Bluelinx Holdings Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Blue Links Holdings first quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode, and today's call is being recorded. We will begin with opening remarks and introductions. At this time, I would like to turn the conference over to your host, Investor Relations Officer Tom Morabito. Please go ahead.

Thank you, Operator, and welcome to the Blue Links First Quarter 2024 Earnings Call. Joining me on today's call is Sham Reddy, our President and Chief Executive Officer, and Andy Wamser, our Chief Financial Officer. At the end of today's prepared remarks, we will take questions. Our first quarter news release and Form 10-Q were issued yesterday after the close of the market, along with our webcast presentation, and these items are available in the Investors section of our website, bluelinksco.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 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 gap financial measures can be found in the appendix of our presentation. Now I'll turn it over to Shannon.

Thanks, Tom, and good morning, everyone. We are pleased with our first quarter 2024 results, especially as we recovered from challenging weather conditions in January. I'm extremely proud of my teammates for their continued grit and teamwork in an uncertain housing market and challenging interest rate environment. and for their dedication to serving our customers and our suppliers at the highest levels despite the market industry headwinds. I am also excited about aligning my executive leadership structure with our corporate strategy to accelerate our strategic commercial growth initiatives. Mike Wilson, previously our Chief Product Management Officer and 30-year industry veteran with significant sales leadership experience, has been appointed into a newly created Chief Commercial Officer role that is focused on driving profitable sales growth through our regional, local, and national account teams. Before turning to the first quarter results, I want to briefly remind everyone of our corporate growth strategy and our vision to become the most technologically advanced two-step distributor building products in the U.S. so that we can become the provider of choice for both our customers and our vendors. We are focused on growing our core business in five key specialty product categories, that are sold into multiple layers of a home's construction cycle from start to finish. They are engineered wood, siding, industrial products, millwork, and outdoor living. By making investments in people, value-added services, and working capital, to name a few, we are more effectively positioning the company to grow our specialty product business with existing customers and new customers nationally and in strategic markets across the country. These categories which are valued by our customers and tend to be two-step distribution friendly, are expected to generate sustainable higher net sales and gross profits over the long term. We are also committed to allocating capital to M&A and Greenfield to expand our geographic reach and to support our specialty product sales growth initiatives. While we continue to evaluate acquisition opportunities and pursue those that meet our valuation expectations, We are moving forward with our greenfield initiative and expect to start our first one by the end of the year. In addition, our growth strategy will continue to be supported by three strategic enablers, operational, business, and digital excellence, all of which are designed to enhance the customer experience. Now, turning to our first quarter results. We generated net sales of $726 million and $39 million in adjusted EBITDA. for a 5.3% adjusted EBITDA margin. Adjusted net income was $19 million, or $2.14 per share. And as Andy will detail in a moment, adjusted EBITDA and net income were favorably impacted on a net basis by a couple of notable import duty items. But even after removing this favorable impact, we were pleased with our results. Specialty products accounted for approximately 70% of net sales and just over 80% of gross profit for the first quarter. We also delivered solid gross margin performance with specialty products coming in at 20.7% inclusive of the import duty items and structural products at 10.6%. Excluding this favorable impact, our gross margin performance with specialty products came in at 19.4%. Our continued focus on business and operational excellence contributed to these positive results. During the quarter, we experienced deflation in specialty product sales that accounted for the overall sales decline. With both categories, volumes were adversely impacted by the extreme weather patterns experienced in January, when nearly half of our locations were closed for between one and five days during the month due to unusually cold weather and winter storms. Volume was recovered in February and March as business ramped back up with particular strength in our specialty products. Lastly, our financial position remains strong, and our significant liquidity leaves us well-positioned to execute on our corporate growth strategy, as well as maintain the flexibility to opportunistically return capital to shareholders. Now, turning to our perspective on the broader housing and building products market. While industry sources had initially been indicating a renewed sense of optimism for the overall market, especially in the second half of the year, headwinds remained meaningful in building products due to the Federal Reserve's current posture regarding rate cuts. In the meantime, the U.S. housing market remains volatile, as reflected by March housing starts sliding to an adjusted annual rate of 1.32 million, down 15% from February. Single-family housing starts dropped roughly 12%, while large multifamily starts fell 21%. Permits also fell about 4%. In addition, after four months of sequential improvement, builders' confidence in April was 51 and remained flat compared to March. Interest rate cuts also seem further out, so mortgage rates that are currently over 7% may remain stubbornly high throughout the year. Although they are lower than the 8% peak last year, they are still well above the 20-year average and back to the levels last seen in the fall of 2023. More importantly, they haven't stabilized, which is critical to accelerating buy-sell activity for housing. Repair and remodel spending continues to be lower than the elevated levels of 2022 and 2023 when a lot of projects were pulled forward and is expected to decline further in 2024. At the same time, existing home sales are at their lowest level in nearly 30 years, which is problematic because a significant amount of repair and remodel activity occurs when families sell their homes and buy new homes. It is important to note that while single-family housing starts have been showing strong numbers the past few months, that strength has mostly been driven by the large builders that can use their size and scale to buy down mortgage rates, offer more attractive deals to consumers, and buy direct from manufacturers to support their production schedules. Two-step distributors like Bluelinks tend to correlate more closely with smaller and custom homebuilders and therefore do not participate as much in the large production builder market. Given the macroeconomic environment we described, we expect this pattern to continue for the remainder of 2024. Although the near-term outlook remains uncertain and muted, we clearly believe in the long-term prospects of the housing and building product sector. which underlies our growth strategy. The shortage of homes, supported demographic shifts, aged housing stock, necessary repair and remodel activity, and high levels of home equity should continue to benefit the building products industry in Blue Lakes. Now, I'll turn it over to Andy, who will provide more details on our financial results and our capital structure.