Builders FirstSource, Inc.

Please stand by. Your program is about to begin. If you need audio assistance during your call, please press star zero. Good day and welcome to the Builders First Source fourth quarter 2024 and full year earnings conference call. Today's call is scheduled to last about one hour, including remarks by management and the question and answer session. In order to ask a question, please press star key followed by the number one on your telephone keypad at any time. I'd now like to turn the call over to Heather Call, Senior Vice President, Investor Relations for Builders FirstSource. Please go ahead.

Good morning, and welcome to our fourth quarter and full year 2024 earnings call. With me on the call are Peter Jackson, our CEO, and Pete Beckman, our CFO. The earnings press release and presentation are available on our website at investors.bldr.com. We will refer to the presentation during our call. The results discussed today include GAAP and non-GAAP results adjusted for certain items. We provide these non-GAAP results for informational purposes, and they should not be considered in isolation from the most directly comparable GAAP measures. You can find the reconciliation of these non-GAAP measures to the corresponding GAAP measures where applicable in a discussion of why we believe they can be useful to investors in our earnings press release, SEC filings, and presentation. Our remarks in the press release presentation and on this call contain forward-looking and cautionary statements within the meaning of the Private Securities Litigation Reform Act and projections of future results. Please review the forward-looking statements section in today's press release and in our SEC filings for various factors that could cause our actual results to differ from forward-looking statements and projections. With that, I'll send the call over to Peter.

