Bluelinx Holdings Inc.

Greetings and welcome to the BlueLynx first quarter 2023 results conference call. At this time, all participants are in a listen-only mode. A brief 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 our host, Alexandra Lucas, Manager of IR. You may begin, ma'am.

Thank you, Operator. Good morning, everyone, and welcome to the Bluelink Holdings first quarter 2023 earnings call. Presenting today are Sham Reddy, President and CEO of Bluelink, and Kelly Jansen, our Chief Financial Officer. Our first quarter news release and form 10Q were issued yesterday after the close of the market along with our webcast presentation. These items are available in the investor section of our website, bluelinkco.com. We encourage you to follow along with the detailed information on the slides during our webcast. Today's discussion contains forward-looking statements. Actual results may differ significantly from those forward-looking statements due to various risks and uncertainties, including the risks described in our most recent SEC filing. Today's presentation includes certain non-GAAP and adjusted financial measures that we believe provide helpful context for investors evaluating our business. Reconciliation 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 Sham.

Thanks, Alexandra. And good morning, everyone. We appreciate you joining us today. I'd like to start by thanking my predecessor, Dwight Gibson. I'm grateful for his leadership and appreciative of his many contributions for and on behalf of Blue Links and our associates. Before I give my quarterly remarks, It's important to highlight the momentum we've gained over the last several years to generate profitable sales growth. Specifically, we took full advantage of the accelerated housing recovery that occurred during the pandemic by focusing on customer service, strategic inventory management, and operational excellence. Fortunately, our efforts accelerated our specialty product strategies during this recent period of unprecedented growth. In fact, Our strong financial performance over the last three years has allowed us to allocate capital to support sustained profitable sales growth, reduce net leverage from 9.7 times to .6 times, invest almost $62 million in CapEx, acquire Vandermeer Forest products for $67 million, and repurchase $66 million of outstanding shares. The cash flow performance of the business remains strong. So we intend to exhaust the remaining 34 million of capacity under our current $100 million share repurchase program in the near term, which is an exciting place to be given the journey we've been on over the last several years. While we are now experiencing a difficult housing and building products environment, I am confident we can navigate these current market conditions and grow our business for years to come because the grit resilient, and competitive nature of our associates will continue to support our efforts to generate long-term value for our shareholders. Now, as we head deeper into the second quarter, we remain resolute about continuing our strategy, but with a greater focus on clarity, execution, and efficiency around three key areas. First, we are firmly committed to growing our five high-value specialty product categories engineered wood, siding, millwork, industrial, and outdoor living. Second, we are committed to driving operational pricing and procurement excellence by leveraging our corporate capabilities to implement best practices that will reduce costs and enable us to be more productive, that will ensure pricing discipline to generate profitable sales, and that will take advantage of our deep supplier relationships to strengthen the value proposition for both our customers and suppliers. Doing so will fuel the market strategies being pursued by our national account local market leaders to generate profitable sales. Third, we will remain disciplined in our approach to capital allocation so that our balance sheet remains strong. Doing so will allow us to grow the business both organically through sales growth initiatives and inorganically through accretive acquisition. while giving us the flexibility to opportunistically repurchase shares. And while we've entered a more challenging period in the housing cycle, continued focus on these strategic priorities will enable us to navigate the current downturn and take advantage of the opportunities that arise when the market improves so that we can grow our business and create long-term value for all of our stakeholders, especially our shareholders. Now moving on to Q1 2023 performance. During the first quarter, our end markets, which primarily include residential new home construction and repair and remodel, continue to be adversely impacted by the effects of a higher interest rate environment and home affordability issues. These factors have contributed to a significant year-over-year reduction in new single-family housing starts this quarter, which declined at 29% when compared to Q1 2022. Single-family housing starts of approximately 900,000 are now closer to the 50-year average. Repair and remodel activity also slowed down compared to the peak last year. Despite the challenging markets and volume declines resulting from an overall reduction in building products demand, I am pleased with our solid first quarter results. We generated net sales of $798 million and $18 million of net income. This resulted in $2.53 for diluted share on an adjusted basis and $47 million in adjusted EBITDA, or about 6% of net sales. We also generated $89 million of operating cash flow, an increase of $87 million when compared to last year, a significant accomplishment. Sequentially speaking, the story is equally compelling. Over the last two quarters, we generated a total of $243 million in operating cash. During the same period, we also increased our liquidity by approximately $150 million to end the quarter at a record $723 million. The additional cash on hand further strengthens our ability to execute on our capital allocation initiative. As expected, our sales volumes were lower in the first quarter, particularly within our specialty product categories. Engineer wood products, for example, are directly tied to new home construction, so it's not surprising that we experienced meaningful declines in this category. As the market stabilized and new home starts increased, we expect to see improvement in specialty volumes. In addition to volume declines, Our specialty products also experienced modest price depletion due to the building product supply chain loosening up and functioning at pre-pandemic levels. Net sales in our structural product category were down 57% because wood-based commodity prices were down more than 60% year over year, though volumes were relatively consistent with the first quarter of last year. Despite the current market contractions, We delivered a strong margin performance in both specialty and structural products during the first quarter, 18.8% for specialty and 11.7% for structural. And we did that because we've developed refined pricing and cost containment capabilities over several years to maintain and expand margins as the markets ebb and flow. We are also aggressively managing our working capital given the muscle we've developed over the last few years, which we believe gives us a competitive advantage. That discipline and relentless focus on inventory management helped us reduce our total inventory by $75 million since the beginning of the year. We took specific actions to align our specialty inventory levels with current market conditions And we also continued to successfully execute on our strategy to maintain low levels of structural inventory, which at the end of the quarter represented less than 15% of our total inventory balance. Through the first four weeks of Q2, we continued to see solid margins for both specialty and structural products in average daily volumes that are up slightly versus Q1. In terms of the market outlook, We are beginning to see some positive signs in the housing market, with single-family housing starts increasing 3% in March when compared to February 2023. Builders' confidence is also up 14 points since December of 45. Some regional market differences also persist, where new home markets are experiencing softer demand when compared to other geographies. As we look at the full year, we continue to believe that single-family housing starts will be down compared to 2022. On the other hand, we believe that recent housing turnover, aged housing stock, and high levels of homeowner's equity will continue to support the repair and remodel market. Our scale and geographic reach enable us to effectively manage the ups and downs of the market. Even with market cyclicality and the current declines we're experiencing in the housing sector, the long-term prospects of the building products industry are strong. Ultimately, this reality will fuel the housing industry once the market improves and provide future profitable opportunities that we will capitalize on to grow our business. In summary, we delivered solid first quarter financial results in a challenging macro environment. and we continue to make progress on strategic priorities that are designed to position the business for long-term profitable sales growth. This success led to meaningful cash generation that we intend to put to work for our shareholders through $34 million of share repurchases in the near term, which will close out our current $100 million share repurchase program. I believe that our strategy, along with our strong balance sheets, and disciplined approach to capital allocation positions us well to take advantage of the housing market as it improves. That concludes my opening remarks. I'll now turn the call over to Kelly for a detailed discussion of our financial results and capital structure. Following that, I'll provide closing remarks before we take your questions.