Bluelinx Holdings Inc.

Greetings and welcome to the BlueLinks Holdings second quarter 2021 results conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Alexandra Lucas of Investor Relations. Thank you. You may begin.

Thank you. Welcome to Bluelinks Holdings second quarter 2021 results conference call. Leading the call today are our President and CEO Dwight Gibson and Chief Financial Officer Kelly Jansen. The presentation we are sharing today is available on our website in the webcast and presentation section and we encourage you to follow along accordingly. Today's discussion contains forward-looking statements about future business and financial expectations. Actual results may differ significantly from those projected in today's forward-looking statements due to various risks and uncertainties, including the risks described in our periodic reports filed with the SEC. Except as required by law, we undertake no obligation to update our forward-looking statements. We are using non-GAAP financial measures in our presentation. The appropriate GAAP financial reconciliations are incorporated into our presentation where available, which is posted on our website. All percentages in today's discussion refer to year-over-year progress, except where noted. At the conclusion of our prepared remarks, we will open the line for questions. With that, I would like to turn the call over to Dwight Gibson for his prepared remarks.

Thank you, Alexandra, and good morning. Before we review our record second quarter results, which by all accounts are a historic achievement for more than 2,100 team members, I want to say how excited I am to be part of the Blue Links team. This is a great business with great people doing great work each and every day. Since joining Bluelinks as CEO eight weeks ago, I've had the opportunity to visit with our employees at multiple sites across the country. I, along with members of my leadership team, have visited 18 branches across four of our five regions. These locations represent roughly 45% of our total sales. During these visits, I was impressed by our associates' competitive spirit, their technical expertise, their deep relationships with suppliers and customers, and their focus on building a best-in-class building products distribution business. Bluelinks is a national business that serves key national accounts in hundreds of local markets, each of which have their own unique challenges and opportunities. Our teams do an exceptional job of understanding the local market dynamics while leveraging our size and scale to provide an integrated, on-demand product and solution suite. I've come across groups of people who show up every day and make it happen. People like Leroy, a material handler in Richmond, who's worked for the company for over 49 years. People like Diana, a territory manager who's new to Blue Links and delivering great results. And people like Nancy, a 20-plus year member of our handcrafted panel production team in Aitkin, Minnesota, who will only allow product out of our facilities that she would be proud to put in her own home. We have a committed group of teammates who I'm now honored to lead. Let me be clear that although our runway is long, there are areas that we must address to realize our full potential. Specifically, we must invest more in our distribution branches. There is a need to upgrade some of our facilities and our equipment to increase efficiency and improve our customer service. We must also invest in technology to make our ordering easier to enable real-time status and shipments, and to improve our internal operations, particular warehouse management. As one investor recently indicated, I've been given the keys to an organization that is making the transition from good to great. I agree. In fact, it echoes one of the primary reasons I decided to join Bluelinks. It's a well-run company with strong financials. The potential for the company is significant given the strong macro trends solid balance sheet, and talented team. We have the capability and capacity to drive meaningful and sustained profitable growth. While it is premature for me to describe my long-term plans on this call, allow me to share some preliminary thoughts around where there are clearly some opportunities. First, let me say that in my experience, culture drives the business, but people drive the culture. I firmly believe in the power of a strong culture, one that values employees and their contributions. Our customer experience will never exceed our employee experience, so we must always ensure that we are enabling our people to be successful in their jobs each and every day. We must ensure that our material handlers can safely and efficiently pick and load products. We must make sure our territory managers have the information they need to best support our customers. We must make sure our drivers can safely and efficiently deliver the right products to the right customers at the right time with the highest quality. If we do these things, we will create raving fans of all our key stakeholders, and most importantly, our customers. We will be increasing our investments in these areas, as I mentioned earlier, to ensure we consistently deliver world-class customer service and satisfaction. I also believe that accountability, productivity, and operational excellence are cornerstones of a well-run organization. The business has performed well in a period of significant supply-demand imbalances. We have had to focus on the things that matter most, our people, strategic product categories, and critical customers. In addition to our focus on culture, we will focus on our position in the market. Structural products are a key component of the products we sell. and we will continue to ensure that we are a key partner to our vendors and customers in these categories. We will seek to sharpen our value proposition, however, and focus on driving growth in higher value specialty product categories. I believe the best way to increase shareholder value will be to grow our top line while shifting a larger portion of our revenue mix toward margin-enhancing, value-added specialty products. These carry higher barriers to entry and are less exposed to volatile price swings. We will do this while ensuring sufficient capacity and capability to satisfy all of our customers' product needs. Next, let's talk a bit about our intention to develop a capital allocation strategy that we believe will generate long-term value for our shareholders. The team has done an outstanding job of driving profitability and strengthening the balance sheet. Net leverage is now at an all-time low, due to targeted debt reduction and growth in adjusted EBITDA. And we have more flexibility to allocate capital toward high-impact opportunities. As I mentioned earlier, this translates to evaluating acquisitions that generate value for the business, such as expanding our capabilities in strategic product categories, deepening our high-value customer exposure, and or meaningfully growing our footprint in target geography. Along with this, we will direct more capital toward organic growth investments, including spending on our fleet and facilities, as well as investing in productivity projects. So that's where my initial focus will be, culture and developing a strategy that strengthens and deepens our market position, a strategy that also deploys capital that delivers value creation for our shareholders. Once again, I consider it a great privilege to lead this organization. Mitch and the team have done a tremendous job of getting us to this point. I'm confident we are in the early innings of a multi-year growth story, one that I'm honored to be a part of. Now, I would like to spend a few minutes before turning it over to Kelly to discuss our second quarter performance. During a period of elevated demand within the domestic residential construction and home renovation markets, we've continued to leverage our scale, deep customer, and supplier relationships, competitive spirit, and technical expertise to drive profitable growth across our organization. Our focus on both national accounts as well as local markets, when combined with the attractive products and solutions offered by our national platform, continues to represent a durable value proposition in what remains a fragmented market. A record second-quarter performance, which resulted in $1.3 billion in net sales, an overall gross margin of 19.2 percent, and $166 million in adjusted EBITDA, was driven by product price escalations, volume growth within our specialty products business, and an improved specialty sales mix. Supply, demand, and balances continued to persist across almost all of our specialty categories during the second quarter. resulting in a continued succession of supplier price increases that supported an expanded specialty margin of 24.4% for the period. This is the highest specialty margin the company has ever experienced. In addition to an incredible specialty performance, we also recorded excellent structural products results, including net sales of $633 million and a gross margin 13.6%. Our disciplined approach of keeping inventory levels lean while continuing to provide excellent customer service, along with maximizing levels of available supplier-consigned inventory, is providing the company resiliency as we navigate the recent extreme deflation in the wood-based commodities market. As of last Friday, the Random Lens framing lumber composite was 68% below its mid-May all-time peak, which is very close to its five-year historical average. The panel composite was 53% below its peak in late June. While we can never predict what commodity prices will do, we believe there is potential for further deflation in panel prices in the coming weeks. and there are signs that lumber prices may have achieved relative stabilization for now. Given these market dynamics, we will continue to maintain lean structural inventory levels, which may have a short-term impact on volume, as we believe keeping lower levels of structural inventory is the right approach to mitigate deflation risk. I would also like to acknowledge the team for achieving our best safety results ever. We've reduced our total recordable incident rate from 3.5 in December of 2019 to 1.8 in June of this year. This is significantly below the building materials industry benchmark for total recordable incident rates, which is above four. We will continue to emphasize the safety of all of our associates and look to lead in this area. With that, I'll hand the call over to Kelly for a more detailed discussion of our second quarter financial results.