Builders FirstSource, Inc.

Please stand by, your meeting is about to begin. Good day and welcome to the Builders First Source fourth quarter 2025 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 the star key followed by the number one on your phone at any time during the call. I would now like to turn the call over to Heather Koss, Senior Vice President, Investor Relations for Builders FirstSource. Please go ahead.

Good morning, and welcome to our fourth quarter and full year 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 investors.vldr.com. We will refer to the presentation during our call. The results discussed today include certain 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, and a discussion of why we believe they can be useful to investors in our earnings press release, SEC filings, and presentations. 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. With that, I'll turn the call over to Peter.

Thank you, Heather, and good morning, everyone. Driven by focused execution and close customer partnerships, we successfully navigated 2025 despite ongoing housing affordability challenges, weak consumer confidence, and depressed commodity prices. We remain committed to reducing barriers to affordable housing and driving a more efficient integrated supply chain. Our ability to perform effectively through each phase of the business cycle reflects the strength of our differentiated value-added solutions, industry-leading technology, and unique operating model. Executing from a position of strength, we continue to invest in initiatives that expand our capabilities, enhance our footprint, and position us to outgrow the competition as conditions improve. I'm confident in our ability to manage through near-term uncertainty and build exceptional long-term value for our shareholders. Let's now turn to slide four. Our full year 2025 results reflect disciplined execution as we sustained healthy profitability despite a soft starts environment, underscoring our operational excellence and strategic investments. This included maintaining a gross margin above 30% and an EBITDA margin above 10%, a clear reflection of the durability of our transformed business. I'm grateful for the dedication of our team members and the ongoing support of our customers as we turn the page to 2026. Let me step back and offer some perspective on the market. The housing market remains weak and is characterized by more headwinds than tailwinds, as affordability challenges, muted consumer confidence, and depressed commodity prices continued. This was apparent in November and December as our sales fell off more than expected as these cross currents impacted starts and led to a softer Q4. Economists are divided in their outlooks for 2026 with some calling for further declines in single family starts and others expecting modest growth as macro conditions and regulatory policies remain uncertain. At the same time, prolonged softness in both residential new construction and repair and remodel have pushed OSB well below normal, resulting in a commodity composite below $350 per thousand board foot as we exited 2025. Commodity supply is being curtailed, but not at a pace that we believe will meaningfully lift prices in the near term. Finally, inflationary pressures continue to impact costs. particularly in the insurance and rent categories. Despite these macro pressures, we remain committed to advancing our strategy with a sustained focus on growth, continuous improvement, smart investments, innovation, and developing our people. We cannot control the macro, but advancing our initiatives will enable us to realize share gains, improve the way we operate, and position us to accelerate growth with any level of recovery. Our single family builder customers have addressed ongoing affordability challenges by offering smaller and simpler homes, as well as incentives such as interest rate buy downs. That creates an environment where there are less sales dollars per start and every start is more competitive on the affordability front. We are working closely with our customers leveraging our broad product portfolio and bundle value add solutions. to drive cost efficiencies while upholding the highest quality standards. In the multifamily market, activity remained muted through year end, in line with our previous thinking. We continue to see green shoots in quoting activity as our customers benefit from improved financing costs. As a reminder, our first sale tends to lag a multifamily start by about 9 to 12 months. Given the current project pipeline, an uptick in our multi-family results will not appear until the back half of this year at the earliest. In response to the market weakness, we are prudently managing spending and maximizing operational flexibility, as shown on slide five. We are aligning capacity across our facilities, managing fixed and variable headcount, and reducing capital expenditures. Pete will provide more detail later in his remarks. We consolidated 25 facilities in 2025, bringing our total to 55 over the past two years, 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 make the necessary adjustments and deliver exceptional customer service. On slide six, we highlight some of the key initiatives under our strategic pillars. In 2025, we invested more than $110 million on new, expanded, or upgraded value-added operations across our footprint. 