Thank you, Heather, and good morning, everyone. Before I get into my prepared remarks, On behalf of Builders First Source, I want to send our thoughts to all of those who have been impacted by the California wildfires. I'm proud of how we have come together as a company to support disaster relief efforts. We will work together with our partners to help communities rebuild in the years ahead. Our fourth quarter and full year results demonstrate our resilience and ability to drive results in the face of a complex operating environment. while maintaining our focus on building for the future. This begins with our strategic pillars, as we show on slide three. By continuing to invest in our value-added products and services, along with leveraging cutting-edge technology, we are addressing customer challenges and serving as the supplier of choice. We have a fortress balance sheet and consistently generate strong cash flow over the cycle, enabling us to remain disciplined and opportunistic Our investments today in organic growth opportunities and value-enhancing acquisitions position us to perform well in any environment. Let's turn now to our full-year 2024 performance on slide four. The strength of our differentiated platform and our operational excellence initiatives drove a mid-teens adjusted EBITDA margin and a nearly 33% gross margin in 2024. Results this year are further proof that our success is driven by the dedication of our hardworking team members and the support of our customers. Turning into slide five, I'd like to share more detail on the execution of our strategy. Our strong organic growth engine is fueled by our investments in value-added solutions and digital tools. In 2024, we invested more than $75 million in our value-added facilities to address demand in our growing markets. This included opening two new truss manufacturing facilities, upgrading 19 truss facilities, and enhancing 13 millwork locations. Our install sales increased by 8% year over year as we leverage our product expertise and help our customers progress along the value-added continuum. While we've always done install in some capacity, We have emphasized it in recent years by utilizing playbooks to expand into new markets and improve execution in existing ones. By growing install in a down market, I'm optimistic about this substantial opportunity for business going forward. In line with this optimism, adoption rates for our industry-leading digital platform are steadily climbing on the heels of consistent positive feedback from our customers. I'm pleased that we were able to achieve $134 million in incremental digital sales in 2024, despite the challenging environment that has persisted for our target customers. Our focus on operational excellence resulted in $117 million in productivity savings in 2024. We accomplished this mainly through supply chain initiatives and more efficient manufacturing. For instance, we were able to improve board foot per labor hour by 10% in trust and panel manufacturing. Not only do our productivity initiatives increase our efficiency, but they also drive additional revenue by enhancing available capacity and shortening leave times. We remain disciplined stewards of discretionary spending and are continuing to maximize operational flexibility. We consolidated roughly 30 facilities in 2024, while maintaining our service levels to our customers with an on-time and in-full delivery rate of over 90%. Single-family starts pulled back as builders managed the pace of building in the face of affordability challenges and uncertainty around potential policy changes. As expected and communicated, multifamily remains a headwind amid muted activity. In response to lower volumes over the last year, we have taken steps to align capacity across our facilities, reduce headcount, and manage expenses. On a normalized basis, multifamily represents about nine to 10% of net sales and remains an attractive and profitable business for us. As we have signaled, multifamily will be a headwind again in 2025. To address the current environment and affordability challenges, builders continue to employ specs, smaller and simpler homes, and interest rate buy-downs to help buyers find affordable options. Builders of all sizes are working to navigate complex market conditions, including regulatory, land development, and infrastructure challenges. Smaller builders have been especially impacted by the availability of land and limited options to buy down rates. We are strengthening our partnerships with customers by offering innovative solutions to address affordability challenges, Our comprehensive product portfolio allows us to provide flexible options, enabling builders to optimize their costs while maintaining quality. We continue to supply more, lower-cost offerings in products like EWP, Windows, and Doors to help alleviate affordability challenges. Although these actions to support our customers mean less sales and gross profit dollars for BFS, our margin profile remains strong, and we are very well positioned for growth. when starts increase and structural headwinds begin to subside. Turning to M&A on slide six, we continue to pursue high return opportunities that augment our value-added product offerings and advance our leadership position in desirable geographies. Over the years, we have developed substantial and proven muscle memory to grow through M&A and have a proven track record of successful integration. In 2024, we completed 13 acquisitions with aggregate prior year sales of roughly $420 million. In October, we acquired Douglas Lumber, which supplies building materials in New England. In November, we acquired Cleet Lumber, a leading provider of building materials on Long Island. In addition to the acquisitions we completed in 2024, in early January, we acquired Alpine Lumber, the largest independently operated supplier of building materials in Colorado and northern New Mexico with 21 locations. Alpine's broad product portfolio includes prefabricated trusses, wall panels, and millwork. And in February, we acquired OC Plus Lumber and Building Supplies, a leading supplier of lumber, building materials, and installation services in Pennsylvania, Maryland, and West Virginia. These acquisitions reinforce our commitment to invest, in our strong value-added business through M&A. We are excited to welcome these talented new team members to the BFS family. Turning to slide seven, our disciplined capital allocation strategy focuses on maximizing shareholder returns through organic growth, inorganic growth, and share repurchases. In 2024, we deployed a total of $2.2 billion. We allocated $367 million to sustaining the business as well as ROI-generating growth investments in value-added capacity and digital. We spent $352 million on 13 acquisitions to expand our footprint into high-growth geographies and enhance our value-added offerings. And we executed opportunistic share repurchases of approximately $1.5 billion, removing roughly 7% of shares outstanding. Now let's turn to slide eight and discuss the latest updates on our digital strategy. With our BFS digital tools, we are focused on creating value for our home builder customers, and in doing so, further extending our industry leadership position and driving substantial organic growth. Despite the challenging market, we have seen continued adoption and growth with our target audience of smaller production builders, in addition to interest from multiple top 200 builders. We continue to release enhancements that are improving the user experience and helping to drive adoption. Since launching about a year ago, we have seen nearly $1 billion of orders placed through our digital platform, of which $134 million were incremental sales from existing and new customers. We're pleased with our progress to date, and we expect additional incremental sales of approximately $200 million in 2025 as we grow wallet share and win new customers. I'm incredibly grateful to lead such a talented and hardworking team that makes a difference every day. One shining example of our values is Bob Whitney in Issaquah, Washington, who recently celebrated 45 years with BFS. Bob began his journey with us as an administrative assistant, managing invoices on the location's first computers. a massive machine that filled a 20 by 20 foot room. Fast forward to today, Bob, a senior designer, is frequently cited by home builders and framers in the area as the key reason they choose our engineered wood products. His detailed designs, expertise, and innovative approach to finding more efficient ways to accomplish tasks have set a high standard. I'm proud of Bob and our countless other dedicated team members who continually raise the bar on service to our customers and each other. I'll now turn the call over to Pete to discuss our financial results in greater detail.