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.

Kelly?

Thanks, Sham. And good morning, everyone. I'll start with the first quarter results. We delivered a solid performance highlighted by strong margins across both our specialty and structural product categories, considering the backdrop of softer market conditions. Net sales were 798 million, down 39% year-over-year. Specialty product sales were down 26% over the prior year due primarily to lower volume. However, 80% of our gross profit was derived from specialty product sales. which is up from 63% in the prior year period. Structural product sales were down 57%, almost exclusively due to significant year-over-year declines in commodity prices. Total gross profit was $134 million, and gross margin was 16.7%, which was down 560 basis points from the prior year period. but still higher than margin levels experienced before the last couple of years. When reviewing the year-over-year comparison, it's important to point out that in the first quarter of 2022, we experienced historically high levels of demand and significant price inflation across the business. Thus, while the variances are quite significant, we are pleased with the financial results we generated this quarter considering the recent market downturn. Turning now to the first quarter results for specialty products, net sales were $568 million, down 26% year over year. This decline was primarily driven by lower volume, especially in categories that are tied to new residential construction like engineered wood. Growth profit in specialty product sales was $107 million, down $77 million due to the volume decline. Specialty growth margin was 18.8%, a strong margin, but down 520 basis points from last year when prices were near their peak, given most of the supply was still on allocation. Through the first four weeks of Q2, specialty product growth margin was in the range of 18, 19%, with daily sales volume slightly improved versus the first quarter of this year. Now moving on to structural products, net sales were $230 million, down 57% compared to the prior year period. This decrease was primarily due to the significant year-over-year decline in average composite lumber and panel prices and volume, which was relatively consistent with the prior year. For random length, the average price in the first quarter of 2023 for framing lumber was $413 per thousand board feet, down 67% from $1,244 per thousand board feet in Q1 of 2022. And the average price for panels was $499 per thousand square feet, down 60% year over year from $1,232 per thousand square feet. Gross profit was $27 million, a decline of 75% year over year, also primarily resulting from lower commodity prices. And gross margin was 11.7% as compared to 20% in the prior year period, a quarter where we benefited from an environment of sharply rising commodity prices. As of the end of the first quarter of 2023, Lumber prices were up to around $417 per thousand board feet and panel prices increased to about $504 per thousand square feet, a 12% and 7% increase respectively compared to the beginning of the year. These prices have improved in the first four weeks of the second quarter and are now $420 per thousand board feet and $530 per thousand square feet. Our strong structural margin continues to reflect the excellent job our team does to manage commodity price volatility risk through leveraging consignment and utilizing centralized purchasing and pricing decisions to keep structural inventory levels low. Through the first four weeks of Q2, structural product growth margin was in the range of 10 to 11%, so higher than the 9% margin we would believe is normal, with daily sales volumes up slightly versus the first quarter. This excludes any net impact that could arise from inventory adjustments, and we will continue to evaluate market pricing for wood-based commodities and adjust accordingly at the end of each period if necessary. For the first quarter, SPNA was $91 million and includes an additional $2 million of operating costs from Vandermeer, which were not included in the prior year period. We have been deliberate in our approach to managing costs to match current demand, and as such, we have reduced our variable costs, such as commissions, incentives, and third-party freight. Our headcount has also decreased since the beginning of the year, mainly through attrition. These reductions were partially upset by inflationary impacts on some of our benefits costs. As we move forward, we will remain focused on right-sizing our cost structure to ensure future profitability. Net income was $18 million and diluted EPS was $1.94 per share. On an adjusted basis, net income was $23 million and diluted EPS was $2.53 per share. The first quarter tax rate was 26.5% in line with our expectations. For the second quarter of 2023, we anticipate our tax rate to be in the 21 to 25% range. Adjusted EBITDA was $47 million, or 5.9% of net sales, a strong result given the current market conditions. Now moving on to cash flow and working capital, during the first quarter, we generated operating cash flow of $89 million and free cash flow of $80 million. Our first quarter cash generation was supported by a $75 million reduction in inventory, reflecting our focus around working capital management. particularly related to right-sizing our specialty inventory to reflect current market conditions. We ended the first quarter with $409 million of inventory, down 15% sequentially from the beginning of the year, and a reduction of $153 million year over year. We have also continued to invest. During the quarter, we spent approximately $9 million in capital expenditures, which were primarily for enhancements to our distribution branches and upgrades to our fleet of rolling stock. For the year, we still expect capital investments to remain around $30 million, focusing on facility improvements and further upgrades to our fleet. Also, we intend to use the remaining $34 million we have under our $100 million authorization for share buybacks in the near term. As a reminder, our guiding principles for capital allocation remain consistent. We intend to maintain a strong balance sheet, which enables us to invest in our business through economic cycles while maintaining a long-term target net leverage of three times or less. Looking now at our balance sheet, as of the end of the first quarter, cash on hand was $376 million, a record level. Total debt was $571 million. A net debt was $195 million, and we have no material debt maturities until 2029. Net leverage was 0.6 times consistent with where we were at the end of the year. When considering our cash on hand and under on revolver capacity of $346 million, available liquidity was $723 million at the end of the first quarter, also a record. We have been deliberate in our approach to fortify our balance sheet. And when combined with our strong EBITDA and cash generation, we have significantly improved our financial position to weather this more challenging cycle and support our strategic initiative. This in turn enables us to expand our capital allocation prospects and invest in high return opportunities such as organic and inorganic growth investments and share repurchases. In the near term, we expect that volumes will continue to remain soft relative to last year and that pricing will remain under pressure. our focus will continue to be on executing our strategy, maintaining a strong financial position, and delivering long-term value to our shareholders. Now, I'll turn the call back over to Sham for closing remarks.

