Builders FirstSource, Inc.

Stand by, your program is about to begin. Good day and welcome to the Builders First Source Second Quarter 2025 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 the star key followed by the number one on your phone at any time during the call. I'd now like to turn the call over to Heather Koss, Senior Vice President Investor Relations for Builders First Source. Please go ahead.

Good morning and welcome to our Second Quarter 2025 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 .cldr.com. We will refer to the presentation during our call. The results discussed today include gap and non-gap results adjusted for certain items. We provide these non-gap results for informational purposes and they should not be considered in isolation from the most directly comparable gap measures. You can find the reconciliation of these non-gap measures to the corresponding gap measures where applicable and 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 statement 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. And with that, I'll turn the call over to Peter.

Thank you, Heather, and good morning, everyone. Our durable results in the second quarter reinforce the advantage of our differentiated product offerings and commitment to execution. In this challenging market environment, we are prioritizing what's within our control, serving customers with excellence, leveraging technology, and managing the business with discipline. These efforts are strengthening our position in the industry and laying the foundation to emerge stronger as market conditions improve. As shown on slide three, we continue to execute against our strategy as we operate in a dynamic environment. This morning, I want to drill down on three key focus areas within our strategy, our customers, operational excellence, and capital allocation, what we refer to internally as smart investments. Delivering exceptional customer service is a core value as we drive for growth. We strive to be trusted partners to homebuilders by providing -in-class service every day and working together to solve the industry's most complex challenges. We are expanding our value-added solutions and leveraging technology, including our -to-end BFS digital tools, to help create a differentiating customer experience while empowering our teams to serve more effectively. The next focused area, operational excellence, is crucial to how we run the business. It's about developing talent, improving agility, and embedding technology into our operations with the implementation of a single ERP system. As we talked about previously, moving to SAP will unlock further opportunities for growth and efficiencies, including how we make decisions, streamline operations, and manage costs. Finally, we remain disciplined in how we deploy capital. Our consistent, strong, free cash flow through the cycle gives us the flexibility to invest in organic growth, pursue strategic M&A, and return capital to shareholders. These investments are strengthening our competitive position and driving long-term value creation. Let's turn now to our second quarter performance on slide five. Our sales were impacted by a softer than expected housing market due to ongoing affordability concerns and rising home inventories as completions outpace sales. While we readily acknowledge that we are experiencing lower margins as we support our customers, I'm pleased that we are maintaining healthy profitability in a low-stress environment, a testament to the operational discipline that is part of the fabric of BFS. Slide six, we highlight key areas where we've been executing our four strategic pillars. In the second quarter, we invested more than $35 million in value-added solutions as we build for the future. This included opening a new millwork location in Florida and expanding or upgrading plants in seven states. We generated $5 million in productivity savings in Q2, primarily through targeted supply chain initiatives. We are focusing on optimizing processes, utilizing new tools, and partnering with suppliers to grow share. Turning to slide seven, we remain disciplined stewards of discretionary spending, and we are continuing to maximize operational flexibility. In response to lower volumes over the last year, we have taken meaningful steps to align capacity across our facilities, manage headcount, and control expenses. -to-date through June, we have consolidated eight facilities while maintaining an on-time and in-full delivery rate of 92%. With our industry-leading scale, experienced leadership team, and a track record of operating proactively through the cycle, we are confident that we can continue to deliver exceptional customer service. Single-family starts remain soft as builders manage the pace of construction. As expected, we have experienced a muted sales pace that is below the normal seasonal levels. Given customer feedback and our understanding of land development trends, we expect single-family starts to decrease through year-end. Builders are working to help buyers find affordable options by offering smaller and simpler homes, as well as incentives such as interest rate buy-ins. We are marching in lockstep with builders through our comprehensive product portfolio. Enabling them to optimize their costs while maintaining quality. Multi-family also remains muted, driven by higher input and financing costs. However, with a substantial mix of value-added products and attractive long-term fundamentals, multi-family remains an appealing and profitable business for us. Turning to M&A on slide 8, we remain focused on pursuing higher return opportunities that expand 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 track record of successful integration. In the second quarter, we acquired Truckee Tahoe Lumber with aggregate prior year sales of roughly $120 million. Truckee Tahoe's reputation of excellence as a leading supplier of lumber and building materials extends our presence in the Northern California and Nevada markets. We have made 35 acquisitions since the BMC merger in 2021, yet our industry remains highly fragmented. Today's market volatility makes price discovery difficult. But despite the current slower M&A environment, we are confident that inorganic investments will remain an important driver of long-term growth. Turning to slide 9, our disciplined capital allocation strategy focuses on maximizing shareholder returns through organic growth, M&A, and share repurchases. In the second quarter, we deployed over $500 million towards return enhancing opportunities aligned with our priorities. Now, let's turn to slide 10 and discuss the latest updates on our digital and technology strategy. In June, we announced Gayatri Narayan as our new president of technology and digital solutions. Gayatri brings over two decades of global technology leadership experience, having held senior roles at Amazon, Microsoft, and PepsiCo. Her proven track record of driving innovation and growth through digital transformation will be instrumental as we leverage technology to enhance connectivity across our industry. We are accelerating the integration of our digital source systems and deploying scalable, customer-centric solutions that will strengthen our operational agility and support long-term growth. Our BFS digital tools deliver meaningful benefits to our home builder customers and align BFS as a key technology partner. Despite the challenging market, we have seen continued adoption with our target audience of smaller builders. Since launch in early 2024, we have seen more than $2 billion of orders and $4 billion of quotes placed through our BFS digital tools. These metrics are up more than 400% and nearly 300% -to-date, respectively, compared to 2024. We continue to refine our new adoption roadmap and will roll out our new thinking around benefits and timing later this year. I'm pleased that we continue to make progress on our implementation of SAP with the launch of two pilot markets earlier this month. Although these conversions are never easy, we are working through the details and are excited about the growth and efficiency opportunities to come with this new software. I remain deeply grateful for the opportunities to lead such a skilled and dedicated team that makes a difference every day. This quarter, I want to highlight Jim Henry, a load builder in our Burr Bankyard who recently celebrated an incredible 40 years with BFS. Jim is known for his efficiency, flexibility, team-first attitude, and his love of cycling. He's had a lasting impact on operations and is someone his teammates look to as a model of how to get the job done right. I'm proud of Jim and the many others across our organization whose hard work and commitment to drive BFS forward. I'll now turn the call over to Pete to discuss