Bluelinx Holdings Inc.

Greetings. Welcome to the Blue Links Holding fourth quarter and full year 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, and please note that this conference is being recorded. I will now turn the conference over to Ryan Taylor, Vice President of Investor Relations. Thank you. You may begin.

Thank you. Good morning, everyone, and welcome to the Blue Links Holdings fourth quarter and full year 2021 conference call. With me on the call today are President and CEO Dwight Gibson and Chief Financial Officer Kelly Jansen. Our fourth quarter and full year 2021 news release and Form 10-K were issued last night, along with our webcast presentation. These items are available in the investor section of our website, bluelinksco.com. We encourage you to follow along with the detailed information on the slides during our webcast. As a reminder, today's discussion contains forward-looking statements. Actual results may differ significantly from those forward-looking statements due to various risk factors and uncertainties, including the risks described in our most recent SEC filings. Today's presentation includes certain non-GAAP and adjusted financial measures that we believe provide helpful context for investors evaluating our business. Reconciliations to the closest GAAP financial measure can be found in the appendix of our presentation. At the conclusion of our prepared remarks, we will open the line for questions. With that, I'll turn the call over to Dwight.

Thanks, Ryan, and good morning, everyone. Thank you for joining our call today. 2021 was a remarkable year for Blue Links and extraordinary in many respects. We finished the year on a high note, reporting double-digit net sales growth and record gross margin for the fourth quarter, reflecting strong operating execution and positive market tailwinds. Before diving into the details, I want to first thank our teammates for their dedication, resiliency, and adaptability. Teammates like Benny Ross, a material handler in Lawrenceville, Georgia, who celebrated his 40-year anniversary with Blue Links last year. And teammates like Lisa Rodriguez, our operations manager in Miami, who has done a tremendous job building a highly engaged and productive team at her branch. In a year filled with uncertainty and change, I'm incredibly proud of the entire organization's effort and execution. We significantly improved our operating performance while capitalizing on dynamic market conditions. As a result, we achieved record full-year profitability in 2021. Achieving all-time highs in gross profit, adjusted EBITDA, and EPS underscores the benefits of fostering a performance-based culture and focusing on a few critical strategic initiatives. Specifically, we implemented actions to emphasize growth in higher value specialty products, leverage centralized purchasing and pricing teams, and importantly, drove a disciplined approach to inventory management for structural products. These actions underpinned our incredible 2021 financial performance. For the full year, net sales grew 38% to $4.3 billion. Gross margin expanded 280 basis points to 18.2%, and adjusted EBITDA increased 172% to $464 million, which is nearly 11% of net sales. We generated $131 million of free cash flow, reduced net debt by 19%, or $115 million, and we capitalized our debt structure. We ended the year in a strong, flexible financial position, with net leverage at 1.1 times and available liquidity over $430 million. With a balanced sheet fortified, we are increasing investment in our people, in our fleet, and in our distribution branches to support our best customers and drive profitable growth. Beyond that, we have ample liquidity to create additional value through disciplined, strategic capital allocation. We continue to build out a world-class leadership team to drive transformational growth by leveraging our scale and increasing stickiness with our best customers through the quality of our delivery, the relevance of our specialty product portfolio, and our value-added service capabilities. I believe a consistent, Delightful customer experience reaches its highest potential through interaction with talented and engaged employees. Developing this culture remains at the core of everything we do at Bluemix. We began 2022 with positive momentum in our business and favorable tailwinds in the U.S. housing market. In January, net sales were up more than 20% year-over-year, and gross margins exceeded 20%. We were poised for another strong year and enthusiastic about our long-term future. Taking a closer look at Q4, net sales grew 12% year-over-year to $973 million. This growth was led by specialty product net sales, which were up 29% year-over-year and comprised 66% of total net sales in the period. We achieved record gross margin of nearly 20%, and delivered $112 million of adjusted EBITDA, which is 11.5% of net sales. Overall, we delivered results that exceeded expectations for the quarter and further demonstrated our ability to capitalize on strong demand amid ongoing supply constraints and continued volatility in wood-based commodity prices. Moving on now to the U.S. housing industry. End market trends remain favorable and demand for building products continues to be robust. Single family starts were up 13% in 2021 and are expected to grow further in 2022 based on multiple industry projections. Repair and remodel activity remains elevated as rising home equity levels and aging U.S. housing stock and flexibility to work from home have combined to drive homeowner investments. and although mortgage rates have risen recently, they remain historically low. Even with the anticipated rate increases by the Fed, we believe the mortgage market will continue to provide financing at historically attractive levels. As demand remains strong, the housing industry continues to experience ongoing supply constraints with no signs of abatement in the near term. As such, volume has