Thanks, Kelly. In closing, our financial position remains strong with ample liquidity, no impending material debt maturities, and a low leverage profile. From a capital allocation standpoint, We will invest in profitable sales growth initiatives, pursue acquisition targets that support our growth strategy, make capital investments that strengthen our ability to grow the business, and opportunistically repurchase $34 million of shares remaining under our current share repurchase program in the near term. I am proud of our Q1 performance because it is testament to the hard work of our talented associates. I am appreciative of their tireless efforts to serve our customers and suppliers during challenging market conditions. Never a doubt, only a sincere desire to grow our business and help our customers succeed. I'd also like to thank our customers and suppliers for their support and faith in us. Without them, there is no Blue Link. I am excited about our future and continuing to deliver what matters so that we can be the leading building products distributor in the United States. That concludes our prepared remarks. At this time, we are happy to answer any questions.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start keys. Our first question comes from Greg Palm with Craig Holland Capital Group. Please go ahead.

Yeah, thanks. This is Danny Egerich on for Greg today. I think I appreciate the color on some of the quarter date volumes and things like that. I guess specifically in terms of specialty, Any way to kind of break out what you're seeing there? I know over the last couple months on the last call, you noted, you know, EWT, EWP pressure and maybe more optimistic on repair and remodel, at least relative. So I guess from now to then, any changes there or any other areas that you want to highlight to the positive or negative?

Sure. You know, As I mentioned, we did have the EWP softness in the first quarter. We're continuing to seeing that softer versus last year. We are seeing the uptick in the last four weeks related to EWP. That is part of that improvement, as well as we're seeing a bit improvement in siting and specialty products across all those areas are really a bit stronger now than they were for the average for the first quarter.

Got it. Then maybe touch on margins. Obviously, those held up really well given the overall demand environment and where lumber is at. Then 18% to 19% specialty and 10% to 11% for structural quarter date. It seems like is that more of a baseline that we can think about? It seems like there's a certain level of stability even with maybe some pricing pressures and and more of a mixed pressure in specialty with the EWP. So I don't know, it seems like there's more upside than anything if things can start to pick up there. Is that how you're kind of thinking about it?