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. This capital deployment is strengthening our competitive position and driving long-term value creation. Operational excellence is crucial to how we run the business as we develop talent, improve agility, and embed technology into our operations. We generated $48 million in productivity savings in 2025, primarily through targeted supply chain initiatives. Moving to slide seven, our prudent capital allocation strategy focuses on maximizing shareholder returns. In 2025, we deployed nearly $2 billion towards return enhancing opportunities aligned with our priorities. Drilling down into M&A on slide eight, we remain focused on pursuing acquisitions that expand our value-added product offerings and advance our leadership position in desirable geographies. We have developed substantial and proven muscle memory to grow through M&A and have a track record of successful integration. As a reminder, we acquired both Builders Door and Trim and Ryston Construction in October, which together formed the leading provider of door and millwork capabilities in the Las Vegas area. In November, we acquired Langefeld Lumber, a leading supplier serving Central Texas, and Pleasant Valley Homes, a wholesale manufacturer of factory-built housing serving 10 northeastern states. Pleasant Valley represents an expansion of our prefabricated component strategy to address challenges facing the homebuilding industry, such as affordability and access to labor, with a cost-competitive factory-built option, which reduces builder cycle times. The company sells HUD-compliant manufactured homes and high-quality semi-custom modular homes to land lease community developers, retailers, and homebuilders. We plan to use available factory capacity to offer high-quality semi-custom modular plans to our existing homebuilder customers, with the potential to expand the offering to our homebuilder customers in other BFS markets in the future. And lastly, in January, we acquired the assets of Premium Building Components, marking our company's first truss and wall panel operations in New York. Since the BMC merger in 2021, we have made 40 acquisitions representing over $2.3 billion in annual sales, the equivalent of a top 10 LBM player, demonstrating our ability to execute and integrate seamlessly. And with the industry still fragmented, we see significant opportunity ahead and are confident that inorganic investments will remain an important driver of long-term growth. Let's now turn to slide nine and discuss the latest updates on our digital and technology strategy. We continue to differentiate by digitally enabling our team members customer relationships and value added product development to drive long term growth through technology driven platforms and services. The investments in automation artificial intelligence and digital integrations highlight our commitment to creating a seamless experience for our customers to help streamline their operations. Since launching in early 2024, our digital platform has processed nearly $7 billion of quotes through 2025, representing a year over year increase in excess of 130%. This week at the International Builder Show, we will showcase the next generation of digital solutions for builders. These solutions deploy emerging technologies to unlock rich insights and make every step of the home building process easier. not only for our builder customers, but also for the entire ecosystem of suppliers and technology partners. We do not categorize digital as only being a driver of long-term growth for BFS. It is integral to how we do business every day. We are committed to digitally transforming the operations and continuing to invest in consumer-grade digital solutions designed to improve our team members' efficiency, engagement, and performance. Our digital investments are particularly impactful in the sales organization, creating time to capture new market share, expand our product offerings, and strengthen our customer relationships. Continuing on the technology front, I'm pleased that we have made steady progress in our comprehensive implementation of SAP after the launch of two pilot markets last July. We're applying the valuable insights we've gained from these initial pilots to prepare for the next phase. In Q4, we advanced the development of our solution and refined our deployment plan, positioning us for continued rollout in 2026 and broader deployment beyond. Although these conversions are always challenging, we are working through the details and are excited about the growth and efficiency opportunities to come with this business-driven transformation. Recognizing one of our incredible team members each quarter is one of my favorite parts of our earnings calls. Today, I want to spotlight Charles Green, an inside sales representative at our Wilmington, North Carolina, Millwork location, who is celebrating an extraordinary 48 years with BFS. Charlie began his career in 1977 as a truck driver. After 13 years on the road, he transitioned into sales, where he quickly became a subject matter expert in the Wilmington market. Charlie developed a loyal following for his customer service, always checking in to make sure the job is done right, and for making jokes. Here's one for you, Charlie. Why did the home builder get in trouble with the neighbors? For raising the roof? All right, so that one's probably not good enough for you, Charlie. But your dedication to our customers, your teammates, and the community reflects the values that are important to all of us at BFS. I'll now turn the call over to Pete to discuss our financial results in greater detail.