remained stable and the majority of our supply of specialty products remains on allocation from vendors. Even so, we are focused on expanding relationships with key suppliers who align with our strategy as we look to increase net sales in specialty product categories, expand our value-added capabilities, and extend our national presence. Through this strategic focus, we secured approximately $200 million of incremental specialty product supply in 2022 from about a dozen select vendors. This includes product categories such as CDER, EWP, and decking. In structural products, our focus remains on efficiently serving our best customers while effectively mitigating risk from ongoing commodity price volatility. To this end, we will continue to aggressively manage our structural product inventory. This approach has served us well as illustrated by gross margin performance in the second half of 2021. Over that six-month period, lumber prices per thousand board foot ranged from $1,000 to $390. Even with this volatility, our structural products gross margin was 9% over the second half of 2021, consistent with our average historical gross margin for structural products. In addition to supply constraints and fluctuations in commodity pricing, we have effectively managed rising input costs, competitive labor market, and extended lead times on imports, which represents approximately 20% of our overall vendor supply. To summarize our view of the market, near-term demand for building products remains positive with a healthy economy, rising wages, and ongoing desire for home ownership and renovations. we expect to continue capitalizing on this robust demand of vigilantly monitoring and controlling commodity risk. In parallel, we are executing our long-term strategic initiatives. These initiatives are focused on commercial excellence and continuous operating improvement, which are core levers for profitable growth. In support of these initiatives, we continue to develop a performance-driven culture underpinned by data-driven decision-making and standard repeatable processes. In January, we launched a balance scorecard to drive accountability to KPIs focused on people, process, and performance. From a sales perspective, we have narrowed our strategic focus on increasing our mix of specialty product sales, growing our private label business, and expanding our value-added service capabilities. On the supplier side, we are working with select vendors to partner on key specialty products in categories such as engineered wood, cedar, molding, outdoor living, siding, and industrial products. Our ultimate goal is to drive profitable sales growth and expand gross margins through the combination of an engaged and accountable workforce, commercial excellence, and continuous operating improvements. I believe we are in an opportunity-rich environment to deliver on this goal. We continue to strengthen our world-class leadership team with proven executives from diverse backgrounds. On this front, I want to highlight a few recent additions. On January 31st, Seth Freeman joined as VP of Marketing and Communications. Seth has over 25 years of experience leading integrated brand and marketing strategies. He joins us from American Family Insurance, where he served as AVP of brand and marketing experience. His integrated analytical approach to our marketing and communications efforts will focus on elevating the BlueLynx brand and driving employee and customer engagement through multiple channels. On February 14th, we added Sean Dwyer, Chief Strategy and Corporate Development Officer. He joins us from Westrock, where he built and led the corporate development functions. Sean has a proven track record, and his addition gives us dedicated internal resources to accelerate growth. And just last week, we announced that Kevin Henry is joining our team on March 1st as Chief People Officer. Kevin brings over 30 years of strategic and operational human resource leadership experience to our team. Previously, he served as Executive Vice President, Chief of Staff, and Chief People Officer for Extended Stay America. Earlier in his career, he served in CHRO roles at Snyder's Lamps, Coca-Cola Bottling, and Nationwide Credit. Kevin is also a current board member for SAIA Incorporated, a publicly traded logistics and distribution company. He is a highly accomplished business leader who will bring a strategic focus to our human capital efforts and spearhead the acceleration of establishing our performance-based culture. We are excited with the additions of Seth, Sean, and Kevin. and they will play critical roles in driving our enterprise strategy. In addition to investing in our people, we are also increasing our capital investment into business. Last year, our capital investments grew to $14 million, about three to four times our historical levels. In 2022, we continue to focus on enhancing the safety and sustainability of our assets, and as such, we have earmarked at least $25 million of capital to further upgrade our fleet and continue to improve our distribution branches. We also plan to upgrade a large portion of our traditional gas-fueled forklifts with state-of-the-art, high-efficiency forklifts, many of which will be electric. Additionally, we are investing in technology upgrades to support branch optimization, process enhancements, and scalability. From an M&A perspective, we are building a pipeline of opportunities that either expand our specialty product sales mix, increase our relevance to key customers or suppliers, or extend our geographic reach. With respect to acquisitions, we intend to be thorough and disciplined as we evaluate strategic fit, integration effort, and return on investment. That concludes my opening remarks. At this time, I'll turn the call over to Kelly for a more detailed discussion of our financial results and capital structure. Following that, I'll provide closing remarks before we take your questions. Kelly?