Yeah, well, I really come back to that average range between that 18% and 19% we feel very comfortable with as it relates to specialty. I was really pleased to see it on the high side for the first quarter, and we're going to continue to push and try to get as much margin as we can. But I think that's really the range that we're we're still comfortable with. And I'm hesitant to come off the 9% related to commodities quite yet. The team has been executing wonderfully around that. We did have some benefit from reversing some reserve this quarter. So if you take that out, we would have been closer to 10 and a half. However, I still feel like there's still some room and volatility going on in the commodity prices. And I don't want to come off of that 9% until we see more stability.

And I'd like to add and just highlight our pricing team and the work we're doing centrally in working with our local and national market leaders to maintain the pricing discipline and muscle we've developed over the last several years.

Yeah, makes sense. Then maybe just one last quick one for you, Shayam. Mortis Broadbase just Thoughts on any areas that you may have identified as, you know, right for improvement and maybe just a little bit more on your priorities as we think about your overall strategic outlook and where you want to take Bluelinks?

Sure. No, that's a great question. Well, first of all, I just want to reiterate that we're going to focus, the strategy remains unchanged. So that means we're going to focus on our five key specialty product categories to grow our existing and new business. Those include EWP, millwork, industrial, siding, and outdoor living. And those make sense for us because they touch both new housing starts, repair and remodel, industrials, and multifamily opportunities, all of which we view as growth opportunities. We'll continue to double down on our customer segmentation strategies to better monetize the benefits of our scale and centralized pricing, product management, and operational excellence teams and capabilities. We'll also continue to focus on our operational pricing and procurement excellence, which continues to improve as we've been focused on that over the last several years. That focus will drive greater productivity, efficiency, and cost containment so we can truly optimize the benefits of our scale more effectively. And then last but not least, we'll allocate capital to grow the business, do accretive M&A transactions, and ultimately opportunistically repurchase shares.

Great. Thanks, everyone. Thank you. Our next question comes from Kurt Janger with DA Davidson. Please go ahead.

Great. Thanks, and good morning, everyone. Good morning. It looked like specialty pricing flipped to a year over your headwind in the quarter. Could you maybe just unpack some of the different moving pieces there in terms of maybe some mixed headwind from EWP, the impact from pressure treated, and overall kind of pricing leverage or competitiveness in the market given the more challenging backdrop?

Sure. Happy to answer that question. First, we did see a bit of pricing pressure. We mentioned that in our remarks and in our deliverables. You know, overall specialty pricing in the 10% range, somewhere in that right around there, slightly less than 10% as a whole, but the bigger impact was really the EWP volume change, you know, having that softness with EWP. EWP is one of our higher margin products, and that mixed change was really the bigger driver as it relates to the margin impact. As I mentioned on the last question, we're starting to see some recovery around the volume for that, so that's good news, and we'll continue to watch that. I still maintain that that 18 to 19 percent is a good range. And, you know, if we see EWP recover, we'll hopefully see a little upside there.

Yeah. And just to add, you know, EWP is directly tied to new housing starts. So as we continue to see new housing starts improve, as we're hearing from the builder community, as reflected in the builder sentiment numbers, and even the percentage in new home starts as a percentage of sales being relatively good in March and continuing in April, we expect to see EWP and other specialty product categories tied to new housing starts continue to increase. So just some early positive signs.

Right, right. Yep, that makes sense and kind of dovetails in my next question. You mentioned kind of the sequential volume trends in specialty quarter to date. Is there any way to contextualize what that looks like on a year-over-year basis or just at least directionally, whether it's, you know, consistent with or perhaps even a bit better than you saw in Q1?

Yeah, I mean, it's still certainly quite a bit softer than last year. I mean, Q1, Q2 of last year were very strong quarters for us. So I know I think if you think about pricing in the range that I just spoke about as it relates to, it's relatively consistent, just slightly off. you'll kind of be able to back into the fact that, you know, we see a fairly significant drop off of volume continue, and we mentioned that in a couple of our other, in our press release and in our other remarks.

And do you think that's, you know, purely just new residential construction activity, or do you think there's perhaps some destocking going on with your customers and some of those key product categories because, you know, new resi is down quite a bit, but it seems like R&R is holding in there. And I guess I would have just thought that given the balance of your kind of end market exposure, maybe it could be a little bit better.

