a different opportunity. It needs to kind of fit with our strategy and our competencies, but that's been an important part of our growth story, and I think we'll continue as we move forward.

Got it. That's very helpful. I'll jump back in the queue. Good luck. Thanks. Thank you.

Thank you. I would now like to turn the call back over to Nate Jorgensen for any closing remarks.

Great. Thank you. I appreciate everyone's time on the call today and interest in Boise Cascade. And we'll look forward to getting caught up with this team here at the end of first quarter. So, again, thank you and have a great day.

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.