Yeah, I mean, certainly the new, as Sham just mentioned, the new residential, the single family housing starts in the new residential is certainly the biggest impact. It's hard to tell completely where R&R stands. We think it was a little softer than flat in the first quarter, although there was factors in that. And frankly, seasonality. First quarter is always a seasonally impacted quarter. So time will tell with Q2 as we see R&R develop as the year goes on. But as a whole, I think the new residential impact is by far the biggest impact in a I'll let Sham answer any other points around that.

Yeah, and look, what I really appreciate about what we're doing is attacking the market in a balanced way by focusing on R&R, single-family housing starts, as well as obviously multifamily and some other categories, which gives us a nice diversified approach to growing sales. So even though R&R will slow down in 2023 relative to its peak in 2022, the fact is there's still an undersupply of homes, the necessary repair activity that's required, aged housing stock, high levels of homeowners' equity, and continued telework, all of which support R&R. Although it's going to be down, we feel like it's still a strong market for us to continue to focus on.

Yeah, so feel confident around R&R for the remainder of the year. Got it.

And just two more for me. In terms of the inventory reduction and specialty versus Q4, I mean, how do you kind of balance the desire and actions to kind of keep working capital in check with your overall role in the supply chain and the ability to provide high service levels to your customers?

Yeah, well... You know, last year was a very unusual year in the fact that so much of our project was on allocation. So, difficult to completely judge what was in the supply chain, what we needed, and the timing of when that would occur. So, in addition, you know, our sales were, you know, significant, as you know. So, especially coming out of 21. So, when you factor all those things in, it was a little... working capital for specialty was not easy to manage through last year. As we started seeing the market correct and return to a more normalized state in the end of the fourth quarter, we were very intentional around working with our teams to ensure we could do good demand forecast planning so that we could see what do we actually need going into this market. And we took these specific steps to get that special inventory down to a reasonable level. We think we absolutely have or had the ability to continue to service our customers and meet the demands of the market with where we are from an inventory perspective. And in fact, we'll continue to work on working capital efficiency as we go forward this year. I don't think we're, we feel like we're done yet. So, you know, I'm really happy with the way that it turned out for Q1 and we'll continue to push for working capital effectiveness.

Thanks for that, Kelly. And then just last, I mean, could you comment on how you're thinking about kind of M&A in the current backdrop and whether that's something that's more or less attractive than maybe a couple months ago and the overall opportunity set that you see out there?

Sure, I'll take that question. I mean, M&A is going to continue to be a focus area for us as we think about the efficient deployment of capital and supporting our sales growth strategies, geographic expansion, product expansion, et cetera, all of which ties into the specialty product growth and other commercial growth initiatives we have. We have a robust pipeline of acquisition targets, and we're absolutely committed to doing accretive deals that support those strategic growth objectives. And we believe, given our financial condition, to be very opportunistic when those opportunities arise. We are very, very disciplined about making sure we pay the right price for these. And right now, the market's a little uncertain as to whether there will be a meeting of the minds. But given the approach we've taken, we feel like we will continue to pursue these opportunistic transactions and really more to come on that front. But it will continue to be a focus area for us.

Got it. Okay. Well, appreciate the color and good luck here in Q2. Our next question comes from Jeff Stevenson with Loop Capital Markets.

Please go ahead.

Hey, thanks for taking my questions today. I wanted to first ask on how volumes trended during the quarter and your core five specialty product categories because you called out kind of challenge engineered wood product volumes, but wondered if any other categories are holding in better than anticipated to start out the year.

You know, thanks, Jeff. The volumes as a whole were, you know, all across the board were certainly much softer than last year. We just call out EWP because it was disproportionately soft as related to the other categories. You know, I think if you look at kind of the year-over-year total, That gives you a pretty good feel for the overall decline. But given that with the pricing, as I mentioned earlier, you know, it was relatively stable. It was only down a little bit. So I really feel like, you know, when the EWP, you know, starts coming back, we'll start seeing kind of the more relative decline to be more consistent across all of the product categories.

Got it. Got it. That's helpful. And then I know it's been touched on, but specialty product margins continue to hold above previous normalized levels of 18 to 19%, despite a slowing residential environment and negative mix from challenge EWP sales. I'm just wondering, Kelly, I know you mentioned there could be upside if EWP comes back, but do the first quarter results give you increased confidence that specialty margins are sustainable at current levels moving forward?

You know, the short story is, yes, as it relates to the range of that 18% to 19% that I mentioned, at least for the foreseeable future, every quarter we reevaluate that. But between the pricing stability that we've seen, the positive signs we're seeing in the market, as well as, you know, our team executing extremely well from a cost perspective, feel confident around that range.

Okay, great. And then, Sham, I just wondered if you could provide a little more color on your capital allocation strategy moving forward and how you plan to prioritize areas such as M&A, internal growth investments, and your share repurchase program.

Yeah, sure. You know, I think, first of all, we are obviously committed to allocating capital to sales growth initiatives. It's important as it relates to the operations and anything we believe will will enhance our sales growth strategic priorities around the five specialty product categories I mentioned. Obviously, a creative M&A is really important, but making sure that we are finding the right opportunities while taking into account the risks and opportunities of the deal so that ultimately we're doing right by our shareholders, obviously. And then as far as The share repurchases, I mean, look, we believe share repurchases are an efficient and effective way to return capital to shareholders, especially when the cash flow characteristics of the business are strong. You know, and as I said earlier, I mean, I've only been in my role for a little more than four weeks with the board and I quickly aligning around announcing that intent to repurchase $34 million of shares remaining under the current $100 million program. And we'll continue to evaluate those opportunities as we move forward But first and foremost, at the end of the day, we want to drive profitable sales growth and invest our dollars efficiently to achieve that objective while growing the business in other ways as well.

Makes sense. Thank you. Our next question comes from Ruben Garner with the Benchmark Company.

Please go ahead.

Thank you. Good morning, everybody. J.M., I hope I'm pronouncing that correctly. Congrats on the new role. Look forward to working with you. Thank you. Maybe we can start on the structural side. I know there's been a lot of questions on specialty, and rightfully so, but I'm curious on the volume that you saw in the first quarter. Is there any reason why the volume is disconnecting with the EWP side so much? I know you guys didn't exactly chase business over the last couple of years, and maybe it's as simple as that, that the comps are easier there, but any color you could give would be great, and how to think about that going forward.

Yeah, well, I think you hit the nail on the head related to, you know, we haven't been chasing it. You know, last year we actually, towards the end of 21, we really started, you know, reining that in, keeping our inventory low, mitigating risk around our commodity pricing, and and managing the volumes as such as part of that. So I think that's the primary reason is that we're continuing to drive that as a base business. In addition, I think we have more R&R activity going on in our structural business as well. So I think, you know, it's, you know, it benefited from having a bit of a exposure to both markets more so than maybe we saw with the EWP in recent months.

Got it. My next question is on, it's a seasonality question, and you kind of alluded to this, Kelly, but do you think it's safe to say that from a revenue, and I know we talked a lot about gross margin, but EBITDA margin standpoint that will kind of return to maybe a more normal seasonality, you know, like what we saw prior to 2020? I think Q1 was typically the low watermark for the year for revenue and for For EBITDA margin, any reasons why that wouldn't be the case this year or going forward?

You know, we haven't really gotten there yet. You know, even though we did see some of the seasonality that I mentioned as a whole, we're still going through that, you know, kind of change in market dynamics as compared to what we were last year. So it's hard to predict. I don't think I can give you an exact answer on that as when we would expect us to return to normalized seasonality. We'll just have to wait and monitor that. We'll start seeing that potentially over the next couple of quarters. You might be able to give a better view.

Okay, thanks. So all my other questions were asked. Congrats on the results and good luck the rest of this year, guys. There are no further questions at this time.

I would like to turn the floor back over to Alexandra Lucas for closing comments. Please go ahead, ma'am.

Thank you, operator, and thank you to everyone that joined us on the call today. We appreciate your engagement and your questions. Our team will be available to assist you should you have any questions. We look forward to speaking with you next quarter. That concludes our call. You may now